Skip to main content

Gangmasters (Licensing Authority) Regulations 2005

Volume 670: debated on Wednesday 2 March 2005

The text on this page has been created from Hansard archive content, it may contain typographical errors.

8.6 p.m.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs
(Lord Whitty)

rose to move, That the draft order laid before the House on 26 January be approved [7th Report from the Joint Committee and 9th Report from the Merits Committee].

The noble Lord said: My Lords, the Gangmasters Licensing Bill was introduced into this House last summer by my noble friend Lord Carter. It had received all-party support in this House and another place. It marked a significant step in the effort to curb the illegal and exploitative activities of some gangmasters in agriculture and related sectors. Some of the experiences and stories of what goes on in that rather murky part of the labour market are indeed horrendous. It was necessary for us to step in.

The Act provides for a gangmasters licensing authority to be established. It covers labour providers operating in agriculture, shellfish gathering and associated processing and packaging sectors. Once the licensing arrangements are in place, it will be a criminal offence for a person to operate as a gangmaster without a licence or to enter into an arrangement with an unlicensed gangmaster.

Throughout the process, from the beginning of Jim Sheridan's Private Member's Bill in another place, there has been considerable co-operation with key industrial stakeholders. In particular, the Bill was in part sponsored by the Transport and General Workers Union, who worked very closely with the National Farmers Union, the Fresh Produce Consortium, the Association of Labour Providers—which provides a positive front for the trade—and other elements within the food chain. Agriculture will always need a seasonal and irregular supply of labour. It is very important that that labour is provided on legal terms. We know that there have been far too many instances of breaches of a number of different rules, from immigration through to taxation and health and safety.

When the Act was passed, we set ourselves the ambitious target of establishing the authority by 1 April this year, and we are on track to achieve that. The regulations before the House tonight relate only to the establishment of the authority, but further regulations will be required before licensing can start. Defra itself will be responsible for the Gangmasters (Exclusions) Regulations, which will be used to fine tune the scope of licensing by specifying the circumstances, such as where workers are loaned by one farmer to another or where there are established practices which do not raise the same kind of problems encountered as those where a gangmaster is used, in which a licence is not required. The background and drafts of those further regulations are now out for consultation.

We shall also need the Gangmasters (Appeals) Regulations and, in the longer term, regulations to set out the "reasonable steps"—the exercise of due diligence—that an employer of such labour must take to satisfy himself that a gangmaster has a valid licence. Beyond that, the authority will be responsible for making orders setting out the licence conditions. We expect that the authority will make early progress on this as soon as it is legally established. If this is the case, we anticipate that gangmasters will be invited to apply for licences in the late autumn of this year.

The regulations before the House today deal solely with the establishment of the authority. They set out the framework within which the authority will operate and give it its constitution and structure. They also deal with a few operational matters.

I am aware that the major comment on these regulations has been about the unusually large size of the board which we are establishing to oversee the operation of the authority. The reason for the large size of the board at this stage is that it builds on the coalition that was so important in ensuring a wide consensus on this issue within the industry. The board includes 19 representatives from the stakeholder organisations specified in Schedule 1. They include trade unions, farmers, labour providers and retailers. That will help ensure that the authority starts up with a wide range of people who are fully informed on what will be required to make the new licensing system work, while ensuring that the system contributes to the prosperity of the agriculture and related sectors.

Nine ex officio members of the board will be government officials drawn largely from the range of departments involved in enforcement. They will encompass a broad range of authorities dealing with immigration issues, the minimum wage, health and safety, taxation and Customs and Excise. Their presence will be needed to ensure a co-ordinated approach to compliance and enforcement activities and, even more important, to ensure that intelligence is shared between the different agencies. Representative and ex officio members will have the same voting rights and must act in the best interests of the authority at all times.

We believe that a large board is necessary at the outset, but that this requirement may change over time. In view of this, we have decided that the structure and working of the board will be reviewed after three years. At that point we shall consider the size of the board, probably with a view to reducing it, and to reviewing the respective role of the board and the liaison groups required by the Act. At this stage, however, it is our view that the board needs to be of the size specified in the regulations.

