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Department
for Business
Innovation & Skills
A - Banking and Finance
Banking Competition...
Business Bank.....
Eu Structural And Investment Funds..
Eu Structural And Investment Funds......
o anu s
Parliamentary Commission On Banking Standards...
B - Better Regulation
SME Bank Lending.
C-BIS
Better Regulation.....
Better Regulation......
Export Licences Israel.......
D - Business and Enterprise
Growth....
Science Funding...
Aerospace...
Automotive...
Construction
Defence...
Defence...
Insolvency Issues.......
Marine.
Marine.
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E- Consumers and Competition
Prompt Payment...
Simplifying Business Support...
Estate Agents — Buyer Pays Fee Aka......
Pubs Code And Adjudicator...
Paperless Billing...
Secondary Ticketing.
F - Further Education and Skills
18 To 21 Work Skills Pilot 1...
18 To 21 Work Skills Pilot 2....
24+ Advanced Learning Loans.......
Adult Skills Fundin;
Adult Vocational Qualifications...
Apprenticeship Reforms In England...
Careers Advice And The National Careers Service......
Employer Ownership Fund....
Employer Ownership.
Employer Routed Funding.. 57
Engineering Skill: 58
FE and Skills Capital Funding...
Further Education Workforce.......
Localism And Skills......
National College Programme.....
Raising Standards In Further Education.....
Traineeships.
Young People NEET......
G - Higher Education
Applications To Higher Education — Ucas Data....
He Key Facts...
Higher Education Fundin;
Unplanned Growth In Alternative Providers....
H - Innovation
Catapult Centres...
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Digital Economy...... 75,
I- Labour Market
Agency Workers Regulations.........
Balance Of Competency...
Blacklistin;
Collective Redundancies....
Early Conciliation..
Employee Shareholder — New Employment Status.........s.sssssessssseeeereee
Employment Status Review..
Employment Tribunal...
Financial Penalties...
Flexible Working.
Industrial Action...
Living Wage....
Migration...
National Minimum Wage Enforcemen
Posting Of Workers Enforcement Directive......
Public Interest Disclosure Act (Pida).....
Recruitment Sector Legislation.........
Shared Parental Leave...
Trade Reform... oe a
Transfer Of Undertakings (Protection Of Employment) Regulations..
Unfair Dismissal Compensation...
Working Time Directive.
Zero Hours Contracts...
National Minimum Wage...........++
K - Low Carbon Economy
Chemicals SeCtOr........sse00
Green Economy..
124
Industrial Biotechnology Sector.....
Plastic Products S@CtOF.....sssssssessssrsssssssnessnssnssnssonsesnscssscnsersvensssnessncanecsesnsssnsessssnssensssssesesssessneeseeseLZD
Support For Energy Intensive Industries... + 126
L- ShEx
Post Office. 129
Royal Mail... seseseesereenee 32
Universal Postal Service And Postal Services Regulation.....
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Banking Competition
Key Facts
e The Competition and Markets Authority, established by BIS, announced on November 7
that it will conduct a full market investigation into the retail banking sector, including
current accounts and SME banking.
e The divestment of TSB from Lloyds has created a new challenger on the High Street with
over 600 branches.
e Measures in the Small Business Bill will require large banks to refer declined small
business finance applications to alternative providers, through platforms that the Govt
will designate. Draft secondary legislation was published on 18 December.
e The Current Account Switching Service has been running for a year, during which more
than 1.2 million people have switched accounts — a 22% rise on the previous year. —
e The British Business Bank is investing to help diversify the business finance market, it
generated almost £800m of lending and investment to business in 2013/14.
Top Government Actions (since May 2010)
1. Regulators have reformed the authorisation system for banks to make it easier for new
entrants, boosting the prospects for competition. More than 20 applications are in the
pipeline.
2. Government has legislated to introduce full utility-style regulation of the payments
system, to ensure a focus on competition and innovation that will help ‘challenger
banks’ to grow.
3. We are legislating to improve access to credit information and require large banks to
refer on declined small business finance applications, making it easier for new providers
to lend to small businesses
4, Both the new regulators have specific competition objectives, making sure the market
remains under constant scrutiny.
5. Establishing the British Business Bank to increase the supply of lending to small
businesses, including by supporting smaller lenders to diversify the supply of finance.
Elephant trap
Why not break up the banks now?
e Simply splitting up our large banks would be extremely complex — the CMA should take
its time to consider all the options.
Cap on market share: Effective competition is about more than arbitrary market share
figures, as the Governor of the BoE has made clear. That’s why the Government has taken
action to reduce barriers to entry and help new challengers compete on a level playing
field.
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Business Bank
Key Facts
¢ The British Business Bank has been established to make finance markets work better for
small firms, allowing them to prosper, grow and support the UK economy. Over the
next five years, the Bank aims to unlock up to £10 billion of financing for viable smaller
businesses.
e The British Business Bank brings together the management of all the Government
lending and investment programmes into a single, commercially minded institution. It is
not a bank in a conventional sense: it does not finance businesses directly, nor does it
have a high street branch network. Instead, it provides funds and guarantees to private
sector partners allowing them to finance more and different smaller businesses.
e The Bank aims to increase the supply of finance available to smaller businesses in areas
where markets do not work well and to help create a more diverse market so that
businesses seeking finance have a greater choice of options.
¢ The Business Bank will work with private sector delivery partners to deliver all of its
programmes, allowing it to pull in significant amounts of private sector funding.
e The British Business Bank launched as an independent institution on 1 November
following State Aid approval. This is an important development providing finance to
small and medium-sized businesses in the UK and is a central plank of the Government’s
Industrial Strategy. It also fulfils a commitment set out in August 2013’s Coalition Mid-
Term Review
Top Government Actions
¢ British Business Bank programmes are already delivering significant results: Business
Bank programmes facilitated a total of £1.45bn of new lending and investment in the
year to end September 2014, to over 21,000 businesses
e In June 2014, in conjunction with the ICAEW the British Business Bank published a new
guide which outlines the different finance options that are available for smaller
businesses.
e A full board for the Bank has now been appointed and met for the first time in June
2014. The Bank is required to ‘comply or explain’ with The Corporate Governance
Code.
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EU Structural and Investment Funds
Key Facts
e The European Structural and Investment (ESI) Funds are:
o European Regional Development Fund (ERDF);
o European Social Fund (ESF);
o European Agricultural Fund for Rural Development (EAFRD);
o European Maritime and Fisheries Fund (EMFF).
e The Department for Business, Innovation and Skills (BIS) leads for the UK Government
on policy for the European Structural Funds (ERDF and ESF). ‘Managing Authority’ (MA)
responsibility for delivering the European Structural Funds within England in 2014-20
will rest with the Department for Communities and Local Government (DCLG) for ERDF
and Department for Work and Pensions (DWP) for ESF. Defra is the MA for EAFRD and
EMFF. The Devolved Administrations are responsible for delivering the Funds in their
own nations.
e The value of the ESI Funds to the UK for the 2014-2020 funding period is over €15billion.
Top Government Actions (since May 2010) in England
e@ Government announced in 2013 that it will bring ERDF, ESF and part of the EAFRD
allocation together into a single ‘EU Structural Investment Funds (ESIF) Growth
Programme’.
e Government confirmed that the ESIF Growth Programme’s top priorities will be:
o innovation and research and development;
© support for small and medium-sized businesses;
o low carbon;
o Skills;
o employment and social inclusion.
e And that they wanted the funds to be:
o easier to access;
o go further; and
o be even better value for money for the UK taxpayer.
e Government announced that the large majority of the funds in the ESIF Growth
Programme will be notionally allocated to LEP areas. The breakdown of the allocations
of ERDF and ESF by LEP area over the next 6 years was announced on 17 April 2014.
e@ Government has ensured that LEPs will have a key strategic role in delivering economic
growth in their area. Each LEP has worked with local partners to develop a strategy for
the investment of its notional allocation of these Funds.
@ The UK Partnership Agreement which sets out the Government’s priorities and
management arrangements for the ESI Funds across the UK for 2014 to 2020 was
formally adopted by the European Commission on 29 October 2014. This now paves the
way for the programmes to be adopted too and for funding begin to flow.
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¢ Government is working with partners to finalise the detail of how the programme will
be delivered and subject to when the funding documents are agreed with the European
Commission, we are aiming for the programmes to launch early in 2015.
Elephant traps
Judicial Review
e The original allocation decisions to both the Devolved Administrations and to LEPs in
England were subject to Judicial Review. This was brought by stakeholders in
Merseyside and South Yorkshire. Allocations were quashed by the High Court on the
sole ground that BIS had not met its Public Sector Equality Duty as part of the decision-
making process. The High Court upheld the Government’s methodology used to make
the allocations.
e Having now fully considered the potential implications of the Public Sector Equality
Duty, the Government is now satisfied that the original allocations are still appropriate,
as is the methodology on which such allocations relied.
e An appeal was heard on 30 June/1 July 2014. The Court of Appeal dismissed the appeal
on all grounds on 28 July, finding that the April 2014 Structural Funds allocations to the
UK’s nations (and notional allocations to LEP areas in England) are lawful and
reasonable.
e After the Court of Appeal result was handed down, the Appellants approached the
Supreme Court directly to request an expedited hearing for permission to appeal. The
Supreme Court granted permission for the appeal to be heard and the hearing took
place on the 22-23 October. The Court’s judgement is expected early in 2015.
e The Supreme Court made it clear that it does not want to influence or affect in any way
the current discussions between Government and the Commission on the formal
approval of the Partnership Agreement, as the Court has been made aware that funding
cannot flow until such approval takes place.
Intermediary Bodies (IBs) and Integrated Territorial Investments (ITIs)
e The ESI Funds, including ERDF, are a complex programmes and it is essential to
minimise liabilities to the taxpayer. Government has decided to maintain the position
set out in July 2013, that no new Intermediate Bodies will be established for
mainstream delivery of the ESI Funds in England. With the exception that the GLA will
be an Intermediate Body for delivery of ERDF and ESF in London.
e An ITI is a way of combining expenditure from European funds to ensure local priorities
are met in a specific geographic area. Cornwall and the Isles of Scilly is the only less
developed area in the programme and as such the Government has announced that the
area will be covered by an ITI as to do so will bring added benefit to this unique area.
@ The approach in favour of national Operational Programmes for each Fund does not
diminish local involvement, but it does streamline and reduce bureaucracy.
Government does not propose to establish separate Operational Programmes at sub-
national level or for separate categories of region.
e The current proposals for LEP and partner involvement in project selection do not rely
on formal delegation of project selection responsibilities from government departments
to LEPs (this formal delegation would result in the LEPs being classed as ‘Intermediate
Bodies’).
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e At present we are seeking to deliver the partnership model we agreed with partners
earlier this year. However, the LGA and LEP Network have provided a paper to
Government on how a limited form of Intermediate Body status might work. We are
considering this on a without prejudice basis, in case an alternative to the current
partnership model becomes necessary. We need to carefully consider how potential
risks and liabilities to the Commission might be managed if project selection functions
are delegated.
@ The role of LEPs in co-ordinating local membership of ESI Funds partnership groups to
support delivery of ESI Funds Strategies in each LEP area, as well as the role of these
committees in agreeing which projects should be supported, is clearly stated in the
programming documentation.
Potential delay to approval of the ESIF Operational Programmes for England
e The Government has been through a long and tough negotiation process with the
European Commission in order to secure some of the key priorities important to
Government and local areas, including funds for rollout of broadband and transport.
e We are now continuing to build on the framework set out in the Partnership Agreement
in the negotiation of the detailed operational programmes. If programmes are not
agreed by the end of the year then funding will not be able to start flowing until June.
e We are working intensively with the Commission to get programmes approved as
quickly as possible.
¢ Government is doing everything it can to mitigate the impact of delays. For example,
we are looking at the possibility of extending the deadline for spending on the 2007-13
European Regional Development Fund programme from end June to end September
2015. We are also planning to work with LEPs to launch the first calls for some projects
as soon as the Commission has agreed the Operational Programmes informally but
ahead of their formal adoption. This will allow us to minimise the impact of any delays.
e Weare aiming to launch the first calls for projects in March 2015.
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Parliamentary Commission on Banking Standards
Key Facts
e The PCBS published its final report in June 2013 June. The Government responded in
July, accepting most of the main recommendations.
e These include: a new Senior Persons Regime for senior bank staff; a new banking
standards regime for other bank staff; and the introduction of a criminal offence for
reckless misconduct; The Banking Reform Act, which gained Royal Assent earlier in
2014, has implemented most of the necessary legislative changes. The FPC announced
proposals in October to set a basic 3% leverage ratio for UK banks, topped up for larger
institutions.
¢ On 17 November, members of the PCBS published a statement on the progress of
implementation of their recommendations, warning about the risks of dilution.
e On 16 December, the Bank of England published the results of it’s 2014 stress testing of
major UK banks. 7 out of 8 banks passed — Co-Op Bank failed and has resubmitted its
capital plan to the PRA.
Top Government Actions (since May 2010)
1. Introducing the Banking Reform Act to establish a ring-fence and end ‘too big to fail’,
creating the framework for a more stable banking system
2. Creating a new, judgement-led regulatory system for financial services through the
creation of the PRA and FCA.
3. The PRA’s Remuneration Code has restructured pay to significantly reduce cash
bonuses and ensure up to 80% of bonuses are deferred and paid in shares, improving
alignment of pay with risk and performance.
4, Regulators have reformed the authorisation system for banks to make it easier for new
entrants, boosting the prospects for competition.
5. Government is legislating to introduce full utility-style regulation of the payments
system, to ensure a focus on competition and innovation that will help ‘challenger
banks’ to grow.
Elephant trap
Leverage ratio:
e The Government supports the FPC’s proposals on leverage — we are currently consulting
on giving the FPC the power it needs to implement the framework.
PCBS Statement:
e The Government welcomes the statement by the former members of the Parliamentary
Committee on Banking Standards and agrees that maintaining the momentum in
implementing the UK’s financial services reforms are essential. Good progress has been
made, for example on implementing the ring-fence.
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SME Bank Lending
Key Facts
e Bank of England statistics show that gross lending to SMEs is on a significant upward
trend. Lending this year up to the end of October is up 25% on the equivalent period
last year.
e Net lending (excluding overdrafts) — that is the difference between new lending and
repayments - has been modestly positive in six out of the last 12 months. The tide is
turning. The annualised figure remains negative, but if current trends are maintained,
this will turn net positive in 2015.
e According to the latest SME Finance Monitor report (latest quarterly report published in
November 2014), 71% of all applications for loans and overdrafts within the last 18
months (Q2 2013 to Q3 2014) were successful. Within this overall figure, 99% of
businesses seeking a renewal of existing facilities were successful. However, only 45%
of first time applicants and 69% of existing borrowers seeking new money were
successful.]
e [Businesses are more likely to get funding from their bank than they think. 50% were
confident that their renewal would be successful, compared to current success rates of
99%, while 45% were confident about a new facility, compared to a 56% success rate.]
e The SME Finance Monitor also shows that there are a range of positive financial
indicators from SMEs — more are reporting making a profit, more hold £5,000 or more
in credit balances and more (with employees) plan to grow. The economic climate is
less of an obstacle to growth, the risk profile is improving and fewer SMEs felt they
‘had’ to inject personal funds into their business.
e The major banks have established internal appeals processes allowing customers to
appeal against a bank decision to decline lending. The process is overseen by an
independent reviewer and is now in its fourth year. Around 26% of appealed lending
decisions are currently being overturned. More businesses should be aware of and use
this ability to request a review.
Top Government Actions (Since May 2010)
e We have established the Business Bank with £1bn of new money and consolidating an
additional £2.4bn of existing schemes. We have already launched a £300 million co
investment programme to provide diverse sources of funding for SMEs. It will aim to
address long standing, structural gaps in the supply of finance to businesses and bring
together the Government's business finance interventions.
e Inthe Autumn Statement, the Chancellor announced a one year extension of the Bank
of England’s Funding for Lending Scheme to the end of January 2016. Additional
borrowing allowances for banks under the scheme will only be generated through
positive net lending to SMEs. This represents a further focusing of the scheme on small
business lending. The extension will give small businesses continued certainty over the
availability of cheap funding in 2015.
Government is continuing to enhance and develop the Enterprise Finance Guarantee
scheme to reach more businesses.
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¢ Delivering transparency and fairness through appeals processes, postcode level lending
data and supporting the development of mentoring networks; working with the banks.
e We have worked closely with HM Treasury and the FCA to ensure that SMEs are
provided redress for interest rate swap mis-selling.
e The Financial Conduct Authority has appointed “skilled persons” under s166 of the
Financial Services and Markets Act to investigate allegations (made by BIS’s then
Entrepreneur in Residence, Lawrence Tomlinson and others) about RBS’s treatment of
businesses in financial difficulties. The investigation is expected to report in early 2015.
Small Business and Employment Bill measures:
e The Government is legislating to improve the ability of challenger banks and alternative
finance providers to conduct accurate SME risk assessments by requiring the biggest
banks to share SME credit data via credit reference agencies.
e The Bill also includes provisions which will require banks to refer customers who have
been declined a loan to alternative providers (via designated platforms) if the customer
wants it.
Elephant Trap
e Funding for Lending (FLS) scheme data published by the Bank of England in November
shows negative net lending by scheme participants
e The FLS data gives only a partial view of SME lending and is limited to the data from
scheme participants. Barclays and HSBC do not participate in the FLS yet, between,
them account for about 34% of lending.
e Net lending is pulled down by reduced lending to small property development
companies and deleveraging by RBS, but the rate of decline slowed in the last quarter.
gross lending to SMEs in the 10 month period to the end of October is up 25% on the
equivalent period last year.
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Better Regulation
Issue
e The Coalition government have set out an ambitious agenda to reduce the overall
burden of domestic regulation over the course of this Parliament.
Key Facts
e The One-in, One-out (O100) rule introduced by this Government, was the first of its kind
anywhere in the world and in January 2013 it moved to an ambitious One-in, Two-out
(OITO), where Departments will now have to find double the savings. Published the
ninth and final Statements of New Regulation (SNR) on 30 December 2014. The report
demonstrates that the annual cost to business from domestic regulation has been cut
by at least £2 billion over this Parliament. NB: The 9th SNR is due to be published at
the end of this month. Update figures will be provided.
e The World Bank ‘ease of doing business’ report placed the UK at 10th for the overall
ease of doing business. The UK has remained in the Top 10 for the past 7 years.
e The World Bank specifically highlights our wide-ranging work on deregulation as a good
example to follow (particularly the One-in, One-out rule and the Red Tape Challenge).
By January 2014, the Red Tape Challenge had identified more than 3,000 regulations to
be scrapped or improved
Over 1000 changes have been implemented to date, saving business over £835 million
per year.
e And the reform is on track to to deliver savings of over £850 million per year by the end
of this Parliament.
e And to ensure the UK implements EU law in the least burdensome way, in July 2011 we
put in place Guiding Principles for EU legislation ( and reviewed and strengthened them
in 2013). These introduced a strict scrutiny and challenge approach to stop“gold
plating”, unless it is clearly in the UK’s interest.
e Since then, there have been only two instances of “gold plating” (extending the scope of
the Consumer Rights Directive and early implementation of Accounting Directive) which
placed extra burdens on business at minimal cost. The first ensures greater protection
for UK consumers, whilst the second aids transparency in the extractives sector and
fulfils a G* commitment.
e Primary Authority was introduced to address business’ concerns about how local
authorities apply environmental health, licensing and trading standards legislation,
including contradictory advice, duplicated efforts, and the lack of effective dispute
resolution when councils disagree. Primary Authority partnerships are legally binding
agreements that give businesses assured advice, driving consistent, proportionate and
effective enforcement of regulation. By October 2014 over 1900 businesses were in
partnerships with nearly 140 local councils and fire and rescue authorities.
e The new framework for regulatory delivery — the Regulators’ Code — was published and
came into effect on 6 April 2014 under the Legislative and Regulatory Reform Act 2006,
replacing the Regulators’ Compliance Code. It provides a clear, flexible and principles-
based framework for how regulators should engage with those they regulate
¢ Over 3000 frontline regulators across 330 local authorities have been using the
common approach to regulatory competency to ensure their knowledge and skills
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facilitate business support for growth. In addition, a network of 30 topic groups
nurtures high quality dialogue between business, regulators and government on how to
comply.
Top Government Actions (since May 2010)
e Running the Red Tape Challenge to scrap or simplify regulations that are ineffective,
unnecessary or obsolete.
e Introduced the “One-in, One-out” rule (and now moved to One-in, Two-out), a world-
leading initiative which caps the cost of regulation to business. The aim of these rules
are to encourage government departments to use regulation only as a last resort. In
January 2013 the One-in, One-out rule moved to an ambitious One-in, Two-out whereby
Departments now have to find double the savings if they want to introduce new
regulations.
e Any government department that introduces new regulation has to consider the impact
it will have on small business. To strengthen and build on the success of the micro
business moratorium, we announced the introduction of a Small And Micro Business
Assessment, which will come into effect from 1 April this year. Now, new regulations
will only be extended to small business (up to 50) if they are essential, justified and
proportionate.
e We published the Small Business, Enterprise and Employment (SBEE) Bill on Wednesday
25 July. This will require a target to be published for the removal of regulatory burdens
in each parliamentary term, and for government to report transparently against it.
@ This will mean that future Governments remain committed to reducing burdens,
enabling small firms to grow and get on with doing business
e In June 2013, the Prime Minister established a Business Taskforce, to propose reforms
to EU rules to boost competitiveness. Their report, “Cut EU Red Tape”, published in
October 2013 puts forward 30 recommendations to reform specific rules. It also
proposes a series of law-making principles (the COMPETE principles), to ensure that
proposals are pro-innovation and pro-growth.
e In November 2014 an update report was published showing that 10 of the 30
recommendations had so far been achieved.
e There is also considerable support for the COMPETE principles among UK and EU
business groups, the European Parliament, and the Commission’s own better regulation
advisory group. We published a report ‘Cut EU red tape: One year on’ in November
2014, outlining progress to date.
e In Autumn 2012, we secured support for our 'Ten point plan for EU Smart Regulation’
from 12 other Member States. Italy has since backed the plan, making 14 countries
visibly like-minded. The Commission addressed six of these ten demands in its REFIT
programme. We are pursuing the outstanding ones as COMPETE principles.
¢ The Commission launched its REFIT programme in 2012 to review the stock of existing
legislation, to identify burdens, inconsistencies and ineffective measures and addressing
them. An initial programme of actions was published in October 2013, and in June
2014, a further Communication put forward additional actions, subject to confirmation
by the new Commission.
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e@ Whilst we welcome the progress that has been made under REFIT, we continue to press
the Commission to be more ambitious, move faster and with a greater focus on
delivering costs savings for business, specifically for SMEs.
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Export Licences Israel
Issue
e Whether to suspend export licences for Israel during the recent Israel/Gaza conflict.
Key Facts
e Weare limited in what we can say on this matter, as it subject to ongoing legal
proceedings.
e In light of the recent conflict, the Government conducted a review of existing export
licences for Israel. The findings of this review were announced on 12 August.
e The review found that the vast majority of exports licensed for Israel were not for items
that could be used by Israeli forces in operations in Gaza.
e However twelve licences for components were identified as potentially contributing to
equipment that could be used for this purpose.
e If there is a resumption of ‘significant hostilities’, we will suspend these licences.
@ On 4 November, the Government decided to carry out a further review of extant
licences, including the twelve licences, and new applications for licences.
¢ This review is being carried out to ensure that up to date information and evidence is
considered and taken into account. BIS and FCO will publicly announce the outcome of
the review when it is completed.
© Our priority remains lasting peace in the region that allows both Israelis and Palestinians
to live alongside one other securely and peacefully. The UK Government will continue
to work closely with colleagues in the EU and the US to help achieve this.
Elephant trap
How will the Government decide that there has been a resumption of ‘significant
hostilities’?
¢ The Foreign Office continues to monitor the situation in Israel and Gaza very closely and
the Foreign Secretary will advise the Business Secretary if in his judgment there has
been a resumption of significant hostilities.
Q&A
Why would you suspend the twelve licences, rather than revoke them?
e If any existing licence is found to be no longer consistent with the export licensing
criteria, that licence will be revoked. If there is a resumption of significant hostilities,
our concern is that we may not have sufficient information to determine whether the
licensing criteria would be contravened, for example, whether a serious violation of
international humanitarian law might occur or whether equipment containing UK
components might be used in relation to such an act. We would therefore suspend the
licences as a precautionary measure while we establish enough information to make an
assessment against the export licensing criteria.
e Weare also carrying out a further review of the twelve licences to ensure that up to
date information and evidence is taken into account. If following this review, we
consider that we do not have sufficient information to determine whether the licensing
criteria would be contravened, we will suspend the licences as a precautionary
measure.
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Was it a mistake to grant the twelve export licences that you may suspend?
@ No. All export licence applications are rigorously assessed on a case-by-case basis
against the Consolidated EU and National Arms Export Licensing Criteria. We would not
grant a licence if to do so would be inconsistent with the Criteria. If circumstances in a
recipient country change, as they did during the recent conflict, we have the power to
suspend or revoke licences.
How does the Government monitor the situation in Israel/Gaza?
e The FCO, including the British Embassy in Tel Aviv and the British Consulate-General in
Jerusalem, monitors the situation in Gaza very closely and provides regular advice.
Will you disclose the details of the twelve export licences that you may suspend?
@ The licences relate to military equipment that could be used by the Israeli Defense
Forces in Gaza. They include components for military radar systems, combat aircraft
and tanks and launching equipment for munitions. Suspensions would not include
components of Israel’s Iron Dome missile shield which helps to protect Israelis from
Hamas rocket attacks, commercial exports, or components for manufacture of
equipment to be supplied to countries outside Israel. The Government is committed to
full and open provision of information as far as we possibly can. The Business Secretary
provided further details of these licences to the Committees on Arms Export Controls
on 15 December 2014.
e@ Why were there so many licensed exports to Israel?
@ The bulk of these exports are not for military end use and some are for Israel’s own
export market rather than for use within Israel. In particular, concerns have been raised
about a licence for exports valued at over £7 billion for civil communications systems.
However, we have no concerns that the intended end use was other than commercial.
However, the licence was returned to BIS unused by the exporter.
Have UK exports supplied equipment for Israeli unmanned aerial vehicles used in the
Gaza conflict?
e We have identified one licence for components for unmanned aerial vehicles for the
Israel Defense Forces, dating back to 1999.
Israel is entitled to protect itself from a perceived threat?
e All countries have the right to self-defence under the United Nation’s Charter. However,
in all cases we need to ensure that the exports we license are used appropriately and do
not constitute a breach of the arms export licensing criteria against which all
applications are assessed.
Will the Government consider an arms embargo for Israel?
e The Government, as well as all European Governments, does not believe that imposing
a blanket arms embargo on Israel would promote progress in the peace process.
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Growth
Issue
e The Government has taken decisive action to protect the economy in this period of
global uncertainty and is united around returning the public finances to a sustainable
position. Deficit reduction and active monetary policy are fundamental for growth, but
so is longer term structural change.
Key Facts.
e UK GDP grew by 0.7% in 2014Q3 following growth of 0.7% and 0.9% in 2014 Q1 and Q2
respectively.
e Inthe 3 months to September 2014, the employment rate rose 0.2ppts to 73.0% while
the unemployment rate fell 0.2ppts to 6.0%.
e Annual CPI Inflation rose 0.1ppts to 1.3% in October.
e Business investment grew by 3.3% and fell 0.7% in 2014 Q2 and Q3 respectively. Recent
methodological changes have revised up the contribution of business investment to
growth, which is now estimated to have accounted for about 30% of UK GDP growth
over 2010-13, against 5% previously.
Top Government Actions (since May 2010)
1. Government has set out its Industrial Strategy, a long-term, whole-of-government
approach, working in partnership with business to support economic growth and has
published 11 sector strategies. We are also taking action on four cross-cutting themes:
technologies, access to finance, skills, and procurement.
2. The Government published its Plan for Growth alongside Budget 2011, setting out the
four ambitions for growth: to create the most competitive tax system in the G20; to
make the UK the best place in Europe to start, finance and grow a business; to
encourage investments and exports; and to create a more educated workforce that is
the most flexible in Europe.
3. The Government is reforming the banking sector, to make banks more resilient to
shocks and easier to fix when they get into difficulties.
4. Corporation tax is the lowest in the G7. A further one per cent cut in the main rate from
April 2014 has reduced it to 21%. From April 2015 the rate will be 20% - the joint lowest
in the G20.
Elephant traps
Are the government's plans to create growth failing?
e No. The Government's strategy is working and we are creating the right conditions to
achieve strong sustainable, balanced growth for all. Implementing our growth strategy
is a priority across Government.
e All parts of the economy are growing: the deficit is down by a third as a percentage of
GDP since its peak; Since March 2010 2 million private sector jobs have been created,
more than offsetting the loss of 0.4 million public sector jobs.
