§ Motion made, and Question proposed, That this House do now adjourn.—[Mr.Coe.]10.17 pm
§ Mr. David Hinchliffe (Wakefield)
I am most grateful for the opportunity to express my concerns and those of some of my hon. Friends about a situation that has led to more than 800 people mainly in Yorkshire, Humberside and the east midlands losing their jobs. Those job losses are a direct consequence of the Government's privatisation of the electricity industry and pose serious questions about the most basic right of employees when redundancies arise.
I declare my membership of the Unison trade union, which represents many of the people directly affected. From my knowledge of the events leading to those huge job losses, the Unison officers concerned are to be strongly commended for striving long and hard to represent their members' interests in an extremely difficult situation. I am particularly grateful to Mr. Dave Mitchell, the Unison district officer, for the help that he has given some of my constituents.
My interest in the matter started with concern for the future of the former Yorkshire electricity board showroom in Wood street, Wakefield. That showroom has existed for as long as I can remember, and has, over the years, given excellent customer service to many of my constituents, particularly elderly people and those with low incomes who have traditionally paid their electricity accounts there through regular contributions.
Following privatisation, the regional electricity companies reviewed their retail operations, and in July 1993 Homepower Retail Ltd. was formed as a joint venture between Yorkshire Electricity and East Midlands Electricity. Later that year, following a ballot, the Homepower Retail employees accepted substantial reductions in pay, in many instances by £3,500 per annum, and reduced holidays and other conditions, as part of an attempt to reduce the new company's cost base. Despite those changes, the sales performance remained poor; by early 1995, Yorkshire Electricity and East Midlands Electricity were looking to sell Homepower, and a major shop closure programme was proposed in readiness for the sale, involving 27 of the 59 outlets in Yorkshire and Humberside.
I raised my concerns about the future of Homepower at a reception held in the House of Commons by Yorkshire Electricity in March last year. A number of my hon. Friends who are in the Chamber today were present at that time. I was concerned to be told that evening that the Wakefield showroom was to be included in the closures.
The following morning, I arranged for my constituency researcher to visit the showroom for a dialogue about how we might support attempts to retain that important facility. The staff there had no knowledge of the closure proposal. I was told subsequently by Yorkshire Electricity that it had made a mistake, and that the Wakefield showroom was to stay open for the time being.
Two severance packages were offered to those involved in the closure programme at the time. The first was a maximum payment of 18 months' salary to someone with 25 years' service leaving in 10 days. The second, 221 a reduced package for those refusing an offer of suitable on-going employment, was seven-and-a-half months' salary for someone with 25 years' service.
PowerStore, which owns electricity stores in the south of England, bid for Homepower, and a business transfer agreement was made on 21 February 1995. However, the completion and actual transfer of the stores and employees did not take effect until 8 May 1995. Mr. Clive Vlotman, the chairman of the PowerStore group, issued a letter dated 10 March 1995 to the recognised trade unions giving assurances which said:That as a minimum, the overall value of existing terms and conditions will be maintained and indeed, in some areas, more beneficial arrangements will be proposedThat any member of staff transferring into Powerstore from Homepower Retail, who within the period of 12 months after completion, find themselves in a redundancy situation, receive the same terms as to compensation on termination of employment (except for those relating to occupational pensions) as those offered to redundant employees as a consequence of the business transferStaff transferring to the new employer received a payment of £1,300 in recognition of loss of benefits such as pension and share save entitlements. I understand that the purchase price for the business was only £2, and that an agreement was reached between the vendors and the purchasers to the effect that, if the number of employees to be transferred increased, Yorkshire Electricity and East Midlands Electricity would reduce the purchase price of the stock by between£1,000 and £7,500 per employee, depending upon the category of the employee.
In correspondence with me, the chief executive of Yorkshire Electricity confirmed that his company and East Midlands Electricitydid many things to give PowerStore a good start.One of Yorkshire Electricity's senior managers, in a telephone conversation with me on 20 May, denied that his company's actions in this respect were motivated by a wish to avoid severance costs in respect of Homepower employees. Those directly affected seriously question that point.
As the Minister will be aware, Homepower went into administration on 29 April. He may have some knowledge of the circumstances from the contents of Mr. Clive Vlotman's affidavit and the report prepared by Arthur Andersen, the administrator. On 29 April, the trade unions were advised that redundancies could result, and that it might not be possible fully to comply with the consultation requirements in legislation.
On 1 May, the trade unions had the first formal meeting with the administrators, with Unison stating that it considered the 29 April letter to be a declaration of redundancy, with the consequence that Clive Vlotman's guarantee of severance payments in the letter of 10 March 1995 must apply. At that stage, the administrators said that, while redundancies were likely, no definite decision had been made—although temporary and agency employees had already been removed from head office.