I hope that the House will approve these important regulations so that the authority can be set up and start work on addressing this very serious problem. I beg to move.

Moved, That the draft regulations laid before the House on 26 January be approved [7th Report from the Joint Committee and 9th Report from the Merits Committee].—(Lord Whitty.)

My Lords, I thank the Minister for introducing so fully these draft regulations. Before I comment any further, perhaps I may remind the House of my interest as president of Concordia, a charity which places thousands of young people and students in placements both in the UK and internationally. In the past the students have usually studied farming-related topics, which is why they seek to come here. These students are well recognised and are certainly not the kind of workers which these regulations seek to address. However, as the Minister pointed out, some gangmasters take their responsibilities very seriously and ensure that their employees are well looked after. I appreciate that the Act and these regulations in no way seek to do them down.

We welcome this important step forward and we thank the noble Lord, Lord Carter, for bringing forward his Bill, which received our full support as it was taken through this House. In my opinion it addresses the longstanding problem of rogue gangmasters who misbehave in relation to their workers. Noble Lords on all sides of the House have expressed their abhorrence of those practices.

Having said that, I want to put on the record a reflection of what the Minister has already indicated. Farming in general, and horticultural businesses in particular, could not operate successfully without employing seasonal workers. Given that the season is being extended at both ends of the year, the working period is now much longer. Our task is to ensure that everyone employed is dealt with in a fair and responsible manner. There is no disagreement between us on that.

The Minister rightly referred to the Merits Committee, which drew the House's attention to the regulations. Its main focus was the number of board members—some 28—to which the Minister has referred.

Perhaps in the first instance that is not a had thing. We need to have a good understanding between unions and employers, and crucially, the nine officials and departments that enforce the regulations—or who have done so in the past.

In another place further questions were raised that were not answered fully, so perhaps the Minister can clarify the position tonight. I am sure that he will agree that consensus is much better than confrontation. Will he confirm that a further review of the numbers of board members will be undertaken? I think that a suggestion of three years was made. Will the Minister say whether the Government accepted that the number of board members would be reviewed after three years?

Under regulation 8(2), to be quorate the board must have,
"at least one half of the representative members",
plus the chairman or his deputy. I have worked that out at 11 persons in total. However, regulation 8(3) allows that quorum to be reduced to only five persons. I wonder why. It is not clear whether that would be for one meeting only or for all meetings thereafter. Will the Minister clarify the position?

On Monday my honourable friend Michael Jack asked the Minister what would happen if someone had breached the law as an employment gangmaster but subsequently decided to go "legit"—that sounds strange for me to be saying—and made an application to the new authority. What would be his position? In other words, would someone who was considered not to be of a suitable standard be barred? If he wished to fall in with the new standards would he be considered as a suitable gangmaster in the future?

In response, Alun Michael said that the board would have to consider that, but I wonder whether it is our responsibility to clarify that issue rather than leaving it to the board. I am not sure whether that falls within the scope of the statutory instrument.

Another matter that was not clarified was whether non-registered UK companies are covered by the same regulations. In other words, if someone from outside wants to become a gangmaster but he is not registered here, will he have to conform in the same way?

Will the Minister also say whether the new body will be required to carry out a Criminal Records Bureau check on those who apply for licences? How will it go about its job?

What about the anticipated cost of financing the agency? I understand that in setting it up, Defra will bear the costs. But we have not been told what those are, or whether the fees will cover the long-term costs of running the agency.

Lastly, will the Minister comment on an issue raised by my honourable friend Owen Paterson who said that currently there are about 14 existing pieces of legislation that were relevant to gangmasters which, had they been enforced properly, could have prevented the horrors of Morecambe Bay? Once the agency is established, will those people's roles be redundant, or will they continue alongside the new agency? Their role is not quite clear, and I should be grateful for clarification.

