Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Second Reading
18:02
Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
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The reasoned amendment in the name of the Liberal Democrats has been selected.

Luke Hall Portrait The Minister for Regional Growth and Local Government (Luke Hall)
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I beg to move, That the Bill be read a Second time.

The Bill contains two halves: first, a measure that changes the valuation assumptions that are applied when making business rate determinations in the light of covid-19; and secondly, a measure that will provide for the disqualification of unfit directors of dissolved companies. I will start with the first measure before moving on to the second.

The pandemic has presented significant challenges for businesses in all sectors. Our response has been of a similarly unprecedented scale, with more than £280 billion provided throughout the pandemic to protect millions of jobs and businesses. In this year’s Budget, the Chancellor announced an extra £65 billion of support for 2020-21 and 2021-22. The support we have provided for businesses included 100% business rate relief for all eligible retail, hospitality, leisure and military properties for 2020-21, at a cost of £10 billion. Combined with those eligible for small business rate relief, this means that more than half of ratepayers in England will have paid no rates in 2020-21.

At this year’s Budget, we confirmed a further three-month extension to the full 100% business rate relief for retail, hospitality and leisure businesses, followed by a further nine-month period of relief at 66% subject to the cash cap, at a further cost of £6 billion. That takes the total level of support provided to businesses by Government through relief from business rates since the start of the pandemic to over £16 billion.

That is an important context for the Bill, because as well as helping businesses through the pandemic, it is also important that we support local government with the critical role it has in supporting our communities. A vital part of that is the income that it receives from business rates, so while it is necessary to provide rates relief to businesses, it is important that we do so in a way that is targeted and that ensures that those who can still contribute continue to pay this tax.

With that in mind, clause 1 is concerned with how rateable values should be assessed during the pandemic. A business rates bill is calculated by multiplying the rateable value of the property by the multiplier, or the tax rate, and then applying the reliefs. The rateable value of a property is therefore, broadly speaking, its annual rental value at a set valuation date, which in the current rating list is 1 April 2015. All rateable values should therefore reflect annual rental values at 1 April 2015. This provides a consistent tax base for all businesses.

Of course, it is necessary to update the tax base, which is done at regular revaluations undertaken by the Valuation Office Agency. The next revaluation was originally scheduled for 1 April 2021, based on values at 1 April 2019, but last year we took the step of postponing it to 1 April 2023 to ensure that it better reflected the impact of the pandemic; Parliament approved that change by passing the Non-Domestic Rating (Lists) Act 2021. The Act received cross-party support, for which we were extremely grateful.

Outside those general revaluations, a ratepayer can still submit a challenge to the VOA on their property’s rateable value between revaluations for a number of reasons, such as to correct factual errors or reflect a material change in circumstances. If not satisfied with the outcome of the challenge, the ratepayer can appeal the VOA’s decision to the valuation tribunal. It has been an established principle of the business rates system that a material change in circumstances challenge can be made on the basis of a physical change to a property or its locality. For example, a successful MCC challenge could be made following the partial demolition of a property, or significant roadworks near a property that might affect its value.

However, following the pandemic, the VOA received high numbers of MCC challenges seeking a reduction in rateable value to reflect the impact of the pandemic. Of course, the MCC legislation, as first set out in the Local Government Finance Act 1988, was not designed with covid-19 in mind, and the MCC system has never been used in response to economy-wide impacts or shocks. It has therefore become necessary to clarify, as clause 1 does, the treatment of covid-19 in assessing rateable values.

We have been clear that relying on the MCC system to help businesses that need further support in the light of the pandemic is not the right mechanism. It would mean significant taxpayer support going to businesses with properties such as offices, many of which might be able to operate normally throughout the pandemic, at a time when we have provided significant support to those most affected.

For example, the workforce of a consultancy firm based in central London that was previously entirely office-based is likely to have been working largely from home since the start of the pandemic, but the business itself may have continued to operate throughout. Under the business rates appeal regime, it could have argued that its office space had undergone a material change of circumstances due to the reduced occupancy.

If that business’s appeal had been successful, it would have been awarded a business rates reduction, but it would not have been right for it to have a reduced tax liability on that basis, given that it had not actually suffered an economic impact. Relying on the MCC system to support businesses would also mean resolving disputes through the courts, which could take years and create additional uncertainty both for businesses and for local government, which relies on income from business rates to deliver vital local services.

The Bill will therefore ensure that the coronavirus and the restrictions put in place in response to it cannot be used as the basis for a successful MCC challenge or appeal. It will ensure that changes to the physical state of a property can continue to be reflected in rateable values as and when they occur, irrespective of whether they are a result of the coronavirus, but that the general impact of the pandemic on the property market will not be reflected until the next revaluation in 2023. Until then, all rateable values will continue to be based on the property market as at 1 April 2015. This approach is supported by the Public Accounts Committee, which has welcomed the financial certainty that such a measure gives to councils.

Clause 1 applies in England. Business rates policy is fully devolved, so whether the same legislation is necessary in Wales, Scotland or Northern Ireland is a matter for their respective Governments, but we have been working closely with the devolved Administrations regarding the Bill. Although the law in Wales is similar to that in England, different legislation applies in Scotland and Northern Ireland. Of course, the impact of the coronavirus may have been different, so whether the devolved Administrations choose to follow the measures set out in clause 1 will depend on the individual circumstances and choices made in those countries.

We have also supported businesses. We have put £16 billion of support into business rates for the pandemic, and we have announced a relief worth an additional £1.5 billion for ratepayers impacted by the pandemic who have not been able to access business rate reliefs. These new reliefs will be administered by local authorities and will be distributed according to which sectors have suffered the most economically, rather than on the basis of temporary falls in property value. This will ensure that support is provided to businesses in England in the fastest and fairest way possible, and we will continue to work with and support councils and local government to enable ratepayers to apply for the new reliefs as soon as possible.

The second part of the Bill deals with the abuse of the process whereby companies are removed from the register and dissolved. The large majority of company directors are responsible, passionate about their businesses and diligent. They act as effective stewards of the companies to which they are appointed, and I pay tribute to the directors who make such a valuable contribution to our economy and who have fought so hard over the past year to ensure their company’s survival, preserving the jobs and livelihoods of so many within their business and beyond.

Unfortunately there are exceptions, and the business community and the wider public must be protected from those individuals who abuse the privilege of limited liability. Those directors who act recklessly, irresponsibly or even criminally should expect to have to answer for their conduct. That means expecting to have their conduct investigated and, if they had done wrong, facing the possibility of being disqualified from acting as a company director for up to 15 years, depending on the severity of their misconduct. Disqualification protects the public from the actions of those who have demonstrated they are unfit to hold the position of a director of a company, and acts as a deterrent to reckless or culpable behaviour.

Evidence to support disqualification action comes from the investigation of companies and the conduct of their directors. The Secretary of State for Business, Energy and Industrial Strategy may investigate live companies through the powers contained in the Companies Act 1985, and also the conduct of the directors of insolvent companies through similar powers in the Insolvency Act 1986 and the Company Directors Disqualification Act 1986. If such investigations reveal evidence that a director’s conduct has fallen below the standards expected of someone in their position, a period of disqualification can be sought, either through a court application or through an under- taking given by the person to the Secretary of State. A period of disqualification protects the business community and the wider public by preventing the person from acting in the promotion, formation or management of a limited company. Breach of a disqualification order is a criminal offence, and an extremely serious matter.

As things stand, though, there is a loophole in the disqualification regime that some irresponsible directors have been able to exploit. It concerns the situation where a company has been dissolved without entering insolvency proceedings. Dissolution should not be used as an alternative to insolvency proceedings, but there is evidence that some directors have been using the process both as a way of fraudulently dodging the payment of company debts and of avoiding insolvency proceedings and the scrutiny of their behaviour that comes with that.

Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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I support the measures that my hon. Friend is taking in the Bill. He mentioned fraud. I take it that the measures he is talking about would not negate the potential for prosecution of fraud where it was demonstrated that a company director had defrauded the taxpayer by means, for example, of a bounce back loan.

Luke Hall Portrait Luke Hall
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I thank my hon. Friend for that point. He is an expert on these matters in this House, and I look forward to working with him as we deliver the Bill.

When a company is dissolved, the only way the conduct of its former directors can be scrutinised is if it is restored to the register, which is a costly process involving court proceedings. The Insolvency Service regularly receives complaints about the conduct of directors when a company has been dissolved, and many such complaints relate to the use of dissolution to dump the debts of one company, only for a new company to start up in the same business, often with the same directors and the same employees, and often even working out of the same premises. The debts dumped in this way are often large tax debts, awards made by employment tribunals or sometimes even debts owed directly to consumers.

The provisions in this Bill will close the loophole and allow the Secretary of State for Business, Energy and Industrial Strategy to investigate the conduct of former directors of dissolved companies and, where public interest criteria are met, to take action to have them disqualified from acting as a company director.

We consulted on this measure back in 2018 and it received a warm welcome from stakeholders. It has now become extremely important that we get it on to the statute book, so that it can support the business community and the wider economy in recovering from the impact of the pandemic.

This new power to investigate and seek disqualification of former directors of dissolved companies forms part of a package of counter-fraud measures seeking to target any fraudulent behaviour relating to bounce back loan schemes through the abuse of the dissolution process and to ensure the responsible use of public funds. Retrospective provisions in the Bill will mean that, when the new provision becomes law, conduct that is happening right now will become subject to investigation and could be used to support future disqualification proceedings even if the company is dissolved.

The Bill fulfils the Government’s commitment to introducing two important measures: it will make changes to the business rate appeals system and provide for the tackling of abuses associated with the process whereby companies are removed from the register and dissolved. These are two distinct areas of policy, but our approach is consistent. We will ensure the continued operation of a coherent framework, deliver certainty, support businesses to thrive, and allow councils to plan for their finances with confidence and continue to deliver the first-class services on which our communities rely. I commend the Bill to the House.

18:15
Jeff Smith Portrait Jeff Smith (Manchester, Withington) (Lab)
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It is a pleasure to respond on behalf of the Opposition to the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill. It is a short Bill but one that will have important consequences for many businesses and individuals.

The Opposition recognise the rationale behind the Bill and we do not intend to divide the House on Second Reading, but there are elements of the proposals where the Government need to be clearer about how some of the measures will work in practice and to spell out how all businesses will be supported. Businesses and local authorities have already faced massive uncertainty this year and they should not face more. I welcome the chance to discuss the Bill to ensure that we get the detail right. We will seek further clarification and information and consider tabling amendments as the Bill makes progress.

Clause 1, as we have heard, legislates to ensure that coronavirus cannot be taken as a cause of material change of circumstance for business rates valuations, and therefore prevents rateable values for businesses being altered to take into account the impact of coronavirus. We recognise that the most effective way to provide help for businesses hit by the pandemic is not via the process of application for a material change of circumstances, and that MCCs, in the context of what we hope and trust is a temporary change in circumstances, are not the correct mechanism for determining valuations.

We also acknowledge that the demand of large numbers of appeals could put strain on the system and that the most effective use of the VOA’s time and resource is the upcoming revaluation of business rates. Indeed, as the Minister said, we supported the delay in the next business rate revaluation last year, so that it did not take place in the middle of the pandemic. It is now important that the VOA is able to effectively carry out the revaluation in 2023, so I accept the logic for these measures. It is important that, where businesses have experienced what would normally qualify as an MCC, for example, a physical change of the property or the locality, not related to coronavirus, the property owner will be able to appeal against the 27-list valuation on that basis. I would be grateful if the Minister, in responding, clarified for the record and for the assurances of businesses watching that a material change of circumstance application not related to coronavirus will still be allowed and that this is not a blanket ban on MCC claims.

We welcome in principle the announcement of additional relief to businesses that have not so far benefited from any rate relief. That is a positive step towards supporting businesses, particularly in the supply chain of the retail, hospitality and leisure sectors—businesses that have seen an economic impact but have not received relief so far.

We welcome the relief, but it is unclear how the £1.5 billion figure was calculated and we have real concerns over whether it will be enough to support all those businesses that desperately need it. We are particularly concerned that the figure may not be enough to compensate one sector that has been particularly hard hit, the aviation sector, and large airports. I know that the airports, some of which have submitted applications for MCCs, are concerned that £1.5 billion is nowhere near enough to fairly reflect the impact of the pandemic and to protect jobs and livelihoods across the worst-affected sectors. The aviation sector is united in agreement that the lack of business rates relief adds to the failings of Government to provide meaningful support to the aviation industry throughout this pandemic. If £1.5 billion is demonstrated to be insufficient, can the Minister assure the House that the Government will come forward with further funding when necessary? Will the Government give consideration to a further package of support for airports impacted by coronavirus? Has the Minister undertaken an assessment of the impact that the Bill may have on the operation of national infrastructure such as airports? Was any consideration given to exempting them from the provisions?

We acknowledge that this funding mechanism has the potential to get help to businesses more quickly than via the process of application for MCC, but the Government need to get the funding out to local authorities and businesses as quickly as possible. That is why it is a matter of real concern that the Government have so far failed to give details of how the £1.5 billion will be allocated and spent.

The original announcement of the funding came on 25 March. Three months later, there is no indication of the methodology. In answer to a parliamentary question on 18 May, the Minister said that the guidance on the distribution of the fund will be finalised once the Bill has passed through Parliament. That means it is likely that allocations of the fund will not be made until after the summer recess. That means businesses will not receive payments until September at the earliest, and that is not good enough for businesses and local authorities. Many businesses do not know whether they will qualify for the fund, given that the criteria have yet to be published. There is a genuine risk that some businesses may not survive long enough to benefit if there is not some assurance of support before the autumn.

The delay also puts local authorities in a difficult position. The Government expect them to set up local initiatives to deliver grants, but have not given them details about their individual allocations or national guidance on administering the scheme. I therefore strongly urge the Government to provide businesses and local authorities with the clarity they need by publishing an early release of the indicative funding allocations and the eligibility criteria. It will be important that this funding is kept under review to ensure it is enough to meet demand. Will any new burdens due to administrative or other costs be covered by the Government? Businesses have been through so much uncertainty in the last 18 months, it is unacceptable if the Government are going to add more confusion and delay.

We welcome that the Bill gives local councils the assurance that their income from business rates will remain reasonably stable and predictable for the immediate future. With business rates currently forming such a substantial part of local authority income, a major change could have hit local government finances hard after an exceptionally challenging period with inadequate support from central Government.

From April this year to March 2023, the VOA is conducting the next business rates valuation. We appreciate that managing a large number of MCC appeals at the same time could lead to a need for extra resources for the VOA, but we think there is already a need for extra resources for the VOA. Revaluations of business rates are slow and infrequent, and a wide coalition of business organisations has called for more frequent revaluations for a closer and more accurate link between the actual rate and the state of the economy and businesses’ ability to pay. We understand the need for the next revaluation to be moved to 2023. The VOA should be given the resources it needs to carry out more frequent evaluations.

Clauses 2 and 3 make provision relating to investigation and disqualification of directors of dissolved companies. The Opposition are pleased to see the closing of a legal loophole that for too long has allowed unscrupulous or unfit company directors to evade responsibility. It is right that the Government should have the power to investigate and disqualify directors of dissolved companies. In particular, we know that between January and March this year there were over 170,000 company dissolutions in the UK, a 25% increase compared with the same period in 2020.

That raises the suspicion that dishonest individuals may have tried to exploit this loophole to avoid repaying bounce back loans. The current way to pursue fraudulent activity in relation to dissolved companies—applying to the court to restore the company—is a lengthy and costly process. We agree that it is in the public interest to remove that barrier and deliver more accountability on unfit company directors. I do, however, have a couple of questions for the Minister on the detail.

First, how will additional investigations brought about by the change be funded? Under the Bill, the Insolvency Service can apply to a court to disqualify a director only if the director’s company has been dissolved for less than three years, so it is really important that the Insolvency Service is given the resources to carry out investigations effectively and quickly. The Government need to ensure that a lack of resources does not lead to investigations into directors of dissolved companies coming at the expense of investigations into directors of insolvent ones. Put simply, if the Insolvency Service is not adequately funded, the aims of the Bill will not be met and unfit directors could continue to get away with fraudulent actions.

Secondly, if a director is to be found culpable, how exactly will the Government go about facilitating the repayment they may owe? The disqualification regime in itself does not provide measures for repayment, so can the Minister give any more detail about how the compensation orders will work? In what circumstances might the Government aim to restore the company and begin an insolvency procedure? These are questions that need to be cleared up for the Insolvency Service, the courts and creditors to have clarity over how the Bill will work in practice.

In summary, Labour accepts the overarching measures in the Bill, but we are concerned by some of the lack of detail within. The good intentions of the Bill will not be delivered without proper funding for all the sectors affected. While those issues go unaddressed, we will continue to express those concerns as the Bill makes progress. Uncertainty is not good for businesses. They deserve clarity. The lack of detail on funding is a concern, and measures to hold directors to account will not be successful unless the Insolvency Service is fully funded. I look forward to the Minister addressing those questions in closing the debate. I have no doubt that businesses and local authorities up and down the country will be hoping he does so, too.

00:01
Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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It is a pleasure to be called so early in a debate, Madam Deputy Speaker; I am not used to that happening frequently. I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

I have been involved in business rates as a businessperson for a long time, and I greatly sympathise with businesses that have been hit by coronavirus. We know there is a disproportionate impact on some sectors as compared with others, but I support the Government’s measures here and I will explain why. The Government have put a lot of support in—I think the Minister said it was £16 billion in business rates relief to certain sectors and at least another £10 billion in grants above that. There is £1.5 billion in the Bill for businesses that were not included in those schemes.

The amendment tabled by the hon. Member for Richmond Park (Sarah Olney), who I think will speak next, is flawed. It shows a deep misunderstanding of how the business rates system works. Business rates are not about a business; they are about a property. All business rates are based on a property value. What she is trying to argue is that a business of a different business type, such as a nightclub, should be treated differently in terms of business rates from, for example, a retailer or a bank that might have traded successfully. Asking the Valuation Office Agency to value something on the basis of how a certain business has been hit by coronavirus would turn the business rates system completely upside down, at a time when that would not be particularly helpful.

I understand that more than 300,000 businesses potentially would have taken this route, some of which had not been hit by coronavirus. The amendment would create a huge opportunity—a bonanza—for the legal sector to look at this area and take these things to court. That would ultimately cost the taxpayer a lot of money on many occasions where the businesses concerned had not suffered from coronavirus.

The point is about the material change of circumstance. It is about a permanent change. That is what the measure is there for: a permanent change, as the Minister said, such as a demolition or something that affected all the premises in a locality. This is not about general market conditions. Hopefully, coronavirus will be a temporary thing and the restrictions caused by it will in two or three weeks’ time be long gone. For that reason, I do not support the hon. Lady’s amendment, and I support the Government’s action in terms of a material change of circumstance and restricting the right to take an appeal forward.

Clause 2 concerns former directors of dissolved companies. I absolutely support closing that loophole, too. As the Minister said, often, one sees business owners who will use subterfuge to avoid, for example, the repayment of bounce back loans or the payment of suppliers. That is inappropriate. If there is a direct route to that through going straight to being a dissolved entity, it is absolutely right that we close that loophole.

I listened to the shadow Minister, the hon. Member for Manchester, Withington (Jeff Smith), and he made some very good points about resources for the Insolvency Service. I have worked with it quite a lot on various matters while I have been in this House and it is not the most proactive organisation around. It may be a lack of resources, but certainly there is no point having the regulations if we do not regulate such businesses, and we have to make sure that, if these measures are introduced, the Insolvency Services does hunt down the people who try to avoid their debts, including fraudulently. As I said in my intervention on the Minister, if these debts have been avoided fraudulently, those people should be prosecuted for fraud. As I said in my intervention on the Minister, if these debts have been avoided fraudulently, those people should be prosecuted for fraud. That is another area where we lack resources. The UK has a very poor record on hunting down fraud and financial crime. That is an area where we need to beef up our resources, which would have a huge payback, of course. Consider the relative amounts charged in financial sanctions in the US versus the UK: even accounting for the size of its economy, five to six times more money comes back into the US Treasury through its prosecution of fraud. There would be a big payback for our Treasury if we beefed up resources.

Let me touch briefly on one issue with the Insolvency Service that is not directly related to the Bill but reflects on certain points made by the shadow Minister. I have been trying to get the Insolvency Service to take action against a rogue set of business rates consultants called RVA, who go into unsuspecting small businesses that do not understand that small business rate relief, for example, is freely available; they just need to contact the council and it becomes applicable to their premises and business. They do not understand that, and RVA signs them up to a contract that basically takes 50% of the relief for up to 12 years, for writing one letter to the local authority. That is absolutely wrong. We should close that organisation down now. The Insolvency Service has promised to look at it, but not as proactively as it might.

I will make a wider point on the general issue of insolvency. As many people in this place know, I am co-chair of the all-party parliamentary group on fair business banking. For some time we have had real concerns about the insolvency profession generally, and its probably unhealthy links with some of the people it gets its work from, not least the high street banks. We are doing an inquiry into that alongside the legal firm Humphries Kerstetter. We are taking evidence now and will produce a report in early September on those conflicts of interest. We have seen lots of cases, including one quite recently with KPMG and HIG where both have been fined a significant amount in a draft judgment.

