 It is a business debate on motion 1,720 in the name of Neil Findlay on the Umbrella's company contract scam. The debate will be concluded without any questions being put. I now invite all members who wished to speak in this debate to press the request-to-speak buttons now or as soon is as possible. Mr Findlay, If you are ready, seven minutes or thereby please. Thanks very much, Presiding Officer. Nothing will surprise me any more about the way in which the biggest players in the construction industry treat their workers. The lens that some of these companies will go to cut wages, erode conditions and increased profits at the expense of ordinary working people is a familiar story for too many construction workers. We see skilled tradesmen, Ricky's, Sparks, joiners, et cetera, who work in some of the biggest construction projects in their country-building houses, schools and the hospitals that we all rely on being systematically ripped off time and again, but the reality is, of course, that some things never change. At the start of the last century, Robert Tressill wrote about these very same practices and his classic book The Ragged Trousard Philanthropist. He wrote about how greed, deceit and intimidation were used by the then bosses to exploit and control building workers, how they kept wages down as profits soared and how the threat of the sack and hunger was used to keep workers in their place. The classic scene where the great money trick is explained by Frank Owen has simply been reinvented by the construction big wigs off today, history does indeed repeat itself. In the 70s it was the lump that brought about the national building trade strike. Then the case of the Shrewsbury pickets still campaigning for justice. We've had the blacklisting scandal and still none of these companies have owned up, apologised or compensated their victims. And yet still to this day we are awarding contracts like the V&A and D, the Aberdeen bypass and the Newdon Frees hospital to these companies. We've had the exploitation of agency workers in bogus self-employment and now we have the umbrella companies scam. This latest attack on workers rights is what Steve Murphy, general secretary of UCAT calls, the most devious and complex one yet, and I'll tell you that is some claim. So how does this work? Well, this was a direct response by the companies to the UK Government's decision to ban employment agencies from falsely claiming that construction workers were self-employed. Companies and agencies were pretending that workers were self-employed to avoid paying employers' national insurance contributions and lobbying by the construction unions and workers themselves forced the Government's hand. So what did the employers do? Did they pay the national insurance except that their scam had been rumbled and it was over? Did they hell? They never ever do. They simply moved on to their next cunning plan, a 21st century version of the great money trick. What happens is that employment agencies use a very complex pay structure to pass on to workers the cost of employers' national insurance and the processing of pay. Agencies are able to pass on those costs, which would normally be met by employers by putting an umbrella or composite company between themselves and the staff they recruit. By using those companies as middlemen to pay workers, agencies engineer a situation where the amount of construction workers received in their pay packet is often a lot less than the rate agreed when he or she took the job. In some cases, people expect in £13, £14 or £15 per hour to actually receive the minimum wage plus whatever amount the umbrella company sees fit to pay on top. They also encourage workers to submit bogus or exaggerated travel and food expenses claims to boost their wages to make up the money that is taken from them by the umbrella company. One pay slip that I recently saw passed to me by a worker shows £277 of basic pay and £389 of expenses. You know what? If the worker gets caught over claiming expenses, it is they who are taken to task by HMRC, not the agency or the contractor. In this great money trick, everyone gains except the person who actually does the graft. The agencies gain by saving the cost of employer's national insurance costs. The umbrella company gains by making a profit by charging a fee, paid for by workers, a fee for processing pay and charging for a pay slip, a pay slip that is often so bamboozling that the employee cannot fathom out what they should or shouldn't be paid. The contractor benefits in the long term from lower staff costs. This type of arrangement is spreading like wildfire throughout construction and other sectors. I attended a lobby of this Parliament by Unite, UK, and the GMB prior to Christmas. There I heard of workers from the Denny power station who had this happen to them. We have workers around the corner from this building on the new university accommodation, run by Arch Blacklist's Balfour Beattie. They are subject to payment via umbrella companies. I am advised by Unite that they are being used by contractors on the inner site of Grangemouth and at the fabrication yard at Methill. We suspect that they are being used on the Forthbridge contract too, and many, many more contracts. Of course, it is not just the worker who loses out, it is also the Government and the taxpayer who lose out. An analysis by UCAT has revealed that the Government receives significantly less tax when a worker is employed via this scam. That is because when an umbrella company pays the worker, they pay a rate