The administrators would make no redundancy payments, and claims were to be against the Department for Education and Employment redundancy fund. Confirmation was given that, if another electrical retailer bought the business in whole or in part, transfer of undertakings legislation would be likely to apply.
222 On 3 May, the administrators advised by telephone that they intended to make 17 individuals redundant later that day. They withdrew the proposal after a threat from the trade unions to seek a court injunction. I am told that, at a meeting with the trade unions six days later, the administrators refused to produce information on prospective purchasers, detailed proposals on redundancies or information concerning selection criteria and the method of implementation. Health and safety concerns were raised at that meeting, because employees in shops had been threatened with violence by customers who had been refused either refunds or access to previously purchased goods, on the instructions of the administrators.
On 13 May, the administrators stated that 31 stores were to be closed, with about 250 job losses and a further 20 to 25 job losses at the head office at Normanton near Wakefield. Employees were sent home immediately, and selection appears to have been based on who was in the shops at the time.
Later—I believe on 20 May—the logistics department and all drivers were made redundant. The drivers received a letter calling them to a meeting at Normanton. They were told to bring their vehicles for inspection. Once they had all gathered at the meeting, their keys were collected and they were told that they were dismissed and should go home. Only after a protest were they given their bus fares.
On 30 May, the administrators advised of an additional round of closures, again without prior consultation or notification, with a further 295 retailing jobs to go. That meant that trading was taking place in only 20 of the 85 shops originally taken into administration. By that point, only 56 employees remained at head office and 154 at the remaining 20 shops.
As a consequence of the shop closures, an associated company—Powerdirect Receipting, which collects electricity accounts through its shops—had to advise its work force of 203 that their employment was being terminated, by reason of redundancy, with effect from 31 May. By that date, more than 800 people had lost their jobs as a result of the company being in administration, the vast majority of whom had no advance notification—merely being turned away from work or being told not to turn up the following day.
A number of my Wakefield constituents have been directly affected, not only by the shabby way in which their employment was terminated, but by the financial implications.
My constituent Mrs. Wendy Gosnay, of Thornes, Wakefield, worked for Yorkshire Electricity and its successor companies for eight years, including two on a youth training scheme. Her employment at the Castleford store ended on 17 May. She expects a baby at the end of August and will lose maternity benefits as a direct result of this affair. She has been advised that she is owed nearly —8,500 in redundancy payments.
My constituent Mrs. Beverley Finnerty, of Alverthorpe road, Wakefield, lost her job at the Dewsbury shop on 31 May. She wrote to me on that day and said:I am one of these poor unfortunates who worked for Yorkshire Electricity for 12 years, only to be sold like a piece of meat to a company owned by Clive Vlotman … along with my colleagues, I viewed this sell-out with some trepidation but I was assured by my Counsellors (one of who was employed by Yorkshire Electricity), that should the new venture fail within twelve months, we would be 223 entitled to the same redundancy package as staff not required by the new company in May 1995…suffice it to say that Yorkshire Electricity now denies all knowledge of their promise…to add insult to injury, the administrator, Arthur Andersen, has treated the workforce with the sensitivity of a military junta, laying people off as they come in to work, denying holiday entitlements etc.To our tired and dispirited little workforce, it seems that everyone has washed their hands of us and this is the second time in a year that this has happened.Mrs. Finnerty has lost more than £13,000 in redundancy payments.
Other staff who were counselled by Yorkshire Electricity before the transfer described the way in which certain counsellors employed by the company left the room to check with the main business before returning to confirm that the severance guarantee was underwritten by Yorkshire Electricity and by East Midlands Electricity.
The staff I have spoken to are firmly of the opinion that those companies—the original owners—bear a very clear responsibility for the situation that their former employees now find themselves in. They firmly believe that the disposal of the company to Mr. Vlotman was undoubtedly a means by which to avoid what would otherwise have been substantial severance costs.
The point has also been made that Yorkshire Electricity and East Midlands Electricity should have ensured that Homepower was being sold to a reputable business man with the ability to safeguard the business and its employees. The business's failure within 12 months clearly suggests that that was not the case.
In my view—I reflect the views of those who have lost their jobs—although Yorkshire Electricity and East Midlands Electricity may be able to avoid a legal responsibility for the redundancy costs, they have a very clear moral responsibility for what has happened to their former employees.
The Government brought about the privatisation of this industry, and they, too, have a responsibility to ensure that those companies properly compensate their employees for what has happened. At the very least, the companies should bridge the gap between the statutory redundancy paid by the state and the enhanced severance that would be due if the company had closed in May 1995.
