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Liz McInnes (Heywood and Middleton) (Lab)
I beg to move,
That this House has considered the closure of Carcraft.
It is a great pleasure to serve under your chairmanship, Mr Williams. I must begin by expressing my sympathy to all the employees and customers affected by the sudden closure of Carcraft last month. I congratulate the hon. Members who have turned up for the debate. I urge the House to take notice of the recent closure of the car dealer Carcraft, which was headquartered in Castleton, in my constituency.
Carcraft fell into administration in late April, leaving 474 people unemployed. This is the first time in the new Parliament that such a topic has been debated, and I hope that we will see some improvements in this field before such a debate is needed again. I would like to stand before you, Mr Williams, and say that the economy in the north-west is as strong and resilient as the people who live there, but that has not been the case for some time. Although the Minister may talk about an economic recovery and a long-term economic plan, there has been little evidence of them in my constituency of Heywood and Middleton—or, indeed, in the wider borough of Rochdale.
During the calendar year of 2014, unemployment in Heywood and Middleton stood at 8.1%, higher than both the regional and the national averages. More than three quarters of jobs in my constituency fall into the service sector, and almost one in six jobs is in wholesale and retail, including the motor trades. That means that the loss of an employer such as Carcraft has a large impact on the economy of both my constituency and neighbouring ones from which employees commute. In fact, with a generally low-wage economy and a shortage of new job vacancies to be filled, the loss of a business with a 60-plus year history in the area, such as Carcraft, could for some be catastrophic.
Carcraft was started in Rochdale in 1951 by Frank McKee, as a sole trader, and it became a registered company in 1964. It was later sold to his sons, backed by the Royal Bank of Scotland’s development capital arm, and was valued at that time at £50 million. The constituent companies of Carcraft were the UK’s seventh largest retailer of second-hand cars. They had an annual turnover of £120 million and were selling 225 vehicles a week. As well as the head office site in Castleton in my constituency, they traded from 10 other sites around the UK, and they were employing 474 staff when they entered administration.
In March last year, a management buy-out led to the resignation of the McKee family from the board of directors, leaving a Mr Robin Bridge as chief executive officer. Unfortunately, Mr Bridge resigned his post in September of the same year. Colin Houlihan was appointed chief executive officer and was still in that post when the company entered administration. Despite an annual turnover of £120 million, from 1 October 2011 until the end of April this year, Carcraft incurred losses of £26.9 million. As early as 2014, the directors reached the conclusion that the business was in difficulty. They are reported to believe that that is because their business has a poor reputation in a highly competitive marketplace. They also agreed that they held a high cost base, including significant rent costs, which they believed to be above market rate, a number of loan notes and an insolvent balance sheet.
It seems that Carcraft was known as a company that would give customers the hard sell, selling overpriced cars with additional extras that probably were not wanted in the first place. Indeed, there was a BBC exposé on its business practices, including having online prices that were not the same as those in the showrooms. It was well known to customers that they would not be allowed simply to take a leisurely look around the forecourt; there would always be an upselling salesperson around to apply pressure. That reputation, whether accurate or not, did not help the company in a crowded and competitive marketplace.
Something else that failed to help Carcraft was the lack of change in its business model in order to keep up with the marketplace. If I had wanted to buy a car when I started driving, I would have had to save what money I could and then buy a car within my budget. However, Carcraft was one of the original automotive companies that offered the opportunity to pay for a second-hand car in monthly instalments. Once customers were introduced to the idea of buying a car in that way, it was not long before they realised they could pay the same amount monthly to lease a brand-new car with 24/7 support. That change in the business model of the car market, combined with the issues above, made business increasingly unprofitable and difficult for Carcraft.
Another reason that the House should note for the failure of Carcraft is the amount of money that it had to set aside for payment protection insurance repayment claims. Given its reputation for the forceful selling of extra products, I think that we would agree that it is not hard to imagine customers being sold payment protection plans alongside their hire purchase agreements for vehicles. We are all aware that banks have had to set aside billions of pounds to compensate customers who were mis-sold PPI, and we know that PPI is the most complained-about financial product ever. Frequently, though, we forget that it was not just banks that mis-sold that insurance. Smaller businesses up and down the country were also involved in the practice.
Kate Green (Stretford and Urmston) (Lab)
I am most grateful to my hon. Friend for securing this debate on a matter that affects workers in my constituency who were employed at the business there. I am sorry that I cannot stay for the whole debate, Mr Williams. Can my hon. Friend say whether, to her knowledge—if she does not know, perhaps the Minister will be able to answer later—now that the company is in administration, any customers who might have PPI mis-selling claims to pursue will be able to continue with those allegations and to receive any compensation if that is due?
Liz McInnes
I thank my hon. Friend for her intervention. I hope that the Minister will be able to respond to that question. I am not sure whether PPI claims against this company will be able to be pursued.