There are some unhealthy alliances here. We need to remove those conflicts of interest and, as the Government have said they will consider doing at some point, move towards an independent, ombudsman-style regulator for the insolvency profession. That does not exist now; it is pretty much self-regulation, which has been proven time and again not to work. I know that is not particularly a matter for today, but this was a good opportunity to get it on the record.

18:32
Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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I am pleased to contribute to this debate. I will confine my remarks to clauses 2 and 3, which are the ones that apply in the whole of the UK. The Minister pointed out that clause 1 does not apply directly to Scotland.

The SNP welcomes the provisions to close the loopholes that have been identified, although they do not go nearly far enough. I am a bit concerned that this is the second or third time recently that a Bill has been brought forward to tighten up on director and company misconduct and company fraud, but it is framed so narrowly that it is almost impossible to amend it to widen its scope or improve it further. Although we will not oppose Second Reading tonight, I hope that we are not too far away from a more comprehensive review of companies legislation with a wider scope so that Members with particular changes they want to see are able to put them forward to be debated by the House.

In effect, the proposals make a slight change to the way in which the directors of a company are allowed to be completely separate from the company itself when things go wrong. The concept of creating a separate legal entity when a limited company is formed is perfectly sound. There were valid reasons for introducing it 150 or 200 years ago, when companies legislation was in its infancy. Many of those reasons are valid today, and we should retain the protection for directors, senior managers and, indeed, shareholders of companies that go to the wall through no fault of their own, through bad luck or misjudgment. But the reasons for protecting company directors do not extend to making it harder to deal with con men, and the occasional con woman, who set out to become millionaires at the cost of other people’s pensions, savings and hard-earned cash.

When there are reasonable grounds to believe that the directors of a company have been guilty of serious misconduct—including criminal misconduct, in some cases—we cannot allow them to delay, reduce or in any way frustrate the result of punitive action just by dissolving the company. That would be like saying that somebody who faces charges under the Road Traffic Acts can get away with it just by scrapping the car. It is not the vehicle that is at fault but the people who were driving the vehicle at the time.

The Government have rightly pointed out that some of the abuses in respect of which they want to tighten up are those carried out by what are called phoenix companies: the directors shut down one company and in essence resurrect the same company, but because they give it a different name, rank and serial number it is legally a different company and all the sins of the previous company are forgotten about.

Directors do not even need to close down the guilty company first: the same abuses can equally well be perpetrated by running two or three—or, in a case I will come to in a moment, 23—parallel companies with exactly the same couple of shareholders and exactly the same couple of directors, and very often no other employees at all. Through a process that is sometimes lengthy, sometimes short, they dump all the liabilities and debts on to one company and shut that one down, while the assets and benefits are hidden away in a separate company, to be shared only by the directors. In those circumstances, surely it is right that the Insolvency Service and other regulators have the unrestricted right to pursue the individual directors, regardless of which company name they hide behind at the time.

It has to be said that if the Government are serious about imposing improved standards of integrity in the City of London, it is unfortunate that they have chosen to present the Bill on the day when one of their own Ministers told the BBC that the standard of integrity in Government conduct by which they want to be judged is what they can get away with electorally. There is a double standard there that is perhaps not directly relevant to this debate, but the Government cannot afford to ignore it.

Let me mention one example of what can go wrong when directors appear to run a company for their own benefit and not for the benefit of those whose money they are supposed to look after. The Nunn McCreesh limited liability partnership was incorporated in August 2012 and dissolved by voluntary strike-off in October 2015. It had only three officers: Phillip Nunn, Patrick McCreesh and a company that they jointly owned called It’s Your Pension Ltd, incorporated in 2013 and dissolved by voluntary strike-off in 2016.

Coincidentally, at the same time that Mr Nunn and Mr McCreesh took the decision to dissolve the limited liability partnership, the Insolvency Service was finding that the LLP had been paid nearly £900,000 for identifying investors for Capita Oak—a name with which Members will be familiar as it was a pension fund that collapsed, taking £120 million of other people’s pensions with it. Capita Oak remains under investigation by the Serious Fraud Office; we do not know whether the part played in the Capita Oak story by Nunn McCreesh and numerous other companies is part of that investigation.

Mr Nunn and Mr McCreesh moved on quickly from their dissolved LLP and set up a whole web of companies —23 at the last count—under the Blackmore brand. Between 2016 and 2019, one of these companies, Blackmore Bond plc, raised £46 million by selling high-risk mini bonds to investors that they knew were completely unsuitable for that type of investment. Blackmore Bond plc went into administration in 2020 and the investors have almost certainly lost all of their £46 million.

Kevin Hollinrake Portrait Kevin Hollinrake
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The hon. Gentleman has raised a very interesting case. I am sure he will be aware that the Financial Conduct Authority was warned on numerous occasions about the activities of Blackmore Bond but apparently did nothing about it until it was far too late.

Peter Grant Portrait Peter Grant
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I do not know whether the hon. Gentleman was reading through the back of my notes, but he is only about five or six lines ahead of what I was going to say.

I do not know whether Mr Nunn and Mr McCreesh were ever placed under formal investigation, or whether they might still be under investigation, for their part in the Capita Oak story—for obvious reasons, that kind of information is not shared—but surely the fact that they were able to dissolve their company should not make any difference to the investigations to which they can be subjected and the sanctions they should face if they are found guilty of misconduct in their management of Nunn McCreesh LLP or, indeed, any of the umpteen other companies they have run.

Perhaps if, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) indicated a moment ago, the various regulators had communicated with each other more effectively, the Financial Conduct Authority would have heard loud alarm bells ringing when in 2017 it was alerted to the highly questionable sales techniques that Blackmore Bond was using; perhaps if the FCA had made the link to the dodgy practices in relation to Capita Oak that were carried out by a different company under the same ownership and direction, it would have moved faster than it appeared to do; and perhaps, at least, the investors who ploughed £26 million into Blackmore Bond after the FCA was warned about it would have had some warning that the Blackmore Group might have been better named the Black Hole Group, because that is exactly what it became for £46 million of other people’s money.

I described that one scandal out of the many I could have described to remind the House that we are not just looking at a theoretical loophole here; we are looking at regulatory weaknesses that have allowed chancers and charlatans to make well over £1 billion of other people’s pensions and life savings disappear, and that is before we start to look at the business-to-business frauds that have forced small businesses into liquidation, often at massive financial cost to the entrepreneurs who have set them up.

The provisions in clauses 2 and 3 address just one of those weaknesses, and much more is needed. We need a complete reform of Companies House so that, for example, details of the beneficial ownership of Scottish limited partnerships and other secretive company structures have to be published. We have known for years that SLPs have been used to launder millions of pounds of dirty money created by illicit business activities, usually related to organised crime. We need to see action soon to put a stop to that. We need to reinstate the principle of the reverse burden of proof on senior bank managers, for example. When something goes wrong on their watch, rather than it being up to the authorities to prove that they were negligent, can we go back to requiring the bank manager to prove that they were doing the right thing? This reverse burden of proof often applies in other cases of professional misconduct or questions about professional conduct. All our regulators, including the Insolvency Service and the Financial Conduct Authority, need to be adequately resourced to keep up with the almost limitless ingenuity of the criminals they are trying to keep tabs on. That is about not just the amount of money they have, but the degree of training and experience that their people have, so that the person asked to take a decision as to whether somebody is fit to be registered with the FCA has the experience to know what kinds of warning signs to look out for.

Finally, we need legislation that allows us not just to disqualify directors who are guilty of wrongdoing; it should allow the authorities to order them to pay compensation to the victims. In some cases, I will support that on the basis of a civil balance of proof, which is on the balance of probabilities, rather than the much higher bar of proof beyond reasonable doubt, which is why so many cases that the Serious Fraud Office takes to court never get as far as a conviction. We welcome the provisions in clauses 2 and 3. If the long title and the scope of this legislation had allowed it, we would have been submitting a significant number of amendments to improve it on Report. I hope the time is not too far away when legislation on the wider issue comes before the House so that directors cannot simply avoid disqualification by scrapping their vehicles.

18:42
Duncan Baker Portrait Duncan Baker (North Norfolk) (Con)
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A snappy title it is not, but a very important Bill it is, for two very good reasons. I wish to recap by saying that this Government have supported the jobs and livelihoods of the people of this country to the tune of some £400 billion—£300 billion in the past year alone; the last time we exceeded 10% of GDP was in the financial crisis, and before then world war two, and we are still supporting businesses, as we are doing with this Bill. When we are trying to protect the jobs and livelihoods of so many people, there will inevitably be areas of difficulty, yet the Government have always tried to support as many people as possible. The £16 billion-worth of rates relief has been an absolute lifeline for countless businesses, including those that get in touch with me in my constituency and others all around the country. The Government are to be commended for that. Even when businesses are more difficult to support, the discretionary funds for local authorities to be able to target those businesses are also a lifeline, and therefore the £1.5 billon of additional support for businesses whose circumstances have perhaps changed during the pandemic is incredibly important and welcome.

I want to touch on an equally serious matter: we read that potentially 60% of the £46.5 billion that has been lent out through various Government schemes—lent, I might add—might be defaulted on and not repaid. When the Government are the guarantor, I certainly welcome the Treasury taking the necessary steps to mitigate that risk and the retrospective powers to curb that significant problem, putting the parameters in place to deal with directors who might dissolve a company, walk away from their responsibilities and then not just have an effect on many people, such as creditors who are equally trying to get back on their feet, but cheat the taxpayers, who must also get back on their feet. That money is so important for the re-emergence of our economy, and we absolutely have to ensure that our public services can get up again, so any power through legislation, with the legal process in there to mitigate that, is very welcome.

It is worth pointing out that we have to be mindful slightly of not being out of this pandemic, and therefore, in going after directors who default on their responsibilities —I was a director once, and I would never dream of defaulting—we need to be careful to enable businesses to resurge again. We have to make sure that approaches to recoup the money are done in the right way. I am happy that the Exchequer is being protected in this way. I think it is very sensible legislation. We know that when we create something retrospectively it is often because we have moved at speed to protect taxpayers in the first place. This is very welcome legislation, and I back it 100%.

18:46
Sarah Olney Portrait Sarah Olney (Richmond Park) (LD)
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I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House, while agreeing that the disqualification regime should be extended to directors of dissolved companies, declines to give a Second Reading to the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill because it retrospectively overrules more than 500,000 business rates appeals made by 170,000 businesses, fails to consult the affected businesses to deliver adequate support, puts business and jobs at risk by delaying the delivery of additional business rates relief, ignores the impact of the pandemic on companies that have been excluded from business rates relief, fails to recognise the impact of the pandemic on jobs and businesses in the supply chain of retail, hospitality and leisure businesses from office-based companies to manufacturing firms, severely limits the only route available to tens of thousands of businesses in claiming Government support during the pandemic, sets a troubling precedent for future crises by retrospectively limiting businesses’ right to challenge their business rates bill, fails to bring forward meaningful reforms of the business rates system and risks leading to more job losses and company closures during an economic crisis.”

I am grateful to the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully) for his engagement on the contents of this Bill. The Liberal Democrats are pleased to support the aspects of it that relate to directors’ disqualification. We have seen far too often how individuals and businesses that are owed money can be defrauded by companies being dissolved and the fact that there is a lack of powers to pursue individuals for debts.

The urgency of introducing new legislation to protect against those practices has been sharpened by the large sums loaned to support businesses throughout the pandemic. The Public Accounts Committee, of which I am a member, recently conducted an inquiry into the bounce back loan scheme, and concluded that the combined fraud and credit risk of the scheme was between £15 billion and £26 billion. Although it was right for the Government to take the action they took and continue to take to protect businesses from the impact of the pandemic and the lockdown, it is now necessary to ensure that as many of those loans as possible can be repaid and to circumvent any possible actions that might fraudulently avoid repayment.

UK businesses, especially those in the worst hit sectors of retail, hospitality, travel and the creative industries, are beginning to emerge from this pandemic with an enormous debt burden. While I welcome these measures to ensure that UK taxpayers are not defrauded, there remains an enormous question mark over how many business owners who have conducted their affairs honestly and with integrity will face a debt burden for many years to come, and the extent to which that will be a drag on the revival of our economy. I urge the Minister to keep this issue at the top of his priority list and to support our indebted small businesses in whatever way he can.

Many businesses will be dealing with their indebtedness by looking to cut costs wherever they can, which will include reviewing all their existing expenses and exploring whether these can be effectively reduced. For many businesses, this will include applying to the Valuation Office Agency for a review of the rateable value of their business premises. Many businesses will be citing a material change of circumstances resulting from the pandemic and the lockdown as the reason for their application. This is an established route for businesses to appeal against the amount of rates they pay. Major crises or changes in the law, such as the foot and mouth disease outbreak or the smoking ban, have previously been accepted as valid reasons for business rates appeals. Many businesses have had their business model permanently changed by covid, and where that will impact on the valuation of the property they operate from, their ratings appeals deserve consideration by the Valuation Office Agency.

I want to pick up on the comment from the hon. Member for Thirsk and Malton (Kevin Hollinrake) about my amendment and to reassure him that it is about the market value, as it were, or the underlying value of the business. He cited nightclubs. I can probably count in decades the last time that I was in a nightclub. I do not know whether he has more recent experience, but it is a really good example of an industry that has been really badly impacted by the pandemic. Of course, not just the operating business model of individual nightclub businesses but the underlying value of nightclub premises will have been impacted, and that will be the material change of circumstances that those businesses will be relying on to contest their business rates.

Kevin Hollinrake Portrait Kevin Hollinrake
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Rarely is a property built to be a nightclub. It is a property, which is valued on the basis of its rental value, which leads to the rateable value. That business may change hands and go from being a nightclub to a different kind of business. How could we have a rates system dependent on the business type that occupy premises? That is not how the business rates system works.

Sarah Olney Portrait Sarah Olney
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The hon. Member raises a valuable point. Nevertheless, if a property has always been operated as a nightclub business, a change of use, for example, which may well require an appeal to the local planning authority, still has a measurable impact on the value of that property.

I understand that 170,000 businesses have made 500,000 appeals to the VOA for consideration under covid-related material changes of circumstances. The Bill’s provisions retrospectively overrule covid-19 and Government restrictions as valid reasons for business rates appeals, effectively scrapping all 500,000 appeals. Instead, the Government propose a £1.5 billion fund to support payment of business rates for companies previously left out of business rates support—in other words, all those not in the retail or hospitality sectors, who have had a business rates holiday. However, the fund will not be available until after the Bill has received Royal Assent, and its Second Reading has already been delayed for 10 days, so how much longer will businesses have to wait before being compensated for not having paid a fair amount on their business rates?

There has been a lack of consultation with businesses before introducing the Bill and the proposed fund, and many firms will be left struggling with higher costs as a result. That is a direct threat to employment and to the ability of our economy to recover from the pandemic. I tabled the reasoned amendment outlining the Lib Dems’ opposition to the Bill, but I shall not press it to a vote.

Members of all parties in the House agree on the need for review and reform of the business rates regime. It imposes costs on businesses that they are powerless to control and creates an unfair playing field for businesses that do not trade out of rateable premises. The Government could make the simple move of committing to annual revaluations instead of every five years. With that, those businesses that genuinely qualify for a rating reduction would see those benefits much sooner and we could remove the need for an appeals process to reduce their costs. Every effort should be made to support businesses and to save jobs. Implementing a punitive retrospective change in the law to prevent businesses taking practical action to save on their non-staff costs represents a threat to the economy and jobs. The Government could take practical action today to help businesses, but they prefer to proceed with this Bill, which enshrines a concerning precedent that will cause many businesses to struggle.

18:53
Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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First, I thank the Minister for setting the scene so very well and for answering some of the questions that I had. I will ask a few questions—it is my nature to do so—which perhaps the Minister will be able to answer for me. Rating is a devolved issue and thus the Northern Ireland Assembly will seek to apply the legislation so that businesses in Northern Ireland are on an equal footing with those on the mainland. The Minister referred to that in his introduction, and I appreciate that, although I feel the need to stress once again that the Northern Ireland protocol is in itself putting our businesses not simply on an unequal footing but on a different playing field. That is not the debate for today, but I want to put that on the record.

The fact of the matter is this: for many businesses, the coronavirus aid package for rates was the only thing that kept the creditors away from the door. I thank the Government and Ministers for all that they did to help businesses. If we are being honest and real, we know that is why businesses are in business today, and why—hopefully—they will continue beyond the next period of time. It is important that we give credit where credit is due. The only thing that kept those creditors away was the rates package, but for some people that was not enough, and coronavirus is the final nail in the coffin—we do not know how the future will unfold over the next period—which is lamentable, and we must continue to support our businesses through a difficult time. The news this morning back home was that some of the grant aid would come to an end this Wednesday, so I would be grateful if the Minister gave us an indication of what help will be available beyond the end of this month.

We are all aware in the House that there are some people who will take what was meant for good, to help those who need it, and use it for their benefit outside the realms intended by the grants. There are always people who may abuse the system and turn it to their advantage. I know one honourable man in my constituency—I know many honourable men and honourable women in my constituency, but I will talk about one in particular—who told me that he did not apply for any grants whatsoever and he could continue to trade during the coronavirus outbreak. However, he also told me that he could do with support right now, as the Northern Ireland protocol has increased his price on orders, and prevented him from selling dog treats in his shop, along with other profitable lines. He would wish me, on his behalf, to inquire what help or rates reduction is available with regard to the insidious protocol.

Moving on, it has become clear that in order to help those who need it, we must tighten loopholes used by those who do not need help. The Government have set parameters tonight, and have closed some loopholes, and I am pleased that they have done so. That is why I support the aims of the Bill in closing the loophole with regard to the disqualification of directors. Currently, the power to disqualify directors under section 6 of the Company Directors Disqualification Act 1986 applies only to directors of companies that have become insolvent. It does not apply to the director of a company that has been dissolved and, as a result, to obtain a disqualification order against a former director of such a company is arduous, time-consuming and costly, as the Secretary of State must apply to the court to restore the dissolved company to the register of companies. The process involves paying various fees, and once the company has been restored to the register, powers under section 447 of the Companies Act 1985 can be used to obtain information and documents that are necessary to investigate the conduct of a director. Finally, a disqualification order can be sought or an undertaking obtained under section 8 of the CDDA on the grounds that disqualification is in the public interest—or section 6 of the CDDA, but only if the restored company is insolvent. Those steps meant that in 2019, out of 529,680 UK company dissolutions, 33 companies were restored to the register in England and Wales so that they could be liquidated instead.

We do not have any idea how many cases were not made for those who abused the system, but I have seen an estimate—perhaps the Minister can give us an indication of the number at the end of the debate—that at most, misconduct occurs in 1% of company dissolutions, or about 5,000 a year. Can the Minister confirm that that is the figure, as I am concerned that the number may rise? Will he set out the steps that will be taken to ensure that it does not, as more insolvencies are expected due to the pandemic and, unfortunately, abuses are feared, in some cases, of the coronavirus loan scheme?

In conclusion, I agree that we should simplify the rules, which should not affect those who have done the right thing. We should give credit to those who did so, and those who want to do the right thing every time. I therefore support clause 2, which relates to sections 6 and 7 of the CDDA, as it will address the problem and close the loophole. The measure is also supported by professional accountancy bodies among others. There is a finite amount of grant aid and support available, so we have to be prudent. As the good book says, every one of us has a duty to be prudent with what we have and to use it correctly, so not one penny of the grant aid and support available should go to the unscrupulous. I support the Bill, and I thank the Government for what they have said tonight.

19:00
Seema Malhotra Portrait Seema Malhotra (Feltham and Heston) (Lab/Co-op)
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I am grateful for the opportunity to respond to the debate on behalf of the Opposition and to consider the contributions made by hon. Members. I also thank the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully), for the meeting we had beforehand, in which we were able to discuss aspects of the Bill and issues that have been raised in the debate.

We have had some very positive and helpful contributions, including from the hon. Member for Thirsk and Malton (Kevin Hollinrake), with whom I have worked closely on mortgage prisoner issues and other areas of financial services regulation. He brought his characteristic clarity to the debate, raising issues including prosecutions for fraud and the resources that are necessary for us to be able to act. The speech by the hon. Member for North Norfolk (Duncan Baker) was so clear that it did not require an intervention, and I thank him for it. The hon. Member for Strangford (Jim Shannon) made the important point that Northern Ireland businesses should remain on the same footing as those in the rest of the UK. The hon. Member for Richmond Park (Sarah Olney) was right about the debt burden that businesses are facing, which is one reason why the Opposition have called for a flexible debt repayment scheme based on what businesses earn. That continues to be an essential part of how the Government must support businesses going forward.

As my hon. Friend the Member for Manchester, Withington (Jeff Smith) outlined at the start, the Bill contains some positive measures and we support its going forward. However, we want it to deliver for businesses and local authorities and to bring justice to unscrupulous company directors, and it also needs to be workable for the Valuation Office Agency and the Insolvency Service. However, there are significant gaps in the detail, which must be addressed if the Bill is to achieve its aim.

Clause 1 rules out covid-related material changes in circumstances in relation to business rates appeals. We understand that assessing thousands of appeals would not be the best use of the Valuation Office Agency’s time when a full revaluation is due to take place in 2023. However, it is vital that this change is coupled with the £1.5 billion relief fund for businesses that have been badly affected by the pandemic but that have so far missed out on business rates reliefs—a point well argued by the Federation of Small Businesses, and I will come back to that point and to concerns that it may not cover everyone. The funding should also support businesses and supply chains that have been unfairly overlooked for so long.