Having said that, we welcome regulations that were supported by colleagues in the other place—anything to raise the standards required of UK employers, especially for those who come from overseas. They are long overdue and we support them.

My Lords, we on the Liberal Democrat Benches welcome the regulations, which are a necessary step towards introducing the new regime set out in the Gangmasters (Licensing) Act 2004. Like the noble Baroness, Lady Byford, I thank the Minister for explaining in his usual cogent way what the regulations mean. I also thank the noble Baroness for asking one or two of the questions that I would have asked. I will now not do so because they are superfluous.

I was slightly fascinated by the interest expressed by the noble Baroness in whether criminal gangmasters can reform themselves and become licensed under the new system. It is very pleasing that the Conservatives are interested in the reform and restitution of criminals. It is an interesting matter and we look forward to the answer.

Most comment during the consultation on the regulations related to the size and structure of the proposed authority, the number of members and so on. Like the noble Baroness, we are content to go along with what the Government propose and see how it works. I understand why they propose a large board and why they want the different parts of the system to be represented, but I am not sure that we should use the phrase "key stakeholders", which appears to be a clumsy New Labour kind of phrase. I do not like it but I think we understand what the Minister means by it.

In many ways, the word "gangmasters" is unfortunate because it suggests that everyone is tarred with the same brush. Clearly that is not the case. We are talking about labour providers or employment agencies, or whatever they might be, that provide a very necessary service in certain industries. Many industries in this country could not exist without flexible, seasonal labour. Agriculture and the food preparation industry are perhaps the most important or the leading examples. I wonder what gangmistresses might be like, but perhaps we should not go into that.

The last question posed by the noble Baroness goes to the nub of the matter. That referred not to what is in these regulations but to how the system will work in future. We all know that throughout industry and throughout the world of employment in this country there are a large number of practices which sometimes are illegal or sometimes rather dubious and there are many people working for less than the national minimum wage, more hours than they should and so on. If these powers would have dealt with the tragedy that occurred in Morecambe Bay, will the situation in future be any better? Will licensing such people and organisations make any difference to inspection, monitoring, policing and enforcement?

We do not know the answers to those questions yet. The existence of a licensing system that provides people with an official status should help, but it will not be the whole answer. There is a question mark over whether this will work properly. We all hope that it will and we hope that it will contribute to a much better, fairer and less exploitative system than exists far too often now.

My final point is that if this works and if it is a success, it may be a model for other industries where the same kind of provision of labour takes place. So it is very important that it works. We fully support the regulations and offer the Government our best wishes in implementing them. We shall have more debates in the future about the outcome.

My Lords, I very much welcome this further step of establishing the board in implementing this major reform. I have some questions that bring the matter sharply into focus now that we see the modus operandi of the board. I have been associated with the campaign of the T&GWU, of which I am a member. We are very proud of the T&GWU campaign and the role of Jim Sheridan MP.

I further welcome the support. We knew that there would be support from the Liberal Democrats, but the noble Baroness, Lady Byford, has just made clear the support from the Conservative Party. I say gently that it is nice to see some pragmatic recognition that in some parts of the economy we need more regulation rather than less and this is a very good example. Not all labour market regulation is as redundant as the war-time ration book. I am sure I shall soon provoke the noble Baroness, Lady Byford, to say something.

My Lords, I thank the noble Lord for giving way. He is quite right. The sadness is that we should need regulation to curtail this sort of activity in the first place. It is a great sadness.

My Lords, there was a case in the press in just the past two or three weeks in which workers were picking flowers for Marks and Spencer, under a gangmaster, for net pay of 52 pence an hour. The report says that Marks and Spencer was shocked by the report and will be carrying out its own investigation, but it shows that there is a big issue of exploitation which we have to address.

I have a couple of questions. First, as and when gangmasters are registered, what will be the procedure for ensuring that some gangmasters cannot slip through the net—that is, remain unregistered?

