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Gangmasters Licensing (Extension to Construction Industry) Bill

Volume 519: debated on Friday 3 December 2010

Second Reading

I beg to move, That the Bill be now read a Second time.

I pay tribute to my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan), who presented the Bill that became the Gangmasters (Licensing) Act 2004. I also thank my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) and other colleagues who did a power of work on that Bill.

The Bill proposes to extend the remit of the Gangmasters Licensing Authority, which currently covers only the agriculture and food processing sectors, to the construction industry. Gangmasters in those sectors are required to hold licences and to pay the very small fee of £400, but if the authority is able to expand into the construction industry, the fee will be reduced in proportion to the number of people whom gangmasters employ.

In the agriculture industry, licences are not revoked for a small transgression. The GLA works with gangmasters to try to ensure that they meet the necessary requirements, and only in the event of serious and continued breaches will the GLA use its power to revoke a licence. Since the Act came into operation, 110 of the 1,200 licensed gangmasters have had their licences revoked. The gangmasters’ organisation supported all those revocations.

Given the shortage of time, I shall have to abbreviate my remarks and not list all the case studies.

Does my hon. Friend agree that the Act was successful because it engaged everyone, from the National Farmers Union to the Transport and General Workers Union, and that it has been a quiet success because it has dealt adequately with the areas of responsibility? When it was first introduced, I had ministerial responsibility. The Government said, “Let us see if it works in this area of endeavour, and if it does perhaps it can be extended elsewhere.” Would it not be a terrible shame if the opportunity to explore that expansion were not taken today?

It certainly would. I congratulate my right hon. Friend on the tremendous work that he did as a Minister at the time. As he says, the Act has been a success story that has not reached the press. The GLA has kept its head down and worked hard with the industry, and we now want that work to be extended.

The Bill does not create any new workplace regulations; it merely changes the enforcement of the existing regulations. That will raise more revenue in increased tax take than it costs. The current net cost of the GLA is £4 million a year, but according to the Treasury’s own figures, false statements of employment in the construction industry cost £350 million a year. There are other ways in which the Bill will create efficiencies on the front line. It will reduce the number of duplicate back-office roles between the GLA and the employment agency standards inspectorate, and will help to deal with issues such as trafficking. In the last few years, some Conservative Members have drawn attention to the amount of trafficking that is taking place, with the support of Oxfam, Anti-Slavery International and the Home Affairs Committee.

Like the hon. Gentleman, I supported the introduction of the 2004 Act, but does he agree that there have been problems in the way in which the GLA has operated since then? Some parts of it have become bureaucratic and interventionist, and some parts are expensive. Some legitimate gangmasters have encountered difficulties in their legitimate operations as a result. If the hon. Gentleman’s Bill becomes law, will he ensure that the GLA’s application to the building industry is slightly different from its application to the agriculture and food industries?

That is not the information that I have received. Many people say that, by and large, the arrangements have worked very well. However, we will certainly need to tweak the system to ensure that it applies properly in the construction industry, and that the beneficial developments in the agriculture industry are transferred. It is not a question of increasing bureaucracy.

Construction is a dangerous industry, with a bad record on health and safety and employment rights and a record of avoidance of employment taxation. The Bill will tackle those problems. The Gangmasters Licensing Authority works; it does a good job and is supported by a wide range of groups including unions, employers and industry groups, as well as non-governmental organisations such as Oxfam and Anti-Slavery International. The GLA has forced rogue gangmasters out of the relevant sectors, but not out of the economy. Our aim is to the extend the GLA’s powers, and to transfer powers away from the employment agency standards inspectorate, a failing body that does nothing to support or protect honest employers.

For the benefit of new Members such as myself, can the hon. Gentleman explain what has changed in the six years since the original legislation was passed in 2004? Why is it now felt to be necessary to add construction workers, when they were not included in the original measures?

We have just sat through three hours of debate on another Bill, so I cannot go into all the details of such arguments as the time available to me has been cut right down to the bone. It is right that we discussed that earlier topic of course, and in that debate it was said that we should have an experiment and review things. Similarly, we said at the time of the original Bill that we would review how the GLA worked, and at some point we might come back with further proposals. We are doing that now. We have looked at the legislation and how it is working, and we now feel it is appropriate to transfer powers into this new area.

I have not got much time, so I am trying not to take too many interventions.