Confirmation that the fund is an alternative to adjustments to rateable values as a result of material changes in circumstances appeals also provides much-needed certainty to local authorities. Since 2013 business rates revenue has formed an increasingly substantial part of local government revenue. While this reliance on business rates is imperfect and longer-term reform is needed, a large fluctuation in income at the tail end of the pandemic would be the last thing that local authorities need, and the Bill makes that less likely.

However, the lack of detail around the £1.5 billion fund is worrying. Since the figure was announced in March, businesses and local authorities have had no further detail on how the amount was calculated, how it will be allocated and who will be eligible, nor is there guidance on how it should be administered. Councils are expected to develop and set up local schemes to deliver this business grant relief, but they cannot start the process until they receive their individual allocations and until the Government publish national guidance setting out the parameters for the scheme.

We are concerned that the allocations will not begin until the Bill has passed through Parliament, meaning that payments are unlikely to be made until September at the earliest. Businesses and local authorities are united in crying out for clarity on the distribution process, for clear and straightforward award criteria and for simplicity and speed in getting the funding out. Waiting until September will mean that many businesses will not survive long enough to benefit, especially in the light of the decision to postpone the next phase of unlocking and the fact that economic measures have not been continuing in lockstep with public health restrictions.

The Government previously said that this grant-based approach was to ensure that relief could be awarded more quickly than if it was sought under a rating appeal, so again, why the delay? I reiterate that the Government must publish an early release of the funding allocations and eligibility criteria, and I urge the Government to work closely with local authorities and the Local Government Association to make sure that that guidance is as clear as possible.

There are also further questions to ask about how the Government calculated the figure of £1.5 billion. What assurances can they give that it will be sufficient to support the businesses that have struggled so much without rates relief during the pandemic? I would be grateful if the Minister could cover that in his closing remarks. While the £1.5 billion discretionary fund has been broadly welcomed, the ruling out of material changes in circumstances rate appeals, as he knows, will have come as a disappointment to many businesses. Have the Government made an assessment of how many are likely to have been affected by the closing off of this avenue and how much they would have been able to claim back otherwise? Did these sums inform the Government’s calculation of the £1.5 billion figure?

The Minister will also be aware of the concerns of airports such as Heathrow, Gatwick and Manchester, and the need for a proper deal for aviation, which, so far, the Government have failed to bring forward. Heathrow has continued to pay its £120 million annual business rates bill in full despite the plummeting passenger numbers, so has the Minister undertaken an assessment of the impact that the Bill will have on the operation of pieces of national infrastructure such as airports? Was any consideration given to exempting them from the provisions?

I will make a few comments on the directors disqualification aspects of the Bill in clauses 2 and 3. It has long been known that a small number of directors of companies fraudulently use the dissolution process as a way of avoiding paying back loans, and this has become a particular concern with the covid-19 bounce back loans. With the dramatic increase in the number of company dissolutions this year compared with last year, there are fears that a minority of rogue directors have sought to use this mechanism to avoid repaying state-backed loans. It is therefore right that the Bill aims to close the dissolution loophole, allowing directors who have unscrupulously dissolved their companies to be punished and deterring others from doing this in the future.

Additionally, applying to court to have dissolved companies restored is time-consuming and costly to the public purse. It is right that the Bill removes this hurdle to tackling business corruption, but it is unfortunate that it comes now rather than three years ago, when a Government consultation, which the Minister referred to in his opening remarks, on the Insolvency Service’s powers saw the majority of respondents agree that there was a gap in powers in relation to directors of dissolved companies. If action had been taken more promptly, as I think the Minister would agree, the significant exploitation of the bounce back loan scheme may never have happened in this way.

My hon. Friend the Member for Manchester, Withington raised Labour’s concerns about how additional investigations will be funded and the need for adequate resourcing of the VOA and the Insolvency Service. R3, the insolvency and restructuring trade body, has highlighted its members’ concerns that not all their reports to the Insolvency Service are acted on, even where serious breaches of the law are suspected, due to resourcing issues. So how do the Government intend to address this while also ensuring that the Insolvency Service stands ready to take on a potentially even bigger case load?

I would add that if resourcing delays result in investigations going beyond three years since the company is dissolved, and that consequently means that a Government run out of time to apply for a disqualification order against a culpable director, that would be an utterly unjust outcome and an incentive for the phoenixism that we want to see end. It would also surely fail the public interest test, so, finally, will the Minister explicitly clarify whether the Government plan to use compensation orders against disqualified directors? The Government’s approach to this must be made clear so that there is efficiency in returning funds to the public purse and other creditors can be monitored and evaluated properly.

I hope that the Government have been able to take note of the issues raised during this debate. Labour will keep pushing for these vital improvements and particularly for swift guidance and the release of the £1.5 billion relief fund. With many of the hardest-hit businesses yet again facing uncertainty following the extension of covid restrictions, we owe it to them to make this Bill genuinely helpful and not one more thing to worry about.

19:09
Paul Scully Portrait The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
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This is a Bill of two halves, considering that the football is on at the moment, and the contributions that we have heard from Members throughout the House attest to the importance of each of them. I am grateful to my hon. Friend the Minister for Regional Growth and Local Government for opening these proceedings by setting out the context and the background of both elements of the Bill. I am also grateful to all the Members in all parts of the House who have participated in the debate. The points that have been raised are really important and I am glad to have the opportunity to respond, first on business rates and then on the measures relating to the disqualification of unfit directors of dissolved companies.

The House has today supported the point made by hon. Friend that the pandemic has unquestionably had a significant impact on ratepayers. This impact has been felt particularly by those in the retail, hospitality and leisure sectors, but also by many other businesses that sit elsewhere in the wider economy. That is why since April 2020 the Government have provided £16 billion of business rates relief targeted at ratepayers in the retail, hospitality and leisure sectors. As announced on 25 March, the Government intend that this will be supplemented by an additional £1.5 billion of relief to be made available to ratepayers who have not been able to benefit from the reliefs already put in place throughout the pandemic. Taken together, that represents an unprecedented package of support that reflects the unique impact of the pandemic on our economy.

These unprecedented circumstances have also tested other aspects of the business rates system, which was created long before covid-19 and was not designed with pandemics in mind. The material change of circumstances process is designed to be used in cases such as localised roadworks. Market-wide economic changes such as those arising from a pandemic can and should be considered only at a comprehensive business rates revaluation. Arguing material change of circumstances cases through the courts could result in years of uncertainty and is unnecessary where we can, as we are doing now, amend the law to ensure that it meets its original intention.

Sarah Olney Portrait Sarah Olney
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On what the Minister has said about the material change of circumstances argument not being appropriate in this case, would it not have been appropriate to have made it clear earlier in the pandemic, perhaps as long as a year ago, that it would not be an appropriate route for businesses looking to reduce their rates payment and not a circumstance that could be cited?

Paul Scully Portrait Paul Scully
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A lot of messages can go out and have gone out over the past year so that we can flex in our ability to work with businesses. I think I can boil down my relatively long job title to “Minister for unintended consequences”. We are always trying to make sure that we can flex and get clear messages out to businesses. The hon. Lady makes an interesting point. We have heard a lot about the £1.5 billion and when the guidance will be out. Clearly that is dependent on the passage of this Bill, but we want to make sure that we can work with the LGA and councils to give the clearest guidance so that they can get the money out as quickly as possible. The argument made by Members on both sides of the House is countered by the fact that by not having to go through so many appeals we can speed up the process and get the money out within weeks rather than, in certain cases, if we had to go through the entire process, years. That is why we can provide certainty to local authorities, which rely on income from business rates to fund their vital local services. It is on that basis that the Public Accounts Committee has welcomed the approach taken by the Government in the Bill.

Members have raised questions relating to when ratepayers will be able to benefit from the £1.5 billion relief that was announced on 25 March. We will work with all areas of local government to deliver the new relief scheme as soon as possible, once the Bill is passed, so that local authorities can set up their local relief scheme. The allocation of the £1.5 billion among local authorities will be made according to which sectors have suffered most economically rather than on the basis of temporary falls in individual property values. That will ensure that the support is provided to businesses in the fastest and the fairest way possible.

Seema Malhotra Portrait Seema Malhotra
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Does the Minister have any clarity at all on the timetable so that local authorities know what to expect and when?

Paul Scully Portrait Paul Scully
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The answer is as soon as possible, once this Bill has passed. I am looking forward to working with the hon. Lady in Committee to make sure that we can work through this as quickly as possible. Clearly, work will be done in consultation and conversation with the LGA and local councils to ensure that we can get comprehensive guidance in place. That is how we have been working over the past 14 months with local authorities on the other grant schemes.

Let me briefly cover a couple of quick points. The hon. Member for Manchester, Withington (Jeff Smith) asked whether there will be a blanket ban on MCCs. I can absolutely confirm that there is no blanket ban. On airports, it is a core principle of the business rates system that a material change of circumstances should be used between rate revaluations, so the drop in demand for airports in light of the pandemic is exactly the sort of market-wide economic change affecting property values that can and should only be considered at revaluation. We have been supporting airports with their fixed costs over the past year from the airport and ground operations support scheme. In his recent Budget, the Chancellor announced a further six months of support up to the equivalent of their business rates liability for the first half of the 2021-22 financial year, subject to certain conditions, and a cap per claimant of £4 million.

Seema Malhotra Portrait Seema Malhotra
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Will the hon. Gentleman give way?

Paul Scully Portrait Paul Scully
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I will not give way, but I will happily come back to the hon. Lady if I have not answered her question. I do want to get through a few areas.

Let me quickly turn to the disqualification of directors of dissolved companies. The issue of insolvency funding came up a few times. Clearly, we will be working with the Insolvency Service to ensure that it has the resources to do its job. It employs its finite resources to the maximum effect by prioritising cases in which there has been most harm to the public and the wider marketplace. Clearly, its resources are not limitless.

The hon. Member for Strangford (Jim Shannon) asked about insolvencies. Actually, the number of insolvencies has been at a 40-year low over the past few months because, effectively, in many areas, the economy has been held in stasis. That is why it is so important that, having put £352 billion-worth of support into the economy, we now have 352 billion reasons why we have to get the next bit right—why we have to help shape the recovery through these mitigations. We need to make sure that we continue to flex and continue to extend the support. That is why furlough carries on until September and why we have ensured that the winding-up proceedings have been extended for another nine months as well, so that we can get conversations going with landlords and tenants. It is so, so important to continue these measures.

I am glad that we have had broad support for the measures. In terms of compensation, directors can obviously be held personally liable for debt, and where there are breaches, there is disqualification.

Peter Grant Portrait Peter Grant
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I note the Minister’s comments that directors can be held personally liable, but does he accept that allowing an individual investor or creditor to sue a director at their own risk is very different from a scheme through which the Government or some other body effectively take that legal action on behalf of a group of aggrieved individuals, who individually cannot afford the risk of taking that action?

Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

I take the hon. Gentleman’s point. Let me just answer a couple of his points. He talked about corporate governance and audit reform. That is something that we will legislate on as soon as parliamentary time allows. He referenced a Minister saying that we would adhere to standards that we thought that we could get away with. No, that is absolutely not the case. I did not hear that comment, but I suspect what the Minister said and meant was that we are accountable to the electorate. When I heard about that comment, I thought about my own constituency where I know at least one High Court judge, an insolvency practitioner, lawyers, forensic accountants, civil servants—I have them in my own Department never mind my constituency—and journalists and, boy, will they hold me to account at the ballot box, in my local media and in the national media should it be appropriate to do so. That is that standard to which we expect to work as a Government. I am glad that he also mentioned phoenixing, because this will strengthen the phoenixing legislation as well.

I have noted the helpful contributions made by Members across the House, and I am looking forward to working with colleagues in Committee to make sure that we can get this really important legislation for both of these measures through. The scrutiny that has been provided today is, as always, greatly appreciated. I look forward to discussing this Bill with Members throughout its passage, and I commend it to the House.

Sarah Olney Portrait Sarah Olney
- Parliament Live - Hansard - - - Excerpts

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question put and agreed to.

Bill accordingly read a Second time.

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 8 July 2021.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Scott Mann.)

Question agreed to.

19:20
Sitting suspended.

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (Programme) (No.2)

Ordered,
That the (Order of 28 June) Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (Programme)) be varied as follows:
(1) Paragraphs (4) and (5) of the Order shall be omitted.
(2) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on the Motion for this Order.
(3) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on the Motion for this Order.—(Luke Hall.)

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Consideration of Bill, not amended in the Public Bill Committee
New Clause 1
Duty to report on directors of dissolved companies
‘(1) The Secretary of State must lay a report before each House of Parliament no later than three months after the day on which this Act is passed, and during each three month period thereafter.
(2) Each report under subsection (1) must include the number of former directors of dissolved companies the Insolvency Service has—
(a) investigated; and
(b) disqualified both in the three-month period prior to the report being published, and in total since section 1 came into force.’—(Jeff Smith.)
This new clause would place an obligation on the Secretary of State to report the number of former directors of dissolved companies investigated and disqualified by the Insolvency Service.
Brought up, and read the First time.
13:25
Jeff Smith Portrait Jeff Smith (Manchester, Withington) (Lab)
- Hansard - - - Excerpts

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

Nigel Evans Portrait Mr Deputy Speaker (Mr Nigel Evans)
- Hansard - - - Excerpts

With this it will be convenient to discuss the following:

New clause 2—Guidance on non-domestic rating and coronavirus

‘(1) The Secretary of State must, no later than three months from the day on which this Act is passed, publish guidance for local government bodies on the application of—

(a) the provisions of section 1 of this Act, and

(b) the wider local business support policy framework associated with that section.

(2) In preparing the guidance the Secretary of State must consult—

(a) independent experts, and

(b) representatives of companies whose non-domestic ratings determinations are affected by section 1.’

This new clause would require the Secretary of State to publish guidance to local government bodies on the application of the provisions of section 1 of this act. This guidance must be prepared following consultation of independent experts and businesses whose business rates appeals are affected by section 1.

Government amendments 1 to 6.

Jeff Smith Portrait Jeff Smith
- Parliament Live - Hansard - - - Excerpts

I am conscious that we have an important debate to follow and that time is pressing, so I shall be relatively brief. Labour’s broad support for this Bill has not changed. We recognise the urgent need to support businesses, as well as the Valuation Office Agency, and the need to close a legislative gap exploited by unscrupulous directors. The Bill remains lacking in some safeguards. Labour attempted to correct that in Committee, but we were unsuccessful. The new clause is concerned with the resourcing and capacity of the Insolvency Service to deal with the new measures relating to directors of dissolved companies.

As we heard from witnesses in July at the evidence sessions, unscrupulous directors can cause significant suffering to those who have invested in or loaned to their companies. Too often, these directors are able to absolve themselves of their financial responsibilities by dissolving their companies and creating a financial and time barrier to holding them to account. So clauses 2 and 3 of the Bill allow for a director to be investigated and disqualified before their company is restored. That plugs the important gap and is a welcome measure; it removes a costly barrier, both in monetary and time terms, to accountability and financial responsibility.

However, as Duncan Swift, the former president of R3 highlighted in the Bill’s evidence sessions, these provisions could see the Insolvency Service take on 10 to 15 times the number of investigations it currently undertakes. Despite that potential increase in workload, there is no indication in the Bill that the Government plan to increase funding and resources at all for the Insolvency Service, let alone to do so by the significant amount it might need to allow it to cope with the extra investigations. So Labour is calling for new clause 1 to be added to the Bill to ensure that there is appropriate, regular oversight and scrutiny of the Insolvency Service’s ability to carry out this increased workload. If it is not given the resources to carry out its increased responsibilities, clauses 2 and 3 of the Bill become, in effect, redundant. New clause 1 would ensure that parliamentarians and others are kept updated on the Insolvency Service’s ability to carry out its tasks and on any need it has for extra resources. We do not intend to press the new clause to a vote, but we think it is important to make this point, particularly given that the Insolvency Service cannot apply to court for the disqualification of a director whose company has been dissolved for more than three years. That means that the Insolvency Service does not just need extra resources to carry out the additional investigations; it needs them to carry out those investigations promptly, within that three-year timeframe.

As Dr Tribe summarised:

“The Insolvency Service needs to be properly funded to ensure that this additional disqualification work can happen.”––[Official Report, Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Public Bill Committee, 6 July 2021; c. 18, Q29.]

Although this Bill goes some way to helping tackle financial corruption, the Government could and should go further. The Bill is too narrowly defined for any financial amendments, but the Government could provide a stronger deterrent, beyond disqualification, for unscrupulous directors.

Let me briefly turn to the other new clause and amendments. New clause 2 stands in the name of the hon. Member for Richmond Park (Sarah Olney) and we do not disagree with it. However, we think we do not have to wait for this until the day the Act is passed. It is clear that there is cross-party support for the Bill, that it will pass and that businesses are desperate for support in the current circumstances. So we see no reason why indicative guidance cannot be published and sent to local authorities, as well as possibly indicative amounts for the grants that local authorities will receive, so that they can get on quickly with designing their schemes, ready for when the Act passes. I make the point that we made in Committee that this should not be on a per-head basis; it should take into account the effect of the pandemic on different regions and on different sectors of the economy. I also note the Government’s technical solution, which allowed the backdating of these grants so they effectively apply this financial year.

13:30
In Committee back in July, the Minister said that the Government were engaging with local authorities and
“working on the final points in the guidance.”––[Official Report, Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Public Bill Committee, 8 July 2021; c. 76.]
Officials have had all summer to do that now. Let us just get on with it—let us let local authorities know what they can do and let them get on with doing it.
Finally, we support the Government’s technical amendments to allow the measures to apply to Wales as well as England. We note that they are at the request of the Welsh Government and we welcome them.
Peter Grant Portrait Peter Grant
- Hansard - - - Excerpts

I beg your pardon, Mr Deputy Speaker. I am standing to speak to the wrong provision.

Luke Hall Portrait The Minister for Regional Growth and Local Government (Luke Hall)
- Hansard - - - Excerpts

I welcome the contribution from the hon. Member for Manchester, Withington (Jeff Smith). I shall start by responding to new clause 1, tabled by the hon. Member for Feltham and Heston (Seema Malhotra) and the hon. Gentleman. I am grateful to him for his constructive words and the way in which he has approached the debate.

The new clause would require the Secretary of State to report to Parliament on the number of directors investigated and disqualified under the new provisions in the Bill every three months from the date that the Act is passed. I am grateful to hon. Members for the opportunity to confirm to the House that statistical reporting is routinely undertaken by the Insolvency Service. Regular three-monthly releases cover company insolvencies across the whole UK as well as individual insolvencies in England and Wales. The releases also contain underlying data and are published and available online to everybody.

As well as that, since the start of the pandemic, the Insolvency Service has been publishing experimental monthly releases of data concerning insolvency numbers. This was so that the statistics could act as an indicator of the impact of the pandemic on insolvencies. It may be of particular interest to hon. Members that the Insolvency Service also releases monthly updates about its enforcement activities. This information includes not only the number of companies wound up in the public interest, but the number of disqualification orders and undertakings broken down by the relevant section of the Company Directors Disqualification Act 1986, under which they were sought. Going forward, these numbers will include any orders or undertakings obtained as a result of this new provision. The reports also include information on lengths of periods of disqualification. Furthermore, there is an annual report on the nature of the misconduct being alleged.

I hope that the hon. Gentleman is reassured that a large amount of information is already provided that can be accessed easily through a quick online search and that future reports of enforcement outcomes will include any disqualifications made against former directors of dissolved companies. I would be grateful to him for withdrawing his new clause.

Let me just add one last point. The hon. Gentleman also mentioned the new burdens on councils. I somewhat couched my answer the last time we spoke about it, so I just want to put on record that we will absolutely be meeting the new burdens cost, including the associated administrative and IT costs.

Jeff Smith Portrait Jeff Smith
- Hansard - - - Excerpts

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Clause 1

Determinations in respect of certain non-domestic rating lists

Amendments made: 1, page 1, line 2, for “an English” substitute “a rating”.

This amendment and Amendments 2 to 6 extend the application of Clause 1 to non-domestic rating lists compiled for the purposes of business rates in Wales (as well as lists for England).

Amendment 2, page 1, line 5, for “an English” substitute “a rating”.

See the explanatory statement for Amendment 1.

Amendment 3, page 1, line 8, for “an English” substitute “a rating”.

See the explanatory statement for Amendment 1.

Amendment 4, page 2, leave out lines 22 and 23.

See the explanatory statement for Amendment 1.

Amendment 5, page 2, leave out lines 28 to 35.

See the explanatory statement for Amendment 1.

Amendment 6, page 2, line 40, at end insert—

‘“rating list” means a local non-domestic rating list or central nondomestic rating list under Part 3 of the LGFA 1988.’.—(Luke Hall.)

See the explanatory statement for Amendment 1.

Third Reading

13:34
Luke Hall Portrait Luke Hall
- Hansard - - - Excerpts

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

It is a pleasure to lead this two-part Bill on Third Reading after a series of constructive debates and scrutiny sessions. The contributions of Members from across the House have underlined the importance of these business rates and insolvency measures being on the statute book and will stand the Bill in good stead as it passes to the other place.