Secondly, the Explanatory Notes say that the gangmaster has to demonstrate to the licensing authority,
"that his business is complying with … employment law (including immigration and taxation legislation)".
How will that translate into ensuring clarity for people as regards their rights and responsibilities both as employers and as workers?

Thirdly, can cases be referred to the licensing authority, or will the licensing authority simply be left to carry out inspections of the licensed as it considers necessary?

Fourthly, on the Inland Revenue front, will the board be able to evaluate, for example, a gangmaster's contention that the worker has freely entered into an agreement whereby the employer may make a range of reductions? I understand that the Inland Revenue polices the whole range of pay-packet deductions.

The last point—which is rather quickly creeping up the agenda; it has been touched on—is the whole European Union context in which this is happening. Is there not now a stronger case that, in such matters, we should have regulations on which we can all agree? All the stakeholders and political parties in Britain agree that such regulations are necessary to ensure decent minimum standards. We do not want to discover that a coach and horses has unintentionally been driven through Parliament's intention in these regulations because a gangmaster is licensed—or not licensed—outside the United Kingdom, elsewhere in the EU.

There is a strong case here. I know that my noble friend the Minister will not be able to give a definitive answer this evening, but I put these points clown for consideration because of the continuing discussions in Brussels on what I believe are two related sets of directives. Is there, first, not a strong case for getting on with a Europe-wide set of rights for contract workers? That has been on the table for some time. And how is that complementary to the debate currently under way on the services directive?

Clearly, there has to be some compatibility so that the left hand and the right hand are saying the same thing. There cannot suddenly be a regulation from the services directive on freedom to register anywhere. Whatever the ambiguity, we know that people will not be able to say, "I have a company in Poland. with workers on the Polish wage rate. I can bring those workers here to work for Polish wages". I take Poland as an illustration only because it is the biggest country to have recently joined the EU.

But there is a large grey area. Can people escape the need to register simply by saying, "I am registered in Poland"—or wherever—because there is no requirement which bites on the need for a registration equivalent to that required under the statutory instrument and its implementation in Britain? We shall have to discover quite quickly whether there is an EU-compatible system for the rules on contract workers and the rules on freedom of registration of services under the services directive.

I congratulate the Government on getting on with this legislation. As both other speakers have said, it covers a wider field, in one sense, than gangmasters as we might all have seen them—Morecambe Bay, and so on. Nevertheless, this authority is an important development. The fact that not only all the stakeholders but, interestingly, the Inland Revenue and the immigration authorities will be involved, augurs well for getting a real grip on these complex developments. I wish them well in implementing the regulations.

My Lords, I join with others in paying tribute to my noble friend Lord Carter and Defra for the good work they have done in bringing forward this legislation. I declare an interest as a dairy farmer, although it is most unusual for dairy farmers to use labour of this kind. It is very encouraging to see that the momentum on the gangmasters' licensing front has been maintained and that the authority will soon be established. Can my noble friend say when he expects the first licences to be issued?

Bearing in mind the predominant position of the multiple retailers in the supply chain, can my noble friend confirm that all the major multiples have endorsed this licensing system, are committed to its success and are taking a positive role within the authority?

I underline the importance of farmers and that they are aware of their responsibilities. Will the licensing authority be writing to farmers notifying them of their responsibilities and making them aware of the due diligence to which they will be subject?

My Lords, I add my congratulations to the Government and to the Minister on producing these regulations. In this regard, will the news of these regulations be sent to all embassies, given that the impetus for their introduction came from the tragedy in Morecambe Bay, which affected people from overseas? Will that be possible? Will the regulations also help to regulate in a better way the people who attempt to come here illegally?

My Lords, I am thankful for the support for the regulations, for the principle of the Act and the establishment of the authority that has been shown on all sides of the House. That consensus is appreciated—indeed, it is necessary to make the Act work—and reflects the view of all respectable elements within the industry.