I have no doubt that everyone in the Chamber has received unwanted calls, emails or texts from companies volunteering to help them to claim for PPI mis-selling. In my case—I am sure this also applies to others—that advice is for PPI that I have never actually taken out. However, the industry around PPI does demonstrate the numbers involved and the size of the marketplace for such claims. The House needs to note that more companies may end up involved in insolvency in the coming months and years because of PPI.
None of this is too surprising. Businesses, sadly, do not always succeed, and in every constituency companies large and small have gone into receivership. During the previous Parliament, 99,530 companies applied for insolvency. The things that concern me about the closure of Carcraft are the decisions taken by the directors, the timing and the lack of consultation with staff and customers. Given that the directors realised in late 2014 that the balance sheet was insolvent and Carcraft was moving towards engaging an administrator, I am surprised that it did not begin a consultation with its employees.
The Manchester Evening News has reported that staff were told only hours before the company entered administration. Staff have said that even after they raised concerns about the future of the company, management told them that everything was fine. Obviously, that was not the case, and staff had their fears confirmed when administrators arrived with redundancy letters for all of them. Even worse, at that point managers reportedly told staff that they had known for at least three months that that might happen. People had turned down opportunities to take jobs elsewhere because managers had assured them that their jobs were secure. Now those folk are left with no jobs, secure or otherwise.
Joan Ryan (Enfield North) (Lab)
I, too, congratulate my hon. Friend on securing the debate, which affects people in Enfield North and their work. I have found it very difficult to get any information from anybody—the administrators or the solicitors who seek to bring a group action—about the former employees, and I am concerned about what is happening to them. They were left high and dry and given no information by the company, and they will now need support to find employment. We cannot turn the clock back and bring the company back, but those former employees deserve some support. I have had difficulty finding out the number of people involved and what has happened since in order to be able to give them that support. Does my hon. Friend have any further information? I hope that the Minister will also address the matter.
Liz McInnes
I understand that the Carcraft outlets employed between 25 and 50 people, but I can get exact figures to my right hon. Friend after the debate. The major employment was in my constituency, where we have lost about 150 jobs. I will go on to talk about the support available, if she will bear with me. There is some support available for staff, but it is on a fairly impromptu basis.
My right hon. Friend referred to legal action. Some of the staff who have been displaced are consulting employment lawyers about bringing legal action against Carcraft. Although staff will receive their statutory redundancy payment, they will struggle to obtain notice pay and unpaid holiday pay. However, because that is now likely to form part of legal action, I do not intend to say any more on the matter at this stage.
When a business such as Carcraft enters administration, another important cost is that incurred by customers, who chose to spend their hard-earned money at Carcraft on vehicles or on packages—such as the “Drive Happy” guarantee—that included servicing, warranty, MOTs and roadside assistance. Customers who bought such packages now have to find those services elsewhere, and they are certainly not driving happy, especially if they were sold the packages only days before Carcraft announced that it was going into administration. Staff have confirmed that they sold vehicles and guarantee packages until the night before the administrators stopped trading.
I am troubled by the fact that Carcraft continued to sell goods in early 2015, despite knowing that administration was highly likely. Of course, it is illegal to continue to trade only after insolvency has been confirmed, but there is something unfair and slightly disreputable about a company that trades in the knowledge that it is highly unlikely to be able to provide the promised services. In the case of the “Drive Happy” package, 29,000 people across the country paid for services that they can no longer receive. Luckily, only a small number of customers bought cars and were unable to collect them, and the administrators have made arrangements with those customers.
Not everything in this situation has been negative. A number of organisations, formal and otherwise, have come to the aid of those most adversely affected by Carcraft’s entering administration.
As my right hon. Friend the Member for Enfield North (Joan Ryan) mentioned, it is important to talk about support for those who have lost their jobs. The devastating impact of the sudden loss of a job on family wellbeing cannot be underestimated. The administrators, along with ERA Solutions, which specialises in assistance on employee matters when a company goes into administration, have provided advice to employees and supported them in accessing help from local jobcentres. Rochdale Borough Council has been in touch with employees in my constituency who were directly affected, and other councils around the country have done similarly. Rochdale has given help and advice to those who wanted it on matters including how to apply for relevant benefits and support, and how to start up their own businesses should they wish to.
The industry has come together to attempt to offer support. The former CEO Robin Bridge, who is now a director of Vehicle Trading Group, quickly joined forces with Andy Coulthurst of Motors.co.uk to help employees of Carcraft. They have set up a Facebook group in which they encourage former employees to send CVs and ask companies whether there are jobs in the industry for those staff. As we might imagine, the response has been overwhelming. Several key members of the industry have provided support, and that is a promising example of a community coming together.