less than the rate that he or she agreed, there is also less income tax and national insurance to pay. When an umbrella company uses its expenses to top up that pay, those expenses are entirely exempt from tax and insurance. Someone earning £500 a week via an umbrella company pays £3,800 a year less in tax and insurance than they otherwise would have. It also impacts on pension arrangements and holiday pay too. On top of that, we see pernicious zero-hours contracting being brought in as well. What should happen? I recognise that some of that requires action at a UK level, but, as always, there are things that the Scottish Government should and could do. Trade unions are calling for employment agencies and other employers to be obliged to employ workers directly, not via umbrella companies. The hourly rate that is agreed between a worker and an employer, including an employment agency, should be the rate that that worker is paid. There should be a legal duty to make payment arrangements transparent and easy for the worker to understand. It should be obligatory for employers to pay reimbursement of travel and expenses in addition to a worker's hourly rate, and holiday pay should never be rolled up into a worker's weekly pay. All forms of bogus self-employment should be abolished. A lot of that could be achieved via public procurement guidance and in tender specification and scoring, but that requires political will. Only last week, writing in the Morning Star, Richard Leonard of the GMB exposed the Government's duplicity on blacklisting at the V&A in Dundee. On Friday, we heard that there is a delay that has delayed the procurement guidance on the living wage until after the general election. The Government does not have a good record on those issues. I welcome the cabinet secretary's offer of a meeting on this issue and I thank her for that, but I hope that, 104 years after Tressall's death, we can get some action on this to end such Victorian practises. Many thanks. I now call on Christina McKelvie to be followed by Cara Hilton. Four minute speeches or thereby please. Thank you very much, Presiding Officer. I thank Neil Findlay for bringing this issue to the chamber and I was delighted to sign the motion to allow it to come here. I have to say a few thanks first before I get into the body of my speech because for the past couple of years now, there have been three men in my life—a trade union point of view—who have helped to inform me and keep this place informed of some of the issues that have been going on in the construction industry. Stuart Hume, Neil Milligan and Greg MacArthur, who are with us in the gallery today, have been immensely helpful to me in ensuring that I understand the issues that they are going through. One of the clearest things about any scam is that there is an inbuilt cycle. A sales pitch, a recipient, an unchallengeable deal that costs money is essential to making it work. That is why most get blown out fairly rapidly. Once people are aware, they are empowered to avoid. I hope that the fact that this seedy business is under its discussion today is achieving just that awareness. Equipped with the knowledge that we may not have at the moment, workers across the construction industry and trades will have the collective power through their union to hopefully say no. Colleagues have already explained how umbrella companies work for employers and agencies while they fail for workers. If you have ever set your eyes on a pay slip, run through the deliberately confusing system, you will know why so many people are completely baffled about why they are suddenly receiving anything up to a third less money at the end of the week. Many workers do not realise of signing up to their employer's national insurance contributions, lose their holiday paying pension rights and perhaps also be subject to a weekly fee of around £30 for the payroll company. Such deductions come via employment agencies engaged in that practice. Not only does the agency not pay the workers' employers' national insurance contribution, they also gain that additional fee contractors benefit because they get the experienced workers on reduced labour costs. That dissembling is intentional, of course. Normal pay slips show deductions and their purposes clearly. On umbrella company pay sips, there is no itemisation of deductions, workers just see a lower final amount than they expected. There is the other complicated layer about expenses. We have heard some of that from Neil Findlay today. Workers have been told that they can make up the balance of their normal pay-by-claim expenses such as travel and assistance. The impact that that then has on pension contributions is immense, so that is not an issue for their weekly pay slip. It is an issue for when they eventually retire. Many people on contract and a lot of construction workers are employed in short-term contracts, and we heard some of that today. They are already entitled to claim travel and assistance, so that is part of the scam that is being used. Those payments are tax-free because they are reimbursements. On umbrella companies provide a legal opportunity to top up low wages with that mechanism. For those who do not have any travel or assistance costs, the wage will stay at the low end of the scale. Many, perhaps most, are coerced into accepting the new arrangements. They are really being told to take it or leave it, and since most workers cannot afford to leave it, they have to take it. The deductions suddenly introduced are not offering any benefit to the worker, but