Members come to this House for a range of different reasons. When I was a young delegate at a colliery, I had to do one the saddest things I have ever had to do in my life. A young lad in his 20s had been killed in an accident. Along with a colleague, I had to go to see his mum and dad the following day to explain what had happened in the accident. I therefore have a vested interest. I have a lot of friends who work in the construction industry, and I worked in a dangerous industry. I know what things are like. The saddest thing anyone could ever have to do is go to a household who have just lost a beloved one who had their whole future ahead of them. The effect of such an event on a family is terrible. That is why I am passionate about making sure that, where appropriate, health and safety legislation is put into operation. That is important.

I also believe the Government should look seriously at creating a single employment inspectorate and enforcement agency. The point has been made in the past that there are too many organisations working in silos; there are too many organisations working independently of each other and fighting over different issues. I know that many friends—indeed comrades—in the trade union movement do not want the role or structure of the Health and Safety Executive to be altered, but I think there is a strong case for merging the GLA, the employment agency standards inspectorate, the HSE and the minimum wage enforcement responsibilities of Her Majesty’s Revenue and Customs into a single body that could also work closely with the UK Border Agency. One such organisation or inspectorate covering all these bases would reduce the massive amount of administration involved in many cases and would mean the various agencies were working not independently, but with each other. That, in turn, would reduce the costs of each of these organisations while at the same time enabling them to be more effective in what they do.

The hon. Gentleman seems to be moving away from what I understand to be the central purpose of his Bill. He is talking now about amalgamating the UK Border Agency, HMRC and other organisations, and creating one large organisation, which I fear would be particularly bureaucratic and difficult to control. Will he explain why he is seeking that very considerable bureaucratic change, when the purpose of the Bill seems to me to be reasonably simple and straightforward?

The hon. Gentleman raises a correct point. If I had been able to read my entire 31-page speech, I would have answered all such points, but I have had to limit my remarks in order to allow the Minister to respond. This is an ambition. The GLA does good work in agriculture and we are seeking to extend its good work to the construction industry. That is what the Bill would do; it is as simple as that.

In my discussions with the Minister, I have suggested that other measures could be looked at in future to reduce the bureaucratic structure of many of the current organisations. My only interest in this topic is to help honest companies, who are competing against dishonest companies, and to protect employees. That is the key to the whole thing. I shall finish on that note, and I wish to thank everybody for being here for the debate. All I ask of the Minister is that in the interests of fairness, which was displayed in the previous debate, this Bill should go into Committee so that we can iron out a number of these issues.

I congratulate the hon. Member for Midlothian (Mr Hamilton) on securing parliamentary time for his Bill. I recognise the depth of his interest in health and safety matters and in securing decent working conditions. Obviously he had a track record in this area before he came to this House, and it was a pleasure to meet him to discuss his Bill prior to today. I hope that I have a few things to say to him in the time that is left to me—

The hon. Gentleman tempts me to sit down, but I will not be doing so quite yet because it is important to put the Government’s position on the record. I wish to say a few things that I think will have made his efforts worth while.

This Government, too, are committed to improving health and safety, particularly in construction, to ensuring fairness in the workplace and to encouraging and raising levels of compliance with workplace rights, in the construction sector and elsewhere. Where we differ with the hon. Gentleman is on whether licensing would be an effective solution to problems in the construction sector. Of course, licensing has its place as a tool in the regulatory arsenal. It is used in relation to labour providers in agriculture and food processing, as he said, and there are other examples too. However, licensing is an expensive and untargeted system of regulation. It burdens all with fees and inspections—the good and the bad alike—and with the risk that the worst businesses evade licensing altogether. Licensing can be an appropriate response to particular problems in particular sectors, but that does not mean it is appropriate in all cases.

I declare an interest, as I am a major shareholder in a food processing business in my constituency. North West Leicestershire is a major provider of building materials and is the base for many large construction companies, as hon. Members are perhaps aware. There is a huge difference between the agricultural and food processing industry and the construction industry, and therefore in the regulatory burden that those industries can carry. The food and food processing industry is a non-cyclical business—parts of it can even be counter-cyclical—and has been almost unaffected by the economic downtown, whereas we know that we cannot say that of the construction industry. I am very worried that any further burdens on the construction industry at this particular time, when it is struggling to deal with the effects of the last recession, could be particularly burdensome. It is not fair to compare the construction industry now with the more resilient food processing industry.

My hon. Friend is exactly right in his analysis of the construction industry and of how we use licensing as one of the tools to deal with everything from health and safety to fairness in the workplace. We need to consider the conditions that need to be met before something such as licensing is appropriate. We need to consider whether existing enforcement arrangements are inadequate; whether there is hard evidence of illegal activity; where a licensing system would be a proportionate and effective way of tackling the problems that are seen; and where licensing would be practicable, enforceable and, finally, affordable. The Government do not consider that those tests have been met for the construction sector.