There have been a number of questions and I shall try to answer the bulk of them. The noble Baroness, Lady Byford, and the noble Lord, Lord Greaves, asked whether the size of the authority will be reviewed after three years. Yes, it will. My presumption at this point is that we will look at reducing its size but the review will obviously consider all options for the structure of the board. Certainly the arguments for having a large board at the beginning are, to my mind, compelling. They will become less compelling if the board is working effectively as we go down the line.

The point made by the noble Baroness about a quorum is slightly complicated. The quorum is described with a reference to five people—the minimum required to propose a motion to change the quorum requirements. You would need five people to propose a motion to change the quorum requirements, but then half the board—or half of those present, under the old quorum arrangements—would have to vote for it. Thus you could, in certain circumstances, reduce the quorum on a temporary basis. I hope I have got that right; if not, I shall write to the noble Baroness.

The noble Baroness asked whether people who had previously operated somewhat dubiously could obtain a licence. Clearly, the authority will have to take a view on exactly what it takes into account. However, the requirements for the licence will be on behaviour from the point of having the licence. The sanction applies to behaviour after that, but there could be information which may make the board reluctant to give a licence initially. To some extent the authority, once established, will have to deal with that on a case-by-case basis. Certainly we hope that a number of operators, having operated at the fringe—in some senses, having been obliged to, because there were worse people undercutting them outside—will take advantage of the licensing system. The work that we intend to set up with the Association of Labour Providers—to put the enterprises of gangmasters and labour providers within a more businesslike operation, with proper information and legal requirements—would help them to operate as legitimate and legal labour providers thereafter.

The noble Baroness also asked about funding. Its basis is that, once operational, the authority will be self-financing through its licence fee income. Defra will meet initial start-up costs for the authority and cover any shortfall in revenue. The authority would be required to account for its use of funds, but we would also underwrite any shortfall in licence fee income. There will be significant expenditure—both in money and in kind—in setting up the authority. Some of that, largely in kind, will be provided by other departments besides Defra—because we will need their expertise to set it up.

On the issue about gangmasters not being registered, anyone who is a gangmaster/labour provider would be required to register under the Act—whatever their legal status. Therefore the provisions would apply to a person acting as a gangmaster in the UK, in relation to the work that the Act covers. It would mean an overseas gangmaster, if supplying or using workers in the UK, would have to have one of these licences. The slight complication raised by my noble friend Lord Lea is that, on certain readings of the proposals under the services directive, establishment in one country would count against another. We are in the early stages of discussing that directive. While it is clearly highly desirable—for single market purposes—to have the principles of that directive established, I do not believe it is the intention of the Commission, or of others supporting that directive, including the other measures of the UK Government, to see that effect. I suspect it will be redrafted—and clearly could, as my noble friend Lord Lea says, be related to other proposals from the Commission relating to the rights of contract workers. That would be a form of indirect enforcement.

The authority will also have to decide how it operates in other ways—whether, for example, they would in particular cases want to have reference to criminal records. The Act itself does, of course, allow access to all the information that is relevant—whichever public authority may be holding it, subject to certain provisos. If things need to be checked with the tax, police or immigration authorities then there can be cross-referencing. That was an important provision in the Act; on the enforcement side, probably the most important to make it work.

In response again to my noble friend Lord Lea, the authority will, of course, be able to check deductions from pay and be able to interview workers to help to establish how deductions were made. If those do not conform with the minimum wage requirements, they would obviously have to be taken into account in whether a sanction would need to be taken against that gangmaster.

The noble Lord, Lord Greaves, basically asked the big question: will it work? I believe that it will, but it will take a lot of effort from a lot of people, not just those on the Gangmasters Licensing Authority, its staff and its enforcers but those from a wide range of other enforcement agencies which will continue to do their job.