the benefit only to the employers who no longer pay the portion of national insurance contributions. They then may add a fee, which will potentially manage to avoid taxation on a massive scale. I know that this place and many of my colleagues do not agree with some of the companies that already tax-avoid. There are losers above and beyond the workers themselves. Law tax revenues for the treasury and the NHS looses out well because unpaid national insurance contributions mean less for hospitals, nurses and doctors. I accept that some of those issues lie with the UK Government, but does she accept that, if there is the political will between us and this Parliament, we could agree that there could be amendments to either the procurement bill or the procurement guidance that could wipe out some of that at that stage in all public procurement? If Mr Finlay was up to the minute with some of his information, he would know that the consultation is with the STUC right now, and maybe he should go and talk to his pals in the Labour Party who are involved in that process. It is entirely illegal, and the reality does not seem to be bothering HMRC in the least. I am nearly finished now. The best that they can manage is to say that they might update guidelines so that the workers better understand what they are getting into. Skills trees people working on construction sites do not normally have the luxury of saying, no thanks, that they will not bother taking up the job. Yet again, we have a clear example of how Westminster control leaves us in Scotland helpless to act on behalf of the workers who are victims of this abuse. We need power over employment rights, not a submission in the Smith commission from the Labour Party at all, while they are helping their retory pals. We need to kill that practice, we need to tell it before it becomes an official home and becomes a normal, acceptable work-owned practice that is an abhorrent scam. People in employment expect and deserve decent and fair treatment, and Governments have the obligation that those obligations are enshrined in law and delivered in practice. United has made it very clear in the reposition of this abuse of system and has very clearly set out the ways to do that. The UK Government must play by the rules and honour its responsibilities towards the working people and those working men up in that gallery today. Many thanks. I now order and I now call on Kara Hilton to be followed by Alex Johnstone. Thank you, Deputy Presiding Officer. I begin by congratulating Neil Finlay on securing this important debate. The umbrella company scam is something that has been ignored for too long and I hope that we can send out a message today that we do not accept this type of exploitation and abuse here in Scotland. I would like to take the opportunity to commend all that has worked so hard to push this issue up onto the political agenda, particularly the trade unions, UCAT and Unite, and I was pleased to join some of their reps outside the Parliament earlier. UCAT has produced an eye-opening report called the umbrella company contract, which outlines the scale of the problem and the impact on workers. It shines a light into the dark and murky world of the umbrella companies that have boomed in the past year. In fact, a recent episode of dispatches estimated that 200,000 workers across the UK are currently being paid by umbrella companies. Many of them are working in Britain's biggest public construction projects. This is a scam that means not only does a worker pay their own national insurance contributions, they also have to pay the costs of processing their own wages and pay their employer's national insurance too. Trade unions have estimated that payment by an umbrella company is costing construction workers as much as £120 a week, as well as cost to the Treasury in the form of lost revenue, estimated at almost £3,800 a year for an average worker, as Neil Findlay has already highlighted. Not only do those scams hit workers hard in their pockets, they also undermine collective national agreements, they make it difficult for unions to organise and to stand up for their member's rights at work. If workers refuse to accept the conditions, as Christina Mckelvie has already pointed out, they are treated with contempt, they simply do not get the work. To add insult to injury rather than the rate for the job, thousands of those highly skilled construction workers are officially now being paid just the minimum wage, forced to rely on expenses and performance pay to top this up. It is not just wages that are hit, workers are losing it in pension entitlement and holiday pay too. Pay slips are often so complicated that it is difficult for any worker to understand how the pay has been calculated. The amount is often a lot less than the rate that was agreed. In fact, many workers are losing out on hundreds of pounds every month. Zero contracts are fast becoming the norm and job security for many workers has went out the window. Many left with absolutely no idea how many hours they are going to work from one week to the next or how many money they will be bringing home from one week to the next. The result is that thousands of highly skilled and valued construction workers have been left feeling exploited, undervalued and demoralised. There is absolutely no doubt that the use of these contracts is both unfair and exploitative. They have been used by unscrupulous employers to maximise their profits, to evade their taxes and their employer responsibilities and its workers up and down