NEW YORK SHARES

In a radical plan to rip up decades of red tape, the Beecroft Report says countless rules and regulations are stifling business growth, and it suggests an array of changes to spur job creation.

The recommendations, revealed by The Sunday Telegraph last week, include making it easier to sack underperforming staff, delaying new pension rights and allowing companies to opt out of certain regulations if they were stopping firms from hiring people.

Among the most controversial findings, the Beecroft Report suggests companies should be allowed to get rid of staff with a payout, in exchange for them never bringing a tribunal claim – the so-called "no-fault" dismissal. The Conservative donor accepts this may lead to some bosses sacking workers simply because they did not like them, but says it is a "price worth paying".

Vince Cable, the Business Secretary, immediately dismissed part of the Beecroft Report as "bonkers". Conservative backbenchers begged to differ, pushing the Prime Minister to back the proposals and help businesses flourish. A survey of more than 1,000 businesses by the Institute of Directors revealed that the majority of respondents backed the argument that simplifying employment law would lead to job creation.

Anyone who objected to this was harming the economy and preventing growth, the body warned.

It has certainly been a bad week for the British economy with official figures downgrading growth to -0.3pc last week. Government spending that hit record levels in the first quarter, despite the austerity drive, did little to offset weak activity in construction, trade and the financial sector.

There is a general reluctance from businesses to invest. Companies are sitting on a £750bn cash pile, equivalent to half of gross domestic product, and are generating about £70bn of surplus cash every year. The Treasury has seen the funds as a potential economic rescue plan – by freeing business from red tape and uncertain tax arrangements, companies, it is argued, would pour the money into the economy and drive the country back to growth.

The argument was certainly one the Office for Budget Responsibility believed until March this year. In November last year, business investment was expected to deliver 0.6pc of the forecast 0.7pc growth in 2012. After a dismal final three months of the 2011, which saw business investment crash by 3.3pc, the OBR changed its outlook. Business investment is now expected to contribute just 0.1pc of this year's revised 0.8pc growth forecast.

The shock to confidence caused by the eurozone crisis has been largely to blame. As the International Monetary Fund (IMF) said last week, "the hand-off from public to private demand-led growth has not fully materialised… [largely] due to transitory commodity price shocks and heightened uncertainty in the euro area".

In its list of policy measures to boost growth, nowhere did the IMF suggest that dramatic supply side reforms – such as changing employment law – were vital. The IMF has tended to applaud the UK's labour arrangements. Instead, it advocated a cut in interest rates, looser planning rules, more freely available credit and government infrastructure projects.

There is some good news emerging, though. In a new report published today, employers' group the CBI says business conditions in the UK service sector are showing signs of stabilising.

Business activity is expected to pick up in the next three months, across both business services, such as accountancy and legal, and consumer-facing firms, including hotels and travel, the CBI said. Profitability is set to improve, too.

But more still needs to come.

"Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list," Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, has said.

For Love, the proposals in the Beecroft Report are refreshing and necessary.

"Like all businesses we would be quicker to employ if the risks were lower should things not work out. It would make us less risk-averse in terms of making difficult decisions, you are more likely to employ if the risk of making a mistake isn't there," she says.

Dealing with a tribunal claim for two years has been an unwelcome distraction from the everyday running of Z-Card, she says, which has inevitably made the firm think twice about hiring new people.

The Government is already consulting on a range of measures to help cut the number of cases that end up at tribunal, but Beecroft thinks it could go further, including exploring the impact of no win-no fee legal services and how they push up the number of tribunal cases.

Elsewhere, one of the most useful proposals in the Beecroft Report is the idea of no-fault dismissal, Love says.

"I understand people's concerns about this proposal – but the worst thing in a small business is carrying someone, and if there is due cause to let them go, you should be able to without fear of reprisals."

The Government is consulting on introducing the no-fault dismissal proposal for firms with fewer than 10 staff – a caveat that was not included in the Beecroft Report – and there are suggestions that the response to the idea has been "lukewarm". The consultation ends next week and then the Government will decide on a course of action.