The Government also have a responsibility to ensure that laws on redundancy procedures are followed to the letter in relation to advanced warnings and consultation. They should ensure that administrators do not see themselves as above the law, and that they concern themselves with employment rights as well as with creditors' interests.
There is a fear that, following the likely closure of all the stores, a management buy-out or external purchaser may then reopen a part of the business and recruit new staff in an attempt to avoid the requirements of the Transfer of Undertakings (Protection of Employment) Regulations 1981.
I end with my concerns about the impact of this affair on consumers. Yorkshire Electricity has told me that customers can now pay bills at post offices. They cannot, however, query bills at post offices, or seek advice there on issues related to their electricity consumption. That facility is no longer available to those—particularly elderly people——who prefer and need face-to-face contact. I have been told of a queue of elderly people forming 224 outside one of the PowerStore shops in Huddersfield the day after it had closed. The people involved had no idea how to make alternative arrangements.
It has also not gone unnoticed that, immediately before the Yorkshire Electricity and East Midlands Electricity sale to PowerStore, the company had actively encouraged customers to buy through credit arrangements. Many customers took on such commitments and made their repayments to credit companies through the shops on a weekly or monthly basis. This is no longer possible, and may well result in serious difficulties for many consumers.
I believe that the Government have a direct responsibility for all the problems I have identified. I hope that the Minister will face up to that responsibility and make it clear how the Government intend to deal with the various issues to which I have referred.
The Minister for Competition and Consumer Affairs (Mr. John M. Taylor)
It is conventional on these occasions for the Minister to congratulate the hon. Member who has secured the Adjournment debate, but I do not think that the hon. Member for Wakefield (Mr. Hinchliffe) wishes me to use that idiom, because he has raised an issue that is clearly of concern in his constituency and others. Indeed, it is an important matter that raises the question of the proper protection of employees on the transfer of their employer and in the unfortunate case of their employer becoming insolvent.
The hon. Gentleman will understand that I was not privy to any of the arrangements and do not know where the residual liabilities lie, but there are courts and tribunals that can test those matters, and, if it is alleged that there has been behaviour of an even more serious nature, complaints can be made to the appropriate prosecuting authority.
The hon. Gentleman referred in particular to the fact that, in his view—I am sure that he expressed it in good faith and that he speaks for others, too—the administrator did not comply with the redundancy consultation legislation. I should like to reply to him right away on that point on the record, because the questions that he raises are matters on which legislation provides for a complaint to be made by a recognised trade union or other representative—they do not necessarily have to be trade unions—to an industrial tribunal, which may award compensation. I ask the hon. Gentleman to examine that possibility with those whose advice he values. It is not for me to comment on the administrator's actions. If a complaint is made, it will be for a tribunal to determine whether there has been any breach of the law.
It is always unfortunate when an employer becomes insolvent. Employees, of course, may be particularly vulnerable in such circumstances. Our law has long recognised that, and provided particular safeguards. I shall return to that issue later. Before then, and in view of the time constraints on Adjournment debates, I must ask the hon. Gentleman, in the spirit of a conversation that we had before the debate began, that if there are any points which, through a lack of time—not an absence of willingness—I do not manage to get around to, please to mention them again to me, preferably in writing, and I shall ensure that they are all properly looked into.
I understand that Homepower Retail Ltd. was a loss-making retail joint venture. It was owned by Yorkshire Electricity Group plc and East Midlands 225 Electricity plc. The company was acquired on 8 May 1995 by Homepower Stores Ltd., which is part of a larger group of companies headed by PowerStore Holdings Ltd.
The hon. Gentleman outlined a litany of events. I can show him the timetable of events as I understand them, and send him a written version rather than take more of the time available tonight. I dare say that we agree on some of the core facts anyway, so a second recitation of them by me will not help the hon. Gentleman or his constituents.
At the end of May, the administrators concluded that, because the industry had expressed no interest in taking on a major electrical retailer, a sale as a going concern would not be possible. Job losses on the scale that followed are always to be regretted. I am sure that we all hope that those people who have been made redundant are able to find suitable new employment quickly.
The Government have long recognised that, when a business is sold over the heads of employees, special protection may be required to ensure that their interests are protected. Such protection is provided by the Transfer of Undertakings (Protection of Employment) Regulations 1981—commonly known as the TUPE regulations.