There is a misapprehension in some quarters that employment agencies that supply labour to the construction sector are unregulated, and that workers are unprotected. In fact, regulatory safeguards are already in place for all agency workers, whichever sector they work in. For example, employment agencies operating outside the Gangmasters Licensing Authority’s sectors have to comply with health and safety and working time legislation enforced by the Health and Safety Executive. They must also comply with the national minimum wage regulations enforced by Her Majesty’s Revenue and Customs. In addition, they must adhere to special employment agency regulations enforced by my Department’s employment agency standards inspectorate—the EAS—which responds to complaints from agency workers, and carries out an additional programme of proactive, risk-assessed inspections each year.

On health and safety legislation and the work of the HSE in the construction sector, the hon. Member for Midlothian is rightly worried about health and safety, which is a big concern for the sector, but I am not convinced that a licensing system would improve the sector’s health and safety record. The GLA applies a range of licensing standards. The conditions for health and safety are intended to ensure agreement between the labour supplier and the hirer about who will have responsibility for managing day-to-day health and safety, including the preparation of risk assessments, but that is already clear in construction.

Under the Construction (Design and Management) Regulations 2007, the principal contractor has responsibilities for ensuring the health and safety of all individuals who work on a construction site regardless of their employment status. This includes directly employed workers, labour-only sub-contractors and the self-employed. In addition, each contractor working under the principal contractor has duties to every individual working under their control. Those duties are on top of the requirements that individual employers have to their employees. Duties of the principal contractor include the requirement to consult all workers involved in a project to ensure that the measures taken to protect their health and safety are effective.

I am listening to the Minister’s remarks with great interest. He has explained his position on why the GLA is not relevant to the construction industry, but will he expand on why he has changed his mind since signing early-day motion 1366 in 2009?

I have considered all the issues that would have to be taken into account, such as whether it would be appropriate, proportionate and justifiable, and it is clear that the EAS does an extremely good job and that it deals with all the problems. Let me quote some of the statistics, which are worth bearing in mind. In 2009-10, there were 42 fatal injuries to workers in construction, with a fatal injury incidence rate of 2.2 per 100,000 workers per year. That compares with 105 deaths and a rate of 5.9 per 100,000 per year in 2000-01. Injury rates are also at an all-time low since the reporting regulations changed in 1995. That is done under the existing system. There has been some success and the previous Government should take credit for that.

It is clear that an extension of gangmaster licensing is not the way forward, but there is a case for taking a fresh look at our compliance and enforcement arrangements. As the hon. Member for Midlothian said, existing enforcement functions are undertaken by a number of bodies, including the EAS, HMRC, the GLA and the HSE. The Department for Environment, Food and Rural Affairs also has a role, in enforcing the agricultural minimum wage, but that will disappear with the proposed abolition of the Agricultural Wages Board as part of the public bodies review.

The single pay and work rights line has drawn those bodies closer together and has been a major step forward in creating a single port of call for workers who want advice or to report an abuse. It has also been a powerful spur to more joint working between the enforcement bodies, which are now carrying forward multi-issue cases together on a regular basis. However, the time is right to ask whether it is possible to build on the progress that has been made. I am therefore announcing today an intention to review the Government’s workplace rights compliance and enforcement arrangements to establish the scope for streamlining them and making them more effective. I hope that the hon. Gentleman will welcome that announcement. The review will be undertaken next year, when other priorities permit, and will be part of the wider rolling review of employment law being co-ordinated by my Department.

It will start in my Department and I envisage it looking at different ways of organising the Government’s compliance and enforcement work. It will consider whether incremental improvements can be made to encourage further co-ordination and joint working, such as better legal information sharing gateways and governance machinery, which would allow priorities to be discussed and set on a broader, cross-agency basis. I envisage it considering whether online and helpline employment law advice channels can be linked and streamlined. I also want it to look at the potential cost and operational benefits of enforcement models that would consolidate enforcement functions in a single body or fewer bodies.

The review will initially be carried out internally within the Government, as I said to the hon. Gentleman, but will involve meetings with key interested parties to solicit views and test thinking. My Department will publish a statement of initial findings and intended next steps next year in the context of progress reports on a wider employment law review—

The debate stood adjourned (Standing Order No. 11(2)).

Ordered, That the debate be resumed on Friday 28 January 2011.