Ironically, Love would miss out on the rule if it were implemented for "micro firms", as the Coalition suggests, since she employs about 30 people.

Love is not the only advocate of no-fault dismissal. Lee Whiting, an employment lawyer from Andrew Jackson law firm in Hull, says small businesses don't have the resources to deal with tribunal claims and should have the freedom to get rid of a troublesome employee without the fear of being taken to court.

Larger businesses, however, have more resources to deal with the costs associated with tribunals and should not be included in the no-fault dismissal rule, he argues.

Some legal experts disagree. They warn different rules depending on business size would create a "two-tier" labour market, since what is "right" and "fair" at one company would potentially be different elsewhere.

Others say that limiting no-fault dismissal to micro firms fails to help the very businesses that are growing and need it the most – like Love's – typically those with between 20 and 100 staff.

The one proposal most companies, big and small, agree on, is the recommendation to slash the redundancy-notice periods from 90 to 30 days.

Keith Luxon, human resources director at Veolia Water, which employs around 2,000 people in the UK, says the change would be "pragmatic and logical". Whiting agrees: "Often employers and workers consult within the first month over redundancies and spend the next 60 days twiddling their thumbs, which is a waste of time on both parts."

Luxon is also a fan of easing the rules around employing migrant workers. At present, companies are expected to check if someone is eligible to work in the UK. Beecroft suggests the Home Office should take responsibility for this.

Other recommendations welcomed by business include a simplifying of the rules around transferring staff from one company to another during takeovers and mergers.

The so-called transfer of undertakings, or TUPE, rules bar companies from firing workers or cutting their wages if they move to a new employer en masse under a takeover deal. But Beecroft says the law should be changed to make it easier to let go of workers if they are not needed.

Whether the findings of the venture capitalist's report ever become a reality remains to be seen.

What Beecroft's proposals have done is remind government that employment law – or at least the fear of it – can hinder hiring new people and therefore stunt growth.

Hugo Burge, chief executive of travel website Cheapflights, and an angel investor, warned that current legislation makes it hard for companies to adapt to change, something which he claims limits the UK compared with America, where workers have fewer rights. "While it is not entirely
comfortable for my European sensibilities to admit, we should perhaps be taking a leaf out of [America's] book," he says.

To solve the problem doesn't necessarily mean ripping up employment rights, just finding a better balance, businesses say.

However, the immediate elephant in the room, as far as the debate on red tape goes, is the economy and growth.

Whiting explains: "Employment law is a pain in the backside. But what's keeping businesses from recruiting isn't concern over tribunal claims but actually that they haven't got the work. It is the economy that is stopping them recruiting."

The two investigations centre on the activities of Enviro Pacific Investments, a company based in the British Virgin Islands, a tax haven which offers secrecy to companies and individuals who conduct their affairs there.

Enviro Pacific Investments is an oil and gas firm working in Kazakhstan, which charges multi-million pound fees to other firms seeking energy contracts in the country.

In the course of the meeting at the resort the trust is understood to have agreed to put up at least £6 million towards for the purchase of the house.

Sunninghill, made up of a house once nicknamed derisively Southyork for its resemblance to an American ranch home, and its five acres of grounds were purchased by the trust in June 2007, having been on sale for more than five years at a price of £12 million.

Despite the £15 million price tag, the house has been left empty ever since and is now apparently derelict. The Duke moved to Royal Lodge in Windsor, which remains his home.

The meeting at the Thai resort of Amanpuri, Phuket, between January 31 and February 5 2007 involved 18 people.

Among those at the meeting were the Duke of York’s close friend Miss Ashkenazi, a socialite and businesswoman, and Arvind Tiku, a wealthy Indian who is Mr Kulibayev’s business partner.

Other guests included Marianna Belchanskaya, a Russian lawyer, and Kairat Boranbayev chairman of the Russian-Kazak Oil company KazRosGaz, which is jointly owned by Kazakhstan and the Kremlin.

They were also joined by a mystery man, who stayed in Miss Ashkenazi’s private villa, who used the alias “John Smith” on the resort’s reservation record.