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© Globally, recovery has been slower than forecast due to persistent inflation from
commodity prices, and the euro area crisis. Despite the on-going impact of the financial
crisis on financial conditions the UK is on the rise, many risks remain but the country is
on the path to prosperity — the Government's credible long term economic plan is
working for all.
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Science Funding
Key Facts
e [On Wednesday 17th December, Government launched the Science and Innovation
Strategy, its long-term vision of how science and innovation will drive growth over the
coming decade.]
e Investment in our science, research and innovation base is critical to ensuring that the
UK remains at the forefront of new products and markets — harnessing new
technologies and leading new innovations.
© Overall science funding is increasing. The ring fenced science and research programme
budget was protected over 2011-15 at £4.6bn pa. Recent additional funding brings the
resource budget to £4.7bn in financial year 15/16.
@ Government has made a long-term commitment to investment in science and research
infrastructure: increasing capital investment in real terms to £1.1 billion in 2015-16 and
growing this in line with inflation each year to 2020-21. The Science and Innovation
Strategy sets out a capital roadmap outlining how this £5.9bn commitment over 2016-
2021 will be invested.
e The UK research base is world class: UK has recently overtaken the USA to become first
by field-weighted citations , and is the most productive in the G8: .
@ The UK is also second only to the USA for numbers of universities ranked in the world’s
top 100.
© Universities have more than doubled their external income (from business, charity and
others) since 2001, to approaching £3.6 billion in 2012-13.
Top Government Actions (since May 2010)
e The 2013 Spending Review for 2015-16 protected the science and research programme
budget at flat cash, whilst increasing the capital budget to £1.1 billion in 2015-16, and to
thereafter rise in line with inflation to 2020-21. In allocating this funding, in April 2014,
Government recommitted to the Haldane principle, which says that Government may
set broad strategic policies for research, but the fine detail of which projects to fund is
decided by experts from the community in arms-length organisations.
e During 2012, the Chancellor of the Exchequer announced £300 million for the UK
Research Partnership Investment Fund (UK RPIF). It will enhance the facilities for world
class university research, by levering at least double co-funding from private sector and
charities. An additional £200 million over 2015-17 was announced in Spending Review
2013. Over £350m has now been allocated to 25 projects levering over £960m private
co-investment in strategic R&D collaborations between universities, businesses and
charities. This includes:
o £15m funding from UKRPIF and £5m from Innovate UK to the University of
Manchester’s Graphene Engineering Innovation Centre (GEIC) in partnership with
Masdar.
o £11.6m funding for the 5G Innovation Centre at University of Surrey.
e In Autumn Statement 2012, the Chancellor announced the investment of £600m in
eight great technologies in which the UK could lead the world in their development.
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These are big data; space; autonomous robotics; synthetic biology; regenerative
medicine; agri-sciences; advanced materials; and energy storage.
In Autumn Statement 2013 the Chancellor announced additional funding, including
£270m funding for Quantum Technologies, and a £75m a year fund for collaborating
with emerging powers. In Budget 2014, he announced £42m for the Alan Turing
Institute and, on 3rd December, he confirmed that it will be based at the British Library
in London.
On Wednesday 17th December, Government launched its Science and Innovation
Strategy, including setting out a capital roadmap outlining how Government will
allocate the £5.9Bn long term settlement for science capital up 2020/2021. As
announced at Autumn Statement 2014, this will include up to £235 million funding for
the Sir Henry Royce Institute for Advanced Materials (led by Manchester University);
£113m for a Cognitive Computing Research Centre; and £95m for European Space
Agency programmes securing UK leadership of Europe’s 2018 rover mission to Mars.
On December 18th, the Higher Education Funding Council for England (HEFCE) will
announce the results of the 2014 Research Excellence Framework (REF) — a periodic
assessment of UK university research. The results will drive core research funding
allocations for university research in the coming years, ensuring that public investment
is targeted towards the very best research departments.
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Aerospace
Key Facts
e The UK aerospace industry is No1 in Europe (No2 in the world, behind USA).
e Key strengths in the most complex parts of aircraft — wings, engines, and advanced
systems; also one of the few nations that can design/build advanced helicopters.
e The Sector employs more than 109,000 people directly and supports a further 120,000
jobs indirectly; and aerospace salaries are over 50% higher than the national average.
e Annual turnover of £28 billion with around 90% of what is produced exported. Since
2011, the aerospace sector has grown by 14%.
e Huge growth prospects — 29,000 new large passenger aircraft worth around $4.4 trillion
needed by 2032. Over a similar period, requirements for new business and regional
aircraft, and helicopters are worth an additional $1billion.
¢ Over the past two years (2012/2013) UK Export Finance has supported almost £3billion
aerospace exports.
e £433m of aerospace research work, including improvements to research infrastructure,
now under way — against the £2billion joint funding commitment by industry and
Government between 2013 and 2020. (Further detail below)
e Around 30,000 take offs (and landings) by large passenger planes a day with British built
wings
e Half the world’s advanced passenger jets are flying on wings made in Britain.
e At any moment, around 400,000 people are flying on aircraft powered by Rolls Royce
engines; and every 2.5 seconds a Rolls-Royce powered aircraft takes off or lands.
e The ATI programme is in its 2nd year of a 7 year programme.
Top Government Actions (since May 2010)
© Created joint industry/Government Aerospace Growth Partnership (AGP) to tackle
barriers to growth, boost exports and grow high value jobs. AGP launched the UK’s
Aerospace Industrial Strategy in March 2013.
e As part of this we have created a UK Aerospace Technology Institute (ATI) at Cranfield -
which will assist with managing a strategic programme of research to keep UK at
forefront of technology, backed with just over £2billion funding by Government and
industry over seven years, from 2013 to 2020.
e Created UK Centre of Aerodynamics, which will now form part of the ATI.
e ATI funding from HMG and industry being put to good use: we’ve recently announced:
e £60m investment in a new aerospace facility at the Manufacturing Technology Centre at
Ansty (Coventry); and £7m titanium casting research at the Advanced Manufacturing
Research Centre in Sheffield.
e £15m investment to improve research capacity of wind tunnel facilities at seven
universities and at the Aircraft Research Association.
¢ Over £300m investment in a range of new collaborative R&D projects spanning all four
pillars of the ATI (wings, engines, aerostructures and advanced systems). These span 59
projects involving around 100 companies (large, mid-cap and small) , universities and
research centres across the UK.
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e The second open competitive call of the ATI, through Innovate UK, is open with up to
£25m public funding, to generate projects worth up to £50m
e Supported a National Aerospace Technology Exploitation Programme (NATEP), as part
of AGP, to help small and mid-sized companies develop innovative technologies and
increase their ability to win new business with higher tier companies anywhere in the
world. HMG is investing £23million through the Advanced Manufacturing Supply Chain
Initiative, which is expected to lever £17million from industry. 5 projects worth £1m
now underway involving 10 funded partners working with 7primes/end users; second
round of 23projects, worth £6.5m, about to commence involving 56 companies.
e Created 500 additional Masters level postgraduate places for aerospace. Industry and
Government are contributing £6million over three years. Over 300 bursaries already
awarded so far with remainder to be awarded in 2015, in line with our target.
© Created an aerospace ‘Sharing in Growth’ intensive capability improvement programme
to raise the performance of up to 40 aerospace suppliers to world class levels. The
£120m programme is supported with £50m from the Regional Growth Fund.
e Also on skills, Ministers have approved a £10m+ bid from the aerospace sector - under
Round 2 — Phase 2 of the Employer Ownership Pilot. This will support a range of
aerospace skills and training programmes to make it easier for companies of all sizes to
access new, high quality apprenticeship training programmes; train employees in
specialist technical subjects; and address wider business capabilities needed to help
companies to grow.
Defensive Lines
Rolls Royce Global Job Cuts Announcement
¢ Government is in regular contact with Rolls-Royce and is working with them to mitigate
the effect of these job losses. Rolls-Royce will use the Talent Retention Solution which
matches skilled engineers with employers looking for talent. This scheme has a
successful track record of redeploying engineering talent, most recently with BAE
Systems.
e We are working across government and with local partners such as Job Centre Plus to
make sure services are offered to the workforce at the appropriate time.
AgustaWestland/Finmeccanica bribery allegations re sale of helicopters to India
@ This is a matter for the Company and the Italian and Indian authorities. Need to allow
the investigation to take its course.
e AgustaWestland produce world class helicopters for both the UK Armed Forces and
export markets, including a recent £1 billion contract to supply 16 helicopters plus
support and training to the Norwegian government.
e The UK has one of the world’s toughest anti-bribery laws.
Serious Fraud Office (SFO) investigation into allegations of bribery and corruption at
Rolls-Royce
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e Rolls-Royce has made it clear that it will not tolerate improper business conduct of any
sort. It is cooperating fully with the Serious Fraud Office, and we await the outcome of
that process.
e The UK has one of the world’s toughest anti-corruption laws, and HM Government
takes any allegations of bribery/corruption extremely seriously.
e Investigations are on-going, and the allegations remain unproven. The Government
continues to work with Rolls-Royce as usual to deliver important UK capabilities.
e The investigation into Rolls-Royce is a matter for the SFO, and it would not be
appropriate for the Government to comment on the investigations.
Ratification of the Cape Town treaty
e The UK is committed to ratifying the Cape Town treaty which aims to facilitate asset
based aircraft financing transactions. The Government recently held a consultation on
how the UK should implement the treaty. We are analysing the response and will
publish the response to the consultation in the autumn. The government aims to make
the necessary regulations to implement the treaty in early 2015.
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Automotive
Key facts
e In 2013 the UK automotive industry announced more than £2.5bn of investment,
forecast to create over 5,000 new jobs. [Source: SMMT]
e UK automotive industry turnover in 2013 exceeded £60 billion, an all-time record, and
9% up on 2012
e UK car production exceeded 1.5 million in 2013, up 3% on 2012, and with 80% exported
e SMMT is forecasting that UK car and light commercial vehicle production will increase
to over 2 million units by 2017.
e Automotive manufacturing employment in 2013 was 149,000, an increase of 8,000 over
2012.
e We have more than 40 companies manufacturing vehicles in the UK as well as a world
class automotive design engineering sector. And we have some of the most productive
plants in the world.
e The UK is recognised as a world centre for Motorsport. The sector is worth £9bn to the
UK economy — a quarter of this comes from Formula 1.
e UK Automotive exports totalled £31.5 billion in 2013, 9% up on 2012. This was an all-
time record, and accounts for 6.2% of UK's entire exports of goods and services.
Elephant Traps/Issues
F1 Difficulties (Marussia/Caterham — administrations & redundancies)
e Caterham’s administrators continue their efforts to find a potential buyer for the team
and the company’s creditors have now agreed the administrator’s plans to continue to
seek a new owner. The Marussia race team has been shut down. Government, through
local agencies, including the Council, LEP and Job Centre Plus continue to work with
Caterham/Marussia and their administrators to see how the skills of the current
workforce can be redeployed elsewhere using a range of local and national tools;
including our Talent Retention Solution which matches engineering talent with new job
opportunities
Geely / London Taxi Company
e The London Taxi Company [and its Chinese parent, Geely Automotive] has an ambition
to invest and build a new factory in the UK. This new investment is set to create
hundreds of new jobs and will see the development and production of a new, ultra low
emission, taxi for the UK and global markets. We are working hard to support that
ambition where we can.
Lotus redundancies
e Very concerned to hear of job losses particularly in an industry which has seen
remarkable progress and growth in this country.
e We have supported Lotus in the UK and will continue to work with them and local
partners to see how the skills of the current workforce can be redeployed elsewhere;
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for example our Talent Retention Solution matches engineering talent with new job
opportunities.
e Lotus has made clear the decision was related to the reorganising of the company so
that it might prosper in the future.
If RGF raised
e Weare in discussions with the company about whether this announcement will have an
impact on the RGF supported projects.
Top Government actions (since May 2010)
e In July 2013 we published our Automotive Industrial Strategy. Government and industry
will invest around £1 billion over the next 10 years in an Advanced Propulsion Centre
(APC) to research, develop and commercialise the next generation of low carbon
technologies. This investment has the potential to secure up to 30,000 jobs. So far
we’ve announced:
o The APC hub location at Warwick University (25 July).
o The first spoke location (London) at the new Loughborough University campus at the
former Olympic Park. (6 November)
o 6 APC collaborative R&D projects, the last 2 were announced on 6 November and are
led by JLR.
o Three APC competitions, the third opened on 12 November, funding available has
been increased from £75m to £100m.
o APC launched its SME Technology Development Accelerator Programme in
November. The programme aims to assist small and medium sized companies
prepare better for partnerships with vehicle manufacturers and Tier 1 suppliers.
e Other key actions focus on boosting the UK supply chain, ensuring industry has a skilled
workforce, improving access to finance such as through the establishment of a £24m
new Tooling Loan Fund (£12m RGF funding and maintaining the UK’s competitiveness in
the global auto industry.
© On 30 July, DfT and BIS launched a £10m Driverless Cars competition, through Innovate
UK. The winning projects were announced in Autumn Statement 2014. Following high
quality proposals, a further £9m was also announced to enable 3 consortia to receive
funding. All 3 projects will commence in January 2015 once Grant Offer Letters have
been agreed. IIn parallel to the competition, DfT is leading a review of the relevant
regulation and legislation - expected to report at the end of 2014.
© On 30 April, the Government announced a £20 million employer ownership fund for the
automotive sector. This has provided a simple and flexible mechanism to help
employers in the auto sector to address skills issues that cannot be supported through
mainstream funding and which supports the Growth Agenda and the Industrial Strategy.
Co-financing by Government and business is at its heart. £2.7m funding was provided in
the first phase to 6 companies to boost training, with a further £10m phase now open
to applications.
e The Automotive Investment Organisation (AIO), with up to £3million funding, is leading
the campaign to attract inward investment as part of the industrial strategy.
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Established in summer 2013, the AIO aims to double the number of jobs created or
safeguarded to more than 15,000 during the three years to March 2016. The
Automotive Council has identified at least £3 billion a year of potential new supply chain
business opportunities for UK based companies.
The automotive sector is receiving £294 million from Rounds 1-5 of the Regional
Growth Fund. Alongside this, £83m support for 32 automotive projects with a total
value of up to £226m under the Advanced Manufacturing Supply Chain Initiative
(AMSCI) is creating and safeguarding over 5000 jobs.
In September 2013, the Government launched: ‘Driving the future today - a strategy for
ultra low emission vehicles in the UK’. Major strands include: Supporting the early
market; Shaping the required infrastructure; Securing the right regulatory and fiscal
measures; Investing in the UK’s automotive capability; and Preparing the energy sector.
Government has made a £400 million commitment over this Parliament to make the UK
a leading market for ultra-low carbon vehicles, and in July 2013 announced an
additional £500 million of capital funding for the period 2015 to 2020. A call for
evidence by the Office for Low Emission Vehicles inviting industry views on how best to
target this support closed on 10 January 2014. On 29 April 2014 Government
announced the key elements of our comprehensive support package for ULEVs out to
2020 (all elements subject to securing the necessary State Aid approvals). The package
included £100 million for research and development.
The NIP announced an additional £25 m of Government funding for R&D 2017-18 and
2019-20 and a London ULEV fund of £10m between 2017-18 and 2019-20 and the Roads
Investment Strategy set aside £15 million between 2015-16 and 2020-21 for a national
network of chargepoints. The commitment is for the Highways Agency to expand the
existing chargepoint network to ensure that for 95 per cent of the time motorists will be
no more than 20 miles from a chargepoint as well as switching the majority of the
Traffic Officer Service fleet to ULEVs by 2020.
This takes total Government support for ULEVs over the period 2015-2020 to £550m.
On 17 July 2014, Government launched the £5m ULEV readiness scheme, supporting the
uptake of low emission vehicles in public sector fleets to demonstrate clear leadership
by the public sector to encourage future wide-spread acceptance. The first phase will
see over 150 ULEVs added to central Government fleets. The scheme will be expanded
in the autumn to the wider public sector, including councils, police forces and the NHS.
Innovate UK is supporting close to £0.5billion of critical R&D investment in the Low
Carbon Vehicle Sector, in partnership with OLEV and EPSRC. The majority of this is for
collaborative R&D but also includes for example a £9 million investment in an advanced
battery R&D and scale-up centre at the High Value Manufacturing Catapult at Warwick
Manufacturing Group and in June 2013 a £1m competition to help SMEs develop new
energy and emission efficient technologies for motorsport that could also have wider
applications.
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Construction
Key Facts
¢ Construction contracting output grew by 1.6% in 2013. However it remains 6.7% below
where it was in 2011 (the post-recession peak) and 12.6% below where it was in 2007
(the pre-recession peak and historic high point).
e Construction contracting contributes 6.3% of GDP [GDP(O)] and was worth £121.7bn in
2013.
e Key sectors of growth include private new housing (9.4% in 2013) and new
infrastructure (2.3% in 2013). However public new non-housing fell in 2013, by 10.3%
e The Labour Force Survey workforce jobs series, which includes self-employment, shows
that there were 2.1m jobs in construction contracting in March 2014. This was the
highest figure since December 2009. Jobs are not the same as people, as one person
can have multiple jobs.
e BIS estimates that the wider industry, including materials production and professional
services, had a turnover of £261.4bn in 2012 (latest available — BIS estimate using
Annual Business Survey data from ONS).
e ONS figures published 12 December 2014 show October output fell by 2.2% compared
to September. Compared with September 2013 output increased by 0.7%, the 17th
consecutive month of growth..
e Apprenticeships. Skills Funding Agency figures show 27,570 apprentices in
“construction, planning and built environment” in 2012/13 (which is the latest full year).
In 2013/14 so far there have been 26,300 apprentices (August to April — the
apprenticeship year runs August to July so we are still in 2013/14). So far in 2013/14
there are 13,320 new apprentices.
Top Government actions (since May 2010)
1. The Industrial Strategy for Construction, published in July 2013, set out a vision of
where the industry will be in 2025 and the steps needed to get there. Collaboration
between industry and Government will be central.
2. Implementation of the Strategy is driven by a 30-strong Construction Leadership
Council, co-chaired by Vince Cable MP and HS2 Chair, Sir David Higgins.
3. The Strategy commits to develop a construction supply chain payment charter,
published in April 2014. The Charter sets out 11 “Fair Payment Commitments” including
reducing payment terms to the supply chain to 30 days from January 2018. The
Leadership Council will encourage construction businesses from across the whole
supply chain to comply.
4. The Council is also looking for opportunities for growth including through the green
economy; more effective use of ICT and in overseas markets.
5. Government is also increasing demand in the construction industry through its support
for the house building industry, and infrastructure development and improvement —
The National Infrastructure Plan (NIP) sets a vision for infrastructure needs it identifies a
pipeline of over 500 projects, committing an additional £3bn on infrastructure from
2015-16 and making £40 billion worth of guarantees available.
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Defence
Key Facts
© UK’s defence industry is a significant part of the UK’s economy, contributing more than
£22 billion of annual revenues.
e UK exports totalled £9.8 billion in 2013, maintaining our position as the second largest
exporter of new defence products and services (after the US).
e The UK defence industry directly employs 162,400 staff in the UK and sustains a further
114,200jobs through the supply chain. Recent export successes included
AgustaWestland securing £1billion Norwegian Search & Rescue contract, providing 16
AW101 helicopters plus a support and training package. In July, MBDA UK signed a £250
million contract to supply missiles to the Indian MOD.
Top Government Actions (since May 2010)
¢ Created the Defence Growth Partnership (DGP), bringing Industry and Government
together to tackle barriers to growth, boost exports and grow high value jobs. The DGP
published its Implementation Plan in July 2014, to build on our strengths in Air
Capabilities and Intelligent Systems
e Through the DGP we are establishing a new UK Defence Solutions Centre to support
collaboration and innovation (in Farnborough). Matthew Hancock opened a new
Centre for Maritime Intelligent Systems in Portsmouth on 17 November, building on the
strong maritime expertise and skilled workforce in the area. We are creating a new
Defence Apprenticeship Trailblazer to develop the skills we need and strengthening
UKTI DSO to support export led growth.
e Ministers across Government including the Prime Minister are committed to supporting
UK defence and security exports.
e We continue to have the one of the largest Defence budgets in the world and have put
in place a fully funded and affordable forward equipment programme which means that
industry can plan better. MOD will continue to make significant spend on defence
equipment and support: over £150bn to deliver the ten year equipment plan.
¢ Government is prioritising investment in science and technology with a commitment of
over £400 million per year, as set out in the National Security through Technology
White Paper (2012).
Elephant trap
Apache CSP (Capability Sustainment Programme)
e The UK currently operates the Apache WAH64, a variant of the US Apache AH64D Block
1. Action is required to address critical obsolescence, reduce operating costs and
maintain operational capability in order to sustain the UK’s Apache capability in service
until 2040.
e The options for the Apache Capability Sustainment Programme are still with Ministers
for consideration. The procurement strategy is a key consideration alongside its value
for money to the taxpayer and Ministers will take into account the potential industrial
and regional implications of large investment decisions as part of this process.
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@ The National Security through Technology White Paper remains the Government’s
approach to purchasing equipment, support and technology for the UK Armed Forces.
The Defence Growth Partnership supports this with its approach to building greater
competitiveness, innovation and international focus in the UK defence sector.
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Insolvency Issues
Consultation: In an insolvency there may be difficult constraints, but it is still important
that as much meaningful consultation with employees is done as possible. My officials
are speaking to stakeholders about how to improve outcomes in these situations.
Prepacks: We are working with the profession and other stakeholders on the voluntary
reforms recommended by the Graham review published in June.
IP fees review/ DRO and bankruptcy petition limit review/ Continuity of supplies: I
expect shortly to announce the way forward in the light of consultation.
Breathing space: Anyone facing debt worries should seek independent, reputable and
free debt advice as early as possible. We asked the Money Advice Service to put fund
free debt advice on a sustainable footing. We will shortly publish the outcome of an
independent review on this.
Latest World Bank insolvency rankings (UK drops from 7th to 13th): UK regime still
returns more money to creditors, quicker and at lower cost, than most others including
US, Germany and France. Change to methodology favours slower and more costly
regimes in the overall rankings.
Enforcement Success:
o In May and September two directors gave undertakings totalling 20 years after:
allowing a bankrupt to act as a director, evading tax of at least £55m and making
payments of £2.3m not shown in the books.
o In October two directors were sentenced to a combined 13 months in prison and
disqualified for 12 years each, for controlling companies whilst disqualified.
o Since April the Insolvency Service has disqualified 883 directors for an average period
of 5.7 years, around 10% were in excess of 10 years.
(if asked) Scottish Power: It is not appropriate to announce whether or not a
confidential investigation under section 447 Companies Act 1985 is taking place. A
public investigation under section 432 Companies Act 1985 is not appropriate on the
basis of current information. However the creditors of the companies in liquidation will
receive reports from the liquidators if they are to be paid further dividends.
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Marine
Key Facts
e The marine industries (i.e. engineering and manufacturing) employ nearly 90,000
people in 5,000 businesses across the country and contribute £3.8 billion Gross Value
Added to the UK’s GDP.
e The wider marine and maritime sectors (which additionally includes shipping, ports and
maritime business services) contribute approximately £19 billion to the economy and
employs 367,000 people.
e The UK has a world class reputation for building warships and submarines; high quality
leisure boats, marine equipment and systems for international shipping, maritime
autonomous systems and marine science.
e Marine Industries Growth Strategy vision is that “greater cooperation across the marine
and maritime sectors could see their value to the UK economy rise to £25 billion a year
by 2020”.
Top Government Actions
e Implementation of the first ever Marine Industries Growth Strategy through the Marine
Industries Leadership Council - co-chaired by Matthew Hancock and Gregory Darling
Chairman of Gardline. Focusing on exports, technology, skills and supply chain. The
Council is also working towards a single brand for marine and maritime to aid
promotion of the sector at home and abroad.
e Increased investment in technology, with £17 million of Government funding since
January 2013 for marine related collaborative research. A £7.5 million Managing Energy
on Marine Vessels research competition will open on 12 January 2015.
e Support for Portsmouth and Solent area to build on strong maritime capabilities with
£7.5 million to support Sir Ben Ainslie’s America’s Cup team, over £4 million investment
in a Centre for Maritime Intelligent Systems to develop cutting-edge technology for use
in autonomous unmanned boats, submarines or other vessels.
e The third round of announcements for the apprenticeship trailblazers saw three
successful bids from the defence and marine industry. They were in advanced systems
engineering, boatbuilding and for mechanical fitters.
¢ Delivering a Marine Export Strategy with additional resource in UKTI to work with
industry. Identifying and pursuing export opportunities in major markets e.g. Brazil and
China, and encouraging inward investment.
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Prompt Payment
Key Facts
e Late payment is not a new issue, but the problem has worsened since the financial
crisis. Between 2008 and 2012, the overall level of late payments owed to businesses
almost doubled from £18.6 billion to £35.3 billion. Studies undertaken in 2014 suggest
that the late payment debt burden borne by UK business stands at £46.1bn.
e Late payment can have a very damaging effect on cash flow, and is a particular issue for
small and medium companies, as it impacts negatively on their ability to invest and
grow.
e@ Most companies in the UK supply goods and services on credit, agreeing to defer
payment for a period after delivery rather than demanding immediate payment. This
system (known as trade credit) is an essential element of business practice in the UK.
Around 80% of business to business transactions are undertaken on credit terms of
some form, and trade credit constitutes about 37% of total business assets.
© Bacs 2014 study estimated that 60% of businesses have experienced late payment. UK
SMEs are owed £39.4bn (average of £38,186 per SME) compared to corporates who are
owed £6.7bn at any one time. Late payment places additional costs on business due to
resulting overdraft fees and administrative costs etc. It was estimated in the Bacs study
that an additional cost borne by UK business was £9.16bn a year due to late payment.
As a consequence of money owed to them 30% of business said they spent £500 a
month however this can be as high as £10,000 a month. The research also showed that
25% of businesses spent over 10 hours a week chasing payments. 21% of businesses say
they are forced to rely on bank overdrafts due to late payment.
e The FSB estimated that late payment has led to £180 million in debt interest charges —
money that could otherwise be used for investment and growth.
e Comparison with other European Member States:
Country Average B2B Average B2B Difference in
payment term payment duration average terms
in days in days and average
duration
(payment beyond
terms)
e Finland e 20 © 26 ° 6
e Sweden e 27 e 35 ° 8
e Germany e 25 e 34 e 9
e France e 40 e 54 e 14
e UK 225 e 42 oe 17
e Spain e 60 e 83 e 23
e italy e 65 e 94 e 29
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Previous legislative attempts to tackle the problem
e The Late Payment of Commercial Debts (Interest) Act 1998 created a statutory
framework for tackling late payment. This was amended in August 2002 (when the 2000
EU Late Payment Directive was transposed into UK law) and again in March 2013 (when
the 2011 EU Late Payment Directive was transposed into UK law).
@ The legislation’s key provisions are:
o Businesses are entitled to charge interest of 8% above Bank of England Base Rate for
any late payment;
o Administration costs for chasing late payment can be claimed by business, on a
sliding scale depending on the size of the debt;
o Payment contracts must not infringe on a business’ right to claim interest and
administration costs for late payment;
o Mandatory 30 day payment terms for transactions with public authorities;
o Maximum 60 day payment terms between businesses, unless they agree longer
terms and this is not grossly unfair to the supplier.
«@ Few companies seek to exercise the rights provided by this legislation, especially against
larger companies. Just 10% of businesses have considered using late payment
legislation despite 22% of businesses having ended a business relationship with a
customer because of continued late payment. A study by the Credit Management
Research Centre found that the most prevalent reasons for not using the legislation
were fear of losing a customer or damaging the relationship, or because of the
administrative aspects of applying the charge.
Voluntary Measures to Increase Prompt Payment
e Tackling late payment is about more than legislation, it is about changing a business
culture and how business customers view their supply chain. For this reason voluntary
measures have been an essential part in tackling late payment.
e The Prompt Payment Code (the Code) was set up by the Institute of Credit
Management (ICM) in 2008 on behalf of Government in order to promote a culture of
prompt payment.
e The Code is voluntary and depends on signatories acting in good faith. Signatories to the
Code agree to:
e Pay suppliers on time;
¢ Give clear guidance to suppliers on how to get paid; and
e Encourage good practice.
e As of December 2014, 1,731 organisations had signed up to the Prompt Payment Code;
74 FTSE 100 companies.
Next Steps:
Duty to report
Through the SBEE Bill we will introduce a requirement for large and listed companies to
report on their payment practices. This measure will give suppliers the information that
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they need to negotiate fair contract terms, challenge unfair terms and better plan when to
expect payment. Secondly, it will increase competitive pressure to improve payment
practices and policies in line with peers. Thirdly, it will encourage businesses to process
their payments more efficiently.
This measure will be implemented through secondary legislation. A consultation on draft
secondary regulations was launched on 27 November, and will run parallel to the Bill’s
progress through Parliament. We propose that companies should report on a series of
metrics, and several narrative components to give an indication of their payment
performance and practices. The proposed metrics include, the proportion of invoices paid
beyond terms; the proportion of invoices paid over 30, 60 and 120 days; and the average
time taken to pay invoices. Our consultation proposes that the reporting frequency be
quarterly, with the report to be published on a company’s website.
