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Agenda item 2 is consideration of a legislative consent memorandum on the Small Business, Enterprise and Employment Bill. The LCM will be introduced by Fergus Ewing, the Minister for Energy, Enterprise and Tourism, who is joined by the following colleagues: David McPhee, who is head of the business and energy unit in the office of the chief economic adviser; Neil MacLeod, who is a principal legal officer in the solicitors constitutional and civil law division; Chris Boyland, who is the head of strategic reform at the Accountant in Bankruptcy; and Elaine Drennan, who is the head of employability, skills and lifelong learning analysis in educational analytical services. I welcome you all to the meeting.
Minister, would you like to make some introductory remarks?
Yes, convener, and thank you very much. Good morning, everyone.
I am grateful for today’s opportunity to address the committee in respect of the motion that was lodged by the Cabinet Secretary for Finance, Employment and Sustainable Growth on 8 August. As you will know, the United Kingdom Government’s Small Business, Enterprise and Employment Bill was introduced in the House of Commons on 25 June and will shortly begin its Westminster committee stages. It aims to remove what are regarded as unnecessary impediments to business and includes a wide range of measures that are aimed at promoting economic growth.
The majority of the bill’s provisions are reserved to the UK Parliament, but what we are concerned with today are the provisions that fall within this Parliament’s devolved competence and which require a legislative consent motion to allow the UK Parliament to legislate on them. I will therefore concentrate on the areas that are contained within the motion and will be happy to address in writing any other queries outwith today’s proceedings, should the committee so require.
The LCM covers three areas: improving access to finance through the assignment—or, as we say in Scotland, the assignation—of receivables; the sharing of information in relation to education and training; and corporate insolvency. I will briefly outline each area.
First, the ban on assignment of receivables measure—as it is referred to in the UK bill; in Scots law, it is called the ban on assignation of receivables—is aimed at improving small businesses’ access to finance by removing legal barriers that can prevent them from selling their invoices to third-party finance providers, and thereby seeks to improve liquidity and cashflow for small business and increasing prospects of sustainability and growth. Viable businesses need access to finance for investment and growth; indeed, the committee recognised as much in its report on access to finance and alternative financing models, which it published earlier this year. This change, which is aimed at delivering a positive impact by nullifying the impact of clauses in business contracts that prohibit a business from selling its invoices to a third-party finance provider, should directly benefit small businesses. As the provision affects contract law, which falls within the legislative competence of the Scottish Parliament, it will require the Scottish Parliament’s consent.
The second measure that is outlined in the LCM relates to the extension of the sharing of information about individuals for the purposes of assessing the effectiveness of training and education. Under existing legislation, the Scottish ministers, the secretary of state and Her Majesty’s Revenue and Customs are able to share information about benefits, tax and education for the purposes of assessing the effectiveness of the provision of training and further education for people aged over 18. However, information about higher education is specifically excluded, so the measure will enable the assessment functions to include people aged under 18 in order to capture all school leavers as well as those in higher education, and to allow us to identify wage and employment outcomes for those who have undertaken training, or further or higher education in Scotland. As the measure will affect the assessment of education and training services, it falls within the Scottish Parliament’s devolved competence and therefore requires the Scottish Parliament’s consent.
The third and final area of the LCM is corporate insolvency. The measure aims to reduce complexity and to improve the efficiency of insolvency processes, which will reduce the costs of administering insolvency proceedings and could lead to higher returns for creditors. The UK Government believes that the whole package, not just the insolvency measures that are outlined in the LCM, will benefit creditors by an estimated £30 million per annum. Although the actual benefits remain to be seen, the aim clearly chimes with the principle that was set out by this Government in our Bankruptcy and Debt Advice (Scotland) Act 2014 of securing the best return for creditors by ensuring that the rights and needs of people who are in debt are balanced with the rights and needs of creditors and businesses. On that basis, we think it sensible that the measures be extended to cover Scotland. As the measures relate to devolved areas of corporate insolvency such as receivership and the process of liquidation, they fall within the Scottish Parliament’s legislative competence and therefore require legislative consent.
The committee should also note that a supplementary legislative consent motion on public sector exit payments might be brought before members at a later date. The bill includes a provision to ensure that exit payments are recovered when high earners return to the same part of the public sector within 12 months of their leaving. It was agreed that, due to the measure’s complexity and its late addition to the bill, UK and Scottish Government officials would continue their discussions on the detail of the policy and the desirability of an LCM on the provision. If agreement is reached on the policy, we will lodge a supplementary LCM in due course.
The Scottish Government is already creating a supportive business environment and has progressed a range of successful initiatives to deliver better regulation for all. In recognising that Scotland’s businesses are the primary drivers of sustainable economic growth, we welcome policies that complement our continuing programme to improve the performance of our businesses, and make Scotland a more open and competitive place for companies to do business.
I ask the committee to support the draft legislative consent motion.
Thank you, minister. Do members have any questions for the minister?
Good morning, minister. Can you clarify your comments about the selling on of debt? I presume that you are talking about invoice discounting, but can you explain the provisions that are set out in the bill?
We understand that some contracts that are routinely imposed, perhaps by larger businesses on smaller businesses, contain provisions that prevent the smaller business from selling on to a third party any claim that they would, under the contract, have for money payable. We can share examples of such provisions if members are interested, but we think that such a ban on assignation—in other words, the selling on of the right to extract payment of a debt—is not in the interests of business and that there is no justification for it. It is simply a practice that some large businesses have got into because they can. As, I am sure, those of us with previous business experience will recall, big businesses tend to get their way. They impose standard pro forma conditions and if you do not like it, your choice is to lump it. I therefore think that it is quite a good measure. A more technical explanation might well be hidden in the notes that are in front of me, but I hope that that punter’s version will suffice.
On recovery of public sector exit payments, I have to say that I do not know what covenants exist in the Scottish public sector under which such a measure could be implemented. Is this a new provision? I thought that under our management of the legislation there are already covenants explicitly stating that people cannot re-enter the same service that they had previously exited at roughly the same salary.
I hesitate to generalise on such a wide area, but I can certainly come back to the committee on the matter. Because we are not at the stage of knowing whether an LCM is required, we—or, at any rate, I—have not yet looked into the perfectly legitimate question that Mr Brodie has raised about the current position. Given his perfectly reasonable question, I undertake to look into the matter and formally write to the committee on it, irrespective of whether there is an LCM.
Thank you.
It all seems to be relatively uncontroversial; the bill will make a number of sensible reforms.
Is the committee minded to recommend that Parliament give its consent to the provisions of the Small Business, Enterprise and Employment Bill, as set out in the LCM?
Members indicated agreement.
Are members also happy to delegate to the convener and clerk to the committee the production and publication of a short factual report detailing the committee’s consideration?
Members indicated agreement.
We will have a very short suspension while we change officials for agenda item 3.
09:15 Meeting suspended.