The business rates element of the Bill is a sensible measure that will mean that the application of the material change of circumstances process meets the law’s original intention. The MCC process is designed to be used in cases such as localised roadworks, not in response to market-wide economic changes. The passage of the Bill would ensure that this continues to be the case. Instead of business rates bills potentially being reduced following lengthy appeals processes, ratepayers will instead be able to benefit from a £1.5 billion relief package to be targeted at those businesses that have not benefited from the support linked to business rates during the pandemic.

The relief will be available as soon as possible once the Bill has passed and local authorities have set up their local schemes. This approach has been welcomed by the Public Accounts Committee and will be mirrored by the Scottish and Welsh Governments. That means that this measure has wide support, both in respect of the English business rates system and across the other nations of the UK, where ratings are a devolved matter.

Similarly, we have also seen widespread support for the second measure, which brings the conduct of former directors of dissolved companies into scope for investigation and potential disqualification proceedings. This measure is a valuable addition that will be an important tool to help to combat bounce back loan fraud and to deter others from acting in breach of their duties as company directors. I am pleased that the measure will apply across the United Kingdom, protecting our businesses and increasing confidence in doing business in all four nations.

I am grateful for the contribution of all Members throughout the Bill’s earlier passage and today. I thank them for the attention that they have paid to the Bill. I am particularly grateful to the shadow Ministers, the hon. Members for Manchester, Withington (Jeff Smith) and for Feltham and Heston (Seema Malhotra), for their constructive scrutiny of the Bill.

Finally, I thank the Clerks of the House and my excellent Bill team at the Ministry of Housing, Communities and Local Government, who have supported us in steering this piece of important legislation through the House. This important Bill speaks to the Government’s commitment to maintaining sensible and fair rating and director disqualification regimes, and I am pleased to have supported it in its passage so far. I commend it to the House.

13:36
Jeff Smith Portrait Jeff Smith
- Hansard - - - Excerpts

I will again be brief, because we set out our concerns on Second Reading and in Committee, I am aware that this might not be seen as the highlight of the parliamentary week by Members, and there is an important debate to follow.

As we said, we have always supported the Bill’s broad aims. We want to see support administered quickly for businesses that have been affected by covid and have missed out on business rates relief. We accept that ruling out material change of circumstances claims, but instead administering the bespoke £1.5 billion fund, will probably be the best way of doing so in the current circumstances. We also support the aims of clauses 2 and 3, which would close the legal loophole and give the Government the power to investigate and disqualify unscrupulous or unfit company directors.

I welcome the Government’s decision to extend the provisions of clause 1 to apply in Wales, which has been welcomed by colleagues in the Senedd. I also welcome the Government’s decision to ask local authorities, when it comes to administering the fund, to award relief against the liabilities of ratepayers for the current financial year—2021-22—as a way of getting around the restrictions on the business rates legislation so that they can effectively award it against the previous year. It is a technical solution to a technical problem caused by the timing of the funding, when it is eventually released. Local government colleagues assure me that they are happy with this.

Again, I emphasise the fact that we need to get this relief out to businesses as quickly as possible. The rates relief was announced in March and not a penny has yet been paid out. I do not think we need to wait for the end of the Bill proceedings to get indicative guidance to local authorities to design their schemes.

There are still concerns about the resourcing of the Valuation Office Agency and the Insolvency Service and how funds will be recouped and actions taken against unfit company directors. I hope that the Minister will take those concerns into further consideration.

Finally, I thank the Minister for his engagement with me and my hon. Friend the Member for Feltham and Heston (Seema Malhotra) on the Bill’s finer points. I thank his officials and the many, many representatives of the business community and local authority officers who have also engaged with us during the passage of the Bill.

13:39
Peter Grant Portrait Peter Grant
- Parliament Live - Hansard - - - Excerpts

I am pleased to make a brief contribution to the debate. As I did at earlier stages, I will restrict my comments to the disqualification of directors, which is the only aspect of the Bill that extends directly to Scotland.

The SNP supports the Bill. Our concerns are the same as those of the official Opposition: that much, much more is needed than is included. We need a much more comprehensive set of regulations, not so much to protect shareholders and directors as to protect customers, members of the public and investors from the scams that have all too often been committed by companies whose shareholders are the directors. A lot of company legislation was designed to protect investors against misaction or misconduct by company directors who are different people, but we are now looking at companies whose directors are the shareholders. They are not going to defraud themselves, but sometimes they may be willing to defraud others.

At earlier stages, I have repeatedly mentioned the conduct of a group of companies called Blackmore Bond and its directors Phillip Nunn and Patrick McCreesh. I will not go over even a fraction of their history, but why they were not at least investigated for disqualification long, long ago is beyond me. The Bill will not make it easier for such directors to be called to order, so we need legislation that fills in the gaps that are left.

As an indication of just how current such behaviour is, the BBC reported as recently as Monday that DialADeal Scotland Ltd has been fined £150,000 by the Information Commissioner’s Office for making more than half a million illegal marketing calls, many to numbers that had explicitly opted out of such calls. DialADeal Scotland Ltd used false business names in its marketing, which is illegal. It disguised the number that it was calling from so that people could not phone back to complain, which is also illegal. The calls were about non-existent green deal energy savings schemes. That is not a telecoms offence; it is fraud or attempted fraud, and very probably conspiracy to defraud.

The fine was decided in September 2021, but clearly the action by the Information Commissioner’s Office started before then. In May 2021, the directors of the company, Calum Mckay Kirkpatrick and Yvonne Mccuaig, applied to Companies House to place the company in voluntary liquidation—almost certainly with the sole purpose of avoiding the financial penalty that they knew was coming their way, because if the company were dissolved before the order was made, its directors would get off scot-free. Fortunately, the Information Commissioner’s Office was able to lodge an objection with Companies House and the voluntary strike-off action has been suspended.

The same two individuals, Kirkpatrick and Mccuaig, were also directors of DialADealUK Ltd, which was voluntarily dissolved in September 2018, immediately before DialADeal Scotland Ltd was created. Coincidentally, shortly after they had started the process of winding up DialADeal Scotland Ltd, they set up another company called Simple Lead Ltd. Not one of those companies has ever filed a set of accounts with Companies House; DialADeal Scotland’s accounts are now over a year out of date.

Why is it that company directors can repeatedly avoid any kind of scrutiny? As I have mentioned in relation to Nunn and McCreesh’s companies, they can go for years and years without filing the very limited information that they have to file at Companies House, which just does not seem able to keep up.

Alison Thewliss Portrait Alison Thewliss (Glasgow Central) (SNP)
- Hansard - - - Excerpts

My hon. Friend makes a very good point about Companies House and its limitations. Does he share my concern that the UK Government just do not care enough about Companies House and the massive loopholes that they are leaving for people to be defrauded and company directors to get away scot-free with the wrong things that they are up to?

Peter Grant Portrait Peter Grant
- Hansard - - - Excerpts

That would certainly be many people’s interpretation of how long it has taken the Government to take any firm action. We keep being promised a comprehensive review of company legislation; it cannot come quickly enough. I hope that we will finally see an end to the scandal of the creatures called Scottish limited partnerships, which are too often set up purely as a means to fund organised crime.

Companies House needs to be reformed and probably better resourced. As the Opposition spokesperson—the hon. Member for Manchester, Withington (Jeff Smith)—mentioned, the Bill may place additional demands on the resources of the Insolvency Service. We know that the Financial Conduct Authority needs another complete sorting out. Either it is not doing its job or it has not been asked to do the right job; it probably does not have the resources to deal with fraud on the scale that is now going on right under our nose.

Although I welcome the Bill and we will certainly not oppose it—we have supported it all the way through—we look for assurances from the Government that it is not the end of the road. It can only be allowed to be one tiny step towards finally stopping these people. I remember one of the witnesses who gave evidence to the Bill Committee describing the United Kingdom as becoming one of the go-to places of choice for international fraudsters. That is not a badge that any of us should bear with honour. If that badge is applied to the financial services industry, and to the business community in the United Kingdom generally, it will take years—decades—to get rid of and honest businesses will suffer desperately.

The Government have to start to act now. I do not know whether the Minister is in a position to tell us today when the comprehensive review of company regulation will come forward, but I certainly hope that we will see it very soon. As DialADeal’s example makes clear, even since we started our consideration of the Bill, further scams have been inflicted on innocent people throughout these islands.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Nigel Evans Portrait Mr Deputy Speaker (Mr Nigel Evans)
- Hansard - - - Excerpts

Dame Rosie Winterton will now take the Chair for our important debate on the legacy of Jo Cox.

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

First Reading
11:40
The Bill was brought from the Commons, read a first time and ordered to be printed.
Debate before Second Reading
18:13
Moved by
Lord Greenhalgh Portrait Lord Greenhalgh
- Hansard - - - Excerpts

That the Grand Committee do consider the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill before Second Reading.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
- Hansard - - - Excerpts

My Lords, this is a Bill with two distinct and important measures. The first is a measure to change the valuation assumptions that are applied when making business rate determinations in the light of Covid-19. The second measure provides for the investigation and disqualification of the former directors of dissolved companies.

Let me start with the business rates measure. Clause 1 of this Bill is about how the impacts of Covid-19 should be accounted for in rateable values, the key component of business rates liabilities. This clause will ensure that the coronavirus and its effects will not be considered as a material change of circumstance for the purposes of assessing rateable values. This measure is needed to respond to the unprecedented volume of appeals received by the Valuation Office Agency since the start of the pandemic. It will provide local authorities with certainty and security against a potentially crippling financial blow. It will ensure that the law operates in the way it was designed to do, by using general revaluations of non-domestic properties to reflect the impacts of major economic events in rateable values. As noble Lords will recall from when we debated and approved the Non-Domestic Rating (Lists) (No.2) Bill, a matter which I am sure is at the forefront of all noble Lords’ imaginations, the next revaluation in England has been moved to 2023 based on the market at 1 April 2021 so that the system can better reflect the impact of the pandemic.

The pandemic has of course hit businesses hard, and the Government have responded with unprecedented support. To take business rates alone, over this financial year and the last one, we are providing £16 billion of business rates relief for retail, hospitality, leisure and nursery properties. We are introducing a further £1.5 billion of relief in recognition of the complex ways in which Covid-19 has impacted the economy and supply chains. Local government has also needed government support. Business rates provide a stable source of income for local authorities to plan the financing and delivery of local public services. The events that necessitated this measure threatened that stability and certainty in a profound way.

The Local Government Finance Act 1988 provided the source of our valuation and local business taxation systems. Ensuring that this system operates as it was designed to do is a vital part of the Government’s rationale. Business rates bills are calculated by multiplying the rateable value of the property by the multiplier or tax rate, then applying various reliefs. The rateable value of a property is, broadly speaking, its annual rental value at a set valuation date. These rateable values are updated at regular revaluations undertaken by the Valuation Office Agency, which provides a consistent tax base for all businesses and a stable income stream for all local authorities.

Of course, ratepayers can challenge rateable values outside of general revaluations for a number of reasons, such as to correct a factual error or to reflect what is called a material change of circumstances, or MCC. If not satisfied with the outcome of the challenge, the ratepayer may appeal the VOA’s decision to the valuation tribunal.

The MCC system was not designed to reflect changes in economic factors, market conditions or the general level of rents. The 1988 Act was not designed with Covid-19 in mind, and the MCC system has never been used in response to an event with such economy-wide impacts as Covid-19. Moreover, the Government are clear that relying on the MCC system to help businesses that need further support in light of the pandemic would be misguided. It would mean significant amounts of taxpayer support going to businesses with properties such as offices, many of which have been able to operate normally throughout the pandemic, of course. It would also mean resolving such disputes through the courts. This could take many years and would create additional uncertainty for ratepayers and local councils.

Instead, the Bill will clarify the law such that coronavirus, and the restrictions put in place in response to it, cannot be used as the basis for making a successful MCC challenge or appeal. It will ensure that changes to the physical state of the property can continue to be reflected in rateable values as and when they occur, irrespective of whether this is as a result of coronavirus, but that the general impact of the pandemic on the property market will not be reflected until the next revaluation in 2023. This approach will provide much-needed certainty to councils and ratepayers alike.

We have of course worked closely with the devolved Administrations on these and other matters over the last 18 months. Following a request from the Welsh Government and amendments tabled on Report in the other place, the Bill will extend to Wales as well as England. Scotland has begun its own legislative process, which mirrors our approach.

The Government welcomed the support of Labour Members in the other place. The Public Accounts Committee also recorded its approval for the Government’s approach, as did the local government witnesses in Committee. These endorsements speak to the fundamental soundness of the policy rationale behind the business rates measures in the Bill.

The second part of this Bill addresses the problem of potential abuse of the process whereby companies are struck off the register and dissolved. I am proud to pay tribute to the resilience and determination of the many thousands of British company directors who have steered their companies through challenges from lockdowns, social distancing, and other restrictions on trading, all of which were necessary to limit the spread of Covid-19 and to keep our country safe. The responsible and effective stewardship of companies has helped to save countless jobs and livelihoods and will continue to provide an invaluable contribution to the economy as it recovers from the effects of the pandemic.

Unfortunately, there will always be those few individuals who do not comply with their duties as directors, and who do not act in the best interests of the company, its employees, or its creditors. It is important that that majority of honest and diligent directors, and the wider public, are protected from the potentially very damaging actions of those few bad apples. Directors who behave recklessly or irresponsibly can expect to have to answer for their conduct and may face proceedings to disqualify them from acting in the management of a company. Evidence to support disqualification action comes from investigation of companies and the conduct of their directors, and I would like to explain a little of how this process works in practice.

For insolvent companies, conduct is investigated through powers in the Insolvency Act 1986 and the Company Directors Disqualification Act 1986. Insolvency officeholders submit returns to the Secretary of State, reporting on the conduct of the directors in question. These are vetted, and where misconduct is suspected, it is assessed on the basis of public interest; for example, how much harm there has been to creditors and the wider public. Further investigation may be undertaken through examining company records and seeking information from third parties, including creditors, and directors themselves will also be asked to provide information and given opportunities to explain their actions. Where evidence of misconduct is found, a period of disqualification may then be sought. Investigations may also occur in live companies, using powers in the Companies Act 1985.

This Bill extends the circumstances in which the Secretary of State may investigate the conduct of directors to where the company has been dissolved without being subject to insolvency proceedings. It will extend the deterrent effect of the disqualification regime to those directors who abuse the company dissolution process. The Government consulted on this measure in 2018, when it was welcomed by stakeholders. Implementation is now particularly important to help reduce the risk of the fraudulent avoidance of repayment of government-backed loans made to businesses to support them during the pandemic.

It is an unfortunate fact of life that people who abuse the system will seek to take advantage wherever they can, so counterfraud checks were built into the lending process for bounce-back loans. For example, as a condition of the guarantee agreement, lenders were required to undertake appropriate anti-fraud and anti-money laundering checks before loans were made, and if they did not, they would not be able to call on the Government’s guarantee in the event of a borrower’s default. The new power to investigate and disqualify former directors of dissolved companies will back up those anti-fraud measures by deterring wrongful avoidance of repayment, and so help to ensure that public funds are protected. It will also pave the way to seek compensation from disqualified directors guilty of misconduct that has caused loss to others, including in relation to bounce-back loans.

Noble Lords may also be interested to hear about other actions taken by my department to minimise the risk of companies fraudulently avoiding repayment of their bounce-back loans. In March 2021, the department entered a blanket objection to any company with an unpaid bounce-back loan being struck off the register. This has prevented almost 51,000 companies, with total unpaid loans of over £1.7 billion, being dissolved. This action has ensured that lenders can continue to make recoveries on loans due to be repaid and will ensure that the public purse is protected. I commend this Bill to the Committee.

18:24
Baroness Blower Portrait Baroness Blower (Lab)
- Hansard - - - Excerpts

My Lords, there are many in this Committee with considerable and specific expertise in relation to the matters covered by this Bill, none more so than my noble friend Lord Sikka. I venture to speak in this debate, however, to seek clarification from the Minister on matters relating to the role of local councils.

On 25 March, Her Majesty’s Government announced that they would give councils £1.5 billion to offer grant relief to businesses, excluding retail, hospitality and leisure, that have been hard hit by the Covid pandemic. As I understand it, this relief is an alternative to any adjustment to rateable value as a result of changes in circumstances. I therefore have a number of questions for the Minister. I do not think that the basis of the calculation of £1.5 billion is known, except presumably by those who made it, nor is it unambiguously clear to me how the money will be disbursed. Can the Minister say what will happen if the fund is exhausted and whether perhaps any local councils would be expected to top it up?

Further, in regard to local councils, given that one assumes there will be criteria for disbursement, is it foreseeable that there may be disputes and possibly appeals? If there were, this would inevitably result in additional administrative and IT costs. It is not clear that any additional funding or financial support will be available to local councils to carry out these duties and responsibilities. Can the Minister tell the Committee whether local councils—their finances already hard hit, not just because of Covid but from years of cuts—will be expected to bear the administration costs of the scheme? If so, what assessment has been made of the impact on local ratepayers and local services? I look forward to the Minister’s response.

18:26
Lord Bourne of Aberystwyth Portrait Lord Bourne of Aberystwyth (Con)
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My Lords, it is a great pleasure to follow the noble Baroness, Lady Blower, who certainly made some very telling points. I thank my noble friend the Minister for setting out the purport of the legislation, which is clearly important. It is legislation that I broadly support. It clearly comes in two parts, “Rating” and “Directors Disqualification”.

On the “Rating” part, it is worth making the point that the Government have given some £280 billion of support to business since the start of the pandemic and that, during 2020-21, more than half of business rate payers have paid nothing. That support continues, and quite right too. The material change of circumstances would be a blunt instrument in the present situation and I can certainly see the point, on financial rectitude and common sense, of proceeding to the basis of valuation in 2023 on an unchanged basis. In the other place, the Public Accounts Committee has approved of that approach.

I have a similar question to the noble Baroness about the £1.5 billion of support. The noble Lord quite rightly referred to the importance of certainty for business, but there is uncertainty as to how this particular fund is going to be disbursed and which businesses will benefit from it. It would be good to hear when there will be clarity on that because, to reiterate the point, certainty is vital for business—as it is for us all in our everyday lives.

There is then the question of whether it will be enough and what will happen if it is not. The case has been well made in relation to, for example, airports. I know that might not be a fashionable point as we approach COP 26, which I strongly support, but we are all heavily dependent on airports in our everyday lives, as we have clearly seen, so it would be good to have some reassurance for that section of the community.

In passing—I appreciate that it is probably beyond the pay grade of both Ministers—I look forward to the Budget next week and perhaps some indication of some tax changes so that digital businesses and the Netflixes of this world, which clearly have not been paying enough tax on a fair basis, are perhaps brought into a position where they pay a fairer tax. I hope that we will get some indication of when that is going to happen.

I move to the second part of the legislation, which relates to “Directors Disqualification”. As the Minister rightly said, this disqualification change predates the Covid pandemic. In a sense, it has nothing to do with Covid; it is something important that needs to be done quite independently of Covid. I appreciate that we all have a great interest—quite apart from tackling the fraud—in ensuring that the bounce-back loans are properly dealt with, but it would be good to hear that this is not the sum total of what is intended here.

It has been a serious issue over a period of time that directors have used the ability to dissolve their company to dodge the impact of insolvency legislation. I hope this is not going to be limited to the bounce-back provision, and I hope the Government are minded to use the Insolvency Service more widely to tackle other frauds. Many creditors of companies are in a very parlous position because of this considerable loophole, which has been abused over a period of time.

I certainly welcome the partial closing of the loophole, but it would be good to hear that the Government intend to move further than that. It has been suggested by the Insolvency Service that more than 5,000 dissolutions of companies a year have sidestepped the insolvency protections of the Insolvency Act 1986 and the Company Directors Disqualification Act 1986. This particular legislation deals only with the protection offered by the Company Directors Disqualification Act. It does not seem to do anything about the Insolvency Act protections, because we do not know that the company is necessarily going to be brought within the purport of the insolvency legislation. There are considerable protections in that 1986 Act that will not govern these companies, notwithstanding the provisions in this legislation.

As I say, this legislation is worth one or two cheers but not three because, as far as I can see, it does not go far enough. It would be good to hear that the Government recognise that and intend to take it further to protect other creditors and to tighten it regarding those who abuse the provisions of the Companies Act—the ability to operate through a company and the separate personality provisions entailed in that. I look forward to hearing more on that point.

I also want to raise the point about reimbursement. This deals with the disqualification of directors and tightens that particular screw for directors using dissolution inappropriately, but as far as I can see it does not do anything directly in relation to them disgorging the profits that they have made fraudulently. It is important that that should happen. The Minister referred to this in a rather vague, amorphous way, but it would be good to hear specifically what it means. Is this going to be by virtue of a compensation order? How is it going to be done?

Further to that point, given what I have said about the number of companies that come within this particular provision—up to 5,000 a year, on a calculation made by the Government themselves—what are we doing about the resources for the Insolvency Service? It is stretched already and, if it is expected to take on this extra work, it will need extra resource if, as we all hope, it is to do the job appropriately.

I support the legislation, but we should not run away with the idea that it solves all the problems in this area. It does not, and we will need more action.

18:33
Earl of Lytton Portrait The Earl of Lytton (CB)
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My Lords, the procedure for this debate before Second Reading was queried at the time of the Chief Whip’s commitment Motion. I had not realised that not only has this procedure been used only once before—namely, last October during our hybrid phase—but, so far as I know, the Procedure Committee has not reported on it. I have to say that I consider it unsatisfactory to separate in time and place the bulk of debate here from a decision to give a Second Reading some other time in the Chamber. Can the Minister confirm what discussions with the Procedure Committee have taken place about using this procedure now that we are out of hybrid mode? He may need to come back to me on that on some other occasion.