As the measure is subject to the affirmative resolution procedure, we do not expect it to
be implemented in this Parliament. Instead, it is likely to be implemented early in the next
Parliament in late 2015 / early 2016, subject to the outcome of further consultation.
Ban on assignment
We will also introduce a measure to remove contractual barriers to invoice finance. The
purpose of this measure is to make it easier for business to access invoice finance. The
effect of this measure is to create a power for the Secretary of State to make regulations
which can invalidate contractual barriers that inhibit small businesses’ use of invoice
finance. It is also hoped that invoice financing will be offered to suppliers at more
affordable rates because of lowered administrative costs to invoice financers.
This measure will be implemented through secondary legislation. We are consulting on
draft secondary regulations which were published on 6 December. These regulations will
be subject to the affirmative parliamentary procedure.
Prompt Payment Code
In conjunction with the Institute of Credit Management, we have created a business-led
Advisory Board to strengthen the impact of the Prompt Payment Code. The principles in
the Code will remain the same, and signatories to the Code will continue to be expected to
pay suppliers on time, give clear guidance to suppliers and encourage good practice. The
Board will focus on monitoring signatory behaviour, promoting awareness of the Code and
improving website content to provide greater clarity to suppliers. The first meeting of the
Board was held on 27 October.
We are also exploring the possibility of including a maximum payment term of 60 days for
signatories. We plan to allow companies to make a case to be exempted from this rule in
certain circumstances.
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We have published a survey for members and non-members to seek their views on our
proposals. This will close on 9 January 2015.
Right for Trade Bodies to represent businesses
An EU Directive permitted trade bodies to take action on behalf of their members to
contest contractual terms or practices that are grossly unfair. However, some
stakeholders, including the FSB, feel that this has not been transposed fully into UK law.
We have made a commitment to consult on this issue, with a view to amending the
necessary legislation (Late Payment of Commercial Debts Act). We plan to consult in the
New Year.
Recommendations we have considered: during the Commons stages of the SBEE Bill, the
Opposition tabled amendments in particular on the following:
e Automatic payment of interest for late payment — the Government opposed because
we felt it would lead to perverse consequences, ie that companies would extend their
payment terms to ensure they never had to pay interest;
e Bans on retrospective unilateral changes to contract terms — the Government opposed
because (a) banning this would in effect mean changing contract law — as a matter of
law it is simply not possible to unilaterally change a contract, rather this has to be done
by agreement; and (b) this would in any case not tackle the practice causing all this
harm, because in practice big companies lean on their suppliers to get them to agree to
a change in terms. This is what happened in the Premier Foods scandal. We are
however consulting on requiring big companies to report on any changes to their
contract terms, to make more transparent such bad practices.
e Bans for payment to be on supplier lists — the Government opposed because we were
not clear how prevalent an issue this is; and we have already acted in the Grocery
sector where this clearly was an issue (through the statutory Grocery Supply Code).
Again, though, we are consulting on this practice and what more, if anything,
Government should be doing.
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Retail Sector
Key Facts
e Retail sales totalled over £321 billion in 2013, around 20% of UK GDP. Internet sales in
2012 were £32 billion, (around 10% of total retail sales).
e UK retail employs 2,955,000 people and is the sixth largest retail sector in the world by
sales.
© 9% of UK VAT-registered businesses are retailers, 187,390 in total.
e Retail sector pays £17.5 billion, of the 4 largest taxes (VAT, Business Rates, national
insurance and Income Tax), 9% of the UK total.
e Almost a third of retail employees are under 25 years of age.
Exports represent 1% of UK total.
Latest Figures (Source: ONS Statistical Bulletin, Retail Sales, released 18 December 2014)
¢ Retail sales volumes in November 2014 was estimated to have increased by 1.6%
compared with October 2014. Sales increased by 6.4% compared with November 2013,
this is the highest year-on-year increase since May 2004.
e In November 2014, the value of retail sales increased by 4.3% compared with
November 2013. And by 1.2% compared with October 2014.
Top Government Actions Since May 2010
e The 2013 Autumn Statement announced the biggest package of business rates support
in over 20 years, including; £1,000 discount in 2014/15 and 2015/16 for retail premises
with a rateable value of up to £50,000 ;Capping the RPI increase in bills to 2% in 2014-15
Extending the doubling of the Small Business Rates Relief to April 2015. A review of
business rates administration is currently being undertaken.
e The business rates announcement was part of a billion pound package to support for
the UK’s High Streets announced in December 2013 which also included a new multi-
million pound competition, to support business-led digital town centres, and action to
tackle unfair parking practices.
e In October 2013, "A Strategy for Future Retail" was published; developed in partnership
and building on the previous strategy published in 2012. The Strategy comprises actions
to address barriers to retail growth and performance, and to help retail prepare itself
for the future. Gloucestershire Local Enterprise Partnership was named as the first LEP
Retail Pathfinder Standard
e In spring 2013 the BIS Select Committee announced an inquiry into the UK Retail Sector,
it focused on Government support for the sector. The Select Committee published its
report in March and BIS worked with relevant government departments to publish a
response on 13 June.
@ The UKTI Retail International Action Plan was launched in March 2013. It commits
Government to work with the sector to support international growth of UK companies
by taking action to maximise investment in priority markets.
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SBEE Bill
Issue
e SBEE Bill will open up new opportunities for small businesses to innovate, compete, and
get finance to create jobs, grow and export.
e Bill passed Commons Third Reading unopposed on 19 November and was then
immediately introduced in the Lords for its First Reading. Lords Second Reading took
place on 02 December where debate was broadly balanced across the Bill as a whole.
e Lords Committee Stage will begin on 07 January and will involve line by line scrutiny of
the Bill.
Key Facts
© Bill will:
o improve companies’ payment practices so that small businesses have more
information on what to expect from them, can negotiate fair terms and ensure more
of their invoices are paid on time;
o improve access to finance through increasing the availability and sources of
investment for small businesses; improve access to credit by allowing HMRC to
provide non-financial VAT registration data to approved parties increasing the
reliability to credit reports; and introduction of ‘Cheque Imaging’, allowing depositing
cheques remotely via Smartphone or tablet meaning businesses receive their funds
more quickly;
o assist small business expansion overseas, increasing the support available from UK
Export Finance and widening their powers to support UK exports and exporters; and
improving access to exporter data, providing greater visibility for UK exporters;
o streamline public procurement to remove barriers and help small business gain fair
access to the £230bn public procurement market, and will, subject to consultation,
include requirements to ensure procurers run an efficient process, accept electronic
invoices, do not charge for bid information, and do proper pre-market engagement.
Also make it easier for small businesses to raise concerns about public procurement
practices;
o cut down on red-tape by ensuring that regulations affecting business are reviewed
frequently and remain effective. Bill will require a target to be published for the
removal of regulatory burdens in each parliamentary term, including transparent
reporting on progress;
o introduce a Pubs Code and Adjudicator to govern the relationship between large pub
owning companies and their tied tenants, bringing fairness to the sole traders and
small businesses that run thousands of tied pubs across England and Wales to help
ensure that they are treated fairly and are no worse off than their free-of-tie
counterparts. Following amendments made at Report stage of the Bill, the measures
also include a Market Rent Only Option. This requires large pub-owning companies to
offer their tied tenants the right to become free-of-tie at certain trigger points;
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© promote a prosperous and growing childcare market making it easier for schools and
other providers to offer out-of-hours childcare and give childminders more flexibility
about the premises from which they can operate;
o provide new and improved information on learning outcomes by tracking students
through education into the labour market; identifying which schools and colleges
best enable their students to progress; and giving a fuller understanding of the
impact of education choices on lifetime labour market outcomes;
o streamline insolvency law to remove unnecessary costs and ensure effective
oversight of insolvency practitioners;
o enhance the reputation of the UK as a trusted and fair place to do business,
increasing transparency around who owns and controls UK companies and helping
deter and sanction those who hide their interest in UK companies to facilitate illegal
activities or who otherwise fall short of expected standards of behaviour;
o strengthen the rules on director disqualifications to help creditors recoup some of
what they are owed; and increase the types of information to be taken into account
when considering a director disqualification;
o deter employers from breaking National Minimum Wage legislation by creating a
power to allow the penalty for under payment to be imposed on employers ona per
worker basis;
o stop abuse of zero hours contracts by rendering unenforceable, where included,
‘exclusivity clauses’ which stop individuals from working for another employer, even
if the current employer is offering no work.
o reform Employment Tribunals by encouraging more efficient management of
Tribunal postponements to reduce delay and cost, and will introduce a penalty to
ensure that Employment Tribunal awards are paid; and
o reform public sector redundancy pay to prevent public sector workers receiving large
pay outs if they then go on work elsewhere in that part of the public sector.
Elephant trap
The proposed reforms will not specifically support small business.
@ That is simply not true. There are many measures that are specifically designed to help
small businesses, including:
e Increasing the availability of investment for small business;
e helping small business gain fair access to the £230 billion public procurement market;
¢ cutting down on red-tape and ensuring that regulatory burdens affecting all business
are reviewed frequently and remain effective;
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Simplifying Business Support
Lines to Take
e Businesses have told us they find it hard to find the right type of support. We have
listened, and on 5 December the Government launched a transformed support offer
making it simpler and easier for every business to get the help that they need.
e For all businesses there is a single place to go for help: , so businesses can find support
easily. This together with the Business Support helpline and the provide a simple,
straightforward way to get help to start-up, grow and find finance.
e For up to 20,000 firms each year with the ambition and capacity to grow, the
Government’s Business Growth Service now brings together expert advice to improve
and grow in one place.
e The service has brought together the support provided by Growth Accelerator, the
Manufacturing Advisory Service, IP Audits and Designing mentoring as well as UKTI/
UKEF export advice. The service is closely linked to InnovateUK and the British Business
Bank.
e At the local level growth hubs will bring together national, local, public and private
support so that there is one access point for business support in each LEP area.
Key Facts
e Research shows SMEs that use advice are more likely to achieve growth and more likely
to make business improvements.
e SME employers who sought external advice or information in the last 12 months were
more likely to be aiming to grow their business over the next 2-3 years (76%), than
those who had not sought advice (61%) (Small Business Survey 2012).
e Research shows the use of business support, whether public or private sector, is low —
less than half of all SME employers (45%) sought external advice or information last
year. The main barriers to take up are businesses finding it difficult to value the
benefits of advice, concerns over trustworthiness or capability of external advisors and
not knowing how to access external advice.
e Only 6% of SMEs used a business mentor in the last year — this means that 4.5 million
UK SMEs are not using a business mentor.
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Estate Agents Double Charging
Issue
e Concerns have been raised about the emerging practice of so-called “double charging”
by estate agents and its potential impact on the housing market. “Double charging” is
where the buyer is charged the agent’s fee (sometimes as much as 2% +VAT of the final
asking price) and the vendor is charged a small amount for marketing the property
(some £150+ VAT)
e The practice in itself is not illegal and although not widespread is causing confusion and
isn’t clear. To try to address this the Propery Omdudsman has prepared specific
guidance for estate agents underlining their obligations, under their mandatory Code of
Practice, for transparency, disclosure, avoidance of conflicts of interest and fairness.
This was published on their web site on 16th December .
e The intention is that this guidance will ensure both buyer and seller have the
information necessary at the earliest point possible to help them make the right
transactional decisions.
Key Facts
e The conduct of an estate agent is regulated by the Estate Agents Act 1979 (EAA). Estate
Agents must also abide by the Consumer Protection from Unfair Trading Regulations
2008, as well as their own self-regulatory industry codes, and must therefore already
make fees and charges clear for both buyers and sellers.
e Since 1 October 2008, all estate agents in the UK engaged in residential estate agency
work have been required to join an approved redress scheme dealing with complaints
about the buying and selling of residential property.
e Enforcement is by way of local Trading Standards Services under the oversight of the
National Trading Standards Board (NTSB) and Powys County Council as the lead
enforcement authority for the sector.
Top Government Actions (since May 2010)
1. Earlier this year the Minister for Consumer Affairs met the redress schemes, The
Property Ombudsman (TPO) and Ombudsman Services: Property who advised that
marketing analysis did not show a significant problem but shared our view that this was
not a practice that should be encouraged. They agreed to monitor complaints in
respect of this practice. There is a danger that if we were to rush into further legislative
measures, we risk damaging and stifling growth within the industry.
2. The Property Ombudsman committed to addressing the matter through guidance to
ensure the industry recognise their obligations under their code of practice and adhere
to high standards of behaviour.
3. The issue has been debated in both houses during the Consumer Rights Bill and an
amendment banning the practice was tabled by Baroness Hayter at HOL’s Report Stage
in November. The opposition pressed for a vote ; the Government won by a majority of
43 votes. Lack of transparency, excessive charges and conflicts of interest are the main
concerns. Baroness Neville Rolfe assured the House that the Property Ombudsman
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(TPO) would issue his guidance in December. This was published and disseminated to
agents on 16th December.
Elephant trap
What use will guidance have?
e The guidance will ensure agents recognise their obligations, under The Property
Ombudsman Code of Practice, for transparency, disclosure and avoidance of conflicts of
interest. It also stresses that agents should not charge the buyer more in agent’s fees
than they would normally charge a seller. If the guidance is not complied with, agents
will be in breach of that Code. Breach of the Code could result in removal from the
redress scheme — this would effectively prevent them from operating as an estate agent
as membership of one of the redress schemes is a legal requirement for estate
agencies. The Property Ombudsman will continue to monitor complaints and
developments in this area and keep Government informed.
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Paperless Billing
Issue
e A Public Campaign called ‘Keep Me Posted ‘ wants to create a legal right to receive
paper bills through the post rather than digital bills; and not to be charged extra for that
service. There is associated discontent about charges a) for processing non direct debit
payments such as cheque or cash and b) for phoning customer services with an account
or service query or to pay a bill.
e Charges for paper billing by utility companies, telecomms providers and financial
services practices are claimed to be penalising the elderly and vulnerable.
e The matter has been the subject of a number of Lords Debates, culminating recently as
amendments tabled to the Consumer Rights Bill.
e The most recent amendment from Baroness Oppenheim-Barnes at the Report Stage in
the Lords of the Consumer Rights Bill sought to compel industry to provide paper bills
and statements and the continued processing of cheque (rather than electronic )
payments free of charge. The most controversial aspect of this amendment was that it
sought to prohibit industry from offering a discount to those opting for cheaper
electronic transactions. It is likely that this requirement would have contravened
relevant provisions of an EU Directive on payment surcharges but it was rejected by a
vote of 189 to 163.
Key Facts
@ This is not necessarily a penalty for choosing paper. In many cases, rather than paying
an extra charge, customers are simply not receiving the discount available available to
those that pay by direct debit. Choosing paper bills retains an additional service for
those who wish not to take a ‘paperless bill discount’ for surrendering that service.
e The Government would not wish to intervene to deprive those opting for paperless
transactions from receiving the cost savings and deprive industry of the ability to use
more cost-effective and lower risk collection and administration processes such as
internet statements and direct debit payments.
e Discounts for paperless billing, statements and direct debits must be justified by and
reflect the actual lower paper, postage, overhead and administration costs incurred.
And Consumer Protection Regulations prevent traders from making a profit on charges
for paper documentation and cheque payment processing.
e It is not necessary to use the internet to set up an on on-going direct debit arrangement
or to pay by credit or debit card for a single payment.
© Direct debits are often arranged by post or telephone ; and payments by credit or debit
card may be made over the telephone. The Government has recently introduced
legislation to prevent callers being charged premium rate and making it easier to
complain about and reclaim any overcharge.
¢ To put this in perspective, charges for traditional non electronic transactions are
typically a very small percentage of the overall cost of any utility or essential services
tariff. .
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e The most important advice for consumers is to look around to find an appropriate
service tariff and overall price for their needs - including the cost of paper bills and
payments if they want them — at the best price possible as savings could far exceed the
cost of the bill or payment method. There are now many organisations looking to
support those such as the elderly and vulnerable consumers in finding the most
appropriate service level and value for money.
¢ Complainants about unfair treatment should seek advice from Citizens Advice who may
in turn refer any widespread intractable issues to Trading Standards or the relevant
regulator/ombudsmen to investigate and respond.
Top Government Actions (since May 2010)
Premium Telephone Lines
¢ Government is intervening in the related cost of premium rate customer service
telephone lines. Government funding has allowed Citizens Advice Consumer Service
Helpline to change their premium number to an 03 this month. 03 numbers are charged
at the same price as a local call (01 and 02 prefixes), and should be included in any “free
minutes” allowance from landline and mobile providers.
Cost of Living
© Government is addressing the costs of items such as electricity supply and petrol which
are having a much larger impact on cost of living than paper bills. Government
intervention requires energy companies to make customers aware of the best tariff.
e The Government has done a lot to support groups of consumers wishing to switch to
suppliers offering a better deal, and this has been very successful especially for gas and
electricity tariffs.
Financial Services
e The Government is committed to improving access to financial services for individuals.
Access to a transactional bank account is key to enabling people to manage their money
effectively, securely and confidently on a day-to-day basis.
Digital Inclusion
e Anew cross-government Digital Inclusion Team based in the Cabinet Office's
Government Digital Services has been established in order to co-ordinate and drive
forward the digital inclusion agenda. This team will work across Government to develop
a digital inclusion strategy
e UK Online Centres, which is a network of 3,800 community-based centres throughout
the UK (funded by BIS and DWP) offer free digital skills training to the most
marginalised groups such as the elderly, long-term unemployed and disabled. Their
tutors are trained to cater for all learning abilities.
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Consumer Rights Directive (CRD) 2011
e From 13 June 2014, when UK Regulations implementing the CRD came into in force,
suppliers should obtain consumers’ express consent to any extra charges including
those for paper bills. They should not use an approach that requires consumers to
untick boxes in order to avoid charges.
Elephant traps
e Several separate requests from ‘Keep Me Posted’ for meetings with BIS Ministers were
recently declined on the grounds of a heavy work schedule. A round robin invitation to
SoS was not taken up. BIS has offered the campaign’s president a meeting with policy
officials and - so far - no response to this has been received.
e The ‘Keep Me Posted’ lobby group position, was strongly supported by some members
of the House of Lords during the debates on the Consumer Rights Bill in Grand
Committee in that House, the Lords seemingly not impressed by the prospects of digital
roll out or of promised digital training for the elderly. Their point remains that — even if
they could - they do not want to have to use the internet — they want choice to receive
paper bills without being penalised by charges and, similarly, to pay their bills by cash,
cheque or postal order.
e BIS took the lead in responding to the EDM and leading in this matter in the November
2013 Lords Short Debate and follow up debate in December (Lord Younger). This was
because of BIS overarching consumer protection brief. However, policy responsibility
and power to act is spread widely across Other Government Departments and
Regulators.
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Pubs Code and Adjudicator
Issue
e Through the Small Business, Enterprise and Employment Bill the Government is
introducing a Statutory Code of Practice and an Adjudicator to enforce the Code, to
govern the relationship between pub-owning companies and their tied tenants.
e Measures will address the imbalance in bargaining power between large pub-owning
companies and the thousands of tenants that run tied pubs across England and Wales.
e Following the Government’s defeat in the Commons on 18 November 2014, the Code
will also require pub-owning companies to offer tied tenants the option to go free-of-tie
at rent review or other specified circumstances. The tenant would pay a market rent for
the pub but would be free to source beer and other products from any source (known
as ‘Market Rent Only’).
Key Facts
e Tenant groups, the BIS Select Committee and other campaigners are concerned about
unfairness in the relationship between pub companies and their tied tenants.
e 57% of tenants tied to large pub companies earn less than £10,000 per year, compared
to just 25% for tenants who are free-of-tie, and 80% of tied tenants earn less than
£15,000 per year (CAMRA).
e BIS Select Committee has published five reports in ten years on pubs, consistently
calling for Government action, including recommending the establishment of a
Statutory Code and Adjudicator in 2011.
e The Office of Fair Trading found in 2010 that there were no competition issues in the
market. Government is not intervening for competition reasons, but to ensure tenants
are treated fairly.
© The Government’s consultation in 2013 received over one thousand one hundred
written responses and over seven thousand responses to an on-line survey conducted
in parallel.
Top Government Actions (since May 2010)
e In November 2011 Government secured a commitment from the industry to build on
self-regulation. Following a call for evidence on how it was working in October 2012, the
Secretary of State announced to Parliament in January 2013 that while it had brought a
number of improvements, self-regulation did not appear to be working well enough,
and he would consult on statutory intervention.
e Aneight week consultation took place between 22 April and 14 June 2013 on
establishing a Statutory Code of Practice and an independent Adjudicator.
¢ On4 June 2014, the Government’s responses to the consultation and to BISCOM’s July
2013 report were published and, on 3 June 2014, the Queen’s Speech announced that a
Pubs Code and Adjudicator would be taken forward in the Small Business, Enterprise
and Employment (SBEE) Bill in the 4th Session.
© The SBEE Bill moved from the Commons to the Lords in December 2014 and Lords
Committee starts on 7 January 2015.
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Elephant Traps
Market Rent Only
Government said Market Rent Only would have unpredictable consequences for the
pubs sector so why have you changed your mind?
e We resisted the Market Rent Only amendment partly on the basis that it could have
unintended consequences for the pubs sector.
e However, we recognised the strength of feeling in Parliament on the Market Rent Only
issue and understand that many in and outside of Parliament believe that pub-owning
companies need the threat of tenants going free-of-tie before they will offer their
tenants a fair tied deal and ensure there are ‘no worse off’.
e That is why we confirmed at Second Reading of the Bill in the House of Lords on 2
December 2014 that we accept in principle the introduction of a Market Rent Only
option.
¢ Our focus now is on making this option workable, to ensure that we minimise the risks
of unintended consequences.
What about claims that the Market Rent Only proposals, if implemented, would
constitute a breach of the Human Rights Act?
e The vote in Parliament demonstrates that Members strongly believe that pub-owning
companies need the very real threat of tenants going free-of-tie before they will offer
their tenants a fair tied deal.
e Although some of the longer-term impacts may be hard to quantify, we consider that
these measures are a proportionate and targeted response to the long-standing
problems in the pubs sector — they strike a fair balance between protecting pub-owning
businesses’ property and bringing in crucial new protections for the rights of tied
tenants. For those tenants, these protections are not just about their business but also
about their home.
The Parallel Rent Assessment (PRA) is redundant now that the Bill includes a Market
Rent Only option. Will you be removing this requirement?
e As drafted the legislation and Code would also require pub-owning companies to
provide a parallel free-of-tie rent assessment (PRA) to tied tenants upon request if rent
negotiations fail, which would make clear whether the deal being offered would leave
the tenant no worse off than a free-of-tie tenant. Government is considering whether
to retain the PRA in light of the addition of the Market Rent Only option into the Bill at
Commons Report stage.
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Secondary Ticketing
Issue: Secondary Ticketing
Key Facts
e@ We have taken action — this summer we introduced a new section into our guidance
setting out what information a trader selling tickets must give a consumer.
Transparency is all important — consumers must know what they are buying from a
trader.
e Of course we should do more if it’s proportionate to do so. However, only 0.06% of calls
to Citizens Advice are about tickets, and industry are concerned about extra burdens, so
we haven’t yet satisfied the proportionality test.
e The Consumer Protection from Unfair Trading Regulations 2008 make it a criminal
offence if a trader provides misleading information and a consumer buys a ticket on the
basis of that misleading information.
e The Consumer Contracts (Information, Cancellation and Additional Charges)
Regulations 2013 provide that a trader must give or make available to the consumer
information about what they are buying, the total cost of the purchase and from whom
they are buying in a clear and comprehensible way before they buy. They came into
force recently — on June 13th 2014.
e Consumers appreciate being able to resell tickets, and may turn to unofficial channels if
we make this difficult: ICM polling found that over 85% of consumers thought they
should be able to freely resell tickets they have bought.
e The All Party Parliamentary Group said, earlier this year: “We believe that the existence
of a secondary market is justified by the need of consumers to pass on tickets bought
for events that they can no longer use”.
e The Culture, Media and Sport Committee said: “Any attempt to ban the secondary
market outright would also be a very serious step in that it would criminalise what has
been a perfectly lawful activity”.
@ The OFT said “Secondary agents can provide a useful function for consumers who need
tickets for events and are willing and able to pay premium prices.”
Top Government Actions (since May 2010)
e The Consumer Contracts (Information, Cancellation and Additional Charges)
Regulations 2013 came into force recently on June 13th 2014. Guidance, including a
specific paragraph on what ticket sellers need to do.
e Ministers have met with all the key players: the main ticketing websites and the
sporting bodies.
Elephant trap
Rugby World Cup in England and Wales 2014
e I have been very impressed by the action the 2015 organisers are taking:
© They are using a ballot system, have anti-forgery designs on the ticket and an official
dedicated resale site will be launched next year — these all moves that will help protect
the market.
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18 to 21 Work Skills Pilot
¢ On-line and blended English and maths training for the young unemployed without level
2.
Issue
e In February the Deputy Prime Minister announced a pilot scheme for 18-21 year olds
who do not have level 2 in English and maths.
e This formed part of the Cabinet Office review of all policies, funding and provision for 16-
to 24 year-olds not in employment, education or training.
Key Facts
© On 25 November, the 18-21 Work Skills Pilot was launched in several Jobcentre districts
in England providing young jobseekers without English or maths qualifications at Level
2, training to improve these crucial skills.
¢ Much of the training is through innovative online learning which will allow young
people to learn at their own speed and work towards GCSE qualifications or Functional
Skills.
¢ New JSA claimants aged 18-21 identified as having English or maths below Level 2 will
be mandated to a provider assessment leading to maths and/or English training for up
to 16 hours per week, alongside their jobsearch.
e The pilot will be evaluated through a Randomised Controlled Trial (RCT). It will test the
impact on educational and employment outcomes of systematically mandating 18-21
year-old JSA claimants to undertake this type of training at this stage of a claim.
QandA
Why the focus on English and maths?
¢ Being competent in English and maths can make a real difference to a person’s life,
both in terms of employment outcomes and their general well-being.
Isn’t this duplicating existing provision?
e By making the best use of learning technology, young people will be helped to get the
English or maths skills they need to find and stay in work, where perhaps more
traditional classroom-based learning may have failed them in their previous education.
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18 to 21 Work Skills Pilot 2
Issue
e Pilot 2 was announced by the Deputy Prime Minister in February 2013 to help reduce
the risk of permanent disadvantage in the labour market. The objective is to give young
people who have been claiming Jobseeker Allowance on a long term basis the
opportunity to address the barriers they are experiencing in obtaining sustainable work.
Key Facts
Jobseekers who have been claiming Jobseekers Allowance for 6 months are required
to participate in a suitable work-related activity lasting up to 3 months.
e Jobseekers are identified by Jobcentre Plus (JCP) and invited to attend a diagnostic
interview with their Work Coach. Through discussion Work Coaches will determine
barriers and agree with jobseekers their appropriate activity to undertake.
e Ifa jobseeker is already participating in worthwhile provision at this stage where job
goals are likely to be reached, it may be more beneficial for them to continue. But
fundamentally, all claimants will be participating in something, doing nothing is not an
option
¢ Work-related activity:
Work Experience Placement (unable to mandate).
Traineeship.
Skills training.
Sector-based work academy.
Mandatory Work Activity.
Other ie New Enterprise Allowance Scheme.
e Pilot 2 is being delivered in Kent; the pilot is running throughout the whole district.
Upto 3000 participants will take part in the pilot.
e The pilot was launched on 25 November 2014.
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24+ Advanced Learning Loans
Issue
e 24+ Advanced Learning Loans are available to thousands of adults wishing to retrain.
Key Facts
e Learners aged 24 and above studying at Level 3 and Level 4 can access loan support to
help meet up-front fees, removing one of the main barriers to learning.
e Loans enhance shared responsibility for skills funding, recognising that much of the
benefit of advanced vocational study goes to the learner.
@ Introducing loans has allowed grant funding to be focused where the barriers to
learning are greatest for young people and those without basic level English and Maths.
e 24+ Advanced Learning Loans went live in April 2013. To end October 2014, around
118,500 applications had been submitted (71,000 in 2013/14 and 47,500 so far in
2014/15).
e The loans operate on the same eligibility and repayment basis as HE student loans, with
nothing to repay until the learner has left the course and is earning above £21,000; and
any outstanding loan amount written off after 30 years.
e On 19 June 2014, the Government launched the consultation ‘Further Education —
Future Development of Loans’, seeking views on proposals to expand and simplify loans
in Further Education. An expansion would have no impact on the fully-funded
provision. The Government response is due to be published early in the New Year.
Elephant Trap
¢ Challenge: The take up of loans this year is lagging behind last year.
e Response: We will continue to monitor take-up and work with the sector to help them
share best practice on how providers have made loans work.
@ Challenge: BIS is overdue in publishing its response to the consultation
e Response: The divergence of views that we received in response to the consultation,
and the interaction between the future of loans policy and other policy areas means
that Government has needed more time than anticipated to come to decisions.