Scotland and across the UK who are paying the price. What we are seeing now could might only be the tip of the iceberg. It has already become impossible in some areas for workers to find jobs where their pay is not through an umbrella company. Unless we take action to crack down on this abuse, given the opportunity that these scams present to legally cut workers' pay, to cut employment costs and to boost profits, there is every chance that these umbrella companies will spiral and spread to other sectors of the economy, too. That will be a race to the bottom in which every worker in Scotland will lose. However, it does not have to be like this. In Wales, the Labour Government is already acting to outlaw the use of umbrella companies on its construction projects. That is a step in the right direction, and I hope that today the minister will take the opportunity to say that Scotland will follow Wales's lead. Last year, the SNP voted against Scottish Labour plans to ban those companies from winning public sector contracts. I hope that the minister will think again and commit to using the procurement powers that the Scottish Government has to ban the use of those contracts in all public sector contracts in Scotland. Workers on umbrella contracts cannot afford to wait any longer. They deserve better than in action from both the Scottish and the UK Governments. Paying workers by an umbrella company is unfair, unjust and unacceptable. The Scottish Government has the opportunity to show which side they are on and to end the misery that those workers are facing. To act now, as Wales already has, to end the scandal of umbrella companies and to ensure that no company involved in those dodgy practices is engaged in any public contract here in Scotland. I now call Alex Johnson to be followed by Gordon MacDonald. I begin by thanking Neil Findlay for bringing this issue before Parliament. In this speech, I am not going to make any attempt to repeat anything that has been said previously, but I hope that I will set out a clear position from this side of the chamber that indicates the level to which we support the view that has been put forward. As Neil Findlay pointed out in his opening remarks, there is, in fact, nothing new under the sun. The schemes that are being described in this debate have had their counterparts in previous times, and legislation has been required in order to cut out some of those practices. However, the whole notion of the bogus self-employment bracket is something that has caused a great deal of concern across our labour force for a long, long time. It is interesting that it is, in fact, attempts to cut down or reduce the loophole that has resulted in another opportunity for this contract scam to make an appearance. The fact is, however, that companies in difficult positions are often faced with options to do things that are inappropriate, but driven to do so perhaps by the structure that exists. In the broader sense, I would like to draw attention to the fact that, while Government has been working for some time to reduce tax thresholds, the fact that national insurance still remains as it was before is something that has caused some unacceptable decisions to be made. Perhaps it is appropriate that, if we look at cutting tax on the lower paid in future, we consider exemption from national insurance contributions as a potential option to cut the temptation. However, that is not to try it—briefly, yes. Against his better nature, I would plead with Mr Johnson, let us not make excuses for these companies. This is outrageous what is going on. Some of these are the most profitable companies that you will ever find in the construction world. Let us condemn what they are doing as wrong and stop making excuses for them. I fully agree with Neil Findlay. What I was about to do is make it clear that I am not prepared to make excuses for these companies. We have seen major companies in this country involved in things before which have damaged their reputation. I have discussed with Neil Findlay on more than one occasion the issue of blacklisting and we have considered what the possibility for dealing with that might be. I would like to think that the blacklisting issue may be behind this, although the consequences are not. However, I am surprised to discover that some of the same companies—or certainly companies in a similar position—once offered the opportunity to do something equally as dubious, seem only too happy to become involved in it. I believe that this is a complex issue and we need all of us to understand it. The concept of self-employment itself is not the problem. I myself was self-employed from the moment I left full-time education to the moment I became a member of this Parliament. It has to be said that self-employment has a role and that role is complex, but that role is not in the area described here. It is vital that we, each and every one of us, do all that we can to name and shame the companies that are involved, to make it clear that this practice is unacceptable and to make sure that, whatever our position, we do all that we can to make sure that it is wiped out. It is only fair that, in this day and age, a skilled man should get a fair day's wage for a fair day's work. If anything steps in the way of that, then it is up to us all, regardless of our political position or our economic opinions, to say that this is wrong and that it should be ended now. I thank Neil Findlay for bringing this important issue to the chamber for debate. Umbrella companies have been in existence since 