A further example of the industry helping to support its own members is the involvement of the Automotive Industry Charity, to which the administrators ensured employees had direct access. The organisation—once known as the Motor and Allied Trades Benevolent Fund, but now known simply as BEN—has informed those affected that it provides listening and advice services, and help with accessing support from the right organisations, through its helpline. BEN’s welfare and care services are available not only to anyone employed in the sector, but to their whole families. That takes its reach to an estimated 3.84 million people in the UK alone.
In the wake of the news about Carcraft’s going into administration, BEN was proactive in contacting the administrator, Grant Thornton, to make it aware of the services available to staff. Additionally, BEN was proactive in sharing contact information, website details and contact numbers on its social media and digital platforms. Although the details of contact made by employees are confidential, BEN has confirmed to me that it received a number of inquiries on the back of the Carcraft closure, in response to which details of the following services were provided.
Employment law and legal advice was provided, including details of the Advisory, Conciliation and Arbitration Service and civil legal advice. Advice was given on dealing with redundancy, including reference to Citizens Advice and the Money Advice Service and direction to online materials. Guidance was given on employee welfare rights and benefit entitlement through Citizens Advice and the jobcentre. Budgeting and debt advice was given through the Money Advice Service, Citizens Advice and StepChange. As it is challenging to talk about many of those issues in the work context, BEN supplemented the work undertaken by existing in-house or state-run benefits provisions. A spokesperson from BEN said:
“Given that many of the employees were only made aware of the situation when they arrived at work…a vast number will…be experiencing shock, stress, worry and an uncertain future. As yet, the full details of the circumstances and the long term future impact cannot be assessed.”
That stark fact cannot be ignored.
The sudden impact of job loss on an individual, their family and, ultimately, the community must be investigated so that people are not exposed to such difficult circumstances without prior warning. I urge the House to consider what the Government are doing to protect workers when an employer goes into administration. How do the Government plan to improve protections both for employees of companies facing insolvency and for customers of such businesses? Do the Government have any plans to legislate to improve workers’ rights in such situations? What can be done to ensure that the Insolvency Service amends the status of former employees to something other than preferential creditors?
It is also vital to ensure that, particularly in times of economic struggle, customers are given the maximum possible protections. What will the Government do to ensure that businesses with insolvent balance sheets or similar financial difficulties are more responsible in the selling of products and services that they may not be able to provide in subsequent weeks or months? The Minister will no doubt tell us all about the Government’s long-term economic plan and the number of jobs that have been created, but there is still a lot of concern about the nature of such jobs. Some 474 full-time jobs with a pension scheme and protections have been lost, and a high number of the jobs that may replace them will be part time, self-employed or on zero-hours contracts. All the talk of economic recovery is not reflected in the day-to-day lives of my constituents and, indeed, others across the country. We must use this opportunity to change that and improve the lives and livelihoods of the people of this country.
I look forward to the Minister’s response. I hope that, following this debate, I will be able to provide my affected constituents with some reassurance.
Simon Danczuk (Rochdale) (Lab)
I congratulate my hon. Friend the Member for Heywood and Middleton (Liz McInnes) on not only securing this important debate but championing this issue locally and nationally. For those who are not aware, the constituencies of Rochdale and Heywood and Middleton are coterminous with Rochdale borough and, as she pointed out, Carcraft has existed in our constituencies since the 1950s, which is one reason for my speaking this afternoon. I declare an interest, because my wife worked at Carcraft’s headquarters when we first met a number of years ago—I thought it would be right and proper to put that on the record.
There is no doubt that the closure of Carcraft is a massive issue in Rochdale borough. I join my hon. Friend in saying that my thoughts go out to the staff who lost their jobs; it is a true tragedy for the reasons she outlined. The economic recovery remains fragile north of Manchester and in and around Rochdale, and the loss of so many jobs makes the situation much more difficult. It will not be easy for those who have lost their job to find alternative employment. Credit goes to the Government for many of the jobs that have been created, particularly in the private sector, but the situation is fragile. She is right to say that many of those jobs are temporary and, particularly in the area we represent, casual. It will be difficult for the former employees of Carcraft.
Carcraft was something of a local institution, and my hon. Friend gave a flavour of that. Some people loved Carcraft and some people loathed it. Most people have a story to tell about Carcraft. Some of those stories are good; some of those stories are not so good. We have to bear it in mind that, ultimately, the business sold used cars. That is an issue about which emotions run high, but some people clearly had an adverse experience when dealing with the company. Either way, Carcraft was generally seen as a positive for Rochdale borough. It created many jobs, and in some ways it helped to put Rochdale borough on the map. People were aware of Carcraft, and they travelled to it.