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Adult Skills Funding
Key Facts
© Overall funding for adult FE and Skills is £4.1 billion for the 2014-15 Financial Year. Of
this £3.4 billion has been granted to the Skills Funding Agency to support learners.
Lines to take
¢ Despite the tough fiscal climate, we have retained funding for adult Teaching and
Learning in 2014-15 at broadly the same level as 2012-13
e Adult skills funding is prioritised where its impact is greatest and our priorities remain
focused on Apprenticeships, Traineeships, and supporting unemployed people to
improve their skills for work and all adults to gain a good standard in maths and
English.
e By 2015-16 BIS’s funding for FE teaching and learning will fall by about 8%. In order to
deliver these savings we are targeting our funding more effectively, and using our
funding to leverage new private sector contributions.
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Adult Vocational Qualifications
Issue
e The adult vocational qualifications system is designed to provide a skilled workforce
with access to relevant, rigorous qualifications that employers value, enhance social
mobility and improve progression into further or higher education and employment.
Key Facts
e Vocational qualifications play an important part in supporting the development of
relevant and up-to-date skills in the workforce. They match the skills, knowledge and
understanding people require for entry into an occupation or progression in a career or
to further training. High quality vocational education is essential to meet new demands
of changing global economies and new technologies and support economic prosperity.
e In March 2014, the Government published “Getting the Job Done”, which set out its
reform programme for vocational qualifications for learners in full-time education, for
adults and for apprenticeships. In each case, it set out the steps we are taking to
develop rigorous qualifications which are recognised as valid by learners and
employers. This programme is now being taken forward by BIS, DfE, Ofqual and the
Skills Funding Agency.
e In particular, Ofqual have just completed a consultation on the framework for
vocational qualifications (the QCF) The main outcome being that the QCF rules will be
removed. Which will mean qulaifiactions can be better designed around the needs of
employers rather than proscriptive QCF rules. The Skills Funding Agency has put into
place new business rules to approve qualifications submitted for funding, leading to a
smaller and more relevant funded offer. A qualification will need to have recognition by
business, a clear purpose and appropriate content and show that it will help a learner
into a job or be a pathway to higher-level skills. Existing qualifications with no or low
take-up are reviewed annually, and removed from the scope of funding unless they fill a
particular niche. Nearly 4,000 qualifications have been removed from the 2014/15
publicly funded offer because they have not met the business rules, and more will be
removed for 2015/16.
e The changes mean that nearly £200m of the adult skills budget has been re-directed
towards the highest quality and most relevant qualifications. The business rules will sit
alongside the Agency’s funding policy rules and the Agency will continue to ensure that
qualifications which attract public funding are high quality, valued by employers and
responsive to learner need.
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Apprenticeship Reforms in England
Key messages
© Delivered 2 million apprenticeships starts in this Parliament (Announcement 9
December 2014).
e Apprenticeships are at the heart of the Government's drive to equip people of all ages
with the skills employers need to grow and compete.
e Apprenticeships are real jobs with training; locations and sectors are determined by
employers offering apprenticeships and recruiting apprentices.
e While apprenticeships already deliver strong returns for the economy, employers and
apprentices, we want to ensure that they become more rigorous and responsive to the
needs of employers.
e We want it to become the norm for young people to choose between an apprenticeship
or university place as equally prestigious routes to a great career.
e Apprenticeships give young people the chance to reach their potential, giving them
what it takes to achieve a successful career and secure future finances.
Apprenticeship Reforms are:
e Putting employers in the driving seat - designing apprenticeships that are more
responsive to the needs of business. Giving them control of funding will also make
them more demanding customers.
e Producing short, simple apprenticeship standards written by employers that are
replacing complex frameworks.
e Increasing the quality of apprenticeships through higher expectations of English and
maths, more end point assessment.
Trailblazers -Employer-led, are designing the new apprenticeship standards and
assessments, which are being trialled during 2014/15 academic year.
¢ Our aim is that from 2017/18 all apprenticeship starts will be on the new standards.
¢ More than 1000 employers are involved in over 75 sectors.
e 73 standards approved and published with more than 75 new standards in
development.
Funding Reform —
¢ Routing funding for apprenticeship training and assessment through employers will give
them greater control and purchasing power over apprenticeship training.
e Atechnical consultation is currently being evaluated independently of BIS and we will
publish a response shortly.
e We are trailling the funding model with Trailblazer standard-based apprenticeships
started 2014/15 Academic Year. This will be based on Government contributing £2 for
every £1 the employer contributes to external training and assessment costs, with
additional payments for small businesses, employment of 16-18 year old apprentices,
and successful completion.
e The Autumn Statement on 3 December 2014 announced from April 2016 employers will
not be required to pay employer National Contributions for apprentices under the age
of 25 on earnings up to the upper earnings limit.
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Careers Advice and the National Careers Service
Issue
e The Government has announced the creation of a new employer-led careers company,
which will operate independently of government and will be tasked with supporting
engagement between employers on the one hand, and schools and colleges on the
other. It will ensure that young people aged 12-18 get the support they need for
success in working life. The National Careers Service will continue to work to help
adults and work with the new company to improve the offer to young people.
Key Facts
¢ The government's growth agenda makes it vital that careers advice, guidance and
inspiration in schools are fit to prepare young people for a modern economy and long-
term economic plan.
¢ Ofsted’s Annual Report (2013/14) reported that many schools need help to formulate
careers advice strategies, and improving employer engagement.
e The company will work closely with the National Careers Service, which will continue to
support young people through its helpline and website and to help the company bring
employers, schools and colleges together though its local brokerage role. The NCS will
also remain the mainstay of the government’s offer for adults.
e The Secretary of State for Education has invited Christine Hodgson to chair the new
company, and it will be formally established by her. We expect the new organisation to
be up and running by March 2015.
@ Since its launch in April 2012, the National Careers Service has delivered: over 1.6m new
adult customers face to face advice sessions; 113,953 telephone, web chat, e-mail and
text contacts with young people; over 500 thousand unemployed 18-24, with 1.5 m hits
a month on its website.
¢ It operates from over 2,800 locations co-located with Jobcentres, colleges and in 116
prisons, and achieves high satisfaction levels amongst adults — with over 50% stating
that the careers adviser contributed to their success.
e BIS is providing £110.9 million in 2014-15, including £14 million ring fenced for provision
in prisons and £1.4 million for the Youth Contract.
e In April 2014 DfE published revised statutory guidance, and departmental advice of
good practice for schools, emphasising the need to provide pupils with experience of
work, labour market and progression routes.
e Inthe December 2014 Autumn Statement, £20m was announced to improve careers
advice and support for young people.
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Employer Ownership Fund
Key messages
e EOF is further developing the Government’s ambition to give employers a leading role
in the adult skills delivery
e Building on the lessons learned from the Employer Ownership Pilot (EOP) to deliver a
new flexible way for employers to tackle skills challenges with government funding
match
e Employer Ownership Fund is strategic, simple and fast delivering funding to projects
quickly so they can get underway.
e Funding goes directly to individual businesses to support training costs on a 50/50
matched basis.
£20 million for skills in the automotive supply chain (2 releases)
e First £10 million announced on 30 April and closed on 25 July. 6 projects being
supported with £2.7m of grant funding matched by employer investment.
¢ Second £10 million opened for applications on 3 November.
£30 million to support engineering skills for employers (3 releases)
¢ £10 million to help people progress in engineering careers (opened 19 June and closed 5
December 2014)
e £10 million to develop more women engineers (opened 23 June and closed on Sth
December 2014)
e £2.5million (part of £10million package) to help small firms tackle their engineering
skills challenges (opened 12 December — scheduled to close 27 February 2015)
Top Government Actions (since May 2010)
e Launched and supported the Employer Ownership Pilots to test the concept and
appetite among employers to take ownership of the adult skills agenda. £340 million
has been made available for two funding rounds through to FY2015-16
e Provided funding for the Employer Ownership Fund to continue to give employers a role
in the delivery of adult skills ensuring that it meets their needs.
e Successfully implemented the first Automotive Skills fund, with 1st tranche of successful
projects now operational and receiving grant funding. First Engineering project now
approved and grant offer made.
Elephant trap(s)
What will be the focus of future calls?
e We will continue to engage with employers to identify strategically important skills
issues where co-investment by Government and business could help to tackle serious
skills shortages that are inhibiting economic growth.
The Adult Skills Budget is undergoing fiscal tightening, where is the money for the EOF
coming from?
e EOF is being managed flexibly within the Adult Skills Budget. We are mindful of the need
for budgetary oversight and will only deliver calls that we can afford.
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Employer Ownership
e Employer Ownership is a key aspect of the Government's policy reforms to make the
skills system more responsive to employers’ needs and to further encourage employers
to invest in improving the skills of their workforce. The concept is being tested through
the Employer Ownership Pilot Programme (EOP) and we have taken the best elements
of the EOP to create a new, permanent funding mechanism called the Employer
Ownership Fund (EOF).
Top Government Actions (since May 2010)
e Launched and supported the Employer Ownership Pilots to test the concept and
appetite among employers to take ownership of the adult skills agenda. £340 million
has been made available for two funding rounds through to FY2015-16.
e Provided funding for the Employer Ownership Fund to continue to give employers a role
in the delivery of adult skills ensuring that it meets their needs.
e Successfully implemented the first Automotive Skills fund, with 1st tranche of successful
projects now operational and receiving grant funding. First Engineering project now
approved and grant offer made.
Employer Ownership Pilot (EOP)
Key messages / facts
© Companies, or groups of companies, bid directly for funding to enable them to develop
and deliver solutions for their own workforce, or on behalf of their sector, supply chain
or locality.
e Aim is to generate innovative approaches to training and development, encourage
more employers to invest in training and promote greater leverage on private sector
funding, thereby increasing value for taxpayer money.
Two funding rounds...
e Round 1(2012) - attracted 269 applications, with 36 projects offered funding. Total
investment around £102 million public funds with £115 million in employer
contributions.
Round 2 (2013) - 315 applications received, (six times oversubscribed). 276 projects
offered funding going forward. £150m approx. awarded to 7 Industrial Partnership
programmes (Aero, Auto, Creative & Cultural, ICT, Life Sciences, Nuclear and
Tunnelling/Construction).
e A full impact evaluation of the Employer Ownership Pilot will run from 2013 to autumn
2017.
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Employer Routed Funding
Issue
© Opponents of the reforms argue that paying providers directly for Apprenticeships
works well and does not need to change. The proposed reforms put added burdens on
employers and will lead to a reduction in the numbers of apprentices.
Key Messages
e We intend to publish the Government response to our technical consultation on
Apprenticeship Funding Reforms this month (January 2015)
e We are not going to rush any changes that would make apprenticeships unattractive to
employers
¢ Giving employers direct control of apprenticeship funding remains a core and non-
negotiable part of our reforms to ensure that apprenticeships become more rigorous
and responsive to their needs
e Routing funding to employers will help them secure the most appropriate and effective
training and make providers more responsive to employer needs.
e By moving away from a provider driven system and giving employers the purchasing
power to influence quality and value of training, we are looking to deliver the best value
for taxpayers’ money and to drive up quality and participation.
e Weare giving careful thought to how we ensure that any off-putting administrative and
financial burdens are avoided. We want the system to be efficient and attractive to
employers of all sizes, including micro businesses and sole traders.
e Weare involving businesses, providers and their representatives in the design and
development of the new system, to ensure it reflects their needs and priorities
e Weare trialling a funding model with new employer-designed apprenticeship standards
in the 2014/15 academic year. We will be maintaining an open mind moving forward as
we learn from this trial
e Any new process will be fully prototyped and live-tested to ensure it is simple, secure an
easy to use before it is implemented.
Key Facts
e The technical funding consultation ended in May 2014.
e We received 1,459 individual responses, almost half of which came from small and
micro businesses.
e We also undertook a series of wider stakeholder discussions, focus groups and met with
employers to discuss the proposed models outlined in the consultation
e Weare trialling a cash co-investment model this year, and will be looking at further
trials in 2015-16, and these trials will inform our future decisions.
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Engineering Skills
Issue
© Boosting supply of engineering skills to meet industry needs and support growth.
Key facts
e Significant growth in university applications for engineering: up by 6.1% in 2014
¢ There are multiple pathways into engineering, including training within the workforce
and conversions from qualifications in related subjects: Only 60% of current engineering
professionals are educated to degree level.
e 45,000 Engineering Apprenticeship starts since May 2010.Over 13,000 Engineering
Apprenticeship starts in the 2011/12 academic year.
e Less than 10% of engineering professionals in UK are women (lowest in EU).
Top lines to take
Government actions in response to the Perkins Review of Engineering Skills:
e £250k seed-funding for the Tomorrow’s Engineers employer engagement programme
to inspire more young people to choose engineering
¢ Over £30m to support employers improve engineering skills in their workforce through
employer ownership fund (EOF)
e £50 million for new National Colleges to train more engineers in manufacturing, high
speed rail and nuclear sectors£200m investment in engineering and science teaching
capital fund in universities matched by private funding and requiring a commitment to
equality and diversity.
e Additional £185m for teaching in high cost subjects, including engineering
e £6m over two years for HEFCE to work with engineering professional and regulatory
bodies to develop an engineering conversion pilot to enable qualified non-engineering
graduates to pursue a career in engineering
e New employer-led “Trailblazer” apprenticeships with a focus on engineering, including
aerospace, automotive and energy.
e Working closely with the engineering community to boost employer engagement with
young people, teachers, schools, colleges and universities.
Government action to improve diversity in engineering
¢ Created the Tomorrow’s Engineers Week campaign to inspire young women about
engineering careers. Inspired by the success of the inaugural campaign, the engineering
community have committed to make this an annual event.
e Set up the Your Life Call to Action, under which over 200 organisations have pledged
concrete action to increase women in engineering and technology.
e £400k pa to address diversity in the STEM workforce through a joint programme run by
the Royal Society and Royal Academy of Engineering.
e BIS funds STEMNET £6.3m per year to run a UK-wide network of over 28,000 volunteers
who travel to schools to inspire students with the range and rewards of STEM careers
and to help teachers. 40% of Ambassadors are women.
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FE and Skills Capital Funding
Context
¢ Capital investment in the skills infrastructure supports economic growth and improved
learner outcomes.
e The Government’s FE College Capital Investment Strategy (December 2012)set out its
priorities for the renewal and modernisation of the FE College estate to provide
attractive, flexible, state-of-the-art accommodation, facilities and industry standard
equipment. To support the strategy, £550m was made available in 2013-14 and 2014-15
for investment on the Capital and College Investment Fund (CCIF) administered by the
Skills Funding Agency (the Agency).
e From 2015-16, responsibility for local skills capital funding will move to Local Enterprise
Partnerships (LEPs) as part of their Growth Deal Local Growth Funds (LGF). Colleges
were encouraged to engage with their LEP to support the development of local skills
priorities, strategies and capital investment plans.
Key Facts
© Overall, since May 2010, the Government has made almost £1.7bn available for capital
investment in the skills infrastructure, enabling over 1000 college projects. A further
£740m has been made available to support skills capital investment in 2015-16 and
2016-17.
e Between May 2010 and November 2012, the Government was able to make over
£330m available to support over 500 new college projects across the country, enabling
total college capital investment in excess of £1bn.
e Since the launch of the FE College Capital Investment Strategy in December 2012, the
Skills Funding Agency has completed seven rounds of capital funding and operated a
College Condition Fund. Over £480m has been committed to over 200 college projects
with a total project value of almost £930m.
e In June 2013, Government announced that it will put £330m of skills capital funding into
the Local Growth Fund (LGF) in 2015-16 to support the delivery of local skills strategies.
In November 2013, the government confirmed that it would put a further £330m into
the LGF for skills capital investment in 2016-17 — making a total commitment of £660m.
e Local Growth Fund allocations for LEPs were announced on 7th July, including skills
capital allocations worth £665m over 2015-16 and 2016-17.
e In June 2013, government also announced that it will continue to invest in the
development of National Colleges and support local initiatives, with a smaller amount of
skills capital funding (up to £40m pa) being held centrally within BIS in 2015-16, and
2016-17 to support strategically important skills infrastructure projects and initiatives.
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Further Education Workforce
Government published its FE Workforce Strategy in July 2014. The strategy focuses on
four priority areas:
o Improving the quantity, quality and professionalism of teachers and trainers,
especially the teaching of Maths and English
o Being responsive to employers need
o Improving the quality of leadership, including system leadership and FE governance
o Making effective use of technology in teaching and learning
The Government is investing £30m over the next two years (2013-14 and 2014-15) ina
range of measures to improve the quantity and quantity of teachers in FE— witha
priority on English and maths including: bursaries for graduates to teach in FE, golden
hellos, grants to colleges and providers to help meet the costs of training maths
teachers who qualify as a teacher whilst they teach and enhancement programmes to
improve the maths and English skills of existing teachers.
ETF have been asked to lead a review of what employers & learners need from maths
and English qualifications taken by students not studying GCSEs.
Government is also investing £25m in 2014-15, via JISC (the sector-owned company), to
provide ICT infrastructure, support and digital resources to enable and enhance online
learning and better use of technology and research in FE and skills, taking forward the
recommendations from FELTAG (FE Learning Technologies Advisory Group).
Government is grant funding the Education and Training Foundation, the sector owned
improvement body - £22m in 14-15. The Foundation is leading the sector’s drive to
improve quality of teaching and learning and published revised professional standards
for FE teachers and trainers in May 2014. From 1 November 2014 the Foundation will
become responsible for conferring professional status for teachers in FE i.e. Qualified
Teaching Learning and Skills (QTLS). QTLS is the kite mark for FE teachers and is
equivalent to Qualified Teacher Status in schools.
Over 2200 teachers undertook the maths enhancement programme run by the
Education and Training Foundation. Over 900 teachers already enrolled on the English
enhancement programme that is just starting with a target of 1400. There are now: 174
English, 124 Maths, 124 SEN (422 in total) FE Initial Teacher Training bursaries.
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Localism and Skills
Key messages
e We are reforming the FE and skills system so that is increasingly responsive to local
individuals and businesses, particularly focused on Local Enterprise Partnerships (LEPs)
and Cities growth agenda. We are building a system driven by needs of employers and
learners and local growth opportunities, not central targets or commissioning.
e Weare putting control in the hands of learners and employers, via Employer Ownership
funding, Advanced Learning Loans for 24+, and reform of Apprenticeships with
employers leading on design and delivery and control of funding through an employer
led system.
e The Government recently announced devolution packages for Greater Manchester
Combined Authority (Nov 2014) and Sheffield City Region (Dec 2014), given them the
lead role in working with the Government to re-structure their local FE systems. The aim
is for there to be forward looking skills system to be in place by 2017 - including
responsibility for part their respective Adult Skills Budget. We are devolving
Apprenticeship Grant for Employers (AGE) to the Cities with immediate effect.
e LEPs have significant local influence over the skills system.
e The Government announced (7 July) plans to invest at least £12 billion in local
economies in a series of ‘Growth Deals’ with LEPs. This includes:
o Skills capital allocations worth £665m across 2015-16 and 2016-17 as part of the Local
Growth Fund. (£261m in 2015-16, and £404m in 2016-17), and
o access to £170 million in 2015-16 (ring-fenced within the adult skills budget) as match
funding for EU funds via Skills Funding Agency’s matching service.
e LEPs are responsible for identifying local skills priorities, working in partnership with key
players across their local economies. Growth Deals enable them to align investment in
skills capital, with other funding, to their key growth priorities.
e LEPs also have a lead role in determining the use of ESF in the next round (2014-2020).
e Three LEPs in North East, West of England and Stoke and Staffordshire are also
developing pilots designed test their local influence over skills delivery, due to be live in
the academic year 2014/15.
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National College Programme
Issue
¢ Development of specialist National Colleges to provide high level skills training in
industry sectors critical to economic growth.
Key Facts
e National Colleges are being established by employer-led partnerships to provide
specialist higher level vocational training at Levels 3 to 5 in sectors critical to economic
growth, where there are recognised skills gaps.
¢ They will set industry standards for training within their sector based on emerging and
future technology, with learners able to use state-of-the-art equipment and facilities.
They will operate in partnership with schools, UTCs, colleges and universities to provide
strong progression routes from entry level to post-graduate.
e The model may vary depending on the sector, but most will be set up as college
corporations. Employers will take a lead role, demonstrated by substantial co-
investment to match the capital funding available under the programme, and
involvement in the governance of the institution, and the development and delivery of
provision.
e In December Ministers announced plans to create 4 new national colleges, specialising
in Digital Skills; Creative and Cultural Industries; Wind Energy and Advanced
Manufacturing. This follows the call for engagement document which was published in
June and invited interested parties to come forward with proposals for other sectors
that could benefit from a National College. These colleges will join the three National
Colleges announced earlier this year, which will specialise in High Speed Rail, Nuclear,
and Onshore Oil and Gas. Up to £80 million of capital funding will be provided for the
colleges, matched by employers over 2015-16 and 2016-17 — a potential investment of
£160 million by 2017.
e Five million pounds has been allocated for maintenance scholarships that will enable
the strongest candidates from across the country to attend the National Colleges in
2016/17. Building on this, the Government will subsequently develop and introduce
new maintenance loans to support students at National Colleges.
Top Government Actions (since May 2010)
e Industrial Strategy published in 2013 prioritised those sectors where the UK can
compete on a global scale. National Colleges will provide strong support for this by
giving employers a lead role in developing and designing the specialist training needed
in some of these sectors.
Elephant traps
e There may be criticism that National Colleges are an expensive duplication of what
already exists. They will provide specialised training in areas where there are recognised
gaps, and are therefore very different from most general FE colleges, which focus on
meeting a much wider range of education and skill needs within a local area.
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Raising Standards in Further Education
Government’s reform policy is freeing colleges from central government control and
placing responsibility for the quality of teaching and learning firmly on the shoulders of
the colleges themselves.
With support of grant funding from Government (worth £21m in 14-15), the sector-led
Education and Training Foundation is helping providers to improve the quality of
teaching and learning, with a strong focus on Maths and English and to improve
leadership and governance.
Ofsted’s strong focus on teaching and learning is also driving quality improvements.
If some providers do fail to deliver, Government has robust arrangements to address
swiftly poor performance and protect learners.
Ofsted’s the Government's independent inspectorate. They inspect the quality of post
16-learning and skills provision that is publicly funded by the SFA, EFA and Local
Authorities. Ofsted’s Annual Report 2013/14 reported that 81% of all FE colleges and
providers are graded 'good' or ‘outstanding’. Ofsted are consulting on changes to the
common inspection framework and its inspection methodology. These changes will be
implemented from September 2015.
The SFA sets Minimum Standards for the delivery of post-19 further education and
Apprenticeships. DfE sets Minimum Standards for vocational and academic
qualifications for 16-19 year olds delivered in all settings.
BIS is developing a wider set of outcome based success measures for performance
based on 3 core aspects: destinations (whether into employment or further learning);
progression in learning (from level to level); and earnings. We published the first set of
experimental data on 12 August 2014 and a consultation on how these measures will be
used for accountability and informing choice. Government’s response, published 10
December, confirmed that we will develop a new accountability framework based ona
wider set of success measures.
Where there are quality and finance issues in FE Colleges and FE institutions the FE
Commissioner intervenes, advising Ministers and the Chief Executive of the funding
agencies on the actions necessary to secure improvements. He is supported by a team
of FE Advisers. Quality and financial failure in Sixth Form Colleges is dealt with by the
SFC Commissioner, managed through the EFA.
The FE Commissioner regularly writes to FE sector leaders sharing lessons learned. He
wrote in February, June and October 2014. The letters have covered governance and
leadership, financial issues and quality improvement. He will publish is first Annual
Report in November 2014.
Independent training providers funded through a contract for services with the SFA will
continue to follow the assessment, escalation and intervention process set out in the
contract, which would usually result in termination of contracts where performance
fails.
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Traineeships
Issue
e Traineeships were introduced in August 2013 and are an education and training
programme with work experience, focused on giving young people the skills and
experience they need to be able to compete for apprenticeships or other jobs.
Key Facts
¢ Traineeships are off to an excellent start — with over 10,000 participants reported in the
first year. Hundreds of major employers such as Virgin Media, Jaguar Land Rover and BT
are already on board as well as smaller employers locally.
¢ To ensure a quality programme, only those providers graded ‘good’ or ‘outstanding’ by
Ofsted are eligible to deliver traineeships.
e TUC and CBI announced their joint backing for traineeships in August 2014.
Top Government Actions (since May 2010)
e We removed the ‘16 hour’ training rule for jobseekers on traineeship in March 2014,
making it easier for unemployed young people to undertake the programme.
e In August 2014, we extended eligibility to 24 year olds and gave providers and
employers greater flexibility to design work placements.
e We consulted on funding changes over the summer and published our response on the
18th November 2014. These changes will mean that:
o From 1 January 2015, we have extended the eligibility criteria so that 19 to 24 year
olds qualified to a full level 2 are able to do traineeships, in line with the current offer
for 16 to 18 year olds;
o In 2015/16, we will use minimum standards and publish data on trainees’
destinations at provider level, to ensure that traineeships focus on high quality
outcomes for young people
Elephant traps
e There have been accusations that traineeship starts are low compared to the number of
young people who are NEET. Traineeships are not suitable for all young people who are
NEET who are catered for by a range of programmes.
e There has been criticism that traineeships are unpaid workfare but it is a voluntary
training programme. While work experience in traineeships is exempt from the National
Minimum Wage, employers are encouraged to offer travel and subsistence costs
subject to benefit rules. Many trainees are eligible for Jobseekers Allowance, the 16-19
Bursary fund or Discretionary Learner Support for those aged 19 and over.
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Young People NEET
Key Facts
e In Quarter 3 2014, the proportion of 19-24 year olds who are Not in Education,
Employment or Training (NEET) decreased year-on-year by 2.4 percentage points
(107,000) to 17.6% (731,000). This is statistically significant and is the lowest Quarter 3
figure since 2008.
e 44.1% of those 19-24 year olds NEET are unemployed. The rest (55.9%) were
economically inactive - caring for dependants, people with a disability or ill health, or
waiting for a course or job to start.
e Youth unemployment levels continue to fall. There were 219,200 18-24 year olds
claiming Jobseeker’s Allowance (JSA) in October 2014, down 5,800 on the previous
month and down 115,900 on the year.
e On average young people leave JSA more quickly. Around two thirds of 18-24 year olds
close new JSA claims within 3 months, compared to a half for older claimants.
Top Government Actions (since May 2010)
¢ Traineeships were introduced in August 2013 to support young people into
apprenticeships and other jobs. They are off to an excellent start — with over 10,000
participants reported in the first year.
e Young people aged 19 to 23 are entitled to full funding for their first full level 2 and/or 3
qualification. Adults aged 19 and over may also be eligible for full funding for
qualifications and units to increase their skills for work, including English and maths
qualifications.
e For 16-24 year olds, £85m in FY14-15 and the same again in 15-16 is available for the
Apprenticeship Grants for Employers. This will fund over 100,000 additional incentive
payments of £1,500 to smaller employers to take on young apprentices.
e Pilot schemes of support for 18 to 21 year olds on Jobseeker’s Allowance (JSA) were
announced in December 2013. Claimants without level 2 qualifications in English or
maths will be required to study these alongside job search; claimants on JSA for 6
months or longer will be required to participate in a work experience placement, a
traineeship or other relevant skills provision, or community work placement.
e National Careers Service (NCS) launched in April 2012, offers unemployed adults
impartial one-to-one support from a qualified, careers adviser.
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Applications to Higher Education
Issue
e Has the introduction of increased fees had a detrimental effect on full time applications
to HE?
Key Points
e Clearly young people have not been put off applying to university. In 2014, the number
of applicants who had been accepted for entry increased to over half a million, the
highest ever.
e This year, we increased the number of higher education places by 30,000, creating more
places than ever before.
¢ This will provide students with more options, and importantly more of them will receive
offers from their first choice.
e In 2015 we are lifting the cap on aspiration and publicly funded universities can choose
to recruit as many students as have the ability and wish to apply.
Accepted Applicants
e In 2014, the total number of applicants who were accepted for entry increased to
512,400, the highest ever. Acceptances from England also rose to a new high of
382,500.
e@ More applicants than ever before (372,200) have been accepted for their first choice
course
e The entry rate (percentage of the 18 year old population who are accepted for entry to
a full-time undergraduate course via UCAS) for English 18 year olds is 30.4%, the highest
it has ever been.
e The entry rate for those from disadvantaged backgrounds has risen to a record high
(18.2%) ; entry rates for those from advantaged areas have not increased as much,
reducing the differences in entry rates between the groups to new lows.
e There have been healthy increases for mature acceptances: 4.1% for 21-24 year olds,
8.6% for those aged 25 and over.
e Entry rates increased for all ethnic groups.
e Entry rates for 18 year olds increased for both men and women, but young women are
still a third more likely to enter higher education than young men.
e There have been increases for most subjects, especially computer science (+9%),
technologies (+9%) biological sciences (+9%) and subjects allied to medicine (+8%), but
falls for mathematical sciences (-1%), linguistics/classics (-1%), European languages (-
4%) and non-European languages (-15%)
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Application data
¢ Total applicants are up by 3.3% to 699,700, only slightly below the peak of 2011
e Applicants are up from England (4%) and Wales (2%), but down in Scotland. Applicants
from Northern Ireland show no change.