2000 and, at the time, they mainly represented freelance workers who had fixed-term contracts. The problem is what they are now being used for. In April 2014, the UK Government passed legislation to crack down on fall self-employment, where some employment agencies were pretending that workers were self-employed in order to avoid paying employers' national insurance. The UKAC report, the Umbrella company contract, highlights that, in order to ground this legislation in the spring of 2014, many construction workers were moved on block onto Umbrella company contracts. That has resulted in the shameful situation of workers having to agree to zero-hour contracts, pay employees and employers' national insurance contributions, admin fees, losing out on pension contributions and potential cuts in their holiday pay. The GMB has called on the UK Government to step in to deal with tax avoidance abuse in scams, which it said are costing workers income and the exchequer much-needed revenues. It also highlighted that workers are seeing their salary slashed by these extra costs, but then pay is partially reboosted through scams using expenses, performance-related pay and other methods. However, this situation could have been avoided. Over six years ago, HMRC investigated Umbrella companies and produced a report detailing a number of issues, including invalid dispensations, in effect of overarching employment contracts, potentially illegal deductions and all unlawful management processes. Other problems identified include non-compliance with dispensations, tax-free expense payments and national minimum wage breaches. The 2008 HM Treasury pre-budget report reported on the consultation on the use of travel expenses in conjunction with being employed via Umbrella companies. The document questioned the validity and fairness of allowing business expenses in this form, suggesting that an overarching employment contract was not a form of employment that allowed travel and subsistence expenses. It was reported in November 2008 that, and I quote Alasdair Darling, the Labour Chancellor of the Exchequer was last night tipped to define an umbrella company in Monday's pre-budget report to help close a tax loophole that they used to deprive the exchequer of £300 million. The outcome, when the announcement came, was, and again I quote, the Government has decided to leave the current rules unchanged. So, a problem was identified back in 2008 and the then Labour UK Government failed to act. However, no thank you, you've said enough. However, workers caught up in this situation aren't interested in who is to blame, only who will act on their behalf to remove the loopholes and resolve their pay issues. Success of UK Labour and Tory Governments have failed to tackle the issues surrounding umbrella companies, therefore maybe it's time that the Scottish Parliament had the opportunity. The difficulty is that that employment law is reserved to Westminster. The S2UC submission to the Smith commission under the section Better Labour Market and Workplace Protection requested, I quote, the devolution of employment law, health and safety, trade union law and the minimum wage. The submission continues, the default position under the current constitutional settlement has been for primary legislation on equalities, employment law, health and safety, trade union regulation and minimum wages to be reserved to Westminster. Whilst this division of powers exists between Hollywood and Westminster, it is not the case across the whole of the UK. In Northern Ireland, all of the legislation listed above is devolved to the Northern Ireland Assembly. Unfortunately, no thank you, unfortunately, this proposal to devolve employment law was blocked by the Labour Party. So we have a situation where UK parties have done nothing to address this situation surrounding umbrella companies and unhollywood is barred from tackling it and workers are therefore caught up in a situation that needs to be resolved urgently. The difficulty is that those who could have done nothing. Many thanks. I now call on the minister, Annabelle Ewing, to respond on behalf of the Government. Seven minutes or thereby, minister, please. Thank you, Presiding Officer. I would like to welcome those union representatives that I understand may be in the gallery tonight watching our proceedings. I apologise, I was not able to come out to meet with some of them today outside the Parliament, for in fact I was already in a meeting with some unite members further to a meeting arranged at the behest of my colleague Christina McKelvie MSP and that meeting was with the cabinet secretary and myself. We did indeed discuss a number of workforce issues, including umbrella contracts, and we heard about the really unacceptable, abusive practices that are going on in the construction industry, but also in other sectors. We heard particularly of the problems in terms of compulsion, in terms of denuding workers of their rights and, of course, of reducing their pay and condition, so I thank Mr Finlay for bringing this important debate to the chamber tonight by way of a member's debate. It should be noted, of course, that in terms of employment law issues, the UK Government has pursued a programme that, I would say, has resulted in the slow dismantling of employee rights, rights that have been built up over many, many decades. Indeed, to cap it all, advance is made to employ rights legislation. Recent years have been undermined by the introduction of significant levels of fees for employment tribunals, in effect at