As to the matter for debate, noble Lords will know of my involvement, over a lifetime as a property professional, with business rates and local government finance and in this House, from the day of my maiden speech to the present time. With my having declared that matter, it will come as no surprise that it is the rating part in Clause 1 of the Bill that I seek to address, and that only. I do not propose to disappoint the Minister in what I have to say, but I apologise in advance because I will need a little time to explain it. I declare at the same time that I am an occupier of business premises and I benefit from a small-business exemption—but, for the avoidance of doubt, I did not claim any Covid grant or relief for the interruption of business activities.

I acknowledge that the Government have made great efforts to relieve business rate payers of many of the worst effects and burdens that have arisen during the pandemic, but it is far from the case that it has been applied equally to all, or indeed evenly across the spectrum of property. Nor has it been in any way linked to impact or means, so far as I can tell.

I also acknowledge that, having introduced measures to grant emergency relief, it might be seen as perverse to allow those who benefited from them to make further claims for the same period due to material changes of circumstances, or MCCs. However, it would be simplistic to go down that road. I do not believe that those who set about to make MCC appeals were those same beneficiaries or intended to claim for the same period, given that the duration of relief was not known at that time. Indeed, it is likely that they were not one and the same. Either way, it should be a simple matter to make provision to prevent such double counting, if indeed there is evidence of it.

MCCs have always been available where substantial change has affected the assumed annual value of property; a supermarket opening up down the road, affecting traditional high streets, or changes in highway arrangements, affecting trade—that sort of thing. However, the Government suggest that this was never intended to address an issue of global impact such as a pandemic. From the dawn of rating under the statute of Elizabeth I to the General Rate Act 1967—on which I cut my professional teeth—and on to the present day, there has been plenty of time to ponder such matters, and yet we have this measure only now. Coincidence? I think not.

The reality is that in the pandemic some sectors did well, others realigned their processes and activities to stay afloat, and a further group floundered and continue to do so. It is not correct to say that the pandemic produced a general downturn lasting for more than a year, which is the usual benchmark for dealing with material matters for rating valuation purposes.

It is a concern that the Government took so long after the commencement of the lockdown to come forward with a measure of this type. Effectively, a year elapsed before the Government chose to lay, initially, a statutory instrument with prospective effect, with the promise of a Bill with retrospective effect—which is where we are now, of course. I do not believe that proper consultation with business rate payers was part of that process.

The courts have been at pains to point out that rateable values are meant to represent the benefit of occupation to the occupier. Where government prevents or limits such beneficial use, rateable values should reduce—but not, it seems, where HM Treasury deems otherwise. As a result, appeals against assessments on grounds of MCCs were made in good faith, in time, and were validated long before the end of March 2021. No attempt was made to avoid this wasted cost and effort during the period when doubtless many public servants were furloughed, but equally the resources were there to consider and act in an appropriate and timely manner on such issues. The Valuation Office Agency was actively involved in negotiations regarding these MCC appeals, in conjunction with ratepayers’ representatives.

I have received representations from, among others, Heathrow Airport—referred to by the noble Lord, Lord Bourne of Aberystwyth—and some advice from rating experts Gerald Eve. If ever there was an MCC event sufficient to interrupt the operation of the nation’s largest airport, this had to be it. While late in the day a grant scheme was set up, it was capped at £2 million per hereditament, so amounted to a flea-bite of a concession in something like the Heathrow rates bill.

Worse than that, it selectively, and, I suggest, unreasonably, failed to address the issues affecting very large assessments and operations such as Heathrow and Gatwick, which to all intents and purposes were completely shut down by force of law while, at the same time, support was given to other types of activity that were still able to keep going, as we have heard. It is therefore hard to comprehend precisely what sort of a material change of circumstances would afford any relief to such a large enterprise, given the effect of the Bill. Nor does it dispel the impression of selective discrimination against a specific class of undertaking.

It is not just about mega-businesses of this sort—many others have suffered equally. Although the productivity may have held up, the double overheads of supporting remote working staff and maintaining empty office buildings have none the less been significant. The Government have protected office tenants from being hounded by their landlords to pay rent for space that they were prevented from physically occupying but have offered them zero protection when it came to business rate bills. That seems to be nothing short of double standards.

The Government have promised to set in place a £1.5 billion discretionary business rates relief fund in place of the MCC reductions that this Bill will now negate. I doubt whether many local authorities will exercise discretion in favour of an international airport, or indeed any but a relatively local cause célèbre, however significant the larger employment and economic activities are of big undertakings that underpin local economies and employment.

The explanatory paper produced at the same time as the SI gives examples in which a ratepayer with a £95,000 assessment might get £7,300 of relief, despite their turnover collapsing to zero. What that tells us is that any benefit is likely to be minimal and that £1.5 billion is a drop in the ocean. To follow what other noble Lords have said, could the Minister please clarify how the Government arrived at this sum of £1.5 billion as appropriate recompense for ratepayers badly impacted by the pandemic? Having been announced in March 2021, in the 2021 fiscal year, does this sum relate only to that year, with nothing further, or is it intended that there should be some further funding for 2021-22?

I find it disturbing that a deliberate decision has been made not to provide information as to how the £1.5 billion will be apportioned between councils and how they should make decisions as to which businesses in their areas should receive some of it—until, that is, this Bill is passed. Of course, that leaves businesses and billing authorities alike in no position to make any plans in relation to it. Can the Minister explain why he cannot today publish a draft of the proposed allocation of the £1.5 billion to each local billing authority and share the draft guidance planned to be issued to councils explaining the circumstances in which the Government believe that businesses should qualify for a share of the cash?

The apparent intention is to make the distribution according to the official data on the impacts of the pandemic on different sectors and not according to estimates of the impact on a property’s value. All this is apparently to ensure

“an even and more proportionate allocation of support”.

We were told that this would enable a speedier payment of support than would have been possible under the usual MCC appeal rules. I am afraid that I do not entirely follow that.

I feel that this is a matter of a veil of obfuscation. Fundamentally, it is about protecting Treasury income streams, first and foremost—and I am afraid that it is just too bad if businesses crumble. It lacks equity and fairness; the most desperate of businesses will be least able to mount a case or may have already gone under, waiting in desperation for government support that has failed to materialise. There is nothing in prospect for those at tipping point now. I have long said, and will say again, that if HM Treasury can think of nothing better to do than to disadvantage businesses which suffer serious losses, due in significant part to government edict, it will be of small concern to it that, in response, reduced exposure to a tax on business floorspace—perhaps by trading increasingly on the web—becomes a standard business plan and, for those who cannot avoid it, a fetter on the nature and extent of the financial risks they will be prepared to underwrite on behalf of the taxman. The moral hazard in all this is that it continues to underpin government willingness to game the system without taking adequate responsibility for the outcome. I suspect that, by the time the £1.5 billion fund kicks in, it will be too little and almost certainly much too late.

Of course, part of the answer is much more frequent revaluations—that, of course, is well beyond the scope of this Bill—but there was supposed to be a fundamental review of business rates, and many expected it to have progressed beyond the 2017 findings. I invite the Minister to give us an update on that if he is willing, but it is no wonder that some on the political spectrum suggest abolishing business rates altogether. It does not need to be so. It would be a perfectly good, fair and cheap-to-run system save for government insistence on overworking it and, essentially, unfairly treating businesses ever since the arrival of the poll tax in 1990. It is a salutary tale of mismanagement, and Clause 1 of this Bill continues the fundamental error.

I leave your Lordships with this thought: what else follows from this further incursion into business rate payer protections and stability of local government budgets?

18:45
Lord Holmes of Richmond Portrait Lord Holmes of Richmond (Con)
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My Lords, it is a pleasure to follow the noble Earl and to take part in this pre-Second Reading debate, which brings me to my first question for my noble friend the Minister. Can he enlighten noble Lords as to when Second Reading is due to take place?

I support this Bill in general, but associate myself with some of the comments from the noble Earl and from my noble friend Lord Bourne of Aberystwyth. I ask my noble friend the Minister to go back to the department and consider all possible new technologies which could assist in reclaiming BBLS, CBILS and other funds which may otherwise disappear into the ether for want of new technologies which can trace and track down such potentially fraudulent activity.

I support the Bill, but want to test the Minister to see whether we can take the opportunity of this small piece of legislation to go broader and look at the whole area of insolvency practice and potentially to consider in Committee whether it is high time to have a single independent regulator and ombudsman for the insolvency sector. They could consider both individual and corporate insolvencies and be funded through a levy. These ideas are hardly radical; they were certainly seen in other parts of our economy decades ago. This Bill offers an opportunity to look at the insolvency arena through these new governance glasses.

What is the situation now? There is a code of ethics which is voluntary. One can join a recognised professional body, of which there are currently four—there have been more—which do not necessarily act in concert or with consistency and which also act as trade associations for this part of economy, with practitioners able to shop between these RPBs if the mood suits, for reasons which we can all appreciate.

This sector of the economy is too important to be left to be governed as it currently is. It is also extraordinarily unique as an outlier when one considers it in comparison with, for example, legal or financial services.

What could we achieve with this Bill if we took a couple of amendments in Committee? We have the opportunity to end this inconsistency, to bring clarity and to stop the perception of conflict and, in some situations, the actuality of conflict. It is better for IPs and for everybody—better for businesses and better for the entire economy—bringing confidence to all involved, and confidence in this part of the economy. Any economy relies not just on brilliant businesses being built and succeeding but on how we deal with businesses when they get into difficulties. It is so important that this is run efficiently and effectively. If we see that a company is distressed and goes into insolvency procedures, how effectively could it be operated? Potentially, it could maintain employment, supply chains and the local community, if run optimally.

This is too important to be left as it currently is, and it was foreseen six years ago in the Small Business, Enterprise and Employment Act, in which powers—yet to be implemented—were given to the Secretary of State to have a single regulator for this service. Would my noble friend agree that six years is long enough to wait? If we bring amendments forward in Committee, it would make complete sense to implement that part of the Act.

We have the opportunity to end inconsistency and bring coherence and confidence to this sector and the wider economy. I look forward to returning to these points in Committee. I wish the Bill a swift and safe passage through Second Reading, whenever that might be, and I look forward to my noble friend’s comments at this and future stages.

18:50
Lord Cormack Portrait Lord Cormack (Con)
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My Lords, I am very glad to follow my noble friend Lord Holmes of Richmond. I associate myself with some of the remarks made by my other noble friend, but particularly underline the very real importance of the speech made by the noble Earl, Lord Lytton, who has a lifetime’s experience here.

I must begin by declaring an interest that, for almost half a century, I have from time to time given advice to the Machinery Users’ Association, which was founded as long ago as 1884 to advise—I see the noble Earl nodding—industry and business on the rating of plant and industrial machinery. There is real concern in the association on behalf of its many members in many businesses and industries. There is an element of retrospectivity in this legislation, which is not good.

I am also somewhat disturbed by the way in which we are debating Second Reading but not debating Second Reading. This was scheduled to be taken on the Floor of the House on 26 October. It was then scheduled to be taken on the Floor of the House yesterday. The change, I might say, had nothing to do with the tragic events of Friday; it had been announced before then. I do not really think this is the way we should legislate when the legislation is very broad-ranging.

I will say nothing about the directors—with broad agreement over that section of the Bill, I do not need to—but we have real uncertainty facing many businesses. The noble Earl put this very graphically in talking about the £1.5 billion. When will we know how this will be distributed? What will be the criteria? We ought to know. Business ought to know.

I asked the MUA to give me one or two examples. I will not detain or weary the Committee by going into great detail, but I am told that the owners of a former British Home Store in Barnstaple, in Devon, cannot market it or let it—they could not begin to let it during lockdown—yet they were required to pay 100% of the rates and were not entitled to a retail discount. For another totally different company, a tenant in Sloane Street—an exclusive address, with costs to match—had premises effectively vacant from the beginning of the first lockdown. This could be replicated up and down the country. I do not dissent at all from anything the noble Baroness, Lady Blower, said about the importance of business rates to local authorities, but local authorities will get nothing at all if they are surrounded by bankrupt businesses, and it is very important—even at this late stage in the progress of the legislation—that the Government come clean a little more clearly.

The sum of £1.5 billion sounds extraordinary and magisterial—to all of us in this Committee it is—but not when spread over a whole country. How long is it for? What precisely will happen when revaluation comes about in 2023? I am delighted to see the noble Baroness nodding vigorously, because these questions must be answered. People’s livelihoods and the livelihoods of local authorities depend to a large degree on this. It is a most unsatisfactory piece of legislation. It is two pieces of legislation cobbled together. One of them I do not particularly dissent from, because nobody could conceivably approve of fraud, and fraud perpetrated at the expense of the taxpayer during a pandemic is about as low as you can get. We would all agree with that. However, the rating put on at the beginning is a different subject which needs more comprehensive and joined-up thinking.

I am sorry that my noble friend Lord Callanan has been called away, but I ask my noble friend who will reply to this debate whether we can have some conversations, if not before Second Reading then at least before Committee, because it would not be beyond the wit of man and certainly should not be beyond the wit of government to table one or two amendments that would bring a degree of cohesion to the Bill. It should be accompanied by a reasonably detailed statement about how this £1.5 billion is to be used.

I could go on, but I will not. However, I am very grateful to the noble Earl, Lord Lytton, for bringing his lifetime of professional experience to our deliberations.

18:57
Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I am delighted to participate in this debate. I particularly commend the speech by the noble Lord, Lord Holmes of Richmond, and agree with almost everything that he said. I will confine my comments to the second part of the Bill, relating to insolvency. It is unlikely to achieve its aims.

The Bill assumes that the Insolvency Service will act in a timely manner, but it is hard to find much evidence to support that. Carillion collapsed in January 2018. Only on 12 January 2021 did the Insolvency Service apply for director disqualification orders against eight directors and former directors of Carillion. To date, none has been disqualified. BHS, which was mentioned earlier, entered administration on 25 April 2016 and liquidation on 2 December 2016, but it was only on 5 November 2019 that former BHS director Dominic Chappell was disqualified for 10 years. A number of executive and non-executive directors, including the BHS chairman, were severely criticised in the joint report by the House of Commons Work and Pensions Committee and the Business, Innovation and Skills Committee, but to date none has been disqualified. It is business as usual.

Of course, little people get picked on. The Bill has not really been preceded by any changes to the law relating to the formation of companies. Anyone, from anywhere in the world, can form a limited company in the UK. There is no authentication check on the identity of individuals forming the company, its directors or its shareholders. Private companies in the UK need one director only, who must be a natural person, and the BEIS website very helpfully tells people that directors do not have to live in the UK. How on earth will the Government enforce the UK legislation against directors who do not live in the UK?

Public companies need at least two directors but only one of them needs to be a natural person. The other can be a shell company located in an opaque tax haven where absolutely nothing is known about directors of companies. There are plenty of examples of that. UK-registered companies have around 7 million directors at the moment. I hope the Minister can tell the Committee how many of those are resident outside the UK or are bodies corporate registered in opaque tax havens. How many of those named are fake and do not exist? You can use any name you like.

Companies House acts mainly as a filing box and rarely performs any meaningful checks. Thousands of companies have directors whose addresses are in offshore jurisdictions and it is impossible for the UK to call foreign nationals to account for corporate offences. Can the Minister again please explain how the Insolvency Service will act against those individuals?

UK company law also permits nominee shareholdings and directorships, which enables concealment of the identity of real controllers and beneficiaries. How will the real controllers of companies be disciplined or disqualified? The Government also act in a very inconsistent manner when taking action against the filing of false information. I will give the Committee a pretty well known but real example.

Individuals connected with the mafia in Italy formed a company in the UK with the name Magnolia Fundaction UK Ltd. The company’s officers used Italian to file information at Companies House. When translated into English, the document said that the name of one of the directors was “The Chicken Thief”. He gave his occupation as “fraudster” and the address given was “The Street of the 40 Thieves in the town of Ali Baba, Italy”. Companies House dutifully accepted such documents. When the matter was raised in the House of Commons on 14 September 2017, the Minister said,

“No action has been taken”—


I think the sound of the Division Bell is the cue for me to stop. I will return to the actions of the Chicken Thief afterwards.

19:02
Sitting suspended for a Division in the House.
19:10
Lord Sikka Portrait Lord Sikka (Lab)
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To recap, I was talking about the individuals connected to the mafia who had a company in the UK called Magnolia Fundaction UK Ltd. They filed information saying that the director’s name was “The Chicken Thief”, his occupation “fraudster” and the address “Street of the 40 Thieves in the town of Ali Baba, Italy. Companies House gratefully accepted this and filed it away—that was it. When the Secretary of State was asked on 14 September 2017 what she was going to do about it, the reply was:

“No action has been taken at this time against the promoters and officers of Magnolia Fundaction UK Ltd for filing inappropriate information in Italian at Companies House.”


Nothing has changed since; it is exactly the same.

I knew the names of some well-known convicted mafia criminals and, out of curiosity, I put one of their names into the Companies House website. The person turned out to be a director of an organisation called Business Bank Italy Ltd, registered in the UK. It had a website that was inviting people to invest. I reported that matter to the shadow Chancellor at the time, Anneliese Dodds, she raised it in the other place and eventually the website vanished.

Nobody in authority at the Insolvency Service or anywhere else even bothers to see whether criminals’ names appear in the Companies House database. It is that bad, and we think that that kind of institutional framework will help us deal with misdemeanours by directors; it is not going to do that. What the Government have done is prosecute someone who demonstrated how easy it is to form a company with a false name and then announced in a newspaper that he had done it. So they went and prosecuted him—effectively, he was a whistleblower.

The proposed regime under the Bill for dissolved companies will suffer from the same problem as the current regime for live companies: the requirement that an interested party, most likely a creditor, raises concerns about the conduct of a company’s directors with the Insolvency Service. But how will the creditors know that a company is being dissolved? Directors are required to notify creditors of the proposed dissolution, and such creditors have an opportunity to object to the proposed dissolution before it takes effect, but not all such creditors may be notified. You can have pre-packs without any creditors meeting. People do not even need to be told. All kinds of things happen.

Once a company has been dissolved, there is no equivalent of a liquidator or an administrator of an insolvent company who has a duty to investigate the conduct of directors and report them to the Insolvency Service. This makes it more likely that only the particularly egregious examples of misconduct significant enough to come to the attention of the interested party will be investigated in respect of the directors of dissolved companies.

Companies can also be dissolved without any formal legal process. For example, Companies House can dissolve a company if it fails to file annual accounts. You do not need to go through any legal process; just do not file the accounts. Every year, thousands of companies do that, so many rogue directors can choose this method to dissolve companies. Such possibilities do not even appear in the Bill, as to who is going to find out and what they are going to do about it.

The Bill places considerable reliance upon insolvency practitioners but the insolvency industry has been engaged in corrupt practices for years. About 20 years ago I published a monograph—titled, appropriately, Insolvent Abuse—which documented many of the corrupt practices of the insolvency industry. Hardly anything has changed in the last 20 years. The industry is still running amok. This week the Financial Reporting Council confirmed its fine of £13 million on KPMG and £500,000 on its insolvency partner, together with costs of £2.8 million for investigation. The reason was that KPMG and its insolvency partner pushed Silentnight, which was a client of the accountancy firm, towards insolvency, so that the private equity group HIG, the client that it really wanted to cultivate, could buy the business out of administration by dumping the defined-benefit pension scheme for Silentnight’s 1,200 staff. KPMG’s partner lied to the Pensions Regulator and to the Pension Protection Fund.

KPMG has been central to numerous scandals, and its involvement in another will perhaps not surprise many in this House. However, it is still in business, and its lying partner is not facing any criminal investigation or charge. Perhaps the Minister can explain why there is one set of laws for ordinary mortals but another for accountancy firm partners, where they go in front of kangaroo courts and lie but still continue with their lives.

In case anyone thinks that was a hefty fine for the partner, usually the partnership agreement states that the firm will reimburse the partner, so his £500,000 fine will be reimbursed, while the £13 million fine for KPMG will go not to the members of the Silentnight pension scheme, who have lost some of their pension rights, but to the coffers of the Institute of Chartered Accountants in England and Wales, which authorised the cheating, lying partner. The institute will be quids in. It is akin to someone being fined for mugging and then being told, “By the way, make the cheque payable to the Institute of Muggers.” That is what we have by way of self-regulation, and it is wrong on every count.

I urge the Minister to act to ensure that the money goes to the victims of KPMG, not the ICAEW, which does not deserve it. It has already recovered the costs of the investigation. These RPBs—recognised professional bodies—must not benefit from the misconduct of their members; in fact, they should be in the dock for authorising those members. What kind of supervision do they actually carry out?

The corrupt practices of the insolvency industry are also documented in last month’s publication by the All-Party Parliamentary Group on Banking, Resolving Insolvency: Restoring Confidence in the System. It notes that insolvency practitioners

“sell their independence, and their considerable powers, in return for an appointment to an insolvency case.”

Who usually appoints them? Banks. So they are basically colluding with banks. The report says that conflicts of interest are regularly being ignored. The interests of banks are prioritised and too many innocent people have lost their homes, businesses and savings as a result. Your Lordships can see the evidence; it is in the monograph that I launched.