¢ The English application rate (The application rate is the percentage of the 18 year old
population who applied) has increased to the highest ever level (34.8%), even more
impressive when seen in the context of the continued fall in the 18 year old population.
e The application rate for those from the most disadvantaged backgrounds has continued
to rise to a record level of 20.7%.
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HE Key Facts
Students
e There are almost 2 million students benefitting from Higher Education at HE Institutions
in England — Of these, around 450,000 (23%) are postgraduates and around 560,000
(29%) are studying part-time.
e The UK attracts the 2nd largest number of international students after the USA. Almost
one in five students at UK HEls come from overseas and of these over 70% are from
outside the EU.
e Three and half years after graduation, around 88% of graduates are in employment and
/ or further study and 83.5% are happy with their career.
e The 2013 National Student Survey showed that students are more satisfied with their
experience at universities or colleges in England than at any time in the nine years of
the Survey, with 86 per cent saying they are satisfied overall with their course (up from
85% last year).
e Most studies of the graduate earnings premium suggest it is holding up at well over
£100,000 extra lifetime earnings after tax. The latest BIS research indicates the lifetime
net earnings benefit of higher education is £165,000 for men and £250,000 for women.
Resources
e There are 132 HEFCE funded HEls in England; 203 FE colleges receive direct HEFCE
funding for delivering HE in England; and 102 alternative providers have specifically
designated courses.
e There are over 150,000 academic staff at HE institutions in England.
¢ The total income of UK HEls was £29.1 billion in 2012/13. The total expenditure of UK
HEls was £27.9 billion — 55% of this is staff costs. (Compared to £12.7 billion total
expenditure in 1999/2000).
e The UK’s research base is world-class, third after the USA and China for numbers of
citations and has the second largest share of the world's most highly cited articles after
the USA.
e Combining HEFCE recurrent grant for teaching and estimated fee income from students
subject to regulated fees, the resource for teaching rose from around £7.9bn in 2011-12
to £8.5bn in 2013-14 and, if applications meet expectations £9.9bn in 2015-16.
© Universities in the UK contributed £3.6 billion to the economy in 2012/13 through
services to business and community activities, including commercialisation of new
knowledge, delivery of professional training, and consultancy
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Higher Education Funding
Issue
e Relaxation of student number controls: impact on public finances
Lines to Take
e Our reforms have made it possible for record numbers of young people to enter
university this year, and increasing the number of places by 30,000 in 14/15 was an
important feature of an orderly transition to the removal of controls in publically
funded institutions in 15/16. We estimate that this could eventually lead to around
60,000 additional entrants per year.
¢ On expansion, precise costs will depend on the total number of students who take up
places, and the ability of the higher education sector to respond to demand. HMT has
provided £5.5 billion in student loan outlay, and additional Resource funding for this
over the next five years.
e The government is committed to expanding higher education to accommodate all who
can benefit from it. The graduate premium has been sustained despite rapid increases
in the graduate population in the past. We will continue to monitor the system.
e There are three types of expenditure which make calls on our budgets and all are fully
funded as part of the Autumn Statement announcement. These are:
o Grants such as HEFCE teaching grant and maintenance grants for student support
o Outlay of loans to students
o The RAB charge (currently around 45%)
Elephant Traps
HEFCE Grant Letter
e Ina tough public spending environment, Government cannot fund everything and we
have been faced with hard decisions about our priorities. The last grant letter is clear
where our priorities lie: meeting a fair proportion of the costs of teaching high cost
subjects such as science and engineering; supporting higher levels of participation in HE
by those from disadvantaged backgrounds; and meeting the unavoidable costs of small
and specialist institutions and provision.
e Our funding reforms have put higher education on to a sustainable basis with the
resources available for teaching rising, from £7.9bn in 2011-12 to around £8.5bn in 2013-
14.
e The next HEFCE grant letter will be published, in the normal way, early in the New Year.
Isn't it true that the RAB charge is just growing and growing. Won't your reforms just
become more expensive than grants?
e In March 2011 we estimated that around 30% of the value of post-2012 loans would not
be repaid. We currently estimate that around 45% of the value of these student loans
will not be repaid. The RAB charge is affected by many factors but this change is partly
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due to an increase in the value of the £21,000 repayment threshold relating to forecast
earnings. For example, if we were calculating an equivalent threshold today it would be
about £19,500. This is as a result of lower than expected earnings across the economy.
Let's be clear, there is a strong rationale for investing in higher education. Across the
world countries are increasing the number of graduates. Recent research by National
Institute of Economic and Social Research (NIESR) shows the benefits to the economy.
Walker and Zhu illustrate both benefits via taxation and to the individual through
increased earnings (Private returns: £250k women, £165K men. State returns: £254K for
men and £318K women).
The RAB charge is an estimate based on a prediction of economic circumstances some
35 years in the future. Estimates can and will continue to change.
We will of course monitor the overall affordability of the system. However, we believe
this is the best way to use limited public funds to meet the country’s long term high
level skills needs.
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Unplanned Growth in Alternative Providers
Issue
e Press reports that unplanned growth by alternative providers is out of control and may
result in cuts to mainstream HE budgets. Ministers have taken urgent action to manage
budgets and prioritise degree level study.
Key Facts
e There are 102 alternative providers with specifically designated courses whose students
are accessing financial support. Tuition fee loans of £84.9 million were paid to 25,900
students at Alternative Providers in 2012/13.
e Student Number controls have been applied to alternative providers in 2014/15 and are
based on the 2012/13 recruitment profiles. Early data from HEFCE suggests that
providers are sticking to their 2014/15 student number control.
e As soon as it became apparent that some alternative providers were not adhering to
expectations and planning to increase recruitment in 13/14, steps were taken to
manage the unplanned expansion (by 23 providers). All providers complied.
e Weare lifting student number controls from publicly funded providers in 2015/16. We
reserve the right to retain controls on the highest risk provision. We will announce in
due course the criteria for how number controls will apply to alternative providers in
2015/16.
Top Government Actions (since May 2010)
e In June 2011 in the White paper “Students at the heart of the system” Ministers set out
an intention to improve the choice available to students by increasing the provision of
higher education through alternative providers and that providers who were designated
for student finance would be subject to a number of conditions including "reformed
number controls". Alternative providers will be subject to student number controls
from 2014/15
e To ensure any growth is manageable the Department wrote last November to 23
providers with the most ambitious expansion plans for growth in HNC and HND courses
to tell them we would not be providing any new students they recruited this year with
student support.
e No new providers had HND courses designated in 13/14 , and there is currently a
moratorium on the designation of any new HND courses for all providers. Most of the
growth in student numbers has been a rapid increase in HND provision at a small
number of providers that have courses already designated. We enabled students at
alternative providers to access loans for tuition fees to a maximum of £6,000.
e We have published guidance on specific course designation process which introduces a
universal set of quality standards to all providers of HE for the first time. Key changes
include a successful QAA Review; and three years audited accounts.
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Elephant trap: What about European students abusing the system?
e The Government is committed to ensuring a wider range of providers can deliver higher
education, whilst at the same time ensuring rigorous controls over public spending
e False claims for maintenance will not be tolerated and immediate and decisive action
has been taken. Stringent new measures to prevent abuse have been introduced,
around a third — or £2.5 million — of money wrongly claimed has been recovered already
and recovery work continues in earnest.
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Catapult Centres
Issue
e The Government has established a network of elite Catapult Centres, through Innovate
UK, the new name for the Technology Strategy Board, to commercialise new and
emerging technologies in areas where there are large global market opportunities and a
critical mass of UK capability to take advantage.
Key Facts
e The first seven Catapults are now open for business (High Value Manufacturing; Cell
Therapy; Offshore Renewable Energy; Satellite Applications; Connected Digital
Economy; Future Cities; and Transport Systems) with total public and private
investment exceeding £1.4 billion over their first 5 years of operation.
e The Chancellor announced a £185 million budget increase for Innovate UK for 2015/16
in the 2013 Spending Review and the areas set to benefit include an expansion of the
Catapult network with new Catapults in Energy Systems and Precision Medicine.
Budget 2014
@ The Chancellor announced a further £69 million investment in Catapults to expand
capability through construction of a Cell Therapy Catapult Manufacturing Centre and a
Graphene Applications Innovation Centrethrough the High Value Manufacturing
Catapult.
Autumn Statement 2014
© This investment was further boosted at Autumn Statement with an additional £61
million for the High Value Manufacturing Catapult to generate economic growth
through two specific programmes (HVM Plus and HVM Reach) and £28 million to
develop a National Formulation Centre at Sedgefield.
Key messages
e As the initial Catapults start to show their impact, we asked leading technology
entrepreneur, Hermann Hauser, to conduct a review to advise on the medium-term
strategy and future scale and scope of the Catapult network. His report and
recommendations were published on 5 November. Government very much welcomes
his report and has reflected on its key findings in the Science and Innovation Strategy.
e The High Value Manufacturing Catapult opened its doors for business in October 2011
and seven partners are working together to bring their expertise in different and
complementary areas of high value manufacturing.
e The Cell Therapy Catapult, based at Guy’s Hospital in London, is working to grow a
viable and sustainable cell therapy industry in the UK.
e The Offshore Renewable Energy Catapult is headquartered in Glasgow, with an
operational centre at the National Renewable Energy Centre (NAREC) in Blyth,
Northumberland, and is focused on the development of commercially viable
technologies applicable to offshore wind, wave and tidal power.
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e The Satellite Applications Catapult is based at the science, innovation and business
campus at Harwell in South Oxfordshire to help UK businesses to develop new satellite-
based products and services.
e The Connected Digital Economy Catapult is based in London and aims to position UK
business to lead the introduction of radically new applications and experiences across
the increasing breadth of internet services.
e The Future Cities Catapult is hosted in London and will help to make cities become
smarter and more forward thinking.
e The Transport Systems Catapult is based in Milton Keynes and will support UK industry
in exploiting the massive global market for new products and services that will drive the
integration of transport and its systems.
Top Government Actions (since May 2010)
e Technology areas all announced by March 2012 (High Value Manufacturing, Cell
Therapy, Offshore Renewable Energy, Satellite Applications, Connected Digital
Economy, Future Cities and Transport Systems).
Appointment of seven high profile chairs and CEOs by August 2013.
Commencement of operations in first seven Catapults by August 2013.
Announcement of two further Catapults in 2013 Spending Review.
Publication of Hermann Hauser’s Review of the Catapult Network on 5 November.
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Digital Economy
Key Facts
e The ICT sector is one of the largest wealth creators in the UK. Each year over 25,000
new ICT businesses are created in the UK.
e The internet economy’s contribution to UK GDP is growing at 10.9% annually, higher
than the G20 average and almost double the growth of China.
© The UK has one of the strongest ICT infrastructures in the world. The IT and telecoms
industry accounts for 8% (£75 billion) of the UK’s total Gross Value Added.
e The UK is the biggest e-commerce market in Europe — and Europe is the biggest e-
commerce market in the world.
e The UK cyber security sector is worth over £6bn per year and employs 40,000 people.
Top Government actions (since May 2010)
e The Information Economy Strategy was published in July 2013. The strategy identified a
long-term strategic action plan for industry, government and academia, working in
partnership to create the business conditions for a thriving UK information economy.
e We fund Tech City UK to deliver programmes focused on accelerating the growth of
digital businesses, in London and cities across the UK, at all stages of their development.
This includes the Future Fifty programme offering tailored support to 50 growth-stage
digital companies.
e In October 2014, the Tech North initiative was launched to co-ordinate the existing
digital technology expertise of Manchester, Leeds, Sheffield, Liverpool, Hull and the
North East tech cluster.
e In November 2014, the Digital Catapult opened its Digital Catapult Centre in Kings Cross,
which provides a space for technologists, businesses and academia to collaborate and
develop their new ideas, as well as showcase their products to the UK and the rest of
the world.
e@ We have made changes to our education system and apprentice system and are
working with employers to help deliver the digital skills the UK requires. We are making
improvements to the visa system with an exceptional talent visa, an entrepreneur,
graduate entrepreneur and investor visas providing other routes to enable businesses
to access to the supply of global talent.
e We established a Smart Cities Forum that brings together cities, industry, Government
departments and research organisations to identify barriers to success, and ways to
remove those barriers. We invested £33 million in a series of city demonstrator projects
to show what can be achieved by the imaginative use of technologies.
e We launched to guide businesses in protecting themselves against cyber threats and
published best practice cyber guidance to help protect and . We also launched a (a
MOOC) with the Open University to raise awareness & improve cyber skills.
Elephant traps
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You have put all your effort in to creating the right conditions for (tech) start-ups. What
have you done to support scale-ups?
e We have been very successful in supporting tech start-ups and our next big challenge is
scale-ups. We are delivering better access to finance, lower taxes, less regulation and
better business advice, creating an environment in which start-ups can turn into scale-
ups. We also have introduced a number of targeted growth support programmes for
tech start-ups, for example Tech City UK’s Future Fifty Programme.
e UKTI is helping 50,000 businesses a year to enter new markets, the British Business
Bank will deliver over £10 billion of new investment into growing firms over the next
five years, and the GrowthAccelerator programme will help high-growth firms release
another £2.2 billion of economic growth by March 2015.
We keep hearing that there is a digital skills gap? What are you doing to make sure the
UK has the digital skills needed for growth?
e It is essential that Government works in partnership with industry to ensure that
education and training routes are providing the skills that employers need now and in
the future.
e The changes to the curriculum launched in September 2014 and will help to build a
digitally confident population. The new curriculum fosters computational thinking,
which will enable young people to adapt and profit from our increasingly digital world.
e In July we announced £18.4m of co-funding for the employer-led Tech Partnership,
which will give businesses the opportunity to take responsibility for their digital skills
needs.
e Reforms to the Apprenticeship system are enabling employers to develop new
Apprenticeship standards that reflect the skills that are needed for roles. Six standards
for digital roles have been published in the last year, with more in the pipeline.
e@ We have announced three new interventions to help strengthen the digital skills
pipeline:
e Degree apprenticeships: which will enable young people to get a fully integrated
honours degree alongside on the job training.
¢ A pilot of digital short courses: these will be designed and accredited by business,
setting new benchmarks for FE provision to meet current skills needs.
e A National College for Digital Skills: the ambition is for this to be a beacon for digital
skills provision, driving up standards across the country.
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Agency Workers Regulations
Issue
e Implementation and review of the Agency Workers Regulations.
Key Facts
e The Agency Worker Regulations came into force on 1 October 2011 and are derived
from the European Union directive, the Agency Workers Directive.
e The Agency Workers Regulations are compliant both with the Agency Workers Directive
and the CBI-TUC agreement.
e The Government is committed to ensuring that businesses understand the regulations
so that they can comply with and implement them in the simplest way possible
e The Regulations give all agency workers equal treatment entitlements in relation to
access to facilities and information on vacancies from day 1. After 12 weeks with the
same hirer in the same role, agency workers are entitled to the same basic working and
employment conditions, including pay and annual leave, and paid time off for ante-natal
appointments during an assignment as directly recruited employees.
e The Agency Workers Directive allows for derogation where there is pay between
assignments. It is an exemption from the equal treatment provisions on pay where a
temporary work agency offers an agency worker a permanent contract of employment
which pays the agency worker between assignments. Agency workers engaged under
this derogation benefit from the additional rights associated with being an employee.
e We believe that it is important to allow employers and individuals choice on the type of
contracts that they sign. Pay between assignments contracts are an important part of
that choice. These contracts will not be suitable for all businesses or agency workers but
they will be right for some. We do not want to deprive employers or individuals of this
choice.
e As part of the Red Tape Challenge, Government committed to examining the paperwork
obligations of the Agency Workers Regulations. The purpose was to ensure that the
practical arrangements for employers were as simple as possible. The review focused
specifically on the record keeping requirements.
e The review identified that while temporary work agencies can invest some resource in
updating their systems to ensure compliance, there was consensus overall that the
AWR is working relatively well.
e@ More can be done to help though, and we will work with interested parties over the
coming months to simplify and refine the existing guidance.
e The European Commission has reviewed implementation by all Member States of the
Agency Workers Directive. The review aimed to identify any major problems, whilst
considering whether the original objectives had been achieved and whether any
amendments to the Directive were required. The Commission published its report on 21
March 2014.
e The Commission concluded there is no reason to amend the Agency Workers Directive
at this stage. However, this is on the basis that more time is needed to consider
whether the Directive has met its objectives.
e The Agency Workers Regulations were identified by an EU consultation of SMEs as one
of the Top 10 most burdensome pieces of EU legislation.
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Balance of Competency
Issue
¢ Balance of Competency (BoC)
Key Facts
e The social and employment policy Call for Evidence was launched on 29 October 2013
and closed on 17 January 2014. The final report was published on 22 July 2014 which
can be accessed on https://www.gov.UK/government/consultations/review-of-UK-and-
eu-balance-of-competences-call-for-evidence-on-social-and-employment-policy
e This report covers the main areas of regulation that impact on the workplace: non-
discrimination, regulation of the employment relationship, social protection and health
and safety at work. It also covers improving coordination between Member States on
social and employment issues. Led by BIS and contributed to by DWP, HSE and GEO.
e Social and employment policy is one of the most controversial areas of EU competence
and the debate about whether the balance is right between the EU and Member States
goes to the heart of what the EU is about.
e This is not a new argument and this report found that there was still a great deal of
fragmentation amongst respondents about whether EU competence in this area is a
good thing.
e There is a spectrum of opinion. Some respondents considered the EU to be
fundamentally an economic project, some felt this meant all social and employment
competence should be removed from the Treaties and left to Member States. Others
were more pragmatic and said the EU should only pursue social and employment policy
objectives where to do so supported economic goals or to the extent that a minimum
level of social and employment policy supported the functioning of the Single Market.
Some other felts that the EU competence in this area is valid in and of itself, regardless
of whether it supports the Single Market.
e However, it was clear that for many respondents it is not a binary trade-off between
economic and social policies, and the arguments are far more complex and nuanced.
e For example, almost all respondents agreed that social and employment policies are
important. However, for some this meant that they should reflect domestic culture and
traditions. Others felt that the EU had an important role to play.
Top Government Points
e The government is carrying out an overall review of the EU’s competences, which the
Foreign Secretary launched in July 2012. This is an audit of what the EU does and how it
affects the UK. It is important that Britain has a clear sense of how our national
interests interact with the EU’s roles, particularly at a time of great change for the EU.
The Social and Employment policy report forms part of the overall review which is
scheduled for completion by the end of 2014.
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Blacklisting
Issue
e The Consulting Association held details on 3,213 construction workers and traded their
personal information for profit. Several companies have been accused of using such
information as a ‘blacklist’ for workers to deny them work, for example because they
belong to a trade union.
Top Government Actions
1. Blacklisting is an unacceptable and illegal practice and we take any allegations of
blacklisting very seriously
2. The Government introduced anti blacklisting legislation in 2010 to deal with this
serious offence and increased the penalty the Information Commissioner's Office (ICO)
can impose for serious breaches of the Data Protection Act to £500,000.
3. The Secretary of State met with the Information Commissioner, Christopher Graham,
at the beginning of April 2013 to make sure that he is ready and able to investigate any
new evidence and to use the new powers given to the Commissioner.
4, In July 2013, the Scottish Affairs Committee (SAC) contacted the Secretary of State to
say they have new information that blacklisting continues. We have referred the
information provided to the ICO as the appropriate body to investigate this matter.
Elephant traps/defensives
Will the Government introduce a construction industry funded scheme, to compensate
victims blacklisted before the Regs come into force?
e No. There are already remedies available under existing trade union law. We
understand that some complaints by workers listed by the TCA have already been made
to the High Court.
e@ When the Blacklists Regulations came into force in 2010 they were not retrospective
and were not intended to be. We see no reason to revisit this decision — nothing has
changed. It would be inconsistent with that approach (and involve the passing of
primary legislation) to introduce a compensation scheme for past blacklisting.
Will the Government ban blacklisters from using public sector contracts?
e Under EU procurement rules, public procurers may exclude a supplier from bidding
when it has committed a criminal offence relating to its business or profession or has
committed an act of grave professional misconduct in the course of its business or
profession.
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¢ Blacklisting of employees is an unacceptable and illegal practice and the Government
takes very seriously any allegations. However, we have seen no evidence of this
practice recurring since the introduction of the Blacklisting Regulations in 2010 made
blacklisting unlawful.
Why have you not created any criminal sanctions in the regulations, as Section 3 of the
Employment Relations Act 1999 enables ?
e We believe the 2010 Blacklists Regulations constitute an effective, targeted and
proportionate package of measures to combat blacklisting without the need for criminal
sanctions. During the 1999 Act's Parliamentary passage, we indicated that we would use
the criminal sanctions sparingly, "if at all". (Lord McIntosh, Government Minister. Lords
Committee, 16 June 1999). Our approach is similar to the approach taken under other
existing trade union law. However, there are criminal sanctions under provisions in the
Data Protection Act 1998 which could well come into play in future blacklisting cases (as
they did in the Consulting Association construction case in 2009).
What is Government doing about the SAC evidence that employees of Crossrail may
have been blacklisted?
e There have been several allegations of new evidence of blacklisting, to date, but no
evidence of this practice recurring. The Scottish Affairs Select Committee and
Information Commissioner are both currently investigating the potential for ongoing
offences, and Government continues to take a close interest in this issue.
e We have always encouraged anyone with evidence of blacklisting to come forward so
that we can investigate. Despite several claims of new evidence of blacklisting, the SAC
are the first to have got in touch formally (in July 2013) to say they possess new
information that blacklisting continues, in relation to particular companies and
individuals, which they are willing to share. We are grateful to them for doing so.
e The Secretary of State will continue to take a close interest in this matter and if
evidence of blacklisting is found, perpetrators can expect to feel the full force of the
law.
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Collective Redundancies
Issues
¢ On6 April 2013 Government changed to the rules governing consultation on large-scale
redundancies, and issued new ACAS guidance.
e BIS is currently appealing an Employment Appeal Tribunal (EAT) decision from 1 July
2013 which has negative implications for collective redundancy consultations.
Key Facts
e Following consultation, Government has:
o reduced the 90-day minimum period before dismissal for 100 or more potential
redundancies to 45 days;
o excluded fixed term contracts which have reached their agreed termination point
from collective redundancy consultation obligations;
o ACAS also published new guidance on 'How to manage collective redundancies’.
o BIS has permission to Appeal the EAT decision.
Top Government Points
¢ Our reforms strike an appropriate balance between making sure employees are
engaged in decisions about their future and allowing employers greater certainty and
flexibility to take necessary steps to restructure.
e The 90-day minimum period delayed necessary restructuring, made it difficult for those
affected to secure new roles quickly and had a significant negative impact on the
morale of staff, including those who may not ultimately be directly affected.
e The 45 days is a minimum period before dismissal. Consultations must also be
completed before dismissal and we know that can sometimes take longer. We expect
that to continue wherever appropriate.
© The EAT ruled that it should remove the EU test of ‘establishment’ from UK law. We are
appealing this judgment as we do not agree with this interpretation of the law. The
Court of Appeal decision to refer the case to the European Court shows that this matter
needs to be clarified.
EAT decision involving ex-Woolworths and Ethel Austin employees
e We have applied to the Court of Appeal for permission to appeal and this has been
granted by the Employment Appeal Tribunal (EAT).
e The Government takes the view that how businesses with multiple sites or operations
should be treated in redundancy situations depends on the facts and that this is best
decided by an employment tribunal on a case by case basis, based on the facts and
evidence before it (For example, the extent to which the different sites are linked in
terms of management and finance structures are potentially relevant factors).
e We think the right interpretation of the law is that employers must consult employee
representatives if making 20 or more redundancies at one establishment. In a dispute, it
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is for the employment tribunals to decide what is an establishment on the facts of each
individual case.
e The Department is not appealing against the principle of payments being made to
employees who have not been consulted properly. The SoS cannot make payment
(from the public purse) until entitlement is determined and there is legal authority to do
so.
Additional Background
e The Department is currently appealing an Employment Appeal Tribunal decision
involving ex-Woolworths and Ethel Austin employees.
e The key issue from the ruling relates to the EAT’s interpretation of the phrase ‘one
establishment’ in the relevant UK legislation.’ The legislation requires consultation if 20
or more redundancies are proposed within 90 days at ‘one establishment’. This
‘establishment’ could comprise of a single site (e.g. factory). It could also comprise of
multiple sites (e.g. the depots of a bus company) and in these cases the position is more
complicated.
e Before the EAT judgment, whether such multiple sites formed one ‘establishment’
depended on the facts of the particular case. However, the EAT has changed the
position in relation to these cases. It has said that the legislation should be interpreted
so that in every case an employer proposing 20 or more redundancies must consult
even if the redundancies are spread across numerous sites. This represents a significant
and unwelcome change, and could make consultation processes unnecessarily complex
and expensive.
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Early Conciliation
Issue
e Early Conciliation (EC) means that other than in specific circumstances, prospective
claimants will first need to contact Acas and consider conciliation before they can lodge
proceedings at an Employment Tribunal (ET).
Key Facts
e The central aim of EC is to help both employees and employers resolve a dispute
without the intervention of the ET, removing the cost and stress associated with
tribunal proceedings. It places a requirement to contact Acas before an individual can
proceed to Tribunal.
e While the requirement to contact ACAS is mandatory, the decision to accept the offer
of conciliation is entirely voluntary; either party will be able to decline the offer.
Whether EC is declined, or is unsuccessful, will be of no relevance in any subsequent ET
claim. The discussion during EC cannot be used for any subsequent Employment
Tribunal claim.
e ECis provided free of charge and commenced on a voluntary basis on 6 April 2014 and
was mandatory from 6 May 2014. We did this to stop claimants with very little time left
on their limitation period on 6 April complying with EC in a rushed manner.
e Since its launch on 6 April, the early signs are that EC is bedding down well. The number
of notifications is as forecast (about 1500 a week) and Acas' operational processes,
including their IT systems, are working as planned. Feedback on EC in the HR and
Employment Press and in social media has largely been positive. Acas has also received
a number of testimonials from satisfied service users.
As part of the evaluation work of Early Conciliation, Acas now publish quarterly
statistics which are presented on a cumulative basis and now cover April — September
2014. The latest figures show that about 18 % of cases resulted in direct settlement
brokered by Acas and another 58% did not proceed to tribunal. There will be a number
of reasons why cases do not go to court stage such as private settlement or a claimant
simply deciding they did not want to take their claim any further. Acas will carrying out
some survey research work to get more insight behind this figure in 2015.
e Acas figures also show that take up rates of EC are very high at around 80% this shows a
real willingness from both employers and employees to give EC a try.
e Acas have now published a wide range of guidance products from a leaflet called ‘EC
Explained’, a process guide, FAQs and their EC helpline is now up and running.
e ACAS’s previous similar offering, Pre Claim Conciliation has now ceased.
Top Government Points
e Set out the high level operating principles of Early Conciliation as part of the response
to the Resolving Workplace Disputes Consultation — January 2011. Primary power taken
as part of the ERR Act.
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e Presented the draft regulations that underpin Early Conciliation for public consultation
in January 2013.
e The consultation was also accompanied by an Impact Assessment which estimated that
the introduction of EC will reduce the number of claims to ET by approximately 17%,
saving business some £40m pa. Exchequer savings of approximately £10m pa were also
forecast.
e HMCTS statistics will be monitored closely to look at the overall number of employment
tribunal claims and we will use these to help assess whether the 17% fewer ET cases
target has been met.
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Employee Shareholder New Employment Status
Issue
e Introduction of anew employment status ‘employee shareholder’
Key Facts
e The Growth and Infrastructure Act 2013 provides for the new employment status of
‘employee shareholder’.
e Employee shareholders must be given shares of at least £2,000 in the employer or
employer’s parent company, and the gain on the first £50,000 of shares are not subject
to capital gains tax. The first £2,000 of shares do not attract income tax or national
insurance liability.
e Employee shareholder is a way for companies limited by shares to hire staff and
structure their work force, in addition to the existing employment statuses of employee
and worker.
e Employee shareholders have all of the rights associated with employees except for:
o unfair dismissal rights (apart from automatically unfair reasons and where dismissal is
based on discriminatory grounds or for health and safety reasons)
o rights to statutory redundancy pay;
o certain statutory rights to request training;
o the statutory right to request flexible working (except in the 2 week period when
parents return from parental leave).
o Certain notice periods for family leave- employee shareholders will give more notice
to their employer of their intention to return early from maternity leave, additional
paternity leave or adoption leave.
Top Government Points
1. Employee shareholders are entitled to the following protections:
automatically unfair dismissal right if an existing employee turns down an employee
shareholder contract; and
a right not to be subjected to a detriment if an existing employee turns down an
employee shareholder contract.
