Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill
Monday 28th June 2021
(3 years, 4 months ago)
Commons ChamberRating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 View all Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Madam Deputy Speaker (Dame Rosie Winterton)
The reasoned amendment in the name of the Liberal Democrats has been selected.
The Minister for Regional Growth and Local Government (Luke Hall)
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 (Thirsk and Malton) (Con)
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
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.
Jeff Smith (Manchester, Withington) (Lab)
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.
Kevin Hollinrake (Thirsk and Malton) (Con)
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.
Peter Grant (Glenrothes) (SNP)
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
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
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.
Duncan Baker (North Norfolk) (Con)
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%.
Sarah Olney (Richmond Park) (LD)
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
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
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.
Jim Shannon (Strangford) (DUP)
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.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
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.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
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
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
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
Does the Minister have any clarity at all on the timetable so that local authorities know what to expect and when?
Paul Scully
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.
Paul Scully
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
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
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
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.