Many victims claim that banks and insolvency practitioners have forged their signatures in order to repossess assets. Evidence of that has appeared in national newspapers and on the BBC, but the National Crime Agency has sat on the evidence for months or even years and has done absolutely nothing. I have been told by authoritative sources that there are hundreds of such cases, but nothing is getting done. The recognised professional bodies are essentially accountancy trade associations—I am sorry; I will finish. They have no independence from their members and have a long history of sweeping things under their dust-laden carpets.

About a year ago, replying to one of my Written Questions, the Minister said that 7,962 insolvency cases had still not been resolved, and that their age was between five and nine years, while 3,642 were more than 10 years old, and 14,328 were more than 15 years old. No regulator asks why insolvency practitioners are milking insolvencies. The longest one that I know of lasted 30 years, and that related to Israel-British Bank. PricewaterhouseCoopers made it last for 34 years, and it came to an end when there was not a penny left in the business. These are real-life sharks, and they really need to be dealt with.

There was a report by Sally Masterton, codenamed “Project Lord Turnbull”, which was written in 2013 and formally published in June 2018 by the All-Party Parliamentary Group on Fair Business Banking. It referred to fraud at HBOS. There was no action by any recognised professional body, although the report made it clear that the fraud could not have been carried out without the complicity of the partners. There has been no investigation into the RPBs either. In the last 10 years, some 8,000 complaints about insolvency practitioners have been lodged with the RPBs and—guess what—only five out of 8,000 have had their licences withdrawn. Over the last seven years, only three IPs had their licences revoked. Is the Minister really content with that?

I finish with two specific requests. Can the Minister arrange two things? One is an independent public inquiry into the insolvency industry. Secondly, could he arrange for a relevant Minister to meet me and a former police and crime commissioner to see and hear the evidence about how banks, lawyers and insolvency practitioners are colluding and perpetrating devious practices that have deprived people of their homes, businesses and savings? I am sure that he does not tolerate corrupt practices and will willingly agree to these two requests.

19:22
Baroness Pinnock Portrait Baroness Pinnock (LD)
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My Lords, I draw the Committee’s attention to my entry in the register of interests, which includes my roles as vice-president of the Local Government Association and as a member of Kirklees Council. The Bill includes two elements, which the noble Lord, Lord Cormack, described as being “cobbled together”—I cannot but agree. The only connection that I could find was that they both relate to businesses. Clause 1 concerns business rates, and Clauses 2 and 3 address the “directors disqualification” part of the Bill title. I anticipated a rather dull afternoon discussing this, so I thank the noble Lord, Lord Sikka, for changing my view of directors’ disqualification. It has been a lively debate, and I think that a lot of people will be reading Hansard as a consequence.

I want to start by talking about Clause 1, which is the part about non-domestic rates. Many businesses have had a very tough 18 months during which they have endeavoured to keep afloat. I accept that the Government have provided considerable financial support to businesses to mitigate the worst of the impacts of the Covid pandemic. Nevertheless, it is not surprising to me that many have tried any potential route that may provide financial relief. As we have heard, this has resulted in businesses applying to the Valuation Office Agency for what is called a check of their rateable value, the aim being to get a revaluation based on material change of conditions that has impacted on their business as a consequence of Covid restrictions and measures. At this point, I thank the House Library for a very helpful explanation to a non-professional of the measures in the Bill.

The purpose of the Bill is to manage this growing number of checks. The government argument is that businesses have been able to access government loans and some grants to tide them over the Covid period and that these are sufficient to address the trading difficulties resulting from lockdowns and restrictions imposed by the Government. The problem with this argument is that, undoubtedly, some businesses will have not been able to access these funds and the recourse taken by unusually large numbers of applying for MCCs is a warning sign that all is not well. I concur with the noble Earl, Lord Lytton, and the noble Lord, Lord Cormack, on this matter, particularly that the £1.5 billion fund that has been set aside by the Government for relief to compensate for these changes is almost certainly inadequate. The pleas that we have heard from the noble Earl and the noble Lord, as well as from the noble Lord, Lord Bourne, that we must see the detail of the fund before we progress this Bill are urgent. I hope that the Minister can give us some assurances that this will happen before Committee.

Clause 1 is retrospective and has a catch-all approach. The only circumstances that businesses can use to apply to the VOA will be physical changes to the property and special considerations in relation to mineral extractions and waste disposal firms. I accept that unless this legislation is passed, the business rates system will be undermined. That is its purpose, but lots of things are not adequate. I am sure that the Minister will have put them right by the time that we are in Committee.

None Portrait Noble Lords
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Oh!

Baroness Pinnock Portrait Baroness Pinnock (LD)
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We have a really lively session; it is excellent.

As a measure that will deal with an immediate problem flowing from the very rare circumstances of a pandemic, we can but agree with it. However, I have a few questions for the Minister. Can he explain the financial impact of these changes on local government? About 25% of local government funding comes from business rates, so any change, however small, can have a considerable impact on really tight council budgets. It is important for those of us who are concerned about local government, as the noble Baroness, Lady Blower, said, to know exactly what the impact will be. When the noble Lord, Lord Callanan, introduced the Bill, he emphasised the importance of certainty of local government funding from business rates.

Can the Minister explain what estimations have been made of the impact of impending rises in interest rates on businesses that have accepted government loans during Covid? The implications for what might happen are obvious. Concerning the £1.5 billion relief fund, we need to know the details and what happens when the fund runs out, as I suspect it will. Also, we need answers to the questions asked by the noble Baroness, Lady Blower, about administrative costs for local government in handling it.

Next, can the Minister say when much-needed fundamental changes to the business rate system will occur? We have been promised them for quite a long time now, and there is a lot of concern around local government and the business world that the current system is not answering the questions it needs to on town centre businesses on the one hand and digital businesses on the other, as the noble Lord, Lord Bourne, said. My concern is about warehouse and distribution centres, which do not pay their fair share by any means. That must be put right. Finally, will the Minister confirm whether a review of these measures is being planned within, say, a year of their introduction, so that we know what is going on?

I turn to Clauses 3 and 4, which relate to director disqualification. The last-minute changes to the timing of this debate have ensured that a number of people who would have spoken are not available. This includes my noble friend Lord Fox, who actually could have spoken because the Bill he has been speaking on has finished. I am sure he will be here for Committee but he has provided me with the following words, as this is definitely not my area of knowledge, let alone expertise.

He writes that these Benches welcome the intentions of the director disqualification part of the Bill. It is right that powers be created so that those who have fraudulently benefited from payments introduced to protect businesses during Covid are brought to book and the money recovered. Like other noble Lords, we received a briefing from R3, which represents insolvency practitioners; I am sure the Minister and the department also heard from it. Its members must file a report on the directors’ conduct with the Insolvency Service when acting as officeholders in a formal insolvency process, so its experience in this is welcome. Its concerns, like ours, focus on how the Bill will actually work and how it will help the wider creditor network.

First, we should be clear about one thing. The work of the Bill should not be at the expense of investigations into insolvent rather than dissolved companies. As R3 explains:

“R3 members already repeatedly express their frustration that not all their reports highlighting suspected serious legal breaches are acted on.”


Can the Minister assure the Committee that additional resources will be available to take on the extra activity created by the Bill, rather than it cannibalising an already stretched situation? Perhaps he can offer some crumb of comfort to the wider insolvency community by talking to his colleague the Chancellor of the Exchequer about this. Given that the Chancellor is embarking on a “non-spending review”, an activity such as this which brings money both back to government and into legitimate circulation will benefit the economy and pay back many times.

Our second point seeks detail as to how in practice this legislation will recover the money. What will be the mechanisms to recoup money from culpable directors? Do the Government intend to use tools such as compensation orders? This is significant because, unlike an insolvency process, where returns are made to the creditor body, the so far little-used compensation orders normally benefit only one creditor—in this case, we guess, HMRC.

Although the Government have indicated that they will expand the number of creditors who can benefit from a compensation order, this has not been made clear in the legislation, so we have to assume they will not. Where there are multiple creditors, an insolvency procedure has to date been more successful at recovering money owed to these creditors. How will the Bill protect all the other creditors as well as HMRC? I look forward to the Minister’s response.

19:34
Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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My Lords, I refer to my interests as laid out in the register. Following on from the noble Baroness, Lady Pinnock, one thing I am fast learning in this place is that the debates that look relatively boring often turn out to be those which have the most depth and interest, as this one has certainly proved.

I am extremely grateful for the evidence and expertise that we have heard from many speakers in the debate today, in particular from the noble Earl, Lord Lytton, and in the eloquent contribution from my noble friend Lord Sikka.

The Bill has the broad support of the Opposition Front Bench, but I refer to its limited objectives in that regard. The provisions to rule out Covid-19-related material change of circumstances business rates appeals, as well as the steps to give new powers to the Insolvency Service, are both appropriate and necessary.

On the first issue, we accept the logic of disqualifying Covid MCC appeals, given that a large number of these appeals could effectively result in a shadow revaluation and, as we have heard, a full revaluation is already scheduled for 2023. The demand for such appeals would certainly put strain on the system when the most effective use of the Valuation Office Agency’s time and resource is the upcoming revaluation of business rates.

On the Insolvency Service, we support the closing of a legal loophole that for too long has allowed unscrupulous company directors to evade responsibility for their financial decisions. However, I would appreciate clarification from the Minister as to whether the service has sufficient resources to carry out this extra work. I also refer to the excellent contribution from my noble friend Lady Blower, who highlighted the real risks faced by local authorities if this situation is not resolved and the impact on local ratepayer services without the necessary resource and income.

As we have heard from several contributors, there remains an enormous question around how the amount of £1.5 billion was arrived at and whether there is any realistic prospect of it being adequate. The noble Earl, Lord Lytton, highlighted in particular the plight of the mega-large companies, which I think all of us have received some interest from, but also all the other anomalies—those of the smaller companies and the plight that they found themselves in. The answer to the question of resource is urgent.

With this in mind, our main concerns with the Bill are less in regard to what is in it than in regard to what is not in it. My Front Bench colleague in the other place, the shadow Chancellor, has called on the Government to cut, and eventually entirely scrap, business rates. The outdated rates system must be replaced with a new system of business taxation fit for the 21st century. We must look to shift the burden of business taxes to create a level playing field, unlike with the current system, which punishes investment, entrepreneurship and the high street. The noble Lord, Lord Cormack, stressed just how urgent this situation is. We must look for more frequent revaluations, instant reductions in bills where property values fall and rewards for businesses that move into empty premises. Ultimately, this is the only way we can help bricks-and-mortar retailers compete with online tech giants. In this sense, the Bill is a missed opportunity.

In the later stages of the Bill, we will seek amendments that can pave the way for this root-and-branch reform of business rates, but also explore ways to better tackle corruption. On this, I am pleased that the Bill will help the Insolvency Service to investigate directors, take disqualification action and potentially implement 15-year bans—but again we have to ask: does the service have enough resource to tackle the job in hand?

Given the significant losses to creditors that corrupt practices in insolvency and dissolution processes can bring, we would like to see wider legislation. We know that not only do these reckless, rogue directors cause enormous harm to the economic state of affected businesses, but the emotional harm done to so many people working in business is truly immense. Unfortunately, the Bill is narrow in scope and therefore difficult to amend, but we will consider options for increasing reporting. As has been said repeatedly in this debate, the Government need to do much more.

As I said earlier, the Opposition Front Bench supports the provisions but, as is often the case with limited Bills such as this, it represents a missed opportunity. Business rates reform needs far more than a four-clause Bill to support our business community. If the Government are serious about confronting corruption, they must do far more than closing loopholes. I hope the Minister will provide assurances that the Bill is not the sum total of their efforts in these two areas.

I end by further emphasising just how important it is that draft guidance for local authorities on how to administer the scheme is laid down and published as soon as possible, including on how the resource will be apportioned between local billing authorities. I do not think it can be said often enough how stretched local authorities currently are. Budget discussions are happening across all levels of local government in a state of some despair. The atmosphere of uncertainty and concern about the future ability of councils to deliver services is something that we in this place all need to treat with the utmost seriousness and concern.

19:43
Lord Greenhalgh Portrait The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)
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My Lords, it is a pleasure to close what has been an engaging and informed debate. I thank noble Lords for their contributions both in the Room and in discussions outside—although I have to say that 10 officials were present for a drop-in session and no one turned up. I am very happy to have engagement on this, but it has sometimes been difficult. This is a short Bill, but the measures contained in it are important issues of public policy and I am grateful for all perspectives.

It is hugely important that the integrity and clarity of the valuation system that underpins business rates are maintained. That is why we are taking forward this important measure to clarify that coronavirus and its impacts should not be considered grounds for a material change of circumstance appeal. The alternative would be to allow the pandemic to have a hugely distorting effect on the rating system, casting local government financial planning into jeopardy. I say in response to the noble Baroness, Lady Pinnock, that these would have been considerable sums. Places such as Westminster obviously have a huge business rate base that is then allocated more widely. Clogging up the appeals courts for years to come is not the way forward and would have set a dangerous precedent for the future.

I am grateful for noble Lords’ support for the director disqualification measure in the Bill, which brings the conduct of former directors of dissolved companies into scope for investigation and potential disqualification proceedings. The United Kingdom has a world-class insolvency regime, and a strong enforcement framework is vital to that. Additionally, this measure will be an important tool for helping to combat bounce-back loan fraud and for deterring others from acting in breach of their duties as company directors.

Before I address the many points in this debate, which forms the largest part of my speech, I put on record that I have commercial property interests and am a company director—I should have raised that right at the start of my speech. Like the noble Earl, Lord Lytton, I did not claim from any of the schemes that we have been discussing today to mitigate against the payment of business rates.

In response to the noble Baroness, Lady Pinnock, I have to say that the purpose of the Bill is to restore the law to its intended practice and so no ratepayer will face seeing their bill increase as a result of the Bill. There will therefore be no material impact on the ratepayer.

The noble Earl, Lord Lytton, is a master of understanding procedure in the House, but I have been assured that this debate taking place in Grand Committee before Second Reading was agreed between the usual channels to prevent a very late sitting on Monday 18 October. In response to my noble friend Lord Holmes of Richmond, the Second Reading will take place tomorrow but without further formal debate.

The noble Baronesses, Lady Blake of Leeds and Lady Blower, raised the issue of how the £1.5 billion would be split and the approach to that. It will be allocated to local authorities based on the stock of properties in the area whose sectors have been affected by Covid-19 and which have not been eligible for existing support linked to business rates. Local authorities will then use their knowledge of local businesses and the local economy to make awards. The noble Baronesses, Lady Blower and Lady Pinnock, raised the issue of the additional administrative burdens. This will of course fall within the new burdens doctrine so that any administrative costs to local government will be covered.

Many noble Lords, including the noble Baronesses, Lady Blake and Lady Pinnock, the noble Earl, Lord Lytton, and my noble friends Lord Bourne and Lord Cormack, asked whether £1.5 billion is enough. This new £1.5 billion relief comes on top of an unprecedented £16 billion of relief over two years provided by the Government for the ratepayers most affected by the pandemic. This new scheme will be targeted at sectors that have been affected by Covid-19 but are not eligible for support linked to business rates. The new £1.5 billion of relief will enable local authorities to provide a meaningful level of support to those who have not been eligible for support linked to business rates.

My noble friend Lord Cormack and others raised the issue of the legislation’s retrospection. The Government are intervening because we want to ensure that the law regarding valuation operates correctly while providing significant relief to ensure that support is provided to businesses most in need. Allowing rateable values to fall for market and economy-wide matters such as the Covid-19 measures would be out of line with the principles of rating, where such matters are reflected at general revaluations. It is right that we ensure that the law continues to follow these principles.

My noble friend Lord Cormack and the noble Baronesses, Lady Blower and Lady Blake, all wanted to know when the guidance for local authorities on the operation of the relief scheme will be published. I recognise that it is important because it will help local authorities make decisions over the design of the relief scheme. We will publish the final local authority guidance as soon as the Bill receives Royal Assent. I want to let Members know that we are engaging very closely with the Local Government Association, the Institute of Revenues, Rating and Valuation and, obviously, CIPFA, in ensuring that we get this right.

My noble friend Lord Bourne and the noble Earl, Lord Lytton, all raised the issue of airports. It is a core principle of the business rates system that market-wide economic changes affecting property values, such as the pandemic, can and should only be considered at revaluation. The drop in demand for airports in light of the pandemic is therefore exactly the sort of economic change which should not be reflected between revaluations. The next revaluation in 2023 will be based on the market on 1 April 2021 and therefore will better reflect the impact of the pandemic.

My noble friend Lord Bourne noted that the measure is itself not enough for bounce-back loan recovery. The Government have been clear that bounce-back loan facilities are loans and not grants and have worked closely with lenders to develop industry-wide principles for the collection and recovery of bounce-back loans. This includes the recovery approach that lenders should take in the event that a borrower defaults and there is a claim on the guarantee with net proceeds being returned to Her Majesty’s Government.

Lord Bourne of Aberystwyth Portrait Lord Bourne of Aberystwyth (Con)
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That is not the specific point I was concerned about. With respect to the Minister, I quite appreciate that it is right to go after the bounce-back loans. My concern was that it did not extend to other creditors who are owed money and that there is a focus just on the bounce-back loans, whereas there is obviously a large field of creditors who have no redress if that is the only concern that the Government have.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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Beyond bounce-back loans, the Government are working closely with lenders to develop industry-wide principles so that we can learn from this and apply those in areas beyond bounce-back loans. However, I will write to my noble friend on that specific point.

The noble Baroness, Lady Blake of Leeds, and my noble friend Lord Bourne asked about the funding for the Insolvency Service. The Insolvency Service’s resources are not limitless. However, all cases are carefully reviewed and assessed to determine the degree of harm caused to the public and to business, with the most serious cases prioritised.

The noble Baroness, Lady Pinnock, mentioned compensation orders and my noble friend Lord Bourne asked about the steps to get directors to reimburse. I want to clarify that compensation orders may be sought for a creditor or creditors, a class of creditors, or as a general contribution to the assets of the company. These are the rules for insolvent company director cases now and we are seeking to extend the same rules to dissolved company directors. The amount and to whom the compensation is to be paid is specified in the order or undertaking. The provision in the Bill extends this to former directors of dissolved companies, although it is unlikely that the court would order a contribution to the assets of the company in such cases.

I will not have to write to my noble friend Lord Bourne, because I have found the relevant note—I hope that noble Lords appreciate that this is not my ministerial area and I am having to pick this up as I go along. My noble friend asked whether the new measure would deal with all fraud and not just the bounce-back loans, and it will. It will, for example, deter directors from the practise of phoenixing, where the debts of one company are dumped using dissolution and a new company starts up doing the same thing. It sets that precedent to deal with the specific example of phoenixing.

In response to my noble friend Lord Holmes on the wider reform of insolvency, the Government recognise the important work that insolvency practitioners do and are currently reviewing the regulatory framework that governs them to ensure that the best possible outcomes are achieved for creditors. As part of this, the Government issued a call for evidence in 2019 to seek the views of stakeholders on the impact of the regulatory objectives introduced for the insolvency profession in 2015. The Government will respond in due course.

There was a tremendous speech from the noble Lord, Lord Sikka, from which I learned an awful lot. He raised issues related to company and insolvency law. Obviously, a number of them go beyond the scope of this four-clause Bill, but we keep the wider company and insolvency law frameworks under constant review and will bring forward amendments to the House as and when needed. However, the noble Lord will know that the Government are considering wider reforms to the register of companies, and that work is ongoing. Unfortunately, it is above my pay grade to be able to approve an independent inquiry such as he called for, but I am sure he can engage with colleagues at BEIS and take forward some of those points, and I know that the team here is very aware of his concerns.

Lord Sikka Portrait Lord Sikka (Lab)
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Will the Minister be gracious enough to arrange for me and a former police and crime commissioner to see the relevant Minister so that the evidence that has been accumulated, showing corrupt practices by insolvency practitioners together with banks and lawyers, can be shown?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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I think that by “a former police and crime commissioner” the noble Lord is referring to me, as a former Deputy Mayor of London for Policing and Crime. Where there is criminality, there are plenty of ways for the noble Lord to put forward his evidence. If he is having difficulty in presenting it to the Government, I shall do all I can to ensure that he gets to the right person. At the moment, this is beyond my direct area, but I am happy to engage and help him in any way possible.

I want to address a point raised by the noble Lord, Lord Alton of Liverpool, who could not be here today, but I know will be following the debate with interest, particularly after the contribution from the noble Lord, Lord Sikka. He wished to convey to me the plight of the English language teaching sector, an important sector that has suffered terribly throughout the pandemic. The Government are carefully looking at the different sectors as we design the new £1.5 billion relief scheme for businesses that have not been eligible for existing support linked to business rates. We will confirm the eligibility of sectors in due course when we publish guidance in the proper way, but certainly the English language teaching sector is one of those that we are looking at very carefully. Ultimately, decisions on individual awards of relief will be a matter for local authorities.

I thank all noble Lords for their participation and engagement. My noble friend Lord Callanan and I look forward to working with noble Lords on future stages of the Bill and, hopefully, seeing it swiftly through its remaining stages, given the support that we have seen. I beg to move.

