Non-UK Residents: Property Ownership Register

Baroness Barker Excerpts

Tuesday 2nd November 2021 Lords Chamber

[Lord Callanan (Con)]

The UK’s overseas territories and Crown dependencies have all now committed to introduce publicly accessible registers of who ultimately owns companies registered there by 2023, as the noble Baroness has said. They regularly share information with UK law enforcement and tax authorities.

[Baroness Barker (LD)]

My Lords, the committee looking at the draft Bill recommended that there be improved means for members of the public, journalists and NGOs who have information about beneficial owners who are not properly registered to flag up concerns with the Land Registry and Companies House. What, if any progress, has been made towards that?

[Lord Callanan (Con)]

When the register is implemented there will be considerable incentives to comply and penalties for not complying. I am sure that Companies House and the Land Registry would be very interested to hear any reports of anybody not abiding by the regulations.

Professional Qualifications Bill [HL]

Baroness Barker Excerpts

Committee stage
Monday 14th June 2021 Lords Chamber

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

We now come to the group consisting of the question of whether Clause 4 should stand part of the Bill. Anyone wishing to press this to a Division should make that clear in debate.

Debate on whether Clause 4 should stand part of the Bill.

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Clause 4 agreed.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

We now come to the group consisting of Amendment 34. Anyone wishing to press this amendment to a Division must make that clear in debate.

Amendment 34

Moved by

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[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank all noble Lords for participating in this short debate, and I thank the noble Baroness, Lady Hayter, for the amendment and the noble Baroness, Lady Blake, for presenting it so ably. I welcome the opportunity to consider the important issue of mutual recognition of statutory audit qualifications in the UK and the audit qualifications in other jurisdictions.

The Companies Act 2006 provides that these may be agreed on a reciprocal basis by the Financial Reporting Council—FRC—on behalf of the UK Secretary of State, with the competent authority of an overseas jurisdiction. Amendment 34 would give the FRC the discretion to relax the standards of compliance that overseas qualifications must meet before they can be recognised in the UK. It would not compel the FRC to relax those standards but would enable it to do so where it considers this appropriate as part of a reciprocal agreement.

The UK’s audit sector is highly respected and valued both domestically and across the world. The Government are currently consulting on the White Paper Restoring Trust in Audit and Corporate Governance. These reforms are needed because there have been a number of examples of poor practice and poor standards in UK corporate audit that have risked the UK’s reputation as a safe and trusted place to do business—a number of noble Lords, including the noble Lord, Lord Palmer, have just mentioned this. We therefore need to be careful when considering the framework to allow individuals to undertake statutory audit in the UK to ensure that it is robust and maintains the UK’s high standards and reputation.

While this amendment would only provide the ability for the regulator to apply looser requirements to recognising other nations’ qualifications, it would open the door to concerns of loosening standards and reduced oversight. It would also expose the regulator to pressures to use the flexibilities provided in cases where this might not be in the best interest of the UK profession or its clients. The statutory audit profession in the UK has a comparatively strong reputation internationally for the standards that it maintains. The Government are working hard to maintain this reputation, and we would not wish either the UK’s standards or its reputation to be devalued.

The Government acknowledge that an essential part of maintaining our standards and reputation internationally is to seek to influence developments in corporate reporting and audit by building links to other regulators that are prepared to uphold comparable standards. The ability for UK auditors and those with comparable qualifications overseas to exchange and transfer experience is an important part of this.

The noble Baroness, Lady Blake, asked why the audit reform was not included in the Queen’s Speech. The reform of audit and corporate governance is a priority for Ministers. We have promised to legislate on an appropriate timetable, and the Government do not intend to add new requirements at a time when they would hold back businesses’ recovery from the pandemic. By the time of presenting proposals to Parliament, the Government want to be confident that they are effective and command broad support. Consultation on the Government’s White Paper is open until 8 July, and Ministers look forward to contributing to the BEIS Select Committee’s inquiry into the delivery of audit reform.

I believe that the regulator can already make agreements with international counterparts to this end, so I ask the noble Baroness to withdraw her amendment.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

I have received a message from the noble Baroness, Lady Noakes, who wishes to speak.