The McKee family established the business back in the 1950s, and the family have always made a big contribution locally—they regularly make a big contribution to charities locally—which is worth putting on record. I have met Noel McKee, one of the brothers who helped to run the business before it was sold, on a number of occasions, and one cannot help thinking that the business would not be in its current position if the family were still involved, and I do not say that lightly. The McKee family guided the business through many downturns in the economy over many decades. They guided the business through the last recession before the management buy-out. The McKee family seemed to have the business skills and ability to make the business work, and perhaps Carcraft would not be in its current situation if they were still involved.
I am pleased to hear that the Insolvency Service is involved in trying to establish what went on with Carcraft’s most recent management. I am also pleased that Rochdale Borough Council, as my hon. Friend said, has been doing what it can to assist those who lost their jobs, and to redirect customers to support and help, where required. I know from personal experience that it is not easy to close a business, particularly when it has been unsuccessful, but we need to examine the details. I hope the Minister will consider a number of my following points. Was the conduct of the directors involved right and proper? Were fair and proper practices followed? Was reasonable attention given to both employees and customers during the closure of the business? Carcraft was a major UK business that served thousands of customers. As my hon. Friend the Member for Heywood and Middleton pointed out, the sale of warranties, MOTs and financial services was exceptionally lucrative for the company; that was where it made a lot of its money. The business was not always about the sale of a car; it was about the sale of financial services. We have to ask questions about that. I am concerned that many customers may have been treated unfairly because of the directors’ decisions and actions.
Customers, employees and supplier businesses deserve answers. I am saddened that a business synonymous with Rochdale borough has closed. I am upset for the employees and customers who may have been treated so poorly, but I am hopeful that the Minister and her Government will help us to understand what went so terribly wrong with this business.
Joan Ryan (Enfield North) (Lab)
I am not sure that this issue would be on the agenda at all if it was not for my hon. Friend the Member for Heywood and Middleton (Liz McInnes) securing this debate, which is a matter of concern. I am keen to hear what the Minister, or her predecessor, knew of this situation. I was not here in the last Parliament, and we only got notice of this closure a week before the general election, so the timing is extremely difficult and it is very hard for anyone to be abreast of this situation.
This issue could have easily just disappeared, and yet we are talking about a big company and a lot of jobs. To echo what my hon. Friend the Member for Rochdale (Simon Danczuk) has said, on behalf of customers and employees of Carcraft, I am very concerned about the points raised by my hon. Friend the Member for Heywood and Middleton about how long it was known that the company was in major financial difficulties, how little notice was given to employees and how little discussion there seems to have been with them. One would have expected the company to feel some smidgen of loyalty to these people; I am quite surprised at how cavalier it seems to have been. I might be harsh in saying that, and I am willing to be corrected, but on the face of it, and given the information we have received, it does not seem that I am being particularly harsh.
I hope that we will get a lot more information to take back to our constituencies, so that our constituents who are customers or employees of this company are not left high and dry. There is some local awareness of this issue, and interest in what is happening, and hopefully customers and employees now feel that there is somewhere that they can raise their issues. However, we need more information.
I pay tribute to BEN; I, too, have also been in touch with it, and I am impressed by its proactive approach and the support it is providing. If it was not for BEN, I am not sure that anybody would be providing any support, and if it was not for my hon. Friend the Member for Heywood and Middleton, I am not sure that anybody would be talking about this issue, which is of real concern.
Michelle Thomson (Edinburgh West) (SNP)
Thank you, Mr Williams, for giving me the opportunity to take part in this debate.
I must declare the reverse position of other Members, if you like. I am the Member for Edinburgh West and a representative of the Scottish National party, and hon. Members will be aware that Carcraft had no branches in Scotland. Nevertheless, speaking as a shadow Minister for Business, Innovation and Skills, and coming from a business background, it is always a matter of regret when people’s jobs are lost, particularly from small businesses, which play such an important role in our communities; indeed, they are the backbone of our communities.
I have some points to make about the company’s balance sheet. I note that the company had been running consistently at a loss even in the lead-up to the management buy-out, which is usually a cause for concern. There was a loss of £6.6 million in the 12 months to 30 September 2012, and I note that the accounts for the year ending in 2014 included a “going concern” statement:
“The company’s Directors believe the business will continue for the foreseeable future and has the full support of the ultimate parent company. As such the directors believe the going concern basis of preparation for the financial statements is appropriate”.
However, I also note that the parent company was a so-called newco or new company that was set up at the time of the management buy-out. So, what test did the auditors apply?
Grant Thornton, a highly reputable company, will obviously look in detail at Carcraft’s financial accounts, and it will go through the right and proper process to establish which secured creditors are paid off first, using the remaining assets. However, I have also noted that £4.8 million went to Pennine Property Investments LLP in 2014; I am not sure whether that money was a loan. Again, I would like the detail in the balance sheet and all the accounts to be looked at rigorously.
Mr Iain Wright (Hartlepool) (Lab)
Thank you, Mr Williams, for calling me to speak. May I begin by saying what a pleasure it is to serve again under your chairmanship, for the first time in this Parliament?