pricing workers out of justice. Some points were made, a few of which I would pick on at this particular point, Presiding Officer, just to provide some clarification. I think that Karen Hilton mentioned the situation in Wales. My understanding is that, whilst, of course, Scottish Government officials have been speaking to their counterparts in Wales, we did try to obtain a copy of the draft guidance that the Welsh Government is currently working on in terms of procurement policy, but they were not keen to give us a copy. However, I understand that the statement that the Welsh minister made the other week might be subject shortly to some clarification in terms of the powers that it would have to do what the minister wanted to do. However, as far as the Scottish Government is concerned, we are, of course, taking action on workforce matters. That, as has been mentioned by members in the debate tonight, is against a backdrop in which part-over-employment law still lies with the Westminster Government. In terms of the general issue of fair work, of course, we are absolutely committed as a Government to pursuing the fair work agenda. We will see in the months to come the establishment of the Fair Work Convention, which was announced in October last year, further to the publication of the working together report. I have never disputed the fact that many of those issues lie with the UK Government. That is accepted. I dispute that the Scottish Government can do nothing. The Scottish Government can do plenty if it has the political will to change procurement guidance and contract tendering to prevent many of those things happening. Will the minister do it or not? I listened to Mr Finlay, and I know that probably his heart lies somewhere else on the constitution to be on this issue. However, the fact of the matter is that the party that he is here representing in this Parliament does not seek this Parliament to have powers to deal with those important issues that would impact if we had the powers to the benefit of workers in Scotland. Rather, he prefers to have those important matters over employee rights and pay and conditions to be determined even by a Tory Government at Westminster rather than this democratically elected Parliament in our country. That is the problem that Mr Finlay had, and in every debate of this kind, he tries to square a circle that just cannot be squared. However, in terms of the action that the Scottish Government is taking within the powers that we do have, we will be setting up the fair work convention. Members may be interested to note that we are currently finalising the membership and the remit of the convention. In the convention, we will have employers and unions working together to promote a progressive workforce policies and, of course, the promotion of the living wage. At the same time, what we will be doing is seeing the introduction of the Scottish business pledge that the First Minister confirmed as part of the Scottish Government's programme for government, which, at its heart, is a partnership, a compact, and that the Government will indicate that it will support a strong and competitive economy so that Government and employers together are able to support a fairer, more prosperous Scotland, but in return for support from the Scottish Government and its agencies such as Scottish Enterprise and Highlands and Islands Enterprise, we want companies to commit to the Scottish approach by, for example, paying the living wage, not using unacceptable zero hours contracts and not using unacceptable umbrella contracts and by implementing, indeed, other progressive workforce policies. In the area of procurement that has been mentioned, it is clear that the key problem, as I have said before, is only a couple of weeks ago in a member's debate convened by Mr Finlay. The key problem is that we do not have the power to set the minimum wage rate. If we did have that power, which we, the Scottish Government, sought for this Parliament in the Smith process, if we did have that power, we would not have to approach the issue on a denuded basis in terms of what we can do, in terms of guidance on the procurement front. I do not know if Mr Finlay is aware—I think that he suggested that we hadn't published guidance or there had been some delay—that there is guidance on the Government's website, a Scottish Procurement Policy note, dealing with workforce issues, including with expressly umbrella contracts. I recommend that he has a read of that. We will continue to do what we can using the powers that we have, because we are determined to do what we can to ensure that workers have the rights that they are entitled to expect to have in the 21st century. I conclude by saying that, with our hands tied behind our backs, we do not have the employment law powers that, even as we heard from Gordon MacDonald, Northern Ireland does. We do not have those powers. We would really like those powers, and I suspect notwithstanding the publication of what we call the Vow Plus. I do not know what it is called, whatever they were up to at the Labour Party the other day. Not even in the Vow Plus did they call for devolution of employment policies. I think that they have to have a long, hard look about where they are going in terms of seeking to protect the rights of workers in Scotland. We are clear that we want to have the power to protect workers' rights. In the months ahead, I suspect that the people of Scotland will be considering those matters very carefully, indeed, as we approach the Westminster election in May.