[Baroness Noakes (Con)]

Could my noble friend the Minister explain why, in Clause 1, which we know will be applied largely to the medical professions—we are therefore dealing with patient safety—it is adequate for medical professions if

“a specified regulator of the specified regulated profession has made a determination that the overseas qualifications … demonstrate substantially the same knowledge and skills”,

but, somehow, a different standard is implied when the much more mundane activity of auditing is involved? I do not quite understand how the Minister can have one view of the medical professions and another of what happens in the accounting profession. Can she explain that contradiction?

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Amendment 34 withdrawn.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

We now come to the group beginning with Amendment 34A. Anybody wishing to press this or anything else in this group to a Division must make that clear in debate.

Amendment 34A

Moved by

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Amendments 48 and 51, tabled by the noble Baroness, Lady Garden of Frognal, probe the use of the word “substantially” in Clauses 9 and 10 and are similar to amendments debated and withdrawn on the first day in Committee. As I set out in that debate, the use of the word “substantially” reflects the reality that professions do not exactly align across different jurisdictions’ regulatory systems and standards. For example, some countries do not make the same distinctions as others in how they define professions. As I have previously cited in your Lordships’ House, for example, England and Wales distinguish between barristers and solicitors, but this is not the case in other countries. These amendments would, therefore, require absolute parity between professions in different jurisdictions, which could impinge on regulators’ flexibility in exercising their discretion on this point, as well as opening them up to the potential for legal challenge. I therefore ask the noble Lord to withdraw his amendment, and I commend that Clause 7 continues to stand part of the Bill.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

I have received a request to speak after the Minister from the noble Lord, Lord Fox.

[Lord Fox (LD)]

I thank the Minister for her response. I am having trouble matching the words that she is using with the thing that she is describing. That is my problem. The words “a website run by two people” and “assistance centre” are not really the same, so are we talking about an assistance centre or a landing page? When I talked about a landing page the other Minister kind of nodded. It would help if the Government would clear up what this thing actually is and, in so doing, tell us how much they think it will cost.

The specific question I have is about data. The Minister seemed to suggest that in order for this centre/website to conform to existing data protection regulation it needed guidance in primary legislation. Is that because it will be asked to do more data protection, less data protection or the same amount? If it is the same amount of data protection, why does it need primary legislation to tell it what to do?

Net-Zero Carbon Emissions

Baroness Barker Excerpts

Wednesday 21st April 2021 Grand Committee

[Lord Bhatia (Non-Afl) [V]]

My Lords, a whole-system approach enables decision-makers to understand the complex challenges posed by the net zero target and to devise solutions and innovations that are more likely to succeed. It is a discovery process combining structured approaches to understanding and managing physical factors—such as infrastructure and novel and advanced technologies—with broader perspectives on economic, behavioural and other issues, taking into account complex interactions. This systematic approach will help to manage the associated uncertainties, including technical and behavioural factors, and will require the use of both quantitative and qualitative approaches, including systems engineering.

Achieving net zero by 2050 is a system transformation challenge. A clear understanding of the entirety—[Inaudible]—an interconnected programme of work, driven by data and analytics, with responsibility aligned behind a single goal. A number of steps have to be taken to develop the analytical capabilities, flow of information and reporting needed to inform decisions, as follows.

First, the Government should require all regulators to develop an explicit first-order objective to support the transition to net zero by 2050. Secondly, to enable transparency and accountability across government, the Government should undertake and publish carbon emissions assessments for all public sector policies, including major infrastructure projects or investments.

Thirdly, the Government should bring together public sector funders to develop a bold, coherent, mission-driven programme of public sector research and innovation investment to achieve net zero. This body should have the level of authority to influence spending decisions across departments, influence the strategic direction of UKRI programmes and set out opportunities for leveraging business activity.

Fourthly, to support the development of decarbonisation technology and infrastructure, the Government should consider establishing a national infrastructure investment plan, with an explicit mandate to support the transition to net zero, to help manage risk, partner with the private sector and bring down the cost of finance. Fifthly, to help households, businesses and public service providers make the investment needed to deliver the transition to net zero, the Government should work with private sector financial institutions to establish frameworks and instruments to give them access to the required finance and support.

Sixthly, the Government should announce a clear, credible domestic plan for achieving net zero, to set an example that could help inspire international action and commitment under their presidency of COP 26 in Glasgow. They should build into their work the objective of fostering international action and international collaborations on trade, investment, finance, technology, capacity building and R&D.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, there is a Division in the Chamber. The proceedings will be adjourned for five minutes.