2. When offered an employee shareholder job, individuals must be given a written
statement setting out the employment rights they would not have as an employee
shareholder and the rights attached to the shares. The individual must gain relevant
independent advice and consider the job offer for a period of seven days before they
can accept an employee shareholder position. If the individual or employer does not
follow this sequence of events the employment contract will not take legal effect.
3. Shares issued to an employee shareholder must be fully paid up and the individual
must give no consideration for those shares other than agreeing to the new status.
4. Any company limited by shares will be allowed to use the status i.e. not only UK
registered companies but also EU and other overseas companies.
5.
°
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The 2013 Finance Bill included measures that:
allow gains on the first £50,000 shares issued to employee shareholders to be
exempt from capital gains tax;
ensure the new employment status is not used as a tax loophole; and
provides that income tax and National Insurance contributions will not be payable on
the first £2,000 of shares awarded to employee shareholders.
Companies limited by shares have been able to use the employee shareholder status
sincel September 2013.
We are unable to collect data on the take up of the new status as companies are not
obliged to tell government.
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Employment Status Review
Top Lines
e Determining your employment status is essential in claiming the employment rights you
are entitled to.
e It has become increasingly clear that determining whether you are an ‘employee’ or a
‘worker’ is not a simple calculation, mired in complex legislation and decades of case
law.
e All too often, your status is only confirmed when everything has gone wrong and you
are in an employment tribunal.
e There needs to be a change in the system, a fundamental shift towards simple, clear
legislation and guidance with a framework that enables individuals and employers to
have a professional conversation about terms and conditions.
e The Government is committed to achieving a system that is fair and transparent - an
environment where businesses feel more confident in hiring permanent staff because
they have complete clarity on what is expected of them and where individuals know
their rights and have the security they desire.
e The Department for BIS are currently undertaking the review and an update was
presented to Ministers before Christmas
The problem
e During the process of developing a number of policies (for instance, on zero hours
contracts and flexible working), it has become clear that the reliance on a definitive
understanding of employment status to determine rights and protections can create
unnecessary confusion. This problem may have been exacerbated during the recession
and now that we are on the road to recovery we need to make sure that no one is being
exploited and that we share the benefits of growth.
In order to address these issues properly, we must approach the problem from three
angles:
e For individuals: How can individuals be sure of what their employment status is so they
can claim their statutory rights without an Employment Tribunal?
e For employers: How can employers be sure of what rights their staff are entitled to
without the unnecessary risk of being taken to an employment tribunal?
e For government: What does the UK labour market look like and how can government
deliver a framework that strikes balance between the rights of the individual and the
needs of business, supporting growth and prosperity?
Q&A - Internal Employment Status Review
Why are you doing this?
e We believe individuals should know what rights they are entitled to and when they are
entitled to those rights.
e An individual’s entitlement to statutory rights is determined by their status.
e As it stands, individuals can only identify their employment status once at an
Employment Tribunal. This can’t be right.
What is in scope?
e It is too early to be sure as initial analysis may open up new areas for consideration.
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© To begin with though, we will be looking specifically at employment status and trying to
better understand how employment rights map across to the UK labour market.
Who will the review cover and what do you see as an outcome?
e The review will be broad and look at the full range of employment statuses.
e It will seek to identify opportunities for clarification and improvement, creating
transparency for individuals and employers and their responsibilities.
‘Workers’ are likely to see the biggest changes. How many ‘workers’ do you believe
there are?
e We simply don’t know, in part because there is no way of capturing this information
accurately without assessing the reality of the working environment for all individuals in
the UK. However, we believe the number to be small, maybe around 5% of those
employed in the UK labour market but this is based on a number of assumptions that
are yet to be tested.
Will the review focus on the individual’s status more than the wider impact on business?
e Employers are just as confused with employment status legislation as individuals. This
review is about improving the situation for everyone.
e The review is not designed to penalise businesses but enhance their understanding.
When do you expect to produce an outcome from the review and do you expect to see
any changes prior to the 2015 General Election?
¢ The review will begin the process of reform. It will produce a better understanding of
employment statuses and outline potential options for change.
e Any fundamental reform is likely to require legislation and therefore not be
implemented until the next Parliament.
Although this is an internal review, will there be any external sources of information or
interaction with relevant parties?
e The review will be led by BIS officials but we will be contacting relevant stakeholders
and other Government departments to provide an input to the review.
Is this review because of the issues with the Working Time Directive?
e No. This is about addressing the current complexity and to ensure that we get the right
balance of transparency and fairness.
Will this look at the significant rise of Self-employment in the UK?
e BIS are already looking at this and this will feed into the review.
NB: Currently, Total employment is 30.6m for the three months ending July 2014. Total
employment grew by 774,000 over the last year, self-employment accounted for around
half of this growth (368,000).
Are the Office of Tax Simplification (OTS) not already doing this?
e The OTS has started the process of an employment status review for tax purposes
which is slightly different. We will work with them to ensure common ground is
covered.
Why can’t you just get the ONS to get you the data?
e Simply because they would encounter the same issues we have.
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e We are talking about a group of individuals in the case of ‘workers’ who are not easily
identified. In many cases, what they agree to in their contract may not reflect the reality
of the working relationship.
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Employment Tribunal
Issue
e Encouraging the earliest possible resolution of disputes, delivering a more efficient
employment tribunal system for all users and supporting growth by giving business
more confidence to take on new staff
Key Facts
e Enterprise and Regulatory Reform Act reforms to the employment tribunal system will
deliver estimated net benefits of more than £49 million per annum to business.
e BIS estimates that employers face average costs of £6200 (excluding effect of tribunal
fees), where a case goes forward to an employment tribunal hearing — and that the
exchequer faces an average cost of £3200 per case.
e Last year over 100,000 employment tribunal claims were received.
Top Lines
e The simplified and improved rules implementing the recommendations from the
Underhill Rules Review will mean that the employment tribunal works more efficiently
and effectively for everyone saving cost for all parties.
e The new rules are half the length of the previous ones and use plain, simple language
where possible. This cuts out a level of complexity for individuals using the employment
tribunal system, particularly if they are self-represented. The rules have been
welcomed by stakeholders.
e The new rules give tribunals greater powers to identify weak or vexatious claims earlier
and deal with them effectively through an initial sift and greater flexibility of deposit
orders.
Top Government Actions (Since May 2010)
e The Government response to the Resolving Workplace Disputes consultation was
published in November 2011 and the implementation of our package of reforms is well
underway.
© On 6 April 2012 the unfair dismissal qualifying period increased from 1 to 2 years.
e The Ministry of Justice published its response to the public consultation on fee charging
for employment tribunals on 13 July 2012. The new fee structure was implemented on
29 July 2013 and a review of the remissions scheme was completed in October 2013.
¢ The new employment tribunal rules implementing the recommendations of the
Underhill review were implemented on 29 July 2013. The new rules are expressed ina
simpler language and strengthen tribunal powers to identify and deal with weak or
vexatious claims. The new rules incorporate the new rules on fees and the Enterprise
and Regulatory Reform Act (ERR) measures on cost and increased flexibility of deposit
orders. Changes to the payment of interest on tribunal awards designed to encourage
prompt payment will also come into force on this date.
e Government conducted further research into the issue of the enforcement of unpaid
tribunal awards. We published this research on 1 November 2013 alongside some of
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the policy proposals we are considering to address this issue, including: introducing
penalties for non-payment (currently being taken through the Small Business,
Enterprise and Employment Bill — Lords stage), and working with enforcement officers
and across Government to address barriers to effective enforcement and tackling the
issues related to rogue companies. We will conduct further research on this important
issue soon.
Elephant Traps
Rebuttal lines on ET fees and pregnancy discrimination
Pregnancy Discrimination
e Pregnancy discrimination in the workplace is unacceptable and unlawful. The
Government recognises the need to tackle this type of discrimination, and believes that
in order to do so in the most effective way, we need to understand the causes and
extent of pregnancy discrimination in UK workplaces.
@ This is why, on 4 November 2013, Government announced an extensive research
project into perceived pregnancy and maternity discrimination in Great Britain. The
research will be jointly managed and funded by the Department for Business,
Innovation and Skills and the Equalities and Human Rights Commission, supported by
the Government Equalities Office. The research will report in 2015.
Discrimination
e Government recognises that the Public Sector Equality Duty is an on-going one, and for
this reason, regularly reviews management information on a range of indicators about
the Employment Tribunals, including data on case receipts, case progression and case
outcomes.
e The revised claim form for issuing proceedings in the Employment Tribunals, introduced
alongside fees, now seeks information on claimants’ protected characteristics. Any
data collected on these characteristics will be helpful in assessing any impact fees have
had on vulnerable claimants, when we undertake the post-implementation review of
fees to which we have committed.
Tribunal Fee
But there has been a huge fall in claims. Fees have just deterred people from bringing
claims.
¢ Itis not the intention that fees should discourage claimants from bringing claims they
believe to be genuine. Only claimants who can afford to so should have to contribute
towards the cost.
e While we accept that the introduction of fees has had an impact on volumes of claims,
it is too early to know the full impact and whether this has prevented people from
accessing justice. We have made a commitment to carry out a review of the
introduction of fees and we will do so.
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Financial Penalties
Issue
e Set out in Section 16 the ERR Act, Financial Penalties (FPs) give discretion for the
tribunal to impose a financial penalty on employers who have committed an
aggravating breach of an individual’s employment rights.
Key Facts
e Aggravating breaches include those that are deliberate, malicious or negligent. In other
words employers who flout employment law.
© Objective of FPs is not to raise money for the exchequer; instead their aim is to deter
non-compliance with employment law and avoid cases ending up at tribunal.
¢ Good employers have nothing to fear — business will not be penalised for inadvertent
errors.
e FPs create a level playing field so that bad employers are not able to gain a competitive
advantage by mistreating their staff.
e FPs will be set at half of the amount awarded to a claimant. They have a minimum
threshold of £100 and an upper ceiling of £5,000. Also, the amount payable will be
reduced by 50% if the employee pays with 21 days.
e FPs will be a civil penalty NOT a criminal penalty, so only standard civil enforcement
levels will be required. No interest can be applied.
@ Companies in insolvency will be able to present evidence to the tribunal regarding their
ability to pay the FP and subsequently a judge will take this into account in deciding
whether or not to impose a penalty.
e@ FPs commenced 6 April 2014, for cases lodged on or after that date.
© To date, there have been no FPs imposed.
Top Government Points
e Part of the Resolving Workplace Disputes Consultation that ran from January 2011-
November 2011.
e The original proposal was for an automatic penalty. However, in light of business
responses to the consultation — a change was made to make the penalty discretionary
and only applicable for cases with aggravating features.
e An FP will only be imposed in exceptional circumstances, in cases that involve an award
to a claimant and when a judge decides that the breach of employment law was
deliberate and the employer’s actions were malicious or negligent.
@ The judge will also give consideration to the size of the employer, the duration of the
breach and the behaviour of the employer and the employee.
e Athird party supplier is in place to administer the collection of FPs.
e Acas have devised some information products that further explain FPs.
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Flexible Working
Issue
e The Government extended the right to request flexible working to all employees from
30 June 2014, in line with the Coalition commitment to extend the right to request
flexible working to all employees, following consultation with business on how best to
do so.
Key Facts
e Approximately 20.6m employees now benefit from the extended right to request,
doubling those eligible under the previous right which was limited to parents and
carers.
e The extension to the right to request flexible working to all employees came into force
on 30 June. (Note: Employee shareholders do not have the right to request flexible
working, except on return from parental leave.)
Top Government Actions (Since May 2010)
e In November 2012, the Deputy Prime Minister announced the Government's intention
to press ahead with plans to extend the right to request flexible working to all
employees.
e We want to highlight that family friendly policies and economic growth are not mutually
exclusive. Flexible working really can help employers boost productivity and profits -
this is critical to maintaining the UK’s competitiveness in the global economy.
e Alongside the extension of the right to request to all employees, we have made it easier
for employers to consider requests for flexible working. We have replaced the current
statutory process for considering requests with a duty on employers to consider
requests in a ‘reasonable manner’. This is a deregulatory measure intended to facilitate
the discussion between employers and employees without the process for that
discussion getting in the way. Under a duty to consider the request in a reasonable
manner, employers are able to use their own informal processes for considering
requests, as long as they can show that the way they considered the request was
‘reasonable’ for their circumstances.
e Acas have published a statutory Code to help businesses understand what a reasonable
manner means. The Code is designed to offer short, practical advice to make it as easy
as possible for employers to handle requests and fit them to their specific
circumstances and procedures. This is supplemented by more detailed good practice
guidance.
e Weare working to encourage cultural change in flexible working, especially to
encourage employers to think about flexible working when they recruit new employees
(the right to request flexible working is designed to help employees remain in
employment but does not support people into work who need flexible working
arrangements in order to start employment).
e Weare encouraging the use of the strapline “Happy to Talk Flexible Working” by
employers when advertising jobs.
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Industrial Action
Key Facts
e There were 126 stoppages between September 2013 and September 2014. This was
down 3.8% from the 131 stoppages in the previous year.
© 836,700 working days were lost through industrial action in the year to September
2014, which is low by historical standards.
¢ It represents a relatively small fraction of the working days lost in the 1980s (when the
annual average was 7.2 million days lost) and the 1970s (when the annual average was
12.9 million days lost).
Top 5 Government Actions (Since May 2010)
1. Public sector pensions negotiations: The discussions with the health, education and
civil service unions, led by Francis Maude and Danny Alexander, have concluded. The
Public Service Pensions Act 2013 implements these agreements. Changes to other
public service pension schemes are being considered and are at different stages of
development.
2. Trade union facility time in the public sector: following consultation, Cabinet Office has
identified best practice requirements for Departments to update facility time
agreements in the Civil Service, including ending the practice of full-time trade union
representatives and restricting funding for facility time to 0.1% of the paybill. Eric
Pickles announced on 1 March similar arrangements for local Government, but
restricting funding to 0.04%.
3. ACAS (a BIS partner organisation): Resolution of disputes is a matter for the parties,
though ACAS stands ready to assist where both parties request their intervention —
and did so effectively in the tanker drivers’ dispute (2012)
Elephant trap
Q&A
¢ Minimum industrial action ballot thresholds: The Government believes that disputes
are best handled through negotiation between the parties. Strikes and other forms of
industrial action should be regarded as a last resort after attempts to resolve
differences through dialogue have been exhausted.
¢ The reforms to industrial action law introduced during the 1980s and early 1990s are
now a well-established part of the UK’s industrial relations framework. In general, both
trade unions and employers have fully adapted to it. Perhaps as a consequence, the
incidence of industrial action is now much less than when these provisions were
introduced. The Government therefore has no plans at present to change industrial
action law. However, the Government monitors the application of the law in this
important area, to ensure our legislation remains compliant with all our international
obligations.
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Living Wage
Key Facts
e This Government is committed to improving living standards, particularly for the low
paid. We support businesses that voluntarily choose to pay the Living Wage when it is
affordable and doesn’t cost jobs
@ The only way to achieve a sustainable increase in living standards is to focus on
economic growth, employment and cutting taxes for the low paid. This is exactly what
we are doing.
e Unlike the Living Wage the National Minimum Wage is carefully set by the independent
Low Pay Commission at the highest possible level without costing jobs. This year the
Government was pleased to accept the LPC’s recommendation to increase the
minimum wage above inflation for the first time since 2007. From October 2014 over a
million low paid workers will receive up to £355 extra in their pay packets, the biggest
cash increase since 2008. We want to continue to see the minimum wage rise in real
terms and last week we asked the Commission to assess whether above-inflation rises
could be made next year without harming employment.
e In addition to the NMW we are raising the personal allowance allowing people to take
home more of what they earn. From April 2015 the average person will pay over £800
less in income tax than 2010 and over 3.2 million people will be taken out of income tax
altogether.
e There are now more people in employment than ever before and employment growth
is at record levels. Since 2010 an additional 2 million private sector jobs have been
created.
Government Actions since May 2010
e The government is helping raise living standards through cutting taxes and increasing
employment. The personal allowance increases to £10,000 from April 2014, one year
earlier than planned, protecting the incomes of working households that have been
squeezed through high inflation and low earnings growth.
e There are now more people in employment than ever before. Government is improving
work incentives through welfare reform and the introduction of Universal Credit.
e The National Minimum Wage has been a success in supporting the lowest paid. Since
its introduction in 1999, the adult rate of the National Minimum Wage has increased
faster than average earnings, prices and nominal output.
e Vince Cable is keen that lower paid workers benefit from the emerging recovery. He has
asked the Low Pay Commission to look at what economic conditions would be needed
to allow the National Minimum Wage to rise in the future by more than current
conditions allow- without an adverse impact on jobs.
e Weare absolutely clear that anyone entitled to be paid the minimum wage should
receive it. HMRC investigates every complaint made through the free and confidential
Pay and Work Rights Helpline. Employers who fail to pay the National Minimum Wage
will be named and shamed under revamped criteria. This is on top of financial penalties
which employers already face.
e A mandated pay floor completely detached from an affordable level is likely to bring
about job cuts. A compulsory Living Wage takes no account of the effect of the
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consequences of raising the cost of labour. The National Minimum Wage is a carefully
calibrated instrument balancing the need to provide a fair wage whilst not damaging
employment.
e The Government supports businesses that choose to pay the Living Wage where it is
affordable. However, decisions on what wages to set, above the National Minimum
Wage, are for employers and workers.
Q&A
How much is the living wage?
e The UK Living Wage is currently £7.85 and the London Living Wage rate is £9.15.
Does the Government support the Living Wage?
e The Government supports employers that choose to pay the Living Wage. However,
decisions on what wages to set are for employers and workers to agree as long as
employers pay at least the national minimum wage.
e We are cutting taxes so people take home more of what they earn: From April 2015 the
average person will pay over £800 less in income tax than 2010 and over 3.2 million
people will be taken out of income tax altogether.
Why doesn’t Government implement a national Living Wage?
e The Government helps the low paid through the statutory National Minimum Wage
which is specifically set at the highest possible rate that will not damage employment
prospects.
e A mandated pay floor completely detached from an affordable level is likely to bring
about job cuts and these effects would most likely be hardest felt by the young and
those who are further from the labour market.
e The National Institute of Economic and Social Research has estimated that increasing
the NMW to the rates supported by the Living Wage Foundation would cause 300,000
young and unskilled employees becoming unemployed.
¢ This Government is committed to improving living standards, particularly for the low
paid and the only way to achieve a sustainable increase in living standards is to focus on
economic growth, employment and cutting taxes for the low paid. This is exactly what
we are doing.
Will the Government become a living wage employer?
e Each department sets their own pay policy and the vast majority of civil servants are
paid above the Living Wage. We support employers that choose to pay higher than the
NMW however it is for employers and their workers to decide.
[Specific to BIS]
© On the basis of fairness and affordability I (Secretary of State) instructed the
department to give the lowest paid contracted staff (including cleaners) an above
inflation pay rise.
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e From 1 April, the lowest paid contracted staff at BIS offices across the UK will be paid
£7.85 per hour, up £1.40 or nearly 22% from the current £6.45 per hour rate. This
increase will restore and surpass the real value of wages that has fallen in recent years.
¢ This means that BIS contractors will be amongst the top 25% (upper quartile) of
contractors across Whitehall. This will benefit 252 employees across 81 sites in the UK.
All other BIS employees are paid above the London Living Wage.
NB: DECC has signed up to become a Living Wage employer.
Will the Government require contractors to pay the Living Wage?
e¢ We would absolutely encourage contractors to pay the living wage where affordable -
but this is a decision that must be taken by the contractors themselves. We will always
award contracts on the basis of the best value for money for the taxpayer.
Will the Government introduce tax breaks for employers who pay the Living Wage? (In
response to Labours Make Work Pay Contracts)
e We would encourage employers to pay the Living Wage when it is affordable and not at
the expense of jobs.
e Labour’s plan applies for 12 months only, and will cover less than a third of the
increased cost to the employer. Increasing the costs of employment could encourage
businesses to employ fewer people, damaging growth and causing benefit spending to
go up. And it could make businesses less profitable, reducing the amount of tax they
pay and risking cuts to public services.
o The IFS have said that this policy: “may distort employers’ behaviour in undesirable
ways... Overall, it is unclear whether the policy would raise revenue for the
exchequer, as claimed by the Labour Party.”
@ The only real way of achieving sustainable increases in living standards is through
focusing on economic growth and employment - as we are doing.
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Migration
Issue
e The Prime Minister and the Home Secretary have both said publicly that they want to
reduce net migration from hundreds of 1000s to tens of 1000s. This target is not part of
the coalition agreement. Recent figures suggest this will not happen in the lifetime of
this Government. There is an on-going debate between those who see increased
immigration as good for the UK and those who would like to see numbers reduced.
Key Facts
© The latest ONS Quarterly Migration Statistics show Net Migration to the UK was 260,000
in the year ending June 2014 — up from 182,000 in the previous 12 months.
e The increase in net migration is driven by significant increases to both EU and non-EU
immigration. Non-EU migration has risen for the first time since 2011.
e¢ Work remains the most common reason given for migrating to the UK. 247,000
migrants arrived in the UK for work related reasons in the year to June 2014.
e There has been a sharp rise in National Insurance numbers allocated to Bulgarian and
Romanian nationals.
e Immigration for study remained stable (176,000) in the year ending June 2014.
Government Activity
Stability — The Immigration Bill has made changes to some policy framework including
policy changes relating to access to services for migrants. In relation to the visa system,
the Home Office are focussing on adjustments to existing routes in response to feedback
from users, or to new visa requirements.
The Immigration Bill — Measures on regulating migrant’s access to benefits and public
services, including the NHS, form part of the Immigration Bill. Following agreement by
both Houses on the text of the Bill it received Royal Assent on 14 May. The Bill is now an
Act of Parliament (law).
MAC Review of Shortage Occupation List - The Migration Advisory Committee last
reviewed the SOL in Autumn 2012 and it is now in the process of doing so again. Given the
closeness to the election and time constraints, the HO narrowed the latest review to focus
on the professions/sectors of health; the digital technology sector; and linesworkers in the
energy industry. The MAC are currently reviewing feedback.
Immigration and visas fees - The Home Office have been chairing a cross-Government
committee looking at various options for ensuring those who benefit directly from the
immigration system and enhanced border services contribute appropriately to their costs
in the future. This process is coming to an end and the Home Office are currently in the
process of seeking Home Secretary clearance for a Home Affairs Committee letter which
sets out revised visa fees for the coming year.
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Elephant traps
Do migrants make a net positive or negative net contribution to the UK?
e Migrants generally arrive on these shores when they are of working age and they often
leave before they retire — contributing more in taxes and spending than claiming back in
social benefits. Immigrants are more likely to be net contributors to the economy.
What effect will imposing a migration cap of tens of thousands have on the UK
economy?
e Migration is good for the UK economy; it allows international business links to form and
for skill gaps in the native work force to be filled. Introducing a cap could potentially
damage efforts to reduce the deficit as most immigrants are more likely to be of
working age and net contributors to the economy, contributing more in taxes and
spending than claiming back in social benefits.
What is the effect of migration on jobs for the native workforce?
e There is relatively little evidence that migration causes significant displacement of UK
natives when the economy is strong, however there is some evidence which suggests
low skilled natives may be displaced during periods of recession although the effects
dissipate over time. Migrants can actually create job opportunities in the UK and are
more likely to set up their own business than natives.
What effect does migration have on the wages of native workers?
e Studies show that migration largely has no impact or a small positive impact on average
wages. Some sections of the native workforce believe that the presence of migrant
workers results in wages being undercut. National Minimum Wage legislation is in
place, and is enforced robustly, to prevent this fear from becoming a reality. The
maximum fine for not adhering to the NMW legislation has been quadrupled from
£5,000 to £20,000.
What impact has lifting EU migration restrictions on Romania and Bulgaria had on the
UK?
e Whilst there has been a sharp rise in NINo allocations to Romanian and Bulgarian
nationals in the year ending September 2014 compared to the previous 12 months, 50%
of EU2 nationals registering for a NINo between January and September 2014, had
arrived in the UK before the transitional controls had been lifted. Transitional controls
for these countries were lifted on 1 January 2014 and it is still too early to know the
precise impact it has had on the UK.
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National Minimum Wage Enforcement
Issue
e The Government is committed to simple, effective NUW enforcement which supports
workers and businesses by deterring non-compliant employers from underpaying their
workers and removing the unfair competitive advantage that underpayment can bring.
Key Facts
e In 2013/14, HMRC identified £4.6m in arrears of wages for over 22,600 workers. This
represents an increase of over 17% in the number of workers that HMRC were able to
help compared to 2009/10. Also, the average arrears per case identified increased by
over 260% in 2013/14, compared to 2009/10.
Since 2010 enforcement has improved in a number of ways. In 2013/14 for example:
© We identified over 17% more workers in 13/14 than we did in 09/10
e The average workers per case has increased by nearly 200 per cent and the arrears per
case by over 260 per cent
e We have improved the incidence of finding arrears in cases by 38% .
Top Government Points
e HMRC investigates every complaint made to the Pay and Work Rights helpline. In
addition, HMRC conducts risk-based enforcement in sectors or areas where there is a
higher risk of workers not getting paid the legal minimum wage.
e The Government is taking a tougher approach on employers that break National
Minimum Wage law. The Government has already named 30 employers. Between them
they owe workers a total of over £50,000 in arrears and have been charged financial
penalties totalling over £24,000.
e We will be naming other employers that break National Minimum Wage law very soon.
e The Government has also increased the financial penalty percentage that employers
pay for breaking minimum wage law from 50 per cent to 100 per cent of the unpaid
wages owed to workers and the maximum penalty from £5,000 to £20,000. The
increase came into effect on 7 March 2014. The Government will also introduce
primary legislation so that the maximum £20,000 penalty can apply to each underpaid
worker.
e Inthe Autumn Statement the Government just announced an increase of £3 million to
HRMC’s enforcement budget.
e The extra money is to increase the number of HMRC compliance officers to identify
businesses that exploit workers (including migrants) by paying them below the National
Minimum Wage. HMRC compliance officers will be proactively going after the worst
offending employers.
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Posting of Workers Enforcement Directive
Issue
e Implementing the Posting of Workers Enforcement Directive.
Key Facts
e The Posting of Workers Enforcement Directive (2014/65/EU) was agreed on 20 May
2014. The UK must implement the Directive by the Commissions deadline of June 2016.
It is a single market measure, to ensure a level playing field when businesses or
agencies post workers temporarily from one Member State to provide services in
another.
e The Directive entitles posted workers to minimum statutory employment rights
available in the country they are posted to (e.g. national minimum wage rates,
maximum work periods). Everyone who works in the UK has the same rights.
e The directive supports the freedom to provide services across the EU. Around 1 million
workers are posted across the EU each year.
e Numbers sent to and from the UK are relatively low (the European Commission
estimates 37k each way) but it is a significant issue for some MS (e.g. Germany and
Poland)
¢ In negotiation, the European Parliament sought administrative requirements of
business, comprehensive joint and several liability and operative measures to combat
illegal working, which were not adopted. This was good news for the UK as it would
have created burdens on business.
Top Government Points
1. The UK does not experience some of the issues faced by other Member states as it has
in place a strong raft of protections for all workers, for example, the National
Minimum Wage, health and safety regulations, working time restrictions and the full
range of anti-discrimination measures. The pay and work rights helpline and ACAS
also provide guidance and advice for everyone working in the UK.
2. The UK Government is now working with stakeholders representing employers and
employees to discuss how the Enforcement Directive can be implemented in a way
which works for the UK economy and its workers and will consult on proposals for
implementation in 2015.
3. The Government supported the final text because:
o For workers it increases awareness of minimum rights and how they can be enforced
and improves cooperation, collaboration and the exchange of information to support
cross-border enforcement.
o For businesses, it clarifies their responsibilities and helps them avoid falling foul of
employment laws in other Member States.
o For the UK economy, it provides reassurance that companies can freely operate across
Europe.
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Public Interest Disclosure Act
Whistleblowing (Public Interest Disclosures)
Key Facts
e Public interest disclosure regime is an employment protection measure designed to
protect workers from being unfairly dismissed by their employer or suffering other
detriment whenever they have reported their concerns to the employer or the
regulatory authorities.
e Act protects employees and workers from victimisation by their employers and co-
workers if they “blow the whistle” in a responsible way.
e The whistleblowing charity Public Concern at Work (PCaW) set up a Commission
February 2013, to examine the effectiveness of existing arrangements for workplace
whistleblowing in the UK and to make recommendations for change.
© On 27th November 2013, the PCaW Commission produced a report making a number of
recommendations to the Government, including but not limited to
o the introduction of a Statutory Code of Practice on employer whistleblowing
arrangements,
o acCclear procedure for regulators to deal with whistleblower who go to them,
o the inclusion of whistleblowing in regulators annual reporting mechanisms,
o the expansion of the provisions to include more categories of “worker” in the
protections and
o Government research into whether there needs to be a central system for the
reporting of concerns.
e@ Government ran a call for evidence from 12 July - 1 November to explore further
whether the provisions are working overall. The Government published its response to
this on 25th June. We have announced a number of legislative and non-legislative
measures in the Government Response to improve the way the legislation works.