As I said in relation to access to records, the co-ordination between authorities and the sharing of intelligence is one vital means of getting the scheme to work. The other is enforcement through the food chain. My noble friend Lord Lea referred to Marks&Spencer. If Marks & Spencer knew which gangmasters were licensed and which were not, they would require their suppliers to use only licensed gangmaster labour. Therefore, the pressure from the top of the food chain down, to ensure that producers all the way down the line use only licensed gangmaster labour, is probably the biggest single enforcement, far greater than any individual enforcement through other regulations. The food chain's commitment to this, including the commitment of the retailers—to answer the question of my noble friend Lord Grantchester—is very important in making the scheme work. I assure him that the retailers have shown a very strong commitment to including this within their requirements on purchasing once it becomes law. In some cases, they are already setting up assurance schemes which relate to the ethical trading initiative which was a precursor to the establishment of this scheme and will run in parallel with it.

My noble friend Lord Lea also asked how to avoid having people slip through the net. One of the most effective ways is through food chain pressure. Again, that will be met by the combination of shared intelligence, shared enforcement and the pressure down the food chain. It is also important that both employees and users of casual labour know what their responsibilities and rights are—and, in particular, that farmers do. To answer my noble friend Lord Grantchester, farmers will have to know what is required of them in checking whether the labour coming to pick their fruit or flowers is supplied by a registered gangmaster. It needs to be very clear and simple to establish what they need to see and where they can raise queries and receive a quick answer. As the labour is frequently required for only a day or two, and very rarely for more than a few weeks, we need an instant way of checking whether that labour is supplied by a genuine and registered gangmaster.

My noble friend Lord Grantchester also asked when the licences were likely to be issued. If everything goes according to plan, it will take some time to set up the licensing scheme. If the authority is established from April this year, as intended, the scheme would not be up and running before the spring of next year. It is not an instant solution and requires all the various elements I have described to be in place by then to change the situation. What I think will help will be the anticipation of this measure and the offer we are making to labour providers and gangmasters to help them into the system when the licensing authority is established.

The noble Lord, Lord Chan, raised the point of whether to let nationals coming into the country know what their rights are. I certainly take the point that we should inform the embassies of those countries from which a lot of the labour is supplied. One of the main abuses has been the use of illegal labour. People whose immigration or work status is illegal have been easily exploited because of their situation. Once there is a requirement for gangmasters to be registered and to have records of whom they employ, this becomes much more difficult. We can establish much more effectively instant checks on the legal status of the workers concerned.

If I have missed any questions, I will write to noble Lords.

My Lords, before the Minister sits down, he has rightly indicated that the scheme will take some time to set up. Can he tell us what the Government are doing to ensure that no bad practices are continuing between now and then; and whose responsibility it is? If he cannot answer now, I am happy for him to write to me. My fear is that, as he indicated, it would be autumn before it was established and maybe into next year before the scheme was up and running. I would be grateful for some guidance.

My Lords, once the authority is established in April it will begin to send out information to labour providers and users of seasonal and casual labour, so the information will start to go out early. Clearly there is a big communications problem; we do not know precisely how many labour providers operate in the market and where they operate at a given time. There is a problem of communication as well as of setting up the administration. We should be able to set up the administration so that licences are issued within a year or so of the board being established and the system can start from there, but it will not catch everyone immediately.

There will be prosecutions for breach of licence or identification of people who have already broken the existing law. These provisions will make that easier. However, the pressure will be if the whole of the food chain co-operates in excluding non-licensed labour from its procurement of products. That is why it is so important to maintain the consensus in the board for which the regulations provide.

My Lords, before my noble friend sits down, would it be the position that when the authority is up and running it will have its own budget and make its own decisions about public information campaigns; but between now and then, I presume, some public information will have to be given, if only about the responsibilities of employers to prepare for the new regime? Could that help to fill the gap to which the noble Baroness, Lady Byford, referred?

My Lords, the information can go out on the Act's basic provisions, but it is the authority's job to decide exactly how the licensing system is going to work; for example, what kind of checks farmers and others using labour would have to go through. That detail would be for the authority to communicate.

While some information can be communicated before the authority is up and running, most of the detail will be a package of the licensing scheme and the responsibility of the authority rather than the department. That is right because it also involves all the other parties to the authority.

On Question, Motion agreed to.