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[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, we are ready to resume our debate. We return to the noble Lord, Lord Bhatia.

[Lord Bhatia (Non-Afl) [V]]

My Lords, getting to net zero will be a big challenge but will create millions of new jobs and improve the UK economy, which suffered huge job losses due to Covid-19.

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

First, I join others in congratulating the noble Lord, Lord Teverson, on securing this debate this afternoon. We have had some excellent contributions from all parts of the House, highlighting what is one of the most important issues of our time. Of course, while we presently find ourselves in the middle of a health pandemic which has to be our top priority, we also need to give this issue all the attention that it so dearly warrants. The Government absolutely accept and are determined that the UK will play its part in upholding the Paris Agreement and driving down our greenhouse gas emissions. Despite the considerable challenges we face, we can leverage our strengths to deliver a better and greener economy and go further and faster to accelerate the transition to net zero greenhouse gas emissions by 2050.

We need look only at what has happened with coal and wind in the last few decades, or the political consensus that has formed around reducing our emissions, to see that this is something that the whole nation is embracing. We were the first major economy in the world to set a legally binding target to reach net zero across our economy by 2050. As many noble Lords have pointed out, today marks another important step forward as we lay legislation for the UK’s sixth carbon budget, proposing a target which would reduce greenhouse gas emissions by 78% by 2035 compared to 1990 levels.

To respond directly to the challenge from the noble Baroness, Lady Bennett of Manor Castle, on where the UK is leading on action, I am sure she has noticed that we are achieving extremely rapid progress on decarbonisation. We have shown that it is possible alongside a thriving economy. Our emissions are down by almost 44% across the past 30 years, and our economy has grown by 78% in the same period.

Under the Climate Change Act 2008, we have made significant progress in meeting our climate targets. We confidently met our first two carbon budgets and we are projected to meet the third out to 2022. We exceeded the required emissions reduction in the first carbon budget by 1.2% and in the second by nearly 14%. Now is the time to double down and decrease our emissions further and faster.

To do this, the Prime Minister has set out his 10-point plan for the UK to lead the world into a new green industrial revolution. This innovative programme sets out ambitious policies backed by £12 billion of government investment. The plan will support up to 250,000 highly skilled green jobs across the UK, accelerate our path to achieving net zero by 2050 and lay the foundations for building back greener.

The 10-point plan will also help to develop the cutting-edge technologies that will be needed to drive down emissions in industry across the UK, such as through our significant investment into hydrogen and carbon capture technologies through our £1 billion Net Zero Innovation Portfolio. This will provide support to sectors which are some of the toughest to decarbonise. The Government recognise the significant advantages that the net-zero transition can bring in addition to the essential benefit of ending our contribution to global warming.

In response to my noble friend Lady Altmann and the noble Lord, Lord Oates, I can say that ahead of COP 26 we will bring forward an ambitious net-zero strategy to cut emissions and create new jobs and industries across the whole country. This will go further and faster towards building a stronger, more resilient future and protecting our planet for this generation and those to come. It will build on today’s announcement on the level of carbon budget 6 and ambitious plans across key sectors of the economy, including the energy White Paper, the transport decarbonisation plan and the heat and buildings strategy. The strategy will set out more clearly our plans and proposals for delivering the historic commitments that we have made.

The noble Lords, Lord Teverson, Lord Shipley and Lord Oates, and my noble friend Lady Altmann, all drew attention to the importance of government working closely with local government to help deliver net zero. It is fair to point out that a significant amount of support has already been made available to councils to act on climate change, from heat networks to cycle paths to flood defences. Councils are uniquely positioned to align local needs, local opportunities and local resources to deliver strategic intervention at all scales.

For those who recognise the urgency of the climate crisis, a great deal of funding is available. In the current financial year, the Government have provided several targeted funding schemes, including the £1 billion public sector decarbonisation fund. BEIS and the Government more widely also work with local authorities across a broad range of net-zero policies. For many of these policies, such as heat networks, EV charging and retrofit, local authorities are some of our key delivery partners. As part of developing these projects, BEIS will consult stakeholders either formally or informally, and ideally both. Local authorities and community groups are important stakeholders and, as such, we have a local energy contact group specifically set up to discuss policy with them. Furthermore, the BEIS local energy programme, set up in 2017, provides capacity and capability support to local authorities through the five local energy hubs.