Top Government Actions (since May 2010)
e The whistleblowing framework is designed to provide a legal remedy, via an
Employment Tribunal, for workers who have suffered detriment in the workplace as a
result of raising an issue of public concern regarding certain categories of wrongdoing.
e The Government made changes during the Enterprise and Regulatory Reform Act 2013
to strengthen the legislation further. The changes brought into scope more workers and
widened the route for redress by introducing vicarious liability. It also introduced a
public interest test to ensure whistleblowing continued to be about public interest
matters.
e BIS launched a call for evidence on 12 July to explore further whether the provisions are
working overall. The Government published its response to this on 25th June 2014.
e We have announced a number of legislative and non-legislative measures in the
Government Response to improve the way the legislation works.
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Following the Government Response to the call for evidence, Government is
introducing a duty on prescribed persons to report annually on public interest
disclosures made to them. This measure is included in the Small Business, Enterprise
and Employment Bill, which was introduced into Parliament on 25 June 2014. The Bill
received a Second Reading in the House of Commons on 15 July 2014. Committee Stage
took place on 04 November 2014. The Committee voted that the clause stand part of
the Bill.
On April 6 2014, Members of Parliament were included on the prescribed persons list.
Certain disclosures to MPs previously already qualified for protection, provided the
relevant conditions had been met. Adding MPs to the list means individuals can make
disclosures to them and these are protected in the same way as disclosures made to
other bodies on this list.
We have undertaken a major exercise; working with other Government Departments to
update the Prescribed Person Order 2014 to ensure the list is accurate and up-to-date.
The updated Prescribed Person Order 2014 was published on 01 October 2014. This is a
move which all prescribed persons and the wider whistleblowing ‘community’ has
welcomed as out-of-date lists were being relied on to interpret the law.
Work is on-going to bring Student Nurses into the scope of whistleblowing protections
by adding them to the definition of a worker as committed too in the Government's
response.
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Recruitment Sector Legislation
Issue
e Reforms to the Conduct Regulations
Key Facts
e The recruitment sector is regulated by the Employment Agencies Act 1973 and the
Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the
‘Conduct Regulations’).
© The legislation is complicated and difficult for businesses and individuals to understand
and was identified by the Red Tape Challenge as needing reform.
e The Government consulted on proposed reforms to the recruitment sector legislation in
early 2013 and the Government response was published on the 12 July 2013.
e We will be publishing a further consultation on specific changes to the legislation
shortly.
e The Government consulted separately on a proposal to prohibit recruitment agencies
from advertising jobs exclusively in other EEA countries. That consultation closed on the
2 September and the Government response was published on the 10 November. The
new regulation came into force on January 2015.
Top Government Points
e We intend to reform the Conduct Regulations, removing some of the burden from
business whilst continuing to protect people who are looking for work.
e We will carry out a further short consultation shortly.
e The Conduct Regulations are enforced by the Employment Agency Standards
Inspectorate (EAS) in BIS.
e We are doubling EAS resource this financial year with a view to increased resource for
financial year 2015/16. This additional resource will be used for targeted enforcement
in high risk areas in order to protect the most vulnerable agency workers.
e The Pay and Work Rights Helpline is the main point of contact for individuals seeking
help and advice.
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Shared Parental Leave
Issue
© The Government has delivered the coalition commitment to “encourage shared
parenting from the earliest stages of pregnancy — including the promotion of a system
of shared parental leave”. All the legislation is now in place to support families juggling
work and family life, and help the businesses that employ them.
Key Facts
e¢ As women’s employment rights have increased their participation in the labour market
has also increased. Women now make up half of the UK workforce.
e The Maternity and Paternity Rights and Women Returners Survey in 2009/2010 found
that the vast majority (90%) of fathers took time off following the birth of their baby,
with 74% of fathers taking some paternity leave.
¢ BIS consulted in 2011 on proposals to redesign the UK’s maternity, paternity and
adoption system to introduce Shared Parental Leave. Through the Children and
Families Act 2014 and a suite of regulations which came into effect on 1 December, all
the legislation is now in force for shared parental leave and pay. The new system is
designed to support shared parenting by enabling working parents to share leave to
look after their child in the early stages. The changes will encourage both parents to
take an active caring role, and help both parents retain their attachment to the
workplace by allowing them to agree a pattern of leave that works for them and their
employers.
e Shared Parental Leave is now in force for babies due on or after 5 April 2015, including
any early births.
Top Government Actions (Since May 2010)
e Additional Paternity Leave and Pay (APL) was introduced from April 2010 as an interim
first step towards this Government’s commitment to develop a flexible system of
shared parental leave. The right provides new fathers with a right to up to six months
additional paternity leave once the mother has returned to work.
e The system of Shared Parental Leave has been developed in conjunction with family and
business representatives.
e This new system of Shared Parental Leave will enable employers to recruit from the
widest possible pool of talent, and helps contribute to the UK’s skilled and flexible
workforce.
e The Children and Families Act successfully completed its Parliamentary process in
March 2014.
e The regulations that give effect to shared parental leave and pay came into effect on 1
December for babies due from April, . but who arrive early.
e Weare focusing on promoting and raising awareness of shared parental leave and
ensuring we meet the information needs of employers and employees.
¢ Guidance for employees and employers is on Gov.UK, along with a calculator to work
out entitlement.
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Elephant trap
No one is using Additional Paternity Leave and no-one will use Shared Parental Leave
e Additional Paternity Leave and Pay (APL) was introduced from April 2010 as an interim
first step towards this Government’s commitment to develop a flexible system of
shared parental leave. The right provides new fathers with a right to up to six months
additional paternity leave once the mother has returned to work.
e Shared Parental Leave offers parents much more flexibility in how they take the leave.
It allows shared parebnting, or for the dad to become the child’s primary carer. The
entitlement is designed to support shared parenting by enabling working parents to
share leave to look after their child in the early stages. The changes will encourage both
parents to take an active caring role, and help both parents retain their attachment to
the workplace by allowing them to agree a pattern of leave that works for them and
their employers.
@ The Children and Families Act 2014 provides the legislative basis for introducing shared
parental leave and pay.
e The regulations giving effect to the detail of the new arrangements have now come into
effect. The proposed system of Shared Parental Leave was developed in conjunction
with family and business representatives.
¢ This proposal gives employers the ability to recruit from the widest possible pool of
talent, and helps contribute to the UK’s skilled and flexible workforce.
e Guidance is available on Gov.UK and Acas websites to help employers and employees
understand and use the new system when it is introduced.
What more are we looking to do?
¢ We will keep under review the take up by fathers/partners of shared parental leave and
will look again at paternity leave at a later date, once we have information on the tae up
of shared parental leave.
e We have taken powers in the Children and Families Act to make legislative changes
which will enable us to increase the number of weeks of paid paternity leave through
secondary legislation at a later date, should the Government decide to do so.
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Trade Reform
Issue
e Possible change to industrial action law to enable e-balloting for trade unions
Key Facts
e Unions seek to modernise how statutory ballots are held, to allow all union members to
vote with electronic means.
Top Government point
e Unions are currently creating a working group to find an e-balloting method to fit in
with legislation. Government needs to be satisfied that the means of voting in a ballot
(such as e-balloting) meets the required standards, i.e. that those entitled to vote have
an opportunity to do so, that votes cast are secret and the risk of any unfairness and
malpractice is minimised, before the idea is taken forward
Defensive Q and A
What is the Government doing to promote e-balloting?
e The Government have engaged with unions and are content that the unions are
working to find an e-balloting method to fit in with the required legislation. If the
requirements of the legislation are able to be fulfilled then it will be possible to change
the law to allow e-balloting in statutory union ballots.
Issue
e Implementation of Part 3 of the Transparency of Lobbying, Non-party Campaigning and
Trade Union Administration Act. This relates to a new union requirement to provide
annual assurance that their systems for keeping membership records accurate and up
to date, are adequate.
Key Facts
e The Bill achieved Royal Assent on 30th January 2014
e The Government published a consultation on the proposed implementation of these
measures which closed on 4th December.
e The Government is analysing the responses received after which and will issue a
response document in due course.
Opposition from Trade Unions:
e The measures are very unpopular with trade unions. Their challenges to Part 3 are
summarised as:
o Aperceived lack of rationale for the measures in the Bill, or evidence of a problem
that the measures look to solve
o The perceived additional burden on trade unions to comply with the new provisions
o However, TUC and its affiliate unions now accept that they now need to focus on
the implementation of these measures.
Top Government Points
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Trade union administration — principles and rationale for change
e The principle behind these measures is already in place - we are building on an existing
obligation, this is not about making it harder for unions to operate.
e These measures will give greater confidence about the accuracy of large membership
registers as a whole — not just a few individual records. When unions have accurate and
up to date membership registers it is easier for them to demonstrate the democratic
basis when they make decisions and take action.
e These measures are an appropriate way to give greater confidence to union members
and to the public that unions know who their members are and can contact them.
Trade union administration — reforms
e Unions that have more than 10,000 members will need to appoint a qualified
independent person to provide an annual assurance regarding maintenance of their
membership register.
e Unions with 10,000 members or less at the end of the reporting period will need to
provide an annual self-assurance.
e The Certification Officer will have power to investigate discrepancies and to issue
declaration and enforcement orders requiring unions to remedy failures.
e We will take a proportionate approach to implementation. We have sought evidence to
inform the application of the measures in practice through engaging with unions and
others, to ensure that they do not impose a disproportionate or unreasonable burden.
Elephant Traps/Defensive Q&A
There is no evidence of a problem in trade union membership records
e Membership registers lose their accuracy quickly because of changes in union
membership as well as changes in the details of individual member addresses.
e The current system relies on an individual union member actively checking their details.
We cannot be certain that unions are compliant with the requirement to maintain a
register that is up-to-date so far as is reasonably practicable.
This is a politically motivated attack on trade unions
e This is not an attack on trade unions. Trade Unions are vital participants in the
economy, working with employers to maximise employee engagement and delivering
practical solutions to workplace issues.
The new regime can’t be justified on human rights grounds
e The existing duty to maintain an up-to-date membership register has been around since
1984. Having agreed that a membership register is necessary, it follows that there
should be an appropriate and effective enforcement regime.
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2006 (TUPE)
As amended by The Collective Redundancies and Transfer of Undertakings (Protection of
Employment) (Amendment) Regulations 2014 (SI 2004/16)
Issue —- Amendments to TUPE
Key Facts
e TUPE is the legislation which protects employee rights when the business or
undertaking for which they work transfers to a new employer. TUPE implements the
Acquired Rights Directive (ARD).
e The Government was concerned that some businesses believed the TUPE Regulations
were gold plated and bureaucratic. Following a consultation as part of the employment
law and under the Red Tape challenge, the Regulations have been amended.
¢ Our amendments will ensure that TUPE continues to provide appropriate levels of
employee protection, but eliminate unnecessary gold plating and red tape so that
business transfers go through as smoothly as possible.
e TUPE's service provision changes (SPC) rules have not been repealed as earlier
proposed. Repeal would have created significant uncertainty in the economy, as
employers struggled to determine whether a service provision change was caught by
TUPE or not. However, the rules on SPCs have been clarified on the face of the
Regulations, in line with case law, so that if businesses radically change the way they
provide services such changes are unlikely to be caught by TUPE.
e The requirement on businesses transferring staff to disclose pre-transfer employee
liability information (ELI) has been changed so that this is required 28 days before the
transfer. There was a clear response from business that repeal of ELI was not desired
and that the timeline should be increased.
e TUPE has been amended to allow renegotiation of terms derived from collective
agreements one year after transfer, even though the reason for seeking to change them
is the transfer, provided that overall the change is no less favourable to the employee.
This change empowers both employer and employee, after one year of working
together, to agree mutually beneficial improvements to terms and conditions. Other
changes include an amendment to the protections against changes to terms and
conditions and dismissal so they more closely reflect the wording used in the Directive
and CJEU case law. This will reduce the risk that the current provisions in TUPE are
interpreted in a way that prevents changes to contracts or dismissals in more situations
than the Directive does. It will also be possible for micro-businesses to directly inform
and consult affected employees about transfers when there is neither a recognised
independent union nor existing appropriate employee representatives.
e An employer proposing 20 or more redundancies may have an obligation to consult
about the redundancies with employee representatives (this is often called “collective
redundancy consultation”). Sometimes the new employer in a TUPE transfer situation
may be proposing such redundancies following the transfer. The Trade Union and
Labour Relations (Consolidation) Act 1992) has been amended to provide that in certain
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circumstances, consultation about the redundancies which begins before the transfer
takes place, can count for the purposes of the rules on collective redundancy
consultation. This will provide certainty for business and employees as well as, among
other things, increasing the efficiency and speed of the restructuring process and
reducing administrative costs for transferee organisations, in particular where there is
to be change of workplace on transfer.
e We have tried to make the TUPE rules more flexible, but recognise the real problem
caused to business and the economy by the barriers in TUPE to harmonising terms and
conditions of the workforce after a transfer, when groups of staff are brought together.
Harmonisation would be a boost to business and could improve fairness for employees.
Any provision to agree a variation to terms and conditions for the purpose of
harmonisation would very likely be incompatible with the Acquired Rights Directive and
so the Government would have to engage with European partners to demonstrate the
potential benefits of a harmonisation framework for individuals and the economy.
However, our priority is to prevent the Commission from making changes to the
Information & Consultation Directives that would damage UK interests. Pressing for the
immediate reform of the Acquired Rights Directive is likely to detract from these
efforts. We must therefore balance carefully the timing and delivery of our objectives.
Reform of the Acquired Rights Directive remains a long-term UK objective.
Top Government Actions (since May 2010)
e The Call for Evidence on the effectiveness of the TUPE Regulations was issued in
November 2011. The Government’s response to the Call for Evidence was issued in
September 2012.
e We consulted between January 2013 and April 2013, publishing the Government
response on 5 September 2013.
e Revised regulations (The Collective Redundancies and Transfer of Undertakings
(Protection of Employment) (Amendment) Regulations 2014 (SI 2004/16) were laid in
Parliament on 10 January and came into force on 31 January 2014.
e Guidance appropriate to the new framework has been prepared and is available on
Gov.UK.
Defensive if raised
This is one sided/very business friendly. You’ve ignored the employee’s rights?
e No. Some of our amendments will help employees. For example, the retention of
employee liability information (ELI) and the extension of the time frame in which it
should be given are pro-employee. The provision of information about obligations
concerning pay and conditions etc helps prevent later grievances arising between
employer and new employer. Additionally, allowing micro businesses to inform and
consult with affected employees directly in cases where there is not a recognised
independent union, nor existing appropriate representatives, rather than having to
invite employees to elect representatives, will reduce bureaucracy for employer and
employee alike. Generally, we have aimed for a less burdensome regime from which
both employer and employee benefit.
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Unfair Dismissal Compensation
Issue
e Unfair Dismissal Compensatory Award Pay Based Cap.
Key Facts
e The limit on the compensatory award has risen rapidly in recent years and creates an
unrealistic expectation about potential awards, given the median award (£4,560 for
2011/12) is far less than current cap (£74,200) and has been around £5,000 since 2005.
e Ending the Employment Relationship public consultation which closed on 23 November
2012, sought views on the appropriateness of the upper limit and a new 12 months’ pay
based limit.
e There was broad support for introducing this pay based cap, which would link the
maximum potential award to an individual’s own salary, to provide more certainty for
both employers and employees
e Therefore the Government Response, published 17 January 2013, recommended
introducing the 12 months’ cap, while leaving the overall specified cap at its existing
level.
e Estimate 1 in 400 (0.25%) unfair dismissal claimants per year affected.
© 94% of awards were below £30,000 and 98% of awards were below £50,000 in financial
year 2011/2012.
e Given that the basic award can be as much as £13,500, the number affected by
changing the compensatory award cap is likely to be much smaller, since the median
award of £4,560 represents the total average award, i.e., both basic and compensatory
award.
Top Government Actions
e We need to give business more certainty about their liabilities at tribunal, and promote
realism about the level of awards
e Weare addressing perception. The median award figure is £4,560 — nowhere near the
current overall cap which is uprated annually in line with the retail price index and
recently increased from £74,200 to £76,574.
e We estimate only 0.25% of unfair dismissal claimants (115 per year) would be affected
by the introduction of an individual cap.
© Compensatory award for dismissals on or after 29 July 2013 that are subsequently
found to be unfair is limited to £76,574 or 1 years pay, whichever is the lower
e The 12 month pay cap on unfair dismissal compensatory awards came into effect from
29 July 2013.
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Elephant trap
e You will be aware of the judicial review that has been served on the department by
compromiseagreements.com, citing discrimination against older workers in relation to
the 52 week cap. The High Court refused permission for the JR. The Claimant has
appealed and won an oral hearing. If challenged about this, your line should be:
e This matter will be reviewed by the High Court next month . It would not be appropriate
for me to comment at this stage.
Unfair Dismissal Compensatory Cap Q&A
This will have a disproportionate effect on particular groups, such as older workers.
e The Equality Impact Assessment of changing the limit was published alongside our
Government Response document on 17 January 2013. This assessment did not
conclude that any particular group would be disproportionately affected.
e The median award is so low it is unlikely many people would be impacted by a pay
based cap. Using the available data, this analysis calculated that around 0.25% of the
total number of claimants for unfair dismissal might be affected by earnings based cap.
e Inthe labour market generally, the majority of people do move quickly to employment
(if they want to). Of those over 50 making a new claim for Jobseeker's Allowance, 85%
leave within a year.
How does this new cap apply to claims already in the system?
e Subject to approval of the regulation, the 12 month pay compensation cap would not
apply to any claim for unfair dismissal lodged before 29 July 2013, even if they reach an
employment tribunal after that date.
¢ Claims already in the system before then are unaffected.
Doesn’t this cap ignore the loss of pension contributions?
e All political parties agree that there should be a cap on compensatory awards. Just
because a claimant has a pension, doesn’t mean that the cap on their compensatory
award should be higher.
e The Employment Tribunal judges will consider the loss of pension contributions as part
of their deliberations when deciding the amount of the compensatory award that’s due.
The cap of one year's salary only bites in cases where the tribunal was considering a
compensatory amount greater than that.
e The median award figure of £4,560 inevitably includes any future pension contribution
losses the tribunal assessed were due. Therefore it does not seem the 12 months’ pay
cap would have any real impact on people with significant pension contributions
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Working Time Directive
Issue
e Current status of the Working Time Directive (WTD), and the impact of certain Court of
Justice of the EU (CJEU) judgments on the domestic Working Time Regulations (WTR)
Key Facts
e The WTD is implemented in the UK by the WTR, which include rules on:
o Annual leave allowance (a minimum of 28 days in the UK, the Directive states 20)
o Rest breaks
o Requirements for night workers
o Maximum weekly working hours (average of 48 hours over 17-week reference
period) — but the individual can opt-out of this element.
e The Commission is assessing the impact of the WTD and carrying out a public
consultation, but there are no current negotiations
e Business organisations frequently cite the Directive as burdensome, whilst public
service, especially health care are impacted by on-call rules
e There are a number of problems with the Directive, especially following:
o CJEU rulings (Simap/Jaeger) around on-call time and compensatory rest (which
particularly affect public services such as health)
o CJEU rulings affecting annual leave and sick leave (e.g. Stringer/Pereda)
o CJEU and UK court rulings affecting holiday pay entitlement (see below)
The UK’s position
¢ Priorities:
o Toretain the individual's right to opt-out of the 48-hour limit in weekly working
time.
o Address problems caused by European Court Judgments on on-call time,
compensatory rest and holiday pay.
e Ensure long-term, sustainable growth and measures that support labour market
flexibility and do not impose significant costs on Member States or burdens on
business.
@ The Coalition Government is committed to limiting the application of the WTD in the
UK.
Holiday pay — The Fulton v Bear Scotland case and subsequent Government Action
Government points
e The Government respects the EAT judgment in this case. This is a significant judgment
for employers and workers.
e We understand the deep concern felt by many employers about the potential costs.
This is why we intervened in the EAT hearing and [this is why we have taken action to
stop claims from going more than two years back in time].
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e BIS has also set up a Taskforce of business representatives and Government
Departments to explore ways to limit the impact on business. We continue to discuss
the implications of this ruling with a wide range of representatives.
@ The right to paid holiday is very important and the UK offers a generous entitlement of
28 days which goes beyond the 20 days required in the Working Time Directive
e The Government wants to get the right balance between the needs of employers and
employees. We want to see jobs created and protected, and for those jobs to provide
employees with appropriate reward for their hard work.
Background
e Recent court cases have concluded that holiday pay should reflect sales commission
(Lock British Gas - CJEU), flying supplements regularly earned by airline pilots (BA v
Williams — CJEU) or non-contractual overtime v Fulton v Bear Scotland — UK
Employment Appeal Tribunal).
¢@ On 4 November 2014, the UK Employment Appeal Tribunal (EAT) decided that holiday
pay should reflect non-guaranteed overtime. This judgment affects people who work
non-guaranteed overtime and who are paid for it. This means where a worker has to do
the overtime but the employer is not obliged to offer it. In practice Court decisions are
expanding the definitions of holiday pay. We estimate that just over 20 per cent of the
UK workforce work is paid overtime, it is important to note that many of these will
already have overtime reflected in holiday pay.
e Inclaims for a series of regularly underpaid holiday pay going back months or years, a 3
month gap in underpayments breaks the series so that claims cannot be backdated any
further.
e The UK Working Time Regulations can be interpreted and applied in line with these
conclusions.
Next steps
e HMG is considering the EAT judgment carefully and what action we need to take as a
result. We are working closely with the Taskforce and a wide range of representatives.
We understand and are concerned about the potential confusion and the financial
burden that this case may bring to the employers.
e [A limit of two years will apply to claims made for underpayment of holiday pay for
claims made to employment tribunals on or after 1 July 2015].
e Employers may wish to check their current arrangements for holiday pay and
overtime/sales commission, and seek legal advice when necessary. Employers and
workers can also contact the ACAS helpline for free and confidential advice.
Annual leave
e There have been several CJEU & UK judgments affecting the interaction of annual leave
and sick leave (e.g. the CJEU judgments of Stringer and Pereda). As a result of these
rulings, workers who fall sick during scheduled annual leave can reschedule their leave
within the same leave year. If they can’t take annual leave due to sickness absence and
are unable to take it again within the same leave year, they can take it forward into the
next leave year (Pereda). Government guidance is clear on these points but there are
no current plans to amend regulations.
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The future of the Directive
e The European Commission is carrying out a public consultation on the Working Time
Directive. It closes in March 2015.
e The Commission also recently sought national reports on the practical implementation
of the Working Time Directive. The UK responded to the Commission’s request on 31
October, setting out our priorities for reform of the Directive.
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Zero Hours Contracts
Key Facts
e Zero hours contracts have a place in today’s labour market. They can support workplace
flexibility, make it easier to hire new staff, as well as providing pathways to employment
for young people, retired people or those with caring responsibilities.
e Zero hours contracts are, on the whole, used responsibly in a wide range of sectors and
have been for many years. They are not a new type of contract, nor has their use
increased beyond 2% of the labour force.
e People on zero hours contracts should get a fair deal. Using exclusivity clauses in this
type of contract is wrong. It prevents people from boosting their income when they
have no guarantee of work.
@ The Small Business, Enterprise and Employment Bill makes exclusivity arrangements in
zero hours contracts unenforceable. That is, they are banned; they are made null and
void.
e We have consulted on the best mechanism to tackle potential avoidance of the ban and
appropriate routes of redress for individuals. That consultation closed on 3 November.
We are analysing the results of the consultation now, and depending on these,
Regulations could be drafted to address any issues identified.
e Data on zero hours contracts estimates they make up between 2 and 4% of the labour
market.
e The latest ONS Labour Force Survey published on 13 August 2014, estimates 622,000
people reporting a zero hours contract in April 2014. This number represents 2% of the
labour force.
e A separate ONS survey published this Aprill estimates 1.4 million individual zero hours
contracts. This number represents 4% of the labour market. This number relates to
individual contracts, not people.
e The ONS LFS estimates zero hours contracts provide an average of 22 hours of work a
week.
e Data has been unreliable so is not a clear indicator that the numbers have gone up.
There is no single legal definition of a zero hours contract. Different surveys have used
different definitions and so the surveys cannot be compared.
e It is not simply the case that the number of those on zero hours contracts have
increased from one quarter to the next. The ONS have advised against direct
comparisons because of changes to the data collection methods and increased
awareness of zero hours contracts.
Top Government Actions (since May 2010)
e Zero hours contracts are not new. In 2013 government recognised and took note of
anecdotal evidence that has illustrated instances of abuse.
e The BIS Secretary of State published the consultation “Zero hours employment
contracts” in December 2013, that sought views on the use of exclusivity clauses in
zero hours contracts, i.e. where an individual is not guaranteed a number of hours of
work nor are they allowed to work for another employer.
' Employee Contracts that do not Guarantee a Minimum Number of Hours — ONS, April 2014
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© 83% of the responses stated that exclusivity clauses in zero hours contracts are unfair
and unjustifiable. The consultation also found that zero hour contracts are seen by
many as a flexible and efficient way for businesses and individuals to agree contracts
that suit their situations.
e Asaresult, the Small Business, Employment and Enterprise Bill has a provision that will
ban exclusivity terms in zero hours contracts. The Bill is now been scrutinised in the
Lords.
e A further consultation was published on 25 August 2014 to find the best mechanism to
ensure employers could not sidestep the exclusivity ban. That consultation closed on 3
November and will help inform the order making power on zero hours contracts in the
Bill.
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National Minimum Wage
Issue
e We are committed to increasing support for lower and middle income earners and
improving the rewards to work. This Government supports the NMW because of the
protection it gives low income workers and the incentives to work it provides.
Key Facts
The National Minimum Wage rates:
Category of worker Rates (and % increase from 2013) I Increase since May 2010
Adults (21 years and
older)
Youth Development
Rate (18-20 year olds)
16-17 Year Old Rate £3.79 (2%) 22p
Apprentices (either
under the age of 19; or
in the fine veovat thei £2.73 (2%) Inioduest 10 Cerober
apprenticeship)
£6.50 (3%) 70p
£5.13 (2%) 30p
Top Government Points
e@ The NMW has been a success in supporting the lowest paid. Since it was introduced in
1999, it has increased faster than average earnings and prices.
e The Government is helping raise living standards through cutting taxes and increasing
employment. Our increases to the personal allowance will benefit over 1 million low-
paid workers with full time minimum wage earners receiving and additional £3552 a
year in their pay packets. It is important that lower paid workers benefit from the
emerging recovery. Following a request from the Business Secretary for more forward
guidance the LPC have stated that we are now in a period of faster, real increases in the
NMW, providing the recovery continues.
? Based on a full time 36 hour week
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Chemicals Sector
Key Messages
e The chemicals sector is a key UK sector, employing over 106,000 people and generating
£8.8bn in Gross Value Added in 2013. The chemicals sector is the second largest
manufacturing exporter sector by value in the UK (after motor vehicles).
e The chemicals sector is the foundation of the UK’s manufacturing industries, supplying
raw materials and inputs to range of sectors, including household products, food,
medicines, advanced materials, fuels, and process technologies.
e Chemistry provides the key enablers for renewable energy, low emission
transportation, energy efficient homes and businesses, and sustainable agriculture. It is
at the heart of the UK’s development of a ‘green economy’. For every tonne of carbon
emitted, the chemical industry saves 2 tonnes3; this will increase with more
implementation. For example: The UK chemical industry energy efficiency has improved
by 35% in the past 20 years.
Key Chemicals Sector Statistics (excluding pharmaceuticals)
e Annual turnover was nearly £32bn in 2013; chemicals accounted for 10% by value of all
UK manufacturing exports in 2013.
e Employed 106,000 people in 2013 with a labour productivity around 1.4 of the UK
manufacturing average.
¢ Generated £8.8bn in value added in 2013 i.e. 5.6%of total manufacturing value added.
e The sector contributed a total of £617m UK R&D investment in 2013, accounting for
around 3.3% of all business R&D in the UK4.
¢ A 2009 global study5 calculated for that every GtCO2e6 emitted by the chemicals sector
in 2005, the sector enabled c. 2.4 GtCO2e in savings by other sectors/end users. This is a
gross saving of 8.5 GtCO2e or a savings ratio of 2.6 (which could rise to 4 under the right
conditions7).
e In 2010, 72% by value of all UK produced chemical products were exported8. 61% of
chemicals exports by value in 2013 were to the EU.
e Major chemicals clusters in the UK are at Wilton (Teesside), Hull, Runcorn (Cheshire)
and Grangemouth (near Edinburgh).
Key Government Actions
Chemistry Growth Partnership (CGP)
@ The CGP is industry-led sector council for chemicals and chemicals-using companies.
The council meets thrice a year.
e The CGP is co-chaired by Matthew Hancock, Minister of State for Business, Enterprise
and Energy, and Neil Carson, formerly Chief Executive of Johnson Matthey.