The Italian authorities are interested in the trust because of allegations of corrupt payments made by Italian firms to politicians in Kazazkhstan.

On Tuesday Milan prosecutor Fabio De Pasquale is due to ask a judge for account details to be disclosed so financial transactions from Italy’s ENI group to Kazakhstan can be tracked.

An indictment lodged with the court earlier this month accused several Italian firms of paying bribes to leading members of Kazakh President Nazarbayev’s regime, including Mr Kulibayev, who is alleged to have received £12.8 million.

Italian prosecutors are looking into the possibility that the bribe may have been used to buy Sunninghill Park, although there is no firm proof as yet and that is why the request for bank details to be disclosed is being made to a Milan judge.

Mr De Pasquale said: “The investigation is still in the early stages we are making a request for information on the 29th May and then we will see what happens. At this moment in time I cannot say anything else.”

In letters to Lucie Wellig, his counterpart in the Swiss prosecutor’s office, written in February last year and March this year, he asked for her assistance in gathering evidence.

In the letters, obtained by the Sunday Telegraph, he said he was aware of allegations surrounding the Sunninghill sale involving the firm Enviro Pacific Investments, which he described as linked to people “at the summit of the Kazakh government”.

Details of the meeting in Thailand obtained by the Sunday Telegraph show that Mr Tiku used his assistant to arrange for $140,000 (£89,370) to be paid in advance to cover the Kazak team’s expenses during their stay, plus an additional $40,000 (£25,550) in cash in an email headed “hotel and stay expenses - Kazak team - Phuket -Enviro Pacific Investments Ltd”,

On other hotel bills and receipts, the party is referred to as the Ocean Oil Group, part Mr Tiku and Mr Kulibayev’s business empire through which they control oil and gas fields in Kazakhstan.

Miss Ashkenazi stayed in Villa number 7, a £2,000-a-night pavilion, which she shared with “John Smith” for the five night trip between January 31 and February 5 2007.

Mr Tiku paid for three $950 dollar a night rooms and four Thai-styled Pavilions located away from the hotel “interspersed throughout a coconut plantation”.

Guests spent £30,000 on food and drink, and a further £3,500 on a fireworks display and £800 on a jazz band to celebrate the birthday of one of the guests, who also ordered several Cuban Cohiba mini cigars on their tab costing £17 each.

Ten days after the Thai trip Bor Investments, the secretive offshore trust which owns Miss Ashenazi’s £27.5 million home in Holland Park, west London, was set up.

Prince Andrew’s close friendship with Miss Ashkenazi had blossomed during 2007 and he introduced her to the Queen at Lady’s Day at Royal Ascot in June that year, when she had lunch in the Royal Box.

Last week she failed to answer questions sent to her via her London office. Other guests who were in Phuket also failed to respond to requests for comment. Sources close to the Prince said he was not present at the meeting.

Oxford University educated Ms Ashkenazi is chief executive of MunaiGaz Engineering Group, a multi-million-pound oil and gas company with operations in Kazakhstan, Russia and Ukraine. She has previously denied rumours of an affair with Prince Andrew as “such nonsense”.

Ms Ashkenazi has said: “Andrew has been a very good friend of mine since we met at a dinner party in 2001. We have many common friends.”

It is also unclear where Mr Kulibayev, who is married to President Nazabayev’s daughter, was during the Thai trip. Miss Ashkenazi is rumoured to be his long time mistress and he is named as the father on the birth certificate of one of her two children.

Ms Ashkenazi has also dismissed the controversy over the purchase of Sunninghill for £15 million after it had languished on the market for more than five years and was valued at £12 million.

“It was a deal struck between friends and the asking price was paid,’ she has said.

'I can’t understand why there has been such a fuss. There was nothing corrupt about it. I think the people negotiating for Timur were not aware they were paying more money. I suspect they were instructed not to haggle with the Royal Family.’

Last night a Buckingham Palace spokesman, referring to the Sunninghill sale, said: “This was a private sale between two trusts. There was never any impropriety on the part of The Duke of York, any suggestions of which are false.”