In his introduction, the noble Lord, Lord Teverson, asked whether the Government would consider a road map for working with local authorities towards net zero. The net-zero strategy will indeed look at this issue further. It will specifically include a focus on place-based approaches and we will continue to stay closely engaged with local partners through forums such as the ADEPT Energy Working Group and the Core Cities sustainability sub-group, and of course the LGA itself, as we develop this strategy.

Further on local authorities, my noble friend Lady Altmann and the noble Lord, Lord Shipley, spoke about plans to decarbonise local authority pension fund assets. The Ministry of Housing, Communities and Local Government will consult later this year on requiring the Local Government Pension Scheme fund to manage and to report on climate risks. On private sector pensions, Parliament has now approved the Pension Schemes Act to allow us to require more effective governance of climate risk and disclosure in line with the task force on climate-related financial disclosures.

The noble Lord, Lord Whitty, asked about plans for integrating policy across Whitehall. He was right to point out that it is a considerable challenge; I think the noble Lord, Lord Oates, also highlighted some of the difficulties that we face in working with some other government departments. The Government aim to take a whole-systems approach to reaching net zero by 2050. This means considering policy areas and economic sectors as part of an interconnected system where changes to one area directly or indirectly impact others.

The National Audit Office has acknowledged that there has been significant progress on net-zero governance and that this reflects the high priority the Government give to the issue. That includes two Cabinet committees dedicated to climate change—one focused on strategy, chaired by the Prime Minister, and the other on implementation, chaired by the president of COP 26.

My noble friend Lord Caithness, and the noble Lords, Lord Grantchester and Lord Redesdale, all asked whether there should be a dedicated Minister for the climate and biodiversity. It is not unusual for government agendas to span many departments. The answer is rarely to move it all into the Cabinet Office or to make all departments have similar responsibilities. The Prime Minister has shown his commitment to net zero by taking the chair of the CAS. The Cabinet committees hold Secretaries of State to collective responsibility for delivery. The focus on net zero is borne out by results of government action, including of course the 10-point plan.

My noble friend Lord Caithness asked how often these committees have met. I am afraid I can tell my noble friend only that Cabinet committees meet as and when required. He will be aware from his time that there is a long-standing convention that the frequency, attendance list and minutes of Cabinet and its committees are not made public. The release of that information could undermine the principle of collective agreement and the ability of Ministers to openly debate policy in a confidential manner.

The noble Lords, Lord Teverson and Lord Grantchester, and the noble Baroness, Lady Hayman, all asked for an update on the net-zero task force announced through the 10-point plan. I can tell noble Lords that a further announcement will be made in due course.

The noble Baroness, Lady Sheehan, and the noble Lords, Lord Stunell and Lord Shipley, asked, correctly, about plans to decarbonise the built environment in the light of developments that noble Lords will be aware of regarding the green homes grant voucher scheme. I can tell the Committee that we are firmly committed to decarbonising the UK’s homes and buildings, and that emissions from public buildings have come down by 42% since 1990. As has been stated, meeting our net-zero target will require virtually all heated buildings to be decarbonised.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, there is a Division in the Chamber. The Committee will adjourn for five minutes.

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[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, the Grand Committee is resumed. Lord Callanan?

[Lord Callanan (Con)]

The Government are planning to publish a heat and buildings strategy in due course. This will set out the immediate actions that we will take to reduce emissions from buildings. These actions will include the deployment of energy-efficiency measures and low-carbon heating, as part of an ambitious programme of work required to enable key strategic decisions on how we achieve the mass transition to low-carbon heat, setting us on a path to decarbonising all homes and buildings.

The green homes grant voucher scheme, referred to by many noble Lords, made significant strides—although not enough—with over 49,000 vouchers worth £208 million issued. To ensure that we continue to deliver on our net-zero ambitions, the Government have expanded their commitment to the green homes grant local authority delivery scheme and the social housing decarbonisation fund, with an extra £300 million of additional funding delivered across these schemes in 2021-22. That will bring the total spending on energy- efficiency measures to £1.3 billion, exceeding the Government’s manifesto commitment of £1 billion.