I congratulate my hon. Friend the Member for Heywood and Middleton (Liz McInnes) on securing this debate. The whole House would agree that, since arriving here just a few short months before May’s general election, she has impressed everybody with her dedication not only to the needs of the NHS, which she has particular strengths in, experience of and passion for, but to the wider concerns of her constituency. She has demonstrated that again today with her excellent speech.
I also pay tribute to the excellent remarks made by my right hon. Friend the Member for Enfield North (Joan Ryan) and my hon. Friends the Members for Stretford and Urmston (Kate Green) and for Rochdale (Simon Danczuk) on the matters affecting their constituents following the closure of Carcraft.
I welcome the Minister for Small Business, Industry and Enterprise, the right hon. Member for Broxtowe (Anna Soubry), to her new position in the Department for Business, Innovation and Skills. It is an excellent appointment. If we must have a Tory in that position—I suspect that because of democracy we do—then I am glad that it is her. I wish her all the very best in her new role of ensuring that business and enterprise are championed and that the interests of workers and consumers are given sufficient priority. Those have been a key theme of today’s debate.
Mr Williams, I hope that you, my hon. Friend the Member for Heywood and Middleton and other hon. Members will indulge me for a moment, because my brother Paul and his wife Leanne had a baby earlier today. Oliver was born at 12.10 am, weighing 7 lb 1 oz and, thankfully, looks like his mother rather than my brother. Both mother and baby are doing well. Coincidentally, today is also the birthday of my son, Jacob; he is 19 today. I wish my son many happy returns and hope that these two cousins can celebrate joint birthdays for many years to come. I thank the House for that indulgence, Mr Williams, and having dispensed with the Wright family’s birthday matters, I will respond to the serious matters that my hon. Friend has brought to Westminster Hall today.
Carcraft was once seen as the UK’s leading car supermarket, but, as my hon. Friend has said, it went into administration very quickly, without any great notice, in April, with the loss of around 474 jobs. My first concern has already been raised time and again in today’s debate: it is about the people who have worked diligently and professionally for the firm but who now find themselves without employment. It must be a very difficult time for many former employees of Carcraft, especially because the company’s fall into administration would have come as a complete shock to many of them.
Given what has already been said by my hon. Friends, what assistance can the Minister provide in this situation, whether it is financial assistance from the Government or—more likely—the removal of bureaucratic inertia to ensure that the people affected by the closure of Carcraft are given help and information, and supported to return to employment as quickly as possible? What liaison is taking place between the Minister and her counterpart in the Department for Work and Pensions to ensure that Jobcentre Plus staff are fully aware of the importance of this matter?
My hon. Friend and others provide a hugely effective bridge between national, local and sectoral organisations; we have heard about BEN a number of times today. But can the Minister set out what will be done with local authorities? Given that Carcraft was a national organisation—colleagues from not only the north-west but London have spoken today—has the Minister sought to establish some form of taskforce to provide effective liaison and deal with the issues arising from its closure, many of which will affect its former employees, whether they live in Rochdale or Enfield?
My hon. Friends the Members for Heywood and Middleton and for Rochdale made an important point about their local economies, which are very similar to that of my own constituency. My hon. Friend the Member for Rochdale will recall the debate we participated in yesterday about city regions and metro mayors. City regions are incredibly important drivers of economic success, and there is probably no greater example in relation to the so-called northern powerhouse than Manchester. However, many of the small towns close to it do not have the same economic viability and are characterised by low-wage, insecure employment—the northern powerhouse seems a long way from the people affected by Carcraft. How can we ensure, therefore, that economic success is not just confined to the cities, but spreads to smaller, neighbouring towns such as Rochdale so that work is created and people can seek alternative employment?
There are broader issues at stake here. As the hon. Member for Edinburgh West (Michelle Thomson) said, the Carcraft group incurred significant losses in recent years: £6.9 million in the financial year ending 30 September 2012; £10.2 million in the 18 months ending 31 March 2014; and, based on current draft management information, about £9.8 million in the 13 months ending 30 April 2015. Grant Thornton, which has been appointed as administrator, has stated that the company was hit by a poor market reputation, a lack of investment and a high cost base. In addition, it suffered from expensive loan note financing and an insolvent balance sheet. Those assessments of the company’s financial position and performance in the run-up to administration are pretty damning.
As the hon. Member for Edinburgh West said, that raises the question of what on earth the auditors were doing; I speak as a member of the Institute of Chartered Accountants and as a former auditor myself. How on earth could the auditors allow the company accounts to be signed off, given the damning assessment we have heard? Crucially, how could the accounts have been prepared on a going-concern basis, reflecting the notion that the entity would be able to remain in business for the foreseeable future? The company had an insolvent balance sheet and significant losses over a number of years, and it was crippled by expensive debt, so how did the auditors provide it with a clean bill of health? Does the Minister think that changes are needed to the audit regime, particularly with regard to inspection? Will she take a look at that?