Motion agreed.
Committee adjourned at 7.58 pm.
Report
18:39
Clause 1: Determination in respect of certain non-domestic rating lists
Amendment 1
Moved by
1: Clause 1, page 2, line 20, at end insert—
“(7A) Before the first determination to which this section applies is made, the Valuation Office Agency must publish a statement outlining—(a) how many checks, challenges or appeals in relation to a material changes of circumstances due to the coronavirus pandemic it has received and what the total monetary value of those checks, challenges or appeals is, and(b) its assessment of the impact of this section on the ability of the current system of business rates to—(i) provide an effective form of funding for local authorities; and(ii) support town centres and local high streets.”Member’s explanatory statement
This amendment would require the Valuation Office Agency to publish information on applications relating to a material changes of circumstances, and whether the changes introduced in this Act will support local authorities, town centres and high streets.
Baroness Pinnock Portrait Baroness Pinnock (LD)
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My Lords, I draw the attention of the House to my relevant interests as set out in the register, as a vice-president of the Local Government Association and as a member of Kirklees Council. I am speaking on Amendment 1 in my name and that of my noble friend Lord Fox, and on Amendment 2 in the name of the noble Baroness, Lady Blake.

I and my colleagues support the principle of the proposals—as I have said at every occasion—in relation to the non-domestic rates element of the Bill. Businesses have faced challenging circumstances due to Covid, and these challenges remain. Understandably, businesses have reviewed their position, and some have decided to use the VOA check, challenge, appeal process to seek a reduction in their business rates. The VOA publishes quarterly statistics of the numbers of businesses using the process to appeal their rates. The statistics do indeed show a spike in both the check and challenge elements of the process. For example, there were around 80,000 checks requested in the March to June quarter of 2020 —this spike compares with an average of around 10,000. However, 70,000 of these checks were quickly resolved. There were around 22,000 challenges in the next quarter, but fewer than half seem to have been resolved. There is clearly a significant increase in the volume of claims being received by the VOA. However, the value of these claims, including the value of successful claims, is not revealed.

Throughout the course of the Bill, I have been concerned to establish the evidence base for its proposals, including, importantly, the total value of successful and potentially successful claims which would result in a loss of business rates income. A loss in business rates income has a direct and adverse impact on local government finances, which have already been squeezed dry. Responding in Committee to similar concerns that I raised, the Minister was unable to give a categoric assurance that there would be no loss of income for local government. The Minister stated then that

“central government will meet 75% of the costs of irrecoverable losses in business rates income for 2020-21.”—[Official Report, 10/11/21; col. GC 522.]

Can the Minister confirm that local government will not be paying for any losses in business rates due to Covid?

Further, it is widely accepted that the existing system of business rates is ineffective and woefully inadequate in ensuring that retail businesses that use online ordering are paying at the same rate as those on traditional high streets that the Government often profess to want to support but lamentably fail to.

Amendment 2, in the name of the noble Baroness, Lady Blake, seeks a review of the impact of the changes and of whether business rates are fit for purpose. Any government review with recommendations to try to fix this broken system is welcome, and we support the sentiments in this amendment. I beg to move.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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My Lords, I declare my interests, particularly as a vice-president of the LGA. I will speak to Amendment 2, in my name, and to Amendment 1, as introduced by the noble Baroness, Lady Pinnock.

As we begin Report, I remind the House that we are broadly supportive of the Bill and recognise that action needs to be taken swiftly. The measure in the Bill to rule out Covid-19-related material change of circumstances business rates appeals—that is quite a mouthful—coupled with the announcement of £1.5 billion in funding to provide additional targeted support to those businesses that have not already received rates relief, provides some certainty for local government.

18:45
The noble Baroness, Lady Pinnock, referred to the impact on the finances of local government, and that of course broadens out to the challenges of the whole pandemic period. In Committee, I was reminded that, only nine months ago, I was the leader of the second largest metropolitan authority in the country. The financial aspects around Covid back then were incredibly concerning, and they continue to be so.
I emphasise the real concern expressed across the local government sector about how that figure of £1.5 billion was arrived at. It sounds a significant amount of money—and indeed it is. The point I keep coming back to is whether it matches the need that it is there to cover. Is it sufficient to prevent businesses falling through the cracks? Will it address the Government’s long-term neglect of the UK’s high streets and local businesses?
I draw attention to the wider issue that remains: whether business rates are fair and effective. In October, the CBI, along with 40 trade associations—including the British Retail Consortium, UKHospitality and the SMMT—representing about 261,000 businesses, called for the reform of the current business rates system, stating that the
“existing, outdated and outmoded business rate regime acts as a drag on … a high wage, high productivity and high investment economy.”
Amendment 2 seeks to get to the heart of this issue for businesses up and down the country. It would ensure that a report is produced on whether further legislation is needed on factors which may or may not be taken into account in making a relevant determination in relation to business rates. Her Majesty’s Opposition would like a root-and-branch reform of the business rates system, to make it fair and to help bricks-and- mortar retailers compete with online tech giants. Such reform cannot come soon enough. Data from the ONS in October revealed that up to 332,000 businesses, employing over 800,000 people, are at risk across the country. We need to shift the burden of business taxes to create a level playing field, moving away from one that punishes investment, entrepreneurship and the high street.
I look forward with interest to hearing the Minister’s comments, particularly referring back to the discussions that we had in Committee. A significant number of concerns were expressed from all sides of the Chamber at the way that this legislation has been brought forward; we need to put a marker down around that. Having said that, given the critical situation facing businesses, and therefore local authorities, and therefore communities, we recognise the need to move forward with the legislation, but we need to recognise that there are some very serious questions still to be answered.
Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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My Lords, I want to add my comments on Amendment 2. I remind the House of my interests: I advise SME businesses and am also a landlord.

Increasingly, a number of people that I talk to, specifically in the retail sector, are very concerned that the Government are not listening to their concerns in respect of rates. Over the last 18 months, a number of companies have gone through CVAs. As a result of those CVAs, they have entered into turnover-based rents with landlords, enabling them to carry on trading from particular locations. But the size of the rates has meant that, despite having turnover rents, they are not able to carry on trading from retail premises, specifically because of the rates; more importantly, they are not able to open new locations that would otherwise be economically viable because of turnover rents, specifically because of rates.

I do not expect my noble friend the Minister to answer these concerns in this debate on this amendment, but business, particularly the retail sector, would like it acknowledged that the Government are aware of, focused on and planning steps to address this issue.

Lord Greenhalgh Portrait The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)
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I thank noble Lords for raising two important issues. The noble Baroness, Lady Pinnock, asked whether we will have data to know whether the £1.5 billion is enough and that we are not short-changing local government in any way. The noble Baroness, Lady Blake of Leeds, wanted to know about the future of business rates reform, given that we are seeing the economy shift to online and that many bricks-and-mortar businesses are struggling to pay their rates bills. I will try to address those points in turn.

I can give the noble Baroness, Lady Pinnock, some assurance on the availability of VOA statistics, which tell us about the adequacy of the Government’s support. During 2022, the VOA will provide new data specifically marking out Covid-related MCCs but, even in the existing data sets, we can get an insight into the nature of these cases. I quote more recent figures from October: as of 30 September 2021, 63,780 challenges were outstanding in England, the vast majority of which are on hold pending this Bill. Far more challenges could come forward from ratepayers who have already made checks—a check being the first stage in appealing the rateable value of one’s property. In the period since April 2020, the VOA has received more than 400,000 checks. So, there is a wealth of statistical evidence out there and it will be enhanced next year. This evidence cautions against any suggestion that we should introduce a like-for-like compensation for Covid-related reductions in rateable value, which, on account of this Bill, will rightly not materialise. That was never the intention, and we should not seek to create an equivalence.

On the point made by my noble friend Lord Leigh of Hurley and the noble Baroness, Lady Blake, we recognise that particular industries have been hit very hard by the pandemic. We have statistics on the drop in gross value added by industry, and there is a wide range of reductions by sector. That comes to the question of how we divide the £1.5 billion, which I will return to in the debate on the next group of amendments.

Let me give the Government’s most up-to-date position. Following the conclusion of the business rates review, the Government will shortly consult on measures arising from that review and seek to bring forward legislation in due course. The consultation was published only yesterday and explicitly anticipates future legislation to deliver major reforms. These include three-yearly revaluations, a major ask of ratepayers, support for property improvements and support for green plant and machinery. So, noble Lords should have complete confidence that there will be an opportunity for them to consider, debate and scrutinise these measures and the Government’s overall business rates policy.

I should have declared my residential and commercial property interests as set out in the register; I forgot to do that right at the beginning. I must underline that I have not been involved with any material change of circumstance approach, but I recognise that many businesses, including many small businesses, are waiting eagerly to hear how we will resolve this situation.

Baroness Pinnock Portrait Baroness Pinnock (LD)
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My Lords, I thank the Minister for his response. We clearly had evidence of the volume of appeals by businesses. I am still concerned about the value of those and whether sufficient money is being made available to recompense businesses, but we will come to that in the next debate. Having said that, I thank the Minister for his reply and beg leave to withdraw the amendment.

Amendment 1 withdrawn.
Amendment 2 not moved.
Amendment 3
Moved by
3: After Clause 1, insert the following new Clause—
“Advice to local authorities
Before 1 March 2022, the Secretary of State must publish a statement containing advice to local authorities on the implementation of this Act.”Member’s explanatory statement
This amendment would ensure that the Secretary of State publishes advice to local authorities on the implementation of this Act.
Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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In this group we also have Amendments 7 and 8, in the name of the noble Baroness, Lady Pinnock.

I move this amendment to seek confirmation

“that the Secretary of State publishes advice to local authorities on the implementation of this Act.”

Clearly, there has been some movement on this issue; there was widespread concern about this Act in Committee. From my experience, this message has been repeated not only in this area but throughout the whole pandemic. Given that local authorities were tasked with many responsibilities in helping businesses with the financial packages from government, which were welcome, it is important that whoever is in government has the full respect for local government that it needs and deserves. Timely, appropriate and full information is of paramount importance.

I am sure that I do not need to remind the House that local authorities face a dire situation, particularly regarding their finances. Many of them are about to publish their budget, which they will have to deliver in the early months of next year. The timing of this Bill brings into focus why local authorities are asking for clarity, and the sense of urgency that is being expressed.

We know that, since 2010, under the policy of austerity, Conservative Governments have variously come together to cut £15 billion from central government funding to local authorities. According to the Local Government Association, councils in England will face a funding gap of more than £5 billion by 2024 just to maintain services at their current levels. That is why we must ensure that they get the best advice from government on the implementation of this Bill. If we could have real clarification from the Minister on what advice they will receive and when, we would be grateful.

On the £1.5 billion in the funding announcement, I remember my noble friend Lord Hunt saying in Committee that there is a problem in that the guidance to local authorities on the distribution of money is still awaited. Many businesses do not know whether they will qualify for funding given that, as I understand it, the criteria have not yet been published. My noble friend was particularly concerned that whole areas have been missed out in the proceedings.

In Committee, the Minister stated:

“The funding will be available as soon as local authorities have established their own local release schemes; the Government will support them to do this as quickly as possible, including through new burdens funding.”—[Official Report, 10/11/21; col. GC 522.]


I would be grateful if the Minister could provide an update on how that work is going, and give a clear explanation of how the rationale running throughout this is being used to inform how decisions are made and how fairness and transparency will be assured. I beg to move.

Baroness Pinnock Portrait Baroness Pinnock (LD)
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My Lords, Amendments 7 and 8 in my name pursue an issue I raised both at Second Reading and in Committee regarding the complete mystery surrounding the £1.5 billion of taxpayers’ money that the Government propose to use as recompense for businesses in removing their rights to appeal their business rates.

This is all very unsatisfactory. The Bill is in its final stages and we do not know, first, the value of the real and estimated claims being made by businesses via material changes of circumstances based on the impact of Covid. The Minister may well claim that there is no information regarding the value of estimated claims, yet that is precisely what the Bill seeks to do. Secondly, we do not know at all whether £1.5 billion will in any way be sufficient to adequately and fairly compensate business for the removal of lawful claims made to the VOA.

19:00
Throughout the course of the Bill’s passage, the Minister has been unable to make a connection between removing the right to appeal the level of business rates using Covid as the reason and the sum of compensation specifically stated in the Bill. This simply will not do. The Minister has also so far been unable to explain how the £1.5 billion will be disbursed. Perhaps he will be able to provide some answers today.
What is the basis for the estimate of the need for £1.5 billion? Will it be sufficient to cover all legitimate claims? What criteria will be used to judge claims? Will criteria be set by government, or will there be local discretion? Will the funding be distributed to local authorities prior to claims being made and, if so, how will this be done? If the funding runs out and legitimate claims are still in process, will the Government be prepared to increase the funding available?
I know that is a lot of questions, but I have been asking them all right through the process of discussing the Bill. I hope the Minister will be able to provide full answers to them, as I am not prepared to support a Bill that leaves so many fundamental questions unanswered. I look forward to his response.
Lord Cormack Portrait Lord Cormack (Con)
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My Lords, I intervene very briefly, as I did at the substitute Second Reading and in Committee. I am concerned only with Clause 1 of the Bill, and I declare again—as I have in the past—that I have from time to time over the last nearly 50 years given advice to the Machinery Users’ Association, which was established in 1884 to give advice on the rating of plant and industrial machinery. Many of its members are, of course, concerned, particularly with the questions the noble Baroness, Lady Pinnock, just raised.

I do not want to prolong the debate; it is clear that the Bill is going to go through your Lordships’ House without amendment. I just ask my noble friend to give as much information and as clear answers as he can to the wholly legitimate questions asked by the noble Baronesses, Lady Blake of Leeds and Lady Pinnock. I await his replies with considerable interest.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I will do my very best. I start by saying that local authorities are protected by what is known as the local tax income guarantee; I know the noble Baroness, Lady Pinnock, knows about that. Three critical questions have been raised, and I will take time in answering them to reassure noble Lords that this has been well thought through.

First, there is a false equivalence between the £1.5 billion and the material change in circumstances. We do not see the £1.5 billion as a like-for-like compensation for Covid-related MCC claims. The statistics show that it would have seen reductions applied indiscriminately to properties whether or not their occupiers needed support. The £1.5 billion relief we are introducing is not—and should not be—designed to mimic or replace the MCCs that were submitted. It is better than that: it is focused on those who submitted MCCs who genuinely needed support and may have had to wait years. They will be able to access it more quickly because the approach is more targeted, and industries that have received quite considerable support are excluded from that amount. That is why we are taking this important approach.

I think the critical question that the noble Baronesses, Lady Blake and Lady Pinnock, asked is how the £1.5 billion will be distributed. I have to say that I have taken quite a long time to understand that myself; I put that right on the table. I have had some help from the former chief economist of the Bank of England, Andy Haldane, and I have had meetings with colleagues and Ministers in the Treasury about this. I think I broadly understand it. The marker that will be used at the national level is the ONS data around the gross value added reduction for those industries that have not had support. That is very robust information at the national level, but unfortunately we do not have very good data at the regional level for the last two years. So we will use the data we have at the local level around industries, because we know, broadly speaking, which businesses are at the local council level. Therefore, it is not something that is going to be gained. There is a clear proxy metric in GVA with the good data we have at the local level. I am satisfied that this is the best we can do in these circumstances and a sensible way in which to divide the cake.

The last question is around the timing of the guidance and implementation. I have spoken of the benefits of using locally administered business rates relief, rather than the appeals system, to funnel support where it is needed. One of these is pace, and since Parliament is agreed on the principle of the Government’s approach, we have a responsibility to avoid unnecessary delay. We need to move, and that is one of the real benefits of this course of action. The best course of action is to speed the Bill through to Royal Assent. On that basis, I hope noble Lords will not press their amendments.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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My Lords, I thank the Minister for taking our concerns very seriously and for going away and having conversations with some very senior people. I am sure I speak for the noble Lords on the Liberal Democrat Benches when I say that we appreciate that. In Committee this concern was repeated from whichever Bench someone was speaking from. This is a very real concern, so I sincerely thank the Minister.

The question that will remain, of course, is how this is maintained and monitored and how we make sure that there will be recourse to additional funds if the £1.5 billion is not adequate. I am not sure that I have quite got that security of knowledge.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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The Government always keep these matters under review. We recognise the importance of business rates in providing the financial stability and underpinning for local councils, and I can make that commitment, as with all government policy.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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With those reassurances, I beg leave to withdraw my amendment.

Amendment 3 withdrawn.
Amendment 4
Moved by
4: After Clause 3, insert the following new Clause—
“Insolvency Service finances and resources
(1) Before 1 March 2022, the Secretary of State must make a statement on the impact of this Act on the financial situation of the Insolvency Service. (2) The statement must include an assessment as to whether the Insolvency Service is sufficiently resourced to meet its obligations under this Act.”Member’s explanatory statement
This amendment would place an obligation on the Secretary of State to make a statement on the impact of this Act on the financial situation of the Insolvency Service and whether the Insolvency Service is sufficiently resourced to meet its obligations under this Act.
Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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This amendment relates to part of the situation discussed in Committee: that this a hybrid Bill which has caused some conversation and comment over its different stages.

In moving Amendment 4 in my name, I will also reference Amendments 5 and 6. Amendment 4 would place an obligation on the Secretary of State to

“make a statement on the impact of this Act on the financial situation of the Insolvency Service”

and

“whether the Insolvency Service is sufficiently resourced to meet its obligations under this Act.”

As we know, the Bill removes the necessity for the Insolvency Service to apply to court to have dissolved companies restored before investigating said companies’ directors. In doing so, it makes it quicker and cheaper for the Insolvency Service to investigate the directors of dissolved companies.

Her Majesty’s Opposition are pleased at the closing of a legal loophole that for too long has allowed unscrupulous company directors to evade responsibility for their financial decisions. However, we remain concerned about whether the Insolvency Service has enough resources to carry out this extra work. We understand the concern caused by the behaviour of some directors in receipt of, for example, bounce-back loans and how the dissolution process might be being used inappropriately to shed liabilities. I should like to ask the Minister: do we have an assessment of the scale of the problem this is causing?

The Bill makes no mention of further funding for the Insolvency Service. Given that the Bill means that the service will be carrying out additional investigations, this is worrying and risks overstretching it. Can the Minister confirm that the service will be given the adequate funding to deal with this workload and ensure that all necessary investigations are carried out to a good standard? If the Minister argues against such a statement, as requested by Amendment 4, will he explain clearly how adequate resourcing for the service for these new powers will be included in its annual report? I beg to move.

Lord Fox Portrait Lord Fox (LD)
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My Lords, I rise to speak to Amendments 5 and 6 in my name and that of the noble Lord, Lord Leigh of Hurley.

Amendment 5 seeks to add a new clause that would require the Secretary of State to report on the resources and the powers available to both the Secretary of State and the Insolvency Service in relation to the Bill. It covers similar territory to the amendment of the noble Baroness, Lady Blake. Despite the Minister’s comments in Committee that resources are always available for cases in the public interest, members of the insolvency and restructuring profession report that they often see cases involving significant breaches by directors that are not investigated and acted on. This would suggest that the Insolvency Service is currently resource-constrained.

That view is supported by looking at figures on the disqualification of directors of insolvent companies by the Insolvency Service. These show a roughly flat line of disqualifications made by the service over a number of years—a constant rate of disqualification, irrespective of economic conditions, trends or fluctuations in the number of corporate insolvencies. Again, that suggests a resourcing issue for the service.

That situation could get worse without a commitment to fund the additional cases that the Bill will create. We have therefore tabled our Amendment 5, which would require the Government to report six months after the Bill has been passed on whether the appropriate resources were available to undertake the additional investigations required as a result of the legislation.

I thank the Minister, who met me and the noble Lord, Lord Leigh, to discuss these amendments—I think very productively. It is clear that the Minister and the Insolvency Service grasp the point that the more resources that there are, the better the return, or likely return, to the taxpayer. We are looking for something from the Minister that indicates that Her Majesty’s Treasury shares this understanding. We of course do not want to upset delicate negotiations that may now be under way between the Minister’s department and the Treasury, but a clear indication that the resource issue is in hand would help negate the need for this amendment.

It would also be helpful if the Minister were able to comment on the nature of the cases that this legislation will enable. Our understanding is that the Bill gives the Insolvency Service the power to pursue recompense from the former directors of dissolved companies and that this can be done via compensation orders without the cost of reinstating the companies in question. The key issue for clarification is which creditors may benefit from these future compensation orders. Can he confirm that future beneficiaries will include all other creditors in addition to Her Majesty’s Treasury? The Minister has just nodded. Can he confirm that the Insolvency Service will include the plights of those other creditors in its calculation of the public interest when it decides which cases to pursue?

The second amendment, Amendment 6, would also add another clause. This time, it creates a requirement on the Secretary of State to report on the impact of the legislation on the investigations into the conduct of directors of dissolved companies. The principal purpose of this amendment is to weigh the success of the legislation by measuring and reporting its ability to claw back money from directors of dissolved companies. We know that the Insolvency Service already has a duty to report annually. However, at the moment, our reading is that the metric we propose here is not explicitly included in the list of requirements on which to report. Again, following discussions with the Minister, it seems reasonable for this “cash-back” criterion to be added to the Insolvency Service’s annual report agenda. We hope that his response to this amendment will do just that, rather than requiring primary legislation. I trust that he is able to make those undertakings.