July 2009 McKinsey report ‘Innovations for Greenhouse Gas Reductions — A life cycle quantification of carbon
abatement solutions enabled by the chemical industry‘
* ONS Business Enterprise Research & Development data
* http://www. hem.org/ICCADocs/ICCA_A4 LR.pdf
®Global total emissions of carbon dioxide equivalent
“http://www.icca-chem.org/ICCADocs/ICCA_A4_LR.pdf
®ONS Analytical Supply Use Tables — produced at five year intervals only
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e Atits inaugural meeting in October 2013, the CGP launched its growth strategy,
Chemistry at Work: A Strategy for Delivering Chemistry-fuelled Growth of the UK
Economy9. This sets out an ambitious target of 50% growth in sector Gross Value Added
by 2030 (from £195bn to £300bn).
e The CGP is undertaking work streams on three priority areas:
o Securing competitive UK energy and feedstock supplies;
o Accelerating innovation; and
o Re-building UK chemistry supply chains.
e Work streams are also taking place on issues such as wider related themes including
skills, exports, and engagement with Local Enterprise Partnerships (LEP). The skills work
stream ensures the CGP is formally engaged with the Science Industry Partnership (SIP)
to shape the SIP deliverables with the CGP strategy.
e BIS and UKTI are engaging with LEPs through a series of workshops to promote more
collaborative working between Government, cluster organisations and the SIP.
e Recent CGP activities include a trade mission for agrichemical SMEs to Switzerland and
Germany, in partnership with BIS, UKTI, and the Chemicals Industry Association
(industry trade association). Further s are planned.
e The CGP has also formed a sub-group to look at supply chain issues and BIS has
completed a pilot supply chain mapping survey to build our understanding of
opportunities, threats and dependancies.
e The four chemical companies in the Strategic Relationship Management programme sit
on the CGP — SABIC, INEOS, BASF and Johnson Matthey. Their contact Minister is
Baroness Neville-Rolfe.
e Inthe Autumn Statement 2015, a £28m National Formulation Centre (NFC) was
announced. This new centre will operate a hub and spoke model with the Centre for
Process Innovation at its centre. The NFC will be based in Sedgefield (North East region).
e Name of CGP Member Company
Neil Carson (Co-Chair) Formerly Johnson Matthey ple
Paul Booth OBE SABIC UK Petrochemicals Ltd
Tony Bastock Contract Chemicals
Torben Jensen BASF
Dave Tudor GSK
lan Shott CBE Shott-Trinova
Harry Swan Thomas Swan & Co. Ltd
Adrian Whitfield Synthomer ple
Tom Crotty Ineos
Steve Foots Croda International
Charles Bragg P&G
Ian Waddell UNITE the Union
Resilience (including flooding)
* hitp:/;www cia org.uk/Policyissues/GrowthStratepy.aspx
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e The sector is currently not part of the UK’s Critical National Infrastructure, but some
sites — because of the volume and types of chemicals they deal with — may be caught
within this category in future.
e Almost all chemical sites are located on either river or coastal flood plains. Depending
on their local geography/topography, some are at risk of flooding. Because of the risk of
chemical pollution from a flooding event, chemical companies take reasonable
preparations and work with the Environment Agency (EA) to mitigate the danger.
¢ Other significant resilience issues include cyber security and security of
energy/feedstock supplies.
Other issues e.g. explosives precursors, chemical weapons
¢ Chemicals can be used for many purposes — legal and illegal. Even consumer products
can potentially be misused to make e.g. improvised explosive devices, Chemical
Weapons, or drugs. The Home Office lead on explosive and drugs policy, DECC lead on
CW issues; and we work with both to put in place effective measures to lessen the risks
of chemicals being misused e.g. the incoming Explosives Precursors Regulation.
Energy
e The chemicals sector is energy-intensive, relying on fuel inputs (e.g. gas, biofuels) both
for electricity and for feedstocks (process inputs). For information, see Topical Brief on
Support for Energy Intensive Industries.
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Green Economy
Issue
e Maximising business opportunities and maintaining industry competitiveness during the
UK’s transition to a green economy
Budget 2014
e Announced a £7 billion package of support for energy costs for businesses:
e Capping the Carbon Price Support mechanism at £18 per tonne of carbon
e Ensuring that the difference in price of carbon between the UK and Europe will never
rise above £18.
e A package of measures designed to support energy intensive industries (Ells), including
extending the existing Ell compensation scheme to 2020; introducing new
compensation to protect them from rising costs of the Renewable Obligation and Feed-
In Tariff to 2020; and an exemption to the carbon price floor for the electricity
generated from good quality Combined Heat and Power plants.
Key Facts
e There are around 7,000 jobs in the offshore wind sector.
e The UK civil nuclear sector (inc. decommissioning, consultancy and its wider supply
chain) generated estimated turnover of around £4 billion in 2011/12.
e Energy and climate change policies will impact primarily on electricity prices.
Top Government Actions (Since May 2010)
e Supporting innovation: Government has established a network of Catapult Centres to
transform the UK’s capability for innovation, including an Offshore Renewable Energy
Catapult which opened for business in June 2013. The Chancellor announced a £185
million budget increase for Innovate UK for 2015/16 in the 2013 Spending Review and
the areas set to benefit include an expansion of the Catapult network with new
Catapults in Energy Systems and Precision Medicine.
e Industrial strategy: Government is working with business to deliver its industrial
strategy to generate economic growth and create jobs. Sector strategies for the
nuclear and offshore wind industries were published in 2013, demonstrating
Government’s commitment to helping these industries deliver their economic potential.
This is creating business confidence, for example with Siemens and MHI Vestas deciding
to invest in new offshore wind production facilities. Mathew Chinn has reviewed the
Offshore Wind supply chain opportunities in the UK and points to the prospect of
increased growth. The offshore wind industry council will take action on his
recommendations. In March this year, the government published its industrial strategy
progress report.
e Nuclear: The Government is working with energy developers, UK companies, inward
investors and the research community to maximise economic benefits from nuclear
energy — including new power stations, operations, maintenance, decommissioning and
future designs.
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e The Government is providing support to enhance the competitiveness of the supply
chain, improve skills and employability in an industry that offers high quality, long-term
jobs, and working with local communities to exploit the opportunities
¢ Green investment: The UK Green Investment Bank is operational with £3.8 billion of
funding from the UK Government to invest in sustainable projects.
e Supporting Energy Intensive Industries: We are already compensating Energy Intensive
Industries (Ells) who operate in an international market for the indirect cost of the EU
Emissions Trading System. The Commission also approved our Carbon Price Floor State
Aid application in May and we began making payments to eligible companies in August
2014.
e Reducing burdens: From 2014 the UK is also exempting mineralogical and metallurgical
processes from the Climate Change Levy as allowed for under the Energy Taxation
Directive.
e Electricity Market Reforms: We are also developing options to exempt Ells from the
costs of Electricity Market Reform (EMR).
e Low Carbon Transactions: We work with DECC to support investment and growth in the
low carbon supply chain such as through investment in the Siemens offshore wind
production facilities. Working together, BIS and DECC ensure that before low-carbon
generation projects can receive financial support, Government has opportunity to
consider and approve each developer’s supply chain plan setting out what impact on
competition, innovation and skills the development will have. This will enable us to
ensure that robust supply chains are in place, as well as understand how UK firms are
benefiting from green subsidies.
¢ To help expand deployment and therefore the supply chain, the UK has a range of
testing and demonstration facilities to support low-carbon tech development such as
NAREC (National Renewable Energy Centre), EMEC (European Marine Energy Centre)
and Wave Hub. This is supported by revenue and capital support set by DECC for the
wave and tidal stream sectors enabling them to move from initial concept onto
prototypes and first arrays.
The CfD budget announcement
e For pot 2 (less established technologies wich includes offshore wind): a total of £235m
will be available - £155m for projects commissioning from 2016/17, and a further £80m
for projects commissioning from 2017/18 — an increase of £80m from the indicative
budget announced in July.
¢ The total value of the Levy Control Framework for supporting low carbon electricity
investment remains £7.6bn in 2020/21.
e The UK is supporting significant offshore wind deployment, and we have a healthy
pipleline. The Government has set out a package which can deliver a range of 8-
15GWI[1] of offshore wind by 2020 — with a clear pathway to around 10GW.
e We realise some companies may be disappointed with this year’s CfD budget allocation,
but we want to manage the budget to have a regular allocation of CfDs, instead of
restricting access to one round.
© All technol
hitps://www.
December 2013
es taken from EMR Final Delivery Plan
government/uploads/system/uploads/attachment_data/file/268221/181213 2013 EMR Delivery Plan FINAL.pdf-
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Industrial Biotechnology Sector
Key Messages
¢ Industrial Biotechnology (IB) is the use of biological resources for producing and
processing materials, chemicals and energy. It is a key underpinning technology with
applications across the highly diverse chemistry-using industries. The UK’s strong skills
base and it significant presence in industries using IB makes it well placed to lead in this
high value area of manufacturing.
Key Sector Statistics
e Industrial biotechnology is growing in importance as a key technology as world
resources become scarce and the population continues to expand. Industrial
biotechnology provides processes and technologies that can help us realise a low-
carbon and resource-efficiency economy. For the chemicals sector, the shift from an
industry based on oil to one based on renewable bio-based feedstocks, including waste,
has the potential to redefine chemical manufacturing in the UK and at the same time
develop a high value economy in the UK. Robust estimates of the global IB market to
2025 range from £150bn to £360bn and in the UK market range from £4bn to £12bn.
[Source: IB IGT Report 2009]. It is widely accepted that this figure has the potential to
be much bigger.
Key Government Actions
e The Industrial Biotechnology Leadership Forum, chaired jointly by BIS Minister Matthew
Hancock and Steve Bagshaw from Fujifilm Diosynth, was set up to oversee the
development of this work. Membership of the Forum is a mix from industry, Research
Councils, TSB, academia, government and learned societies to develop new industrial
biotechnology products and technologies
e BIS has funded the creation of an open access demonstrator facility in the North East to
allow industry, particularly SMEs, access to the expertise and equipment needed to test
develop their ideas.. As well as this, the Centre for Process Innovation (CPI) — part of the
HVM Catapult — is a key pillar in the strategy set out by the chemical and chemistry
using industries. It is a front runner in the development of commercial scale industrial
biotechnology applications.
e Inthe summer of 2014, the Government responded to a House of Lords report into the
opportunity for waste resources to underpin the development of a high value bio-
economy. BIS and Defra have a joint Government championship role in coordinating
cross-departmental activity relevant to this objective. A principle action is to oversee
the production of a long term plan towards maximising a waste based bio economy by
2030. This work is now underway and will be published in 2015.
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Plastic Products Sector
Key Messages
e The plastics and rubber industries form an integral part of the UK manufacturing base.
Plastic and rubber products are utilised by almost all sections of manufacturing; in
particular the lightweight characteristics of plastics have led to its increasing use in the
agricultural, automotive, construction, electronics, energy, food/drink, furniture,
medical and packaging sectors as those sectors seek to reduce the carbon footprint in
their transport.
e The plastics sector has an important role to play in helping to the UK to become a low-
carbon and resource-efficiency economy. Only 4 per cent of the global oil production is
used for plastics. Plastics are also durable and lightweight, reducing the energy required
to run cars and aircraft.
Key Sector Statistics
e The plastic and rubber products sectors had a combined turnover of nearly £22 billion in
2013 (4% of all manufacturing turnover)10. The combined sectors generated over
£8.3bn of value added in 2013, 5.3% of all manufacturing value added.
e The plastics and rubber sectors employ over 160,000 people in 5,700 companiesi1, the
largest of which are significant, international players in terms of market access,
geographical market positioning and raw material consumption.
e Over £6.8 billion of plastics and rubber products were exported from the UK in 2013.
e Approximately 50% of all products are now packed in plastics.
e The UK plastics and rubber sector is broadly on par, in terms of productivity, with our
main European partners/competitors, and is the fourth largest producer in the EU of
both plastics product and rubber processing after Germany, France and Italy12.
e Approximately 25% of the 5m tonnes of plastics used in the UK annually are recycled.
Key Government Actions
© To help achieve the government’s waste minimisation targets, manufacturers and
retailers of plastics products are being encouraged to design them to facilitate
reuse/recycling and to favour recycled materials over virgin materials
e The Government has set ambitious targets for the recycling of plastics packaging and
estimates that this would provide a net benefit of £181m to the UK economy over the
2013-2017.
e The Government plans to introduce a 10 pence levy of plastic bags in England from
October 2015 which should drastically reduce the amount of bags given out freely by
large retailers.
e BIS is currently working with the British Plastics Federation to develop an industry
strategy for maximising the economic potential of the UK plastics sector.
(Note: Manufacture of plastic itself (plastics in primary forms) is classed under chemicals
‘ONS Annual Busi
"ONS Annual Busi
© EUROSTAT Prodeor
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Support for Energy Intensive Industries
Budget 2014
e Steps have been taken by government to offer further relief to businesses affected by
the rising cost of energy. These include:
o Apackage of relief for Energy Intensive Industries (Ells), such as steel and chemicals,
whose competitiveness is impacted by energy and climate change policies, through:
© compensation from the costs of the Renewables Obligation (RO) and small scale
Feed in Tariff (FIT) from 2016/17, subject to state aid approval.
e extending the compensation scheme from indirect costs of the EU Emissions Trading
Scheme (ETS) and Carbon Price Floor (CPF) beyond 2015/16 to 2019/20.
exempting fuel used to generate electricity from Good Quality Combined Heat and
Power (CHP) for onsite purposed from the Carbon Price Floor from 2015/16.
© capping the Carbon Price Support mechanism at £18 per tonne of CO2 — ensuring the
difference in the carbon price between the UK and Europe will not go above £18 — to
limit its impact on British companies competing internationally.
e Government had also previously committed to exempt energy intensive industries for
the indirect costs of the EMR Contracts for Difference starting in 2015 and to exempt
mineralogical and metallurgical processes from the Climate Change Levy from April
2014
Issue
¢ Climate change and energy policy costs are creating a cost differential between the UK
and other countries. This increases the risk of carbon leakage - i.e. multinational
companies will still make the investment but in a more competitive country location.
The bulk of these costs are on electricity.
Government is therefore implementing measures to reduce the impact of policy on the
costs of electricity for the most electricity-intensive industries. This includes £3bn
compensation for electricity-intensive businesses to help offset the indirect cost of the
Carbon Price Floor (CPF), the European Union Emission Trading System (EU ETS), the
costs of the Renewables Obligation (RO) and small scale Feed in Tariff (FIT), subject to
state aid guidelines.
Energy Intensive Industries - Government Actions
e EU Emission Trading System (EU ETS). Together with the CPF compensation, the
Government made a commitment to compensate electricity intensive industries for the
indirect costs of the EU Emission Trading System (EU ETS). We received state aid
clearance in 2013 and at the end of October we had paid compensation of £45.6m to 53
electricity intensive businesses who operate in an international competitive market.
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¢ Carbon Price Support mechanism (CPS). The Commission approved our State Aid
application in May; we began making payments in August 2014. At the end of October
we had paid out compensation of £21.6m to 49 companies, all of which have previously
received compensation for the indirect costs of the EU ETS.
e Mineralogical and metallurgical exemption from the Climate Change Levy. As
announced in Budget 2013 we are also supporting Ells by exempting mineralogical and
metallurgical processes from the Climate Change Levy. This started in April 2014. CCL is
a tax on fuels used for lighting, heating and power, by business consumers including
consumers in industry, commerce, agriculture, public administration, and other
services.
e Relief from the costs of renewables. Government has committed to compensate
electricity intensive industries for the passed through costs of the Renewables
Obligation (RO) and small-scale Feed-in Tariff (FiT), and exempt them from the costs of
EMR Contracts for Difference, subject to state aid approval, Government has consulted
on guidance on eligibility and how the schemes would run. This closed on 24 October,
We received 46 responses predominantly from industrial stakeholders and are
analysing responses. We will publish a response by the Spring 2015
e A separate consultation on draft regulations for the EMR CfD was also held, led by
DECC, and this closed on the 5 November. We expect to lay regulations in January 2015
and subject to approval of our state aid case expect the scheme to commence in
October 2015.As announced in Budget RO / FiT compensation will commence in April
2016
e Exempting Good Quality Combined Heat and Power (CHP) generation from the Carbon
Price Floor from 2015/16. This will incentivise the uptake of CHP saving carbon
emissions through energy efficiency and supporting industrial competitiveness. On 10
December, HMRC published its draft regulations for how this relief will be implemented,
as part of its Finance Bill 2015 package.
e Capping the Carbon Price Support at £18 per tonne of CO2. While the government
remains committed to the Carbon Price Floor as a means to stimulate investment in low
carbon generation, it is capping the Carbon Price Support rate at £18.00 from 2016-17
to 2019-20 to limit any competitive disadvantage British companies face in the global
race
e State Aid Rules. The European Commission has issued revised energy and
environmental state aid rules. They provide a framework for the UK Government to
implement the measures above.
Background
e We have committed to a £7bn package of measures to support energy intensive
industries, including £3bn of compensation, to run to 2020, when the Commission’s
current state aid guidelines expire.
@ The UK pre-notified the ETS compensation scheme to the Commission in September
2012. Approval was granted in May 2013, and payments began in August 2013.
e The UK pre-notified the CPS compensation scheme to the Commission in September
2012. Approval was granted in May 2014, and payments began in August 2014.
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State aid cases are usually approved under relevant Commission guidelines. However,
the CPS scheme did not fit any of the existing guidelines, thereby making its assessment
and approval more difficult. The novelty of the CPS case was a major cause of the delay.
The state aid guidelines under which these schemes were approved restrict eligibility
for compensation to a relatively small number of sectors, based on a list of NACE codes
defined by the Commission.
New environmental and energy state aid guidelines were issued by the Commission in
April 2014. The list of eligible NACE codes is significantly broader, covering more
sectors.
The UK pre-notified the Commission of the RO/FiT compensation scheme and the CfDs
exemption in September 2014. We expect to be able to implement the exemption from
autumn 2015 and pay compensation from April 2016, subject to the state aid process.
These measures to support Ells are business critical for companies such as INEOS
ChlorVinyls, Tata Steel Europe and Celsa Steel because of their electricity intensity and
pressure from international competitors.
The Government intends to seek a review of the list of sectors eligible for EU ETS and
CPF compensation with the Commission, in order to bring relief for indirect carbon
taxes for other UK based electricity intensive industries, such as cement, industrial
gases and parts of glass and ceramics.
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Post Office
Key Facts
¢ There are around 11,700 post office branches in the UK, with the Post Office network is
at its most stable for over two decades.
e 93% of the national population (and over 95% in urban areas) live within one mile of
their nearest post office branch.
e Around 18 million customers & a third of SMEs visit post offices every week.
¢ Government has committed nearly £2 billion13 to maintain a network of at least 11,500
branches and to protect and modernise the network by 2018.
e For 2014/15, Government is providing a subsidy of £330 million to maintain, modernise
and protect the network.
e Post Office Ltd was separated from Royal Mail in April 2012, and is an independent
company. It has along term commercial agreement with Royal Mail to provide access
to Royal Mail services at post office branches.
Top Government Actions (since May 2010)
e There will be no repeat of the closure programmes of the previous Government. We
have committed to maintain a network of at least 11,500 branches, and to transform
the network securing its sustainable future.
e Weare providing funding to modernise post office branches by 2018. Two new
operating models — "Main" and "Local" — will see improvements for customers. To-date
over 3,500 branches have already been converted. The BIS Committee concluded “the
reforms are necessary” and “in the right direction”.
e Where a post office is “the last shop in the community” it will continue to receive public
subsidy to ensure vital services remain available. There are around 3,100 ‘Community
Branches’, which will also benefit from a £20 million investment fund.
e The Post Office is making good progress on its ambition to provide more services on
behalf of Government — for example it was recently awarded a new cross-government
framework contract, runing to 2020. DVLA and HM Passport Office have already
moved their services onto this contract. The Passport Office is discussing introducing
new in-branch services which would allow customers to apply for their passports
digitally, without the need for any supporting paper forms.
e The Post Office card account is one of the Post Offices largest contracts which also
drives important footfall for branches across the UK. The recent announcement by
DWP to extend this contract until at least 2022 is a welcome development.
Acknowledging the important role subpostmasters play in their communities while also
protecting the revenue and footfall Post Office card account customers are responsible
for.
@ Government supports Post Office in its front office ambition.
® £1.34 billion in the 2010 Spending Review, and a further £640 million announced in November last year to
cover the period 2015/16 to 2017/18.
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Elephant trap
[If pressed about the relationship with the banks]
e Post Office Ltd already provides access to 95% of current accounts across the counter at
more than 11,500 branches. This is in addition to the Post Office’s own wide range of
personal financial services, which includes three types of current account.
e It also operates a network 2,500 ATMs which are free to use and part of the LINK
network, enabling withdrawals from a full range of current and other accounts; many of
these in rural and deprived areas.
e Since 2010, Post Office Ltd has reached agreement with RBS (including NatWest) and
HSBC to allow customers to access their current accounts at post office branches. Post
Office Ltd continue to engage with the one remaining high street bank (Santander) who
have yet to offer their customers this service.
e The Secretary of State has written to the banks to ask them how they plan to ensure
that the banking needs of vulnerable consumers are met, particularly in areas facing
branch closures. He will also be encouraging them to give priority consideration to
creating or building on existing partnership arrangements with Post Office Ltd, including
considering how to address any additional financial and operational burdens on the
Post Office.
[If pressed about Crown franchise proposals]
¢ Eliminating the significant losses incurred by the Crown post office network is a key
element of the strategy to make the network sustainable in the long-term. As part of
this strategy, Post Office Ltd is seeking retail partners to provide post office services in
up to 58 branches, and the company will be holding local public consultations on all of
these proposals.
[If pressed on the removal of car tax discs]
e Although the car tax disc is being withdrawn, DVLA customers who choose to pay for
their car tax in post offices will continue to be able to do so.
[If pressed about the progress towards Mutualisation]
e The Government is committed to seeing clear progress being made towards
mutualisation before the end of this Parliament. In early 2014 POL published a set of
mutualisation milestones and a public purpose, developed alongside its stakeholders —
this was an important step. In addition POL has also launched the Post Office Advisory
Council, a consultative body for POL to engage — on a business as usual basis — with its
stakeholders on matters of mutual interest.
[If pressed about Industrial Action balllot for POL’s supply chain]
e The Government is fully committed to modernising the Post Office network and
safeguarding its future. To achieve this Post Office has developed a strategy to deliver a
sustainable network. The Government supports the Post Office in devliering that
strategy.
e The Government does not play any role in pay negotiations between Post Office Ltd and
its staff, which are an operational matter for the company and its CWU represented
staff.
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[If pressed about the Second Sight review into the Horizon system]
e An independent report, published in July 2013, explicitly confirms that there is “no
evidence of system-wide problems with the Horizon software”. Horizon successfully
handles six million customer transactions every day, and tens of billions since its
national rollout in 1999.
e Areview and mediation scheme, overseen by an independent Chair, has been
established to address subpostmasters’ concerns in individual cases.
[Only if needed]
® Government cannot comment on any individual matters or documents in connection
with the scheme — this is an independent and impartial mediation scheme. The
Government, as shareholder of the Post Office is not involved.
e Details about any cases being considered by the Scheme are a confidential matter for
the parties involved. It would be entirely inappropriate for the Government to be
involved in individual cases.
[If pressed about business rates application to ATMs]
@ The VOA, which is an executive agency of HM Treasury, is responsible for ensuring that
all sites that should be assessed for business rates are correctly rated. The VOA treats
all businesses equally when determining whether a business should be rated. This takes
account of particular circumstances, such as contractual factors, between the ATM
operators and the host business.
e Asa matter for the VOA, your question should most appropriately be directed to the
responsible Minister, the Financial Secretary to the Treasury.
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Royal Mail
e HMG’s overarching objective is to secure the long term future of the UK’s universal
postal service — the six day delivery and collection of letters at uniform and affordable
prices.
e The Royal Mail sale of shares has enabled the company to access the fast, flexible
private capital that it needs to invest in its future and compete in a rapidly changing
market. Royal Mail has raised £1.8bn in bank facilities and debt capital markets since
the IPO.
Sale of Shares
e The IPO raised gross proceeds of £1.98billion for the Exchequer.
e HMG has retained a 30% stake of Royal Mail to ensure that the taxpayer will share in
any future increase in Royal Mail’s value and receive dividends (nearly £40m in July this
year).
e 17% of the shares in the company were made available to members of general public
through a “retail offer”.
e 10% of the shares were given free to eligible Royal Mail employees.
Share Price
e The share price remains volatile with ranging from 388p-618p in 2014 .
e Market analysts have not yet reached a consensus on the target price for Royal Mail
shares which have ranged from 360p-700p.
e We could not have placed 600m shares at today’s price.
e The price range was based on extensive analysis and engagement with a range of solid,
long-term, high-quality investors. Ministers took advice from UBS and Goldman Sachs
as well as from the Government’s independent adviser Lazard. (see separate brief on
Lord Myner’s Review)
NAO/BISCOM Report
e The NAO and BISCOM reports confirmed that the Government achieved its primary
objective in the privatisation of Royal Mail.
e We have protected taxpayers from the risk of needing to offer on-going support whilst
safeguarding the vital six day a week service we all rely on.
e The alternative — a failed sale and retaining Royal Mail in public ownership — would have
been the worst outcome for the taxpayer.
e We had no evidence to suggest that we could have achieved a higher price without
introducing unacceptable risks to our overall objective of delivering a sale to safeguard
the future of the universal postal service.
Investors
© The Government achieved its intention to ensure that RM started out with a core of
long-term, stable investors who understood the business, along with some hedge fund
participation to ensure liquidity in the aftermarket.
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e@ We never expect the shareholder register to remain static. Some investors have sold
their shares, presumably because they feel that the current price is too high. Others
have bought shares. There is still a wide range of views on the value of this company
between 360p and 700p.
Lazard Asset Management profiting from sale
e The relationship between the advisory and asset management arms of banks is
overseen by the Financial Conduct Authority who require information barriers between
the two. Neither the NAO or the Business Select Committee found evidence to suggest
that there was a breach of these information barriers.
e While Lazard Asset Managements’ clients made profits as a result of the rise in the
share price, this side of the firm itself only generated income of some £40k on an
annualised basis from the sale.
Sale of Residual Stake
e There are no current plans to sell all or part of the Government’s 30% residual
shareholding in Royal Mail.
Property
e Stripping out Royal Mail’s surplus property would have reduced the company’s value
and required us to notify the European Commission under State Aid rules, jeopardising
the sale timetable. Instead we chose full disclosure to investors in order to ensure it
was reflected in their valuations and deliver value for money. There was no ‘hidden
value’ here - full information on the sites was provided and market analysts included
this in their research reports. We and our advisers are clear that the alternatives —
stripping out or clawback arrangements — would have had a detrimental impact on
value and the sale.
e Lord Myners’ Review
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Universal Postal Service and Postal Services Regulation
Universal postal service under threat
e The Government has taken effective steps to protect the universal service by enshrining
its core requirements in law and by giving Ofcom, as the regulator for the market, the
primary statutory duty and the powers it needs to safeguard the provision of the service
throughout the United Kingdom.
© Ofcom has now reviewed Royal Mail’s concerns about the effects of competition on the
universal service and having assessed all the market evidence it has concluded that
postal competition does not currently threaten the service. Ministers have been
assured by Ofcom’s Chief Executive that the Regulator will continue to monitor market
developments on an ongoing basis and that if a threat emerged they would be able to
act in good time to protect the delivery of the universal service.
e As part of a wider review, Ofcom is now looking at other factors that may affect Royal
Mail’s ability to provide the universal service in the future — namely Royal Mail’s
efficiency and its performance in the parcels market. The reviews will be concluded in
2015.
Changes to the universal postal service minimum requirements
e The minimum requirements of the universal postal service — which include 6 day a week
letters service at a uniform price to urban and rural addresses up and down the country
—are enshrined and protected in law. Only Government with the approval of
Parliament can change the minimum requirements of the universal postal service. And
this Government has no plans to change the minimum requirements.
¢ CompetitionProtection of the universal service is at the very heart of the regulatory
framework. In carrying out its primary duty, the regulator is required by law to carefully
consider the financial sustainability of the universal provider. It does have a general
duty to promote competition, but if this conflicts with its primary duty, the universal
service comes first. It is also required by law to look at the efficiency of the universal
service provider to make sure that the universal service provider is providing a cost-
efficient service to its customers.
e As far as market competition is concerned, the Government has made its position very
clear: we recognise that competition can bring benefits to customers in terms of
cheaper prices and innovative products and driving operational efficiencies, but market
competition must never be allowed to compromise the provision of the universal postal
service that is still vital to communities and businesses throughout the UK.
e The reforms that were progressed under the Postal Services Act 2011 have helped
Royal Mail, as the only operator in the country capable of providing the universal
service, return to profitability. Its latest figures show that its earnings continue to
move towards the target range seen by Ofcom as being consistent with the provision of
a sustainable universal service.
e Royal Mail is healthier and better placed than it has ever been to compete and to tackle
the challenges of competition. This is good news for the future of the universal service
and good news for all postal users who rely on the service.