In many regards, the closure of Carcraft reflects many of the issues seen at City Link last year. Lessons should now have been learned from that company’s demise, and they can and should be applied to Carcraft to ensure that employees, creditors and consumers are given as much clarity as possible. Will the Minister outline what the Government have done to review the requirements for consultation on redundancies during administration to clarify what employees can expect and what company directors’ specific responsibilities are? On the various categories of creditor, does she think that a review of insolvency practice is required to change the order in which creditors—whether employees, customers with warranties or others—are paid?
All In One Finance Ltd was the finance arm of the Carcraft group. The company provided loan finance for Carcraft customers to purchase vehicles and the Carcraft “Drive Happy” package—a warranty that provided servicing, MOTs and roadside assistance. In the days leading up to administration, Carcraft customers were sold warranties, but they are no longer covered. That seems incredibly unfair: it goes against the consumer on three separate levels. First, Carcraft customers bought the warranties in good faith, even though it looks as if Carcraft knew it was on the verge of insolvency. Secondly, customers may have had insurance at a discount, as a result of mitigating factors such as having good roadside assistance, MOTs and servicing in place. However, those customers now face an uplift in insurance premiums. Thirdly, customers will face a further penalty if they break down or fail to get the servicing they paid for—they will be out of pocket yet again.
All In One Finance is authorised and regulated by the Financial Conduct Authority. Will the Minister outline what protections the FCA has in place to ensure that customers are not adversely affected? Does she think the arrangements in place are adequate, or do they need refining in the consumer’s interests, in the light of what is happening with Carcraft? Given the boom in finance and warranty provision, what is in place to ensure that the customer is protected?
I thank my hon. Friend the Member for Heywood and Middleton for bringing this important matter to the House. It is right and proper that such matters are discussed, and, in the interests of Carcraft’s former employees and customers, I hope the Minister is able satisfactorily to outline the provisions the Government will put in place to ensure they are protected.
The Minister for Small Business, Industry and Enterprise (Anna Soubry)
It is a pleasure, as ever, to serve under your chairmanship, Mr Williams. I congratulate the hon. Member for Heywood and Middleton (Liz McInnes) on securing the debate. It is absolutely right and important that we debate these matters. This is an awful situation, and our heart has to go out not just to the employees who have lost their jobs, but to their families. Many of these workers will have families, who will also suffer as a result of the redundancies. Few things are more unsettling and unpleasant than losing one’s job, especially when it is through no fault of one’s own.
There are a number of points of concern in this case and I will deal with all of them, but first, on a lighter note, I should say that I am looking forward to doing battle—and working too—with the hon. Member for Hartlepool (Mr Wright). I wish everybody in his family a happy birthday, although I should tell him that the traditional way for people to do that is to send a card or make a phone call—he knows what I mean. I am sure his family will be celebrating at various levels this evening.
Now to serious matters. Carcraft employed 474 people before the redundancies, including 152 in Rochdale, where the head office was located. Some 407 employees’ redundancy claims are continuing. Carcraft had 10 sites across England and Wales at the time of administration, and a further site in Merseyside which closed in March. I can assure everyone that the Government are focusing on supporting those affected so that they can find new jobs, and we are paying eligible employees redundancy pay.
It is alleged that Carcraft sold cars for cash or on credit that have not been delivered and that extended warranties were also mis-sold. Those are serious allegations. There are also concerns about the ongoing validity of a number of warranties. I certainly take those matters seriously. Given everything that has been said today, as well as the activities of local Members of Parliament, who are clearly taking a keen interest, I am confident that if there is any allegation of wrongdoing, the relevant authorities will be properly informed and the police will become involved if necessary. I should make it absolutely clear that if it appears there has been wrongdoing, there will be full inquiries, and if there has been wrongdoing, people will be brought to justice in some way or another.
A number of hon. Members have former Carcraft employees in their constituency. The hon. Member for Stretford and Urmston (Kate Green), who made an interesting and valid intervention, has 15—that is the lowest number, according to the figures I have been given. The hon. Member for Heywood and Middleton has 152 constituents who have lost their jobs. The right hon. Member for Enfield North (Joan Ryan) has 37 constituents who have been affected. I mention that because those Members contributed to the debate.
Let me deal now with the customers. Any administration affects the customers of the failing business. Many consumers had continuing loans or direct debits with Carcraft, and they will of course be worried about where that leaves them. Some consumers will have cars or services that they have partly paid for, and they will be wondering what rights they now have, given all that has occurred. The advice is clear: they should contact the administrator—we have heard that Grant Thornton has been appointed. They may also wish to review their position with Citizens Advice or other advisers. I understand that some loans taken out by customers with Carcraft’s finance arm, All in One Finance, are now owned by another finance company. The Government—that is, my officials—have spoken to the administrators, who have informed us that the majority of straightforward hire purchase agreements on Carcraft cars were provided by third party finance companies. Those customers are being advised to contact their provider directly about repayment.