Those regulations provide, among other things, for employees' contracts to be transferred to their new employment; for the dismissal of employees in connection with a transfer to be automatically unfair unless it is for a genuine economic, technical or organisational reason—for example, genuine redundancy that would have occurred irrespective of the transfer of the business; and for representatives of the employees to be informed and consulted about any measures to be taken in connection with the transfer. That was quite a central point of the hon. Gentleman's dissatisfaction.
The regulations provide a detailed package of measures aimed at providing protection for employees in such circumstances. It is not for me, however, to say when the regulations apply in specific cases; that is a matter for the courts and tribunals, but the proper statutory framework exists. In respect of the acquisition of Homepower, I understand that the arrangements for staff who transferred were discussed and agreed with the trade unions concerned.
I also understand that, in addition to any statutory rights that the employees had on the acquisition of Homepower Retail, employees who transferred to the new company were given a guarantee that they would receive an enhanced redundancy payment if they were made redundant within 12 months of the transfer.
I believe that there is some dispute about who is responsible for that commitment—whether it is Homepower Stores Ltd., which is now unable to meet it because it has become insolvent, or Yorkshire Electricity and East Midlands Electricity. I believe that the two electricity companies and the administrator are all strongly of the view that it was an undertaking given by the purchaser of the business.
Whatever the facts of the matter—it would not be right for me to comment further, as it was a purely commercial transaction in which the Government were not involved in any way—I fully appreciate the distress and worry felt by the employees concerned. Therefore, it may be helpful if I explain the assistance that my Department can give in such circumstances.
226 When an employer is insolvent, any employee who is entitled to a statutory redundancy payment may apply for payment from the national insurance fund. Payment is usually made within about six weeks and often, in a straightforward case, more quickly. I am aware that we have already received some claims from former employees of Homepower, and I can assure the House that we will make payments as quickly as possible. Indeed, I hope that the first payments will be authorised this week.
My Department can offer help with other debts owed to the former employees. There is a guarantee covering any arrears of wages, holiday and notice pay due to them and we are also able to make contributions into the resources of a pension scheme in respect of unpaid contributions due from the employer.
Unfortunately, at this stage, I am not clear what payments may be due to the employees, but I note from the hon. Gentleman's comments tonight and his early-day motion 916 that, for example, there may be an issue concerning deductions from the employees' pay in respect of union contributions that have not been paid over. We may be able to reimburse the employees, as it would count as arrears of pay.
It has been suggested that the remaining solvent companies in the PowerStore group should take responsibility for the guarantees given to the Homepower employees at the time of its acquisition. It is, of course, not unknown for a parent company to support an ailing subsidiary and, at first thought, it is rather tempting to suggest that this might be underpinned by some statutory mechanism. I am sure that the hon. Gentleman will agree, however, that the net result could be to pull down other companies in a group.
It is not unusual to have a group of companies, some of which at any particular time are flourishing, and some of which are not. If one limited company were forced to underwrite the actions of another, the effect might simply be to damage the interests of employees in the profitable parts of the group, raising questions as to why the interests of employees and others associated with those parts of the group should suffer through the actions of another company. I respectfully say that that would not make sense.
The hon. Member for Wakefield called for the establishment of an urgent inquiry into the affair. I understand that it is tempting, each time we see a situation with which we do not agree, to call for a Government inquiry. I must inform the hon. Gentleman, however, that, while the Secretary of State has powers of inquiry under the provisions of the Companies Acts 1985 and 1989, those powers may be exercised only when there is good reason to suspect fraud, misfeasance or misconduct in relation to the affairs of a limited company.
It may be part of the hon. Gentleman's allegation that such things exist. If so, I shall not, of course, stand in the way of his advancing the giving of information and the laying of due process. The powers are not intended as a substitute for, or in any way to be supportive of, the usual civil remedies available to creditors, including employees or former employees who are in dispute about their contractual entitlements.
To return to the main thrust of the debate, I think that there is substantial agreement between us that there is a need for proper protection for employees whose employer 227 is sold over their heads or who may be affected by corporate insolvency. We believe that we have established the proper framework through which such rights and protections may be exercised. It is a matter for the courts and tribunals to determine whether there has been any breach of the law. That is not a matter for the Government. In my experience, trade unions—the hon. Member for Wakefield has said that he is associated with one—have skills and knowledge in the general area, and I have no doubt that the hon. Gentleman will be consulting them further.
228 I hope that hon. Member for Wakefield will take some comfort from the assistance that is available to former employees of Homepower. I am sure that, with the progressive and sustained improvement that we have seen in the economy, many of them will soon be back in suitable employment, but it is not for me to palliate, mitigate or in any way deny the sheer misery of losing one's job, especially in such circumstances.
§ Question put and agreed to.
§ Adjourned accordingly at thirteen minutes to Eleven o'clock.