The noble Lord, Lord Shipley, asked about the decarbonising of the transport system. The Government recognise the urgency of stepping up the pace of progress to ensure that the transport sector plays its part in supporting the delivery of the UK’s emissions reduction targets. We have recently announced that the UK is embarking on a comprehensive transport decarbonisation plan, which will be a bold and ambitious programme of co-ordinated action needed to end the UK’s transport greenhouse gas emissions by 2050 and at the same time ensure that the transport sector plays its part in delivering our legally binding carbon budgets. The plan will think in terms not only of modes of transport but of technology and places. Part 1 of this plan was published in March 2020, with part 2, containing policies and proposals, expected shortly.

The noble Lord, Lord Knight of Weymouth, described an aversion to green spending. The outcome of the 2020 spending review counters this impression: in order to ensure that net zero remained a priority within a one-year spending review, the Treasury made exceptions on measures that are critical to meeting net zero by providing some multiyear settlements. SR20 committed £12 billion to green measures, boosting the UK’s global leadership on green infrastructure and technologies, ahead of COP 26 next year.

The noble Baroness, Lady Sheehan, asked about the alignment between revenue and net zero. Government cannot simply spend its way to net zero, not only because bearing the cost alone is simply unaffordable for current and future taxpayers but because spending is often not the most effective way to reduce emissions. It also risks crowding out private investment in the green industries of tomorrow: for example, while the 10-point plan will mobilise £12 billion of government funding directly, it will potentially drive three times as much from the private sector to create and support up to 250,000 green jobs.

The noble Lord, Lord Grantchester, asked about the Treasury’s net-zero review. The Government have announced that the review report will be published in spring this year, instead of its originally intended target date of autumn 2020. In the meantime, Her Majesty’s Treasury published an interim report this autumn, which sets out our approach to the review and analysis, which will inform the final report.

The noble Lord, Lord Knight of Weymouth, asked about our plans for the public sector. I can tell him that phase 2 of the public sector decarbonisation scheme has now been launched and has a stronger focus on heat decarbonisation, as this is what we need to reduce direct emissions from public sector buildings. Phase 2 of the scheme supports the transition to low-carbon heating in public buildings by providing funding to replace end-of-life fossil fuel systems, such as gas boilers, with low-carbon heat sources. The funding can be used to deliver projects that combine low-carbon heating measures, such as heat pumps, with energy-efficiency measures, such as insulation and LED lighting. Phase 2 of the public sector decarbonisation scheme has now closed to applications, and those that we received are being assessed.

The noble Baroness, Lady Altmann, raised the interesting issue of the Government’s plans for bitcoin and other cryptocurrencies. As always, the Government stand ready to respond to emerging risks or changes in the market and will continue to monitor how cryptoassets are being used in the UK, specifically with regard to the emissions that they create. This is an important point, but it is also vital to consider this in the context of the UK’s success in decarbonising the power sector. Between 1990 and 2019, the sector saw a reduction of emissions of 71%.

The noble Lord, Lord Redesdale, made some good points and asked about the potential to include a requirement for companies that fall within streamlined energy and carbon reporting to include an outline of their net-zero plans. It is important to note that, for most organisations in scope, this will be the first time that they will be reporting this information in company reports on a mandatory basis. We will therefore keep under review whether to mandate other types of disclosures, such as those that address the net-zero target, as we continue to evaluate the impact of these regulations and how the new reporting practices are being embedded.

In response to points made by the noble Lord, Lord Lea of Crondall, I can say that the Government already publish estimates of historic and projected UK emissions annually. Later this year, we will publish a net-zero strategy that will consider what metrics are needed to monitor delivery of our emissions targets, and will take the noble Lord’s helpful suggestion into account.

The noble Lord, Lord Knight of Weymouth, asked how the Government could elicit the behaviour change necessary to meet net zero. Reaching net zero requires not only changes to our energy systems and substantial new low-carbon infrastructure, but shifts in how we, as individuals, travel, what we buy and how we use energy in our homes. In many areas, delivering net zero will require the uptake of new lower-carbon technologies, such as electric vehicles or heat pumps. The Government are supporting people to adapt to these new technologies, with initiatives such as Go Ultra Low and the Simple Energy Advice service. We are also exploring how we could go further and support individuals to make green choices, as part of the development of our net- zero strategy.