Anna Soubry
It would be absolutely wrong of me to give any advice, because I do not know the answer to that question. I can make full inquiries and write to the hon. Gentleman, but I do not know the answer. Some loans were retained by the Carcraft group, and what happens to them will depend on the type of loan that the customer had. I understand that borrowers are being notified about that.
Additionally, as we have heard, Carcraft provided an MOT, servicing, warranty and roadside assistance package known as a “Drive Happy” plan. The administrators are not able to provide for continuation of that service and have informed my officials that they intend to contact all affected customers with such a plan, to make arrangements to reduce monthly payments so that they will no longer be paying for that service. If any consumers are worried about their payments or how services might be affected, they should speak to Citizens Advice or other advisors who can explain their options and give them the quality advice they obviously need.
Hon. Members have raised concerns about directors’ conduct, and there are obvious concerns about the effect of Carcraft’s closure on jobs and the local economy. I will talk briefly about the actions that Government can take if director malpractice is suspected. Whenever a company enters administration, the conduct of its directors is looked into by the administrators. If evidence of unfit conduct is found, a director can be disqualified from acting as a director for between two and 15 years. My officials have been proactive in contacting the administrators to discuss the directors’ conduct in this case; we have already raised the matter with them.
As I set out in my response to the written question of 27 May from the hon. Member for Heywood and Middleton, the Insolvency Service made early contact with the administrators to discuss the circumstances surrounding the closure of Carcraft’s business, including the conduct of the directors. The Insolvency Service takes those matters seriously, as do all Governments. The Government are also talking to the Financial Conduct Authority, which regulates the financial services part of the Carcraft group. If there is cause for concern, it will be identified and investigated and any appropriate action taken, as I have explained. It is too early in the administration of Carcraft to form a view on the directors’ conduct, but I would mention that last year the Insolvency Service disqualified more than 1,200 directors in circumstances where their conduct fell short of the high standards that we expect of them. That of course means that they cannot do such work, which is a genuine punishment and says that their conduct does not entitle them to occupy what is an important role in any business.
As for redundancy payments, one of the hardest-hitting consequences of any insolvency is the risk of job losses and the impact on people’s lives. Although it is little consolation for the nearly 500 staff involved, they can claim certain outstanding payments, including up to eight weeks’ arrears of pay from the Government’s redundancy payments service, which has a maximum £475 a week. To make that happen as quickly as possible, the Government have already set up a dedicated team for former Carcraft employees, and to date 407 people have made use of the service—I am assuming that that is from around England and Wales. Their claims are being processed and moneys owed will be paid out as soon as possible. I want to make it clear that if any hon. Members have a single constituent who is not receiving the money they are owed, as a matter of some urgency they should not hesitate to write to me or to grab hold of me around the parliamentary estate. I take such matters extremely seriously. It is bad enough for someone to lose their job, but then not to have money that is owed to them is completely unacceptable.
Anna Soubry
I am grateful to the right hon. Lady, but that is the way I work. Some hon. Members will know that they can just come up and badger me; I do not have a problem with that, and if necessary I will go and badger whoever needs badgering. I imagine that it is very busy at Grant Thornton at the moment, which may be a reason it has not replied to the right hon. Lady’s request. If there are any problems, I do not have a problem with people coming to me.
We have set up our dedicated team, and that is the right approach. Claims are being processed, and 321 people have received or are about to receive their payment. The Government are in close contact with the administrator to make sure that there are no unnecessary delays in that payment. The redundancy payments service can be contacted either by phone on 0330 33100200 or by email to redundancyclaims@insolvency.gsi.gov.uk.
Where an employer proposes to dismiss as redundant 20 or more people at the same establishment within 90 days or less, the employer has to consult employee representatives about the dismissals and must also notify the Secretary of State of the proposed redundancies. A call for evidence is currently out for comment on what happens where employers are facing an insolvency situation and on how stakeholders think outcomes—forgive me, Mr Williams; I should have changed these words, as I do not like the word “stakeholders”. The question for comment is how anyone with an interest thinks that outcomes—results, in good plain English—might be improved in such circumstances. We want to hear from people. I would urge anyone with suggestions, including hon. Members, to contribute. Responses to that will be considered and next steps will be identified.