19:15
Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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My Lords, I have put my name to Amendments 5 and 6, although, with all credit to the noble Lord, Lord Fox, his team did most of the work in compiling the text. Given the hybrid nature of the Bill, I need to declare a completely different set of interests, which is that I am chairman of an AIM company, Manolete Partners plc, which is in the insolvency-related area.

The direction of travel from the noble Lord, Lord Fox, and me is to ensure that regular creditors, in addition to Her Majesty’s Government and agencies such as HMRC, are looked after where companies have been dissolved. It is clear that some people are prepared to be struck off as directors and do not see that as much of an impediment to their business life. I am grateful to the insolvency trade association, R3, which has advised us that insolvency and restructuring professionals, who have extensive experience in tackling fraud, have noted that serious serial rogue directors do not see being disqualified as a significant deterrent, and will often go on to commit repeat frauds. Insolvency practitioners frequently see disqualified directors contributing to successive business failures or breaching the terms of their disqualification by working as shadow directors or “advisers” to these phoenix companies that are subsequently set up. In fact, R3 has given us specific examples of where that has taken place.

It is clear that the disqualification mechanism is not in itself deterring culpable directors, thereby putting the public at risk. For the policy to be effective, it is clear that investigations should lead to prosecutions. It is not clear to me how the prosecution of a director of a dissolved company—that is, a company that no longer exists—can legally take place without the company first being restored. Perhaps the Minister can clarify that. Does the Insolvency Service intend to restore every company when it is going for prosecutions? That is why we want to see how the Insolvency Service will do that and how successful it has been. That is why Amendment 5, particularly proposed new subsections (2) and (3), is required.

There is still the open question: is this the right route? For example, should we be looking at changing the law somehow to allow prosecution of directors of former companies, now dissolved, without returning them to the register? I would be keen to push the Insolvency Service to tell us, as proposed new subsection (2)(b) of Amendment 5 requires. But what the noble Lord, Lord Fox, and I are most concerned about is compensation. In that regard, I thank the Minister for his letter of 22 November setting out the position on the existing regime as far as Sections 15A and 15B of the Company Directors Disqualification Act 1986 are concerned in respect of compensation orders.

As I understand it, using a compensation order means that many other frauds, not just the bounce-backs that prompted this legislation, can be carried out, whereby the directors simply will not get investigated or identified if the dissolved company is left alone. As I have mentioned, currently it is only by restoring these entities and putting them through an insolvency process that misplaced assets, other frauds, misfeasance and so on can be identified, leading to further action against these directors.

I genuinely think there is some confusion—certainly for me and possibly the noble Lord, Lord Fox, and others—in understanding whether or not a company needs to be restored before further action can be taken. If it is not restored, what are the mechanics of a compensation order in respect of a company that does not exist anymore? We would like to see the evidence of what the Insolvency Service is up to. With a dissolved company remaining dissolved, the normal creditors—non-government creditors—stand to gain nothing from the compensation order because the fraud concerned related primarily to bounce-back loan fraud. This is clearly very important where the Government are the victim and we all want to assist them, but that does not help the wider body of creditors who have suffered.

I appreciate we are straying into some technical areas, and we are going to have to rely on assurances that compensation orders will be used by the courts for the benefit of all creditors rather than just HMRC. We are also, frankly, just going to have to wait and see what definition will be used for public interest. I do not think there has been any offer of assistance in defining public interest. We are going to have to see how many cases are dealt with by the Insolvency Service. That is why we have tabled Amendment 6, so we can see what happens and—as is our usual style—then suggest some helpful further steps that might be taken.

I am aware that the Insolvency Service, as has been mentioned, publishes an annual report, which I have read carefully; it was updated a couple of weeks ago. That shows that the Insolvency Service is a big and important agency. I was surprised to learn that it spends some £625 million per year. By statute, it has to report on its activities, and I was pleased to see that it has an 84% customer satisfaction result, on which I congratulate it and the Minister. But it is not clear to me from reading this report that the specific items requested in Amendment 6, particularly subsection (2) of the proposed new clause, would be required to be disclosed as separate, specific issues. I welcome the Minister’s views on how we can best achieve some transparency, and how the Government are getting on with implementing this Bill and achieving the aims we all seek.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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My Lords, Amendments 4, 5 and 6 seek to put reporting requirements into statute, and I am happy to comment on them. I am grateful to noble Lords for giving me the opportunity to talk both about the process of investigation and disqualification and the reporting work that the Insolvency Service already undertakes. I also put on record my thanks to the noble Baroness, Lady Blake, the noble Lord, Lord Fox, and my noble friend Lord Leigh, for the very constructive and helpful meetings that we have had in the lead-up to this debate.

Before I talk specifically about resourcing and reporting of investigative outcomes, let me take some time to remind noble Lords of the process which leads to the disqualification of company directors, focusing on the situation where a company is subject to insolvency proceedings—which is different to the situation where a company is dissolved. The officeholder, whether they be an administrative receiver, a liquidator or an administrator, must report to the Secretary of State on the conduct of the directors of the company within three months of the company going into insolvent liquidation, administration or administrative receivership. Upon receipt of this conduct return, the Insolvency Service will assess the information provided to prioritise the case in terms of its public interest. Factors that could be considered—for the benefit of my noble friend Lord Leigh—might be the seriousness of the misconduct in terms of the damage caused, the previous behaviour of the director in question and the need for protection of the public from the actions of the director. This assessment is used to prioritise the most serious cases, which are then investigated using the powers in the Company Directors Disqualification Act 1986.

Of course, not all investigations will lead to disqualification proceedings being brought. One outcome of the investigation might be that the director acted reasonably given the information that was available to them at the time, and if this became apparent then the investigation would be concluded. Where there is evidence of misconduct, though, and the Secretary of State is satisfied that public interest criteria are met, disqualification proceedings may be sought, either through an application to the court or through the director giving an undertaking not to act as such for a period of time, depending on the determined seriousness of the misconduct. An application for disqualification must not be made after three years from the start of the insolvency proceedings unless the court gives its permission. For unfit directors of insolvent companies, the period of disqualification can be between two and 15 years.

Following on from successful disqualification proceedings, if it can be identified that the director’s conduct caused losses to creditors, then the Secretary of State may seek payment from the director for their benefit by way of disqualification compensation. As with the disqualification proceedings, this may be dealt with by way of an application to a court or by an undertaking given by the director. Compensation may be paid to the Secretary of State for the benefit of a specific creditor or creditors, or a specific class or classes of creditors, or instead may be paid to the insolvency officeholder for the benefit of all creditors.

Compensation work is undertaken by investigators at the Insolvency Service, so as much of the money as possible may be returned to creditors. I confirm for the benefit of the noble Lord, Lord Fox, and my noble friend Lord Leigh, that no preference is given to any particular creditors or groups of creditors, other than that the compensation payments are for the benefit of those who have lost out as a result of the misconduct. It is important to note also that, if the insolvency officeholder had already used the various provisions in the Insolvency Act 1986 which allow them to seek recoveries for the benefit of creditors, such as the fraudulent or wrongful trading provisions, then compensation would very probably not be sought for the conduct which led to those claims so that the directors would not face double jeopardy.

Noble Lords will have seen that the Bill gives a similar standing to the new measures to investigate and disqualify former directors of dissolved companies as currently exists for insolvent companies and they use the same sections of the Company Directors Disqualification Act. Unlike insolvent companies, though, there will not be an officeholder in a dissolved company, so the investigation process will not start with a report on the director’s conduct. Instead, the Secretary of State will in most cases be alerted to potential misconduct through complaints received by members of the public. This will not mean that conduct reports provided by insolvency officeholders will be overlooked in favour of complaints received in dissolved companies. All will be assessed in terms of their relative seriousness and the level of public interest. A disqualification application must not be made after three years from the date of dissolution unless the court gives its permission.

This would perhaps be an appropriate point in my remarks to pay tribute to the excellent work of insolvency practitioners, who provide the conduct returns to the Insolvency Service, and who in many cases continue to assist with the investigative effort beyond that initial assessment.

Noble Lords may well recall that these measures were developed and consulted on back in 2018, before any of us had even heard of a disease called Covid-19 or a bounce-back loan. At the time, the Insolvency Service had been receiving a regular low level of complaints about the abuse of the process of company dissolution. Many of those complaints concerned its use in phoenix companies—where one company is dissolved only for another to spring up essentially doing the same thing but without the debts. Because of the dissolution, the Insolvency Service had been unable to take action against the directors responsible. The opinions of stakeholders on new powers to tackle this kind of misconduct were sought, and these were generally fairly positively received. Implementation of the measures has now become even more important and more urgent because of the risk of abuse of the dissolution process to avoid repayment of bounce-back loans.

This brings me to the question from the noble Baroness, Lady Blake. I can tell the noble Baroness that the Bounce Back Loan Scheme closed for new applicants on 31 March 2021. At the time of the scheme’s closure, £47.4 billion-worth of finance had been provided to some 1.5 million businesses. Given the levels of uncertainty around the economy and the virus, the anticipated fraud levels are very preliminary and speculative. They are not based on any repayment data because that did not even begin until May 2021.

I make a final point on the process for disqualification. I can confirm to my noble friend Lord Leigh that it would not be necessary for a company to be restored to the register for the conduct of its directors to be investigated, and the same applies if and when compensation is sought from a disqualified former director of a dissolved company. There will be no automatic restoration process, nor is there any need for one for the purposes of the investigation and disqualification. This way, the costs and administrative burden of restoration can be avoided.

19:30
I turn now, if I may, to the amendments seeking to establish a statutory reporting requirement for investigations and the resourcing of the Insolvency Service. I am pleased to confirm to noble Lords that, under an existing statutory requirement, Her Majesty’s Treasury directs the Insolvency Service to report annually on its work and finances. This is pursuant to a power in Section 7 of the Government Resources and Accounts Act 2000. Its annual report and accounts include both an overview and an analysis of the agency’s performance over the course of the year. There are sections on how it makes use of resources available, including those used for enforcement activities and enforcement case studies, including disqualification and criminal prosecution. The report also includes information on how much money was returned to creditors during the year. Full accounts are provided, which are audited and signed off by the Comptroller and Auditor-General, and the whole package is available to everyone online. Going forward, the annual reports and accounts will of course include relevant information on the new measures as part of the enforcement reporting package.
In response to a question from my noble friend Lord Leigh, specific information on money returned to creditors from compensation orders has not previously been published, as they are relatively new in this framework. However, I have asked the Insolvency Service to consider how this can best be achieved when such information becomes available. In addition, the Insolvency Service regularly makes available a large amount of insolvency and enforcement statistics and, again, these are readily available online.
Specifically regarding enforcement activities, the number of disqualification orders is published and updated monthly, and a breakdown of disqualification orders and undertakings obtained by the relevant section of the Company Directors Disqualification Act under which they were sought is provided. Other information provided on a monthly basis includes lengths of periods of disqualification. Furthermore, there is an annual report on the nature of misconduct in disqualification allegations. Future releases of statistical information will include the number of disqualified former directors of dissolved companies.
I note the concern of the noble Lord, Lord Fox, and my noble friend Lord Leigh about the reporting of how much money will be returned to creditors, and of course the Government are also concerned about getting money back for taxpayers. But I should emphasise that this measure expands the Secretary of State’s powers to investigate and disqualify culpable directors, and disqualification itself is not a process which is a mechanism for returning money to creditors. Instead, it is intended to protect creditors from future losses caused by those directors who, through their reckless or irresponsible behaviour, have shown themselves unfit to hold that position—and to deter others from behaving similarly.
The Secretary of State’s power to seek compensation from disqualified company directors was a welcome addition to the enforcement regime in 2015, which will obviously benefit from these new cases. Nevertheless, the purpose of the legislation is primarily as I described.
On the part of the amendment that requires a statutory review of the effectiveness of the mechanism for the new investigation and disqualification measures, I hope that noble Lords will be pleased to note that the Bill’s impact assessment gives an undertaking for a post-implementation review to take place within five years of commencement. As well as being in line with better regulation requirements, this will ensure that a proper assessment is undertaken of whether the use of the new powers has been effective.
Finally, I know that noble Lords, in particular the noble Baroness, Lady Blake, are keen to ensure that the Insolvency Service is sufficiently resourced to tackle wrongdoing and misconduct. Following the outcome of the spending review 2021, the Government are currently considering the resourcing level needed for the Insolvency Service to undertake its statutory functions, and that includes the additional proposed enforcement requirement contained in the Bill, should it be passed by the House. That process is ongoing, with budgets set to be finalised ahead of the next financial year.
I apologise for the length of my reply, but I hope that I have been able to satisfy noble Lords and reassure them that all the information they seek through their amendments will be published—some as part of an existing statutory requirement—and that the reviews that they look to secure are in fact already in place. Once again, while thanking all noble Lords for their contributions, their continued interest in this Bill and, of course, for their amendments, I hope I have been able to convince them not to press their amendments.
Lord Fox Portrait Lord Fox (LD)
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Before the Minister sits down, first I thank the Minister, who has largely been able to meet most of our concerns. On a point of clarification, he said something like, “There will be no automatic restoration process, nor is there a need for one” for the purposes of investigation and disqualification. Does that also mean that there would be no need for one for the purposes of pursuing a compensation order? Can the Minister confirm that there does not need to be reinstatement for the compensation order to be pursued?

Lord Callanan Portrait Lord Callanan (Con)
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Yes, it is my understanding that the Bill, if passed, will enable compensation to be pursued, and there is no need for the restoration of companies to the register for that to take place.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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I start by thanking the Minister for a very full response. Sometimes when I get a very full response, I wonder whether it is an attempt to overload the system, but actually it was very technical. I also thank him—I think on behalf of us all—for taking time to bring his officials together to talk us through it.

We established in Committee that the Bill does not have the capacity to deal with some of the serious concerns raised in our discussions. We will need to revisit some of the worst excesses and infringements of current legislation. Some of the personal testimonies to the levels of fraud and the fact that some directors were re-emerging and getting away with some unspeakable behaviour is still of huge concern to us all.

On reporting, would it be possible to have a conversation on how we can pull out the relevant information from the various reports to which the Minister referred? With the best will in the world, we will not all be able to sit down to go through a whole set of annual accounts. With the particular experience with Covid and the extent of concern about it, there is a real need for transparency. I hope that we can pick this up and take it forward.

My concern about resourcing is still very live, and I hope that after the reassurance on the spending review and the need to focus on this, the debate in this Chamber will help to inform the decisions that are made. Noble Lords will have heard several in-depth media reports on the concern about the levels of fraud that have been perpetrated over the past 18 months, and I think there is a lot more to come to light.

I thank the Minister for his reassurances, and we will keep scrutinising progress in this important area. I look forward to opportunities—perhaps through further legislation—to deal with some of the real problems that continue.

Amendment 4 withdrawn.
Amendments 5 and 6 not moved.
Clause 4: Extent, commencement and short title
Amendments 7 and 8 not moved.
Third Reading
15:49
Motion
Moved by
Lord Greenhalgh Portrait Lord Greenhalgh
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That the Bill do now pass.

Lord Greenhalgh Portrait The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)
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My Lords, it is a pleasure to see this Bill through to its conclusion.

The pandemic has had far-reaching and unexpected impacts and the business rates part of this Bill seeks to address its potentially distortive effects on the rating system and local government income. By clarifying that coronavirus and the Government’s response to it will not be considered a “material change of circumstances” for the purpose of property valuation, the Bill ensures that the rating system will continue to operate as it was intended to. It also removes a significant source of uncertainty for local councils.

I thank noble Lords for the engagement we have had during the passage of the Bill. We have sought to strike the right balance between getting this important measure passed quickly and leaving space for legitimate discussion on the wider issues at play, for instance the future of business rates. Considerable expertise has been in evidence, which will be of great value when we come to debate the more substantial changes that the Government have announced. In particular, I thank the noble Baronesses, Lady Blake and Lady Pinnock, for their careful scrutiny and, ultimately, the very welcome support they have offered.

The new power to investigate the conduct of former directors of dissolved companies and seek to disqualify them where appropriate will have far-reaching benefits to the economy, in terms of improved confidence in lending, and to business and the wider public, in protecting them from the actions of rogue directors.

Of course, there is the very pressing matter of ensuring that the Government have the tools they need to tackle those reprehensible individuals who have taken advantage of a public health crisis to line their own pockets, and this new measure will play its part in bringing them to task. I am sure noble Lords will agree with me that it is only right that the retrospective provision in this measure will mean that the investigation of those individuals may start immediately upon Royal Assent.

As well as the noble Baronesses, I extend my thanks to the noble Lord, Lord Fox, and my noble friend Lord Leigh, who have provided thoughtful and constructive contributions to the debate on the director disqualification part of this Bill. Finally, I thank the Bill teams in the Department for Levelling Up, Housing and Communities, and the Insolvency Service for bringing me up to speed on some of the more detailed provisions and helping me get a proper understanding of the Bill. I beg to move that this Bill do now pass.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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My Lords, it is fair to say that there has been some significant consternation from noble Lords at the way this Bill was initially put together. However, in the main, we support its passage to get help to those in serious need.

We expressed our ongoing concerns at different stages of this Bill. It is obvious that the whole area of business rates needs urgent review and root-and-branch reform. Likewise, enormous concerns remain as to whether the Insolvency Service is sufficiently resourced to meet its obligations under the Bill with regard to the significant increase in business, as outlined.

I put on record my appreciation of the informed contributions from the noble Lords, Lord Fox and Lord Leigh, the noble Earl, Lord Lytton, and the noble Baroness, Lady Pinnock. I thank my noble friends Lord Hunt and Lord Sikka for their invaluable insights and knowledge on these matters.

From these Benches, we express our gratitude to the Bill team, the clerks and the staff of the House, and the Insolvency Service for the in-depth briefings it provided. I also thank both Ministers involved in this Bill: first, the noble Lord, Lord Greenhalgh—I particularly acknowledge the further detailed investigation he went into when the cause of our concerns over the business rates issue came to light—and the noble Lord, Lord Callanan, for his continued courtesy in offering regular briefings from his team and the insolvency support service on the various matters under consideration.

Finally, I thank both Ben Wood and Dan Harris, our excellent advisers, for their unfailingly high standard of support throughout the proceedings.

Clearly, both matters leave further work to be undertaken in both Houses, as has been outlined. I will watch the implementation of provisions with great interest.

Baroness Pinnock Portrait Baroness Pinnock (LD)
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My Lords, on behalf of my noble friend Lord Fox, I thank the noble Lord, Lord Callanan, for the constructive meetings that helpfully resolved the issues in the part of the Bill dealing with directors’ disqualifications and insolvency. I thank the Minister for the time he devoted to discussions on the Bill and the private meetings we held to try to resolve various issues, some of which remain; nevertheless, we are happy that the Bill has to pass to deal with the issues in front of us. I am still concerned about its retrospective nature, an issue that we did not fully resolve, inevitably. As the noble Baroness, Lady Blake, has said, the reforming of business rates is still a major concern. But with that in mind I wish to thank everybody who was involved, particularly Sarah Pughe, from the Lib Dems’ legislative team, for her help and advice. I am grateful for the way the Bill was discussed and debated so that we were, in the end, able to support it. With that, I thank the Minister for his help.

Earl of Lytton Portrait The Earl of Lytton (CB)
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My Lords, I will make a contribution from, as it were, the technical Benches on the matter of non-domestic rating. I thank the Minister—this will probably be the only time I can thank him publicly—for writing to me about matters he raised when we were at a previous stage of the Bill, in connection with the package of measures the Government have put in place to try to alleviate the problems facing businesses. I do not know whether the right term is “sidestep”, but I suspect he did not quite get the point I was making. Where a major manufacturer carries out works to meet an environmental target—for decarbonisation, for example—and in doing so wrecks something tantamount to a building or structure, or an item covered by the plant and machinery order, a proportion of its value automatically gets built in as an addition to the rateable value. That has been described to me as the double whammy of having to pay for the improvement to meet a government-imposed target, and additional rates. I was trying to focus on specific instances involving a building or structure, or the plant and machinery order, but I leave that to one side because that was to some extent an overture to what the Bill is about. I mention it only because the Minister was making the point about the assistance the Government have provided.

As for the Bill itself, I obviously regret a business rating measure of such a binary nature preventing the effects of coronavirus being properly reflected in rental values as a material change of circumstances for the purposes of making appeals against the assessments. Although the government package of reliefs and other support for the business sector is extremely welcome, it none the less pales into insignificance compared with what businesses could have expected, had a material change of circumstances applied. I will leave that there.

The Government say that the material change of circumstances was never intended to apply to things like pandemics. Well, probably not, but there has never been a time like this when HM Treasury and HMRC have been quite so keen to protect their income streams come what may, regardless of the precise effects on businesses. I hope this Bill does not have the consequences I fear it might, but I remain concerned that the whole process of business rates is beginning to drive responses, which should always be a warning sign with any taxation measure going forward. That said, I thank the Minister and the Bill team, and other noble Lords who have spoken up for the business rate payer. I wish this Bill a safe passage, and I hope it will not fulfil my worst prognostications.

15:59
Bill passed.

Royal Assent

Royal Assent
Wednesday 15th December 2021

(5 months, 2 weeks ago)

Lords Chamber
Read Full debate Read Hansard Text Amendment Paper: HL Bill 50-R-I Marshalled list for Report - (29 Nov 2021)
11:06
The following Acts were given Royal Assent:
Critical Benchmarks (References and Administrators’ Liability) Act,
Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act,
Armed Forces Act.