In response to the question from the noble Baroness, Lady Hayman, regarding the Climate Assembly UK, I can tell her that the right honourable Alok Sharma as BEIS Secretary of State spoke at the report launch and welcomed the report. Its findings will help to shape the work that the Government are doing over the next year in the run-up to COP 26 and as we develop our plans for reaching net-zero emissions by 2050.

In response to the points made by the noble Baroness, Lady Sheehan, I can say that the Government have committed to issuing their first sovereign green bond. Subject to market conditions, this will be done this summer. Reflecting our long-term commitment to the green finance sector, we intend to follow up with a further issuance in 2021 to start to build out a green gilt yield curve.

On how to finance local authorities, the UK Infrastructure Bank has £4 billion set aside for local authority lending at very favourable rates. Furthermore, the Government launched the Green Finance Institute in July 2019, alongside the City of London Corporation. The GFI’s overarching mission is to accelerate the domestic and global transition to a clean, resilient and environmentally sustainable economy through accelerating UK leadership in green finance. Since its inception, the GFI has progressed significantly with initiatives and coalitions established on the built environment, transport, supply chains, and using finance to deliver nature-based solutions.

The noble Baroness, Lady Altmann, asked what could be done to encourage sustainable investments. Our new and ambitious UK ETS came into force on 1 January and will promote cost-effective decarbonisation in industry, power and aviation, allowing businesses to cut carbon where it is cheapest to do so. It will help to mobilise the scale of capital investment necessary, deploy clean energy technologies and capture new trade opportunities on the back of the energy transition.

In response to the points made by the noble Baroness, Lady Bennett of Manor Castle, I can tell her that the Government are currently consulting on a bottle deposit return scheme for England, Wales and Northern Ireland. With regard to the UK shared prosperity fund, a point raised by the noble Baroness, Lady Sheehan, I can say that the 2020 spending review sets out the main strategic elements of the UK SPF in the heads of terms, and the Government will shortly publish a UK-wide investment framework later this year and confirm the multiyear spending profiles at the next spending review.

As we develop our plans for reaching net-zero emissions by 2050, we will of course continue to engage with local authorities, devolved Administrations, businesses and the public on the changes needed to develop our ambitions to reach net zero. I know that I can speak for my right honourable friend the Secretary of State when I say that significant work is under way to engage with stakeholders across society at pace to understand how the transition can best work for the whole country.

This year we find ourselves in the extremely privileged position of being both president of the G7 and host of COP 26, and we are determined to use both those key international moments to promote ambitious action to deliver the transformational change required by the Paris agreement. Ahead of COP 26, we will bring forward further bold proposals, including a net-zero strategy to cut emissions and create new jobs and industries across the whole country, going further and faster towards building a stronger, more resilient future and protecting our planet for this generation and those to come.

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Motion agreed.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.

Grand Committee adjourned at 6.01 pm.

Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2020

Baroness Barker Excerpts

Monday 16th November 2020 Grand Committee

Motion agreed.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

The Grand Committee stands adjourned until 5 pm. I remind Members to sanitise their desks and chairs before leaving the Room.

Common Rules for Exports (EU Exit) Regulations 2020

Baroness Barker Excerpts

Tuesday 10th November 2020 Grand Committee

[Lord Grimstone of Boscobel (Con)]

My Lords, I thank Members for their contributions and will respond as fully as I can in the time available. I am conscious that I will not be able to do full justice to the many points that have been raised which, as always, show the great expertise of your Lordships. If I may, I will write to those noble Lords whose questions I am not able to do justice to during my closing statement.

As I have set out in my opening remarks, the SI makes technical amendments to the retained domestic version of the EU common rules for exports regulations. This will ensure that the retained EU regulation can apply effectively at the end of the implementation period. Many of the complexities to which noble Lords have referred are not as a consequence of this SI, which in a sense has quite a simple purpose; they relate to the complexity of the underlying regulations of the EU. I repeat that the purpose of this SI is to make technical changes to those regulations to bring them into line with our leaving the European Union.

This is a debate about the application of the retained EU regulation as amended in relation to Great Britain. I completely understand the many and varied points that noble Lords have made about Northern Ireland, but for those who want additional information about Northern Ireland, I direct colleagues to the Government’s Command Paper, The UK’s Approach to the Northern Ireland Protocol. This sets out that any procedures that are necessary to comply with any international obligations provided for under Article 6(1) will apply only to—and I stress this—minimal volumes of relevant trade. I take this opportunity to make absolutely clear that any such processes put in place in these very specific cases will have negligible implications for trade as a whole. An important point is that they will be administered by UK authorities, which will, of course, retain operational responsibility. I assure noble Lords that these authorities are able to, and will, exercise their discretion as appropriate.

To make it clear to noble Lords, I repeat that, as I set out in my opening remarks, Article 6(1) of the Northern Ireland protocol makes it clear that nothing—I repeat, nothing—shall fetter the movement of goods from Northern Ireland to Great Britain, except in order to fulfil an international obligation. The EU regulation is not used to fulfil international obligations, and therefore will not fetter the movement of goods from Northern Ireland to Great Britain. The noble Lord, Lord Wallace, asked where on earth these international obligations come from. They come about if the UK agrees to enter into any such international obligation and agrees to be bound by them.

Since the regime in Northern Ireland will be unchanged after the end of the implementation period, the United Kingdom Government will still be able to implement export restrictions in Northern Ireland in circumstances permitted by Article 10 of the EU regulation; that is where they are required on grounds of public policy, or for the protection of health and life for humans. These restrictions under Article 10 are very specific in this effect, and noble Lords can see those in the original regulation.

I ought to again make it clear that this SI is compatible with the United Kingdom Internal Market Bill. The objective of the United Kingdom Internal Market Bill is to protect the highly integrated market across the United Kingdom, guaranteeing that, as EU law falls away at the end of the year, companies will be able to continue to trade unhindered in every part of the United Kingdom. This SI will ensure that the retained EU regulations on the common rules for exports will operate effectively in Great Britain from the end of the implementation period. As I have described, in no way will trade be fettered between Northern Ireland and Great Britain, except in circumstances not covered by these regulations, and therefore perhaps not appropriate for us to debate in great detail today.

A number of noble Lords, including the noble Lords, Lord Blencathra and Lord Purvis of Tweed, asked how the role of Parliament operates and, in particular, about the differences between Articles 5 and 6. As I said earlier, the role of Parliament is as set out in Article 7A in the regulations. The difference between why that article is subject to the negative resolution procedures and Article 6 is subject to the affirmative procedure relates directly to the urgency of the situation in front of us.

Let me explain further. If the Secretary of State implements a measure under Article 5 of the retained EU-authorised regulation as amended, that export authorisation can only be implemented for up to six weeks to prevent a critical situation arising on account of a shortage of essential products or to remedy such a situation. That seems appropriate if the urgency is such that this has to be brought forward quickly and last for only six weeks. A negative resolution SI, which can be annulled in either House of Parliament, is therefore appropriate. If the Secretary of State implements measures under Article 6 of the retained EU regulation as amended, they can take a wider range of forms and are not time-limited. In those circumstances, because of the greater scan, scope and longevity of such regulations, they would be set out in a “made affirmative” SI, which must be voted on within 40 days of being made.

The noble Lord, Lord Purvis, asked about the information that would be available at that time and drew a contrast with the Commission report under the EU regulation. In both cases, further information would be provided to the Houses of Parliament as part of an Explanatory Memorandum. I can assure noble Lords, particularly the noble Lord, Lord Wallace of Saltaire, that in coming to their conclusions about the necessity for the use of regulations, the Government would take account of the whole UK and, if necessary, any views expressed by the devolved Administrations.

I should stress that we are not rushing or looking to find ways in which to use these powers. The Government have been clear throughout the Covid-19 pandemic that the use of export restrictions around the world should as far as possible be limited. No one would be happier than us if we found that we never had the need to use these powers. The Prime Minister underlined that view recently in a speech to the United Nations, in which he urged countries to lift export controls on Covid-critical products wherever possible. The Government have no plans at present to bring forward further export restrictions under this retained UK regulation.

The Government do not apply any restrictions on medicines under these regulations and do not intend to do so. I can reassure the noble Lord, Lord Wallace of Saltaire, on those points. The UK applies certain limited restrictions on the export of medicines designed for UK patients on the UK market where there