I want to talk about the important matter of the support that workers who have been made redundant are being offered by the Government in finding new jobs. We are helping them by ensuring that there is support to help them back into work. My colleagues at the Department for Work and Pensions have made contact with the administrators to advise them of the services available to Carcraft’s former employees. DWP will also support employees through its rapid response service. Depending on each individual’s circumstances, that can include help with CV writing and interview skills, help with identifying transferable skills and skills gaps linked to the local labour market, and training to update skills, learn new ones and gain industry-recognised certification that will improve employability. It all sounds marvellous, but if it is not out there happening in the real world, I would again urge hon. Members to badger me. We would then find out more and contact the responsible officials in the DWP. It sounds great, but it means nothing unless it is actually happening for the people who have lost their jobs.
Although the loss of jobs at Carcraft comes as a severe blow to employees and their families, overall the employment rate in Rochdale has been on the rise since 2011. Rochdale and the Greater Manchester area have also benefited from heavy investment in recent years. I do not really want to get into a party political squabble about all this, but I wanted to give some facts and figures. Two regional growth fund awards have been made to Heywood and Middleton, and that is just some of the £111 million of regional growth fund money that has been allocated to projects in the Greater Manchester area. The Growing Places fund supports key infrastructure projects designed to unlock wider economic growth and create jobs. Greater Manchester benefited from this fund, receiving £37 million.
Greater Manchester’s growth deal, announced on 7 July last year, sets out a £533 million investment programme that will support further economic growth in the area. That investment will go to the life sciences investment fund, creating apprenticeships and maximising skills investment, as well as providing major investment in local infrastructure. The growth deal also brings forward £140 million of additional investment from local partners and the private sector and will create at least 5,000 jobs by 2021. If it does not, I imagine that many hon. Members here will be holding the Government to account, and rightly so.
As well as this investment in the Greater Manchester area, the Government are committed to creating jobs and reducing unemployment across the region. The Government’s long-term economic plan—
Anna Soubry
I know, I just read it out. Do forgive me.
Our brilliant economic plan—in all seriousness—seeks to rebalance growth across the regions. We have the determination to build what is called the northern powerhouse, although I am not sure it should not be called the north of England powerhouse. Creating this powerhouse enables the northern region to reach its potential as a driving force in the UK economy and rightly gives the north a powerful voice. Even I, a representative from a constituency in the east midlands, can say that, and I promise hon. Members that I am not saying it through gritted teeth. This is an exciting new development in the way that we do growth, and I believe that it is welcomed by everybody. We are putting the emphasis on that in the north and, indeed, in all cities.
I saw a presentation on productivity, which we know we have problems with. The evidence is clear that one way to get real growth and improve productivity is to make real investment in our cities and turn them into magnets that attract investment. I was shocked to hear that some rents in great cities such as Glasgow are higher than in parts of Manhattan. We have to sort this all out. Cities are wonderful places and they can be the magnets that attract all the investment, including public money, to bring the growth and the jobs that we all want.
Mr Wright
I was trying to make this point in my speech. City regions are important. Cities are important as drivers for economic prosperity. Rochdale is a good example, relative to Greater Manchester. How do we ensure that the city region approach, with Greater Manchester and particularly the city of Manchester driving forward economic growth, spreads to areas like Rochdale?
Anna Soubry
I will be corrected by Rochdale Members if I am wrong, but in my view they are part of the Greater Manchester conurbation. Rochdale Borough Council is part of the coming together of all the councils. These things only work when everybody comes together. If a few councils do not want it, it is not going to happen. When all local representatives—the chambers of commerce, and borough and district councils as well as city councils—are working together, buying into it, it will work. I cannot imagine that Rochdale Borough Council would not let its people benefit from the northern powerhouse. It has to be done like that because it cannot be imposed by Government. It has to be agreed and driven by local government. That is what has happened in the north and around Manchester.
There are some PPI claims against Carcraft and those are likely to be an unsecured claim in administration and can be pursued through the administrator, which is Grant Thornton. I wanted to address that point in particular, although a number of points were raised. I will, of course, write to any hon. Member on any point that I have not answered.
Although the closure of Carcraft will have caused anxiety and worry for all involved, I hope that I have reassured the hon. Member for Heywood and Middleton that assistance has been, and will continue to be, provided both for former employees and for consumers and that the Government’s wider economic policy will help ensure job creation and opportunities in the region.
Liz McInnes
I am grateful to the Minister for her full response to the queries I raised, and grateful to all my hon. Friends who have taken the time and trouble to attend and contribute.
We have had a good debate. I am grateful to my hon. Friends for their appreciation, which they have expressed to me, for my securing this debate. This debate arose as a result of a question I asked during business questions. I was more or less challenged and told, “If you want to discuss this further, call for a debate.” That is exactly what I did, and I am grateful for your excellent chairmanship of this debate, Mr Williams.
I feel more reassured. I feel that I can go back to my constituents and give them some new information about assistance that they can access. However, I am conscious that an investigation is ongoing, and I will be watching the results with interest. There are an awful lot of unanswered questions. Finally, I thank everybody concerned.
Question put and agreed to.
Resolved,
That this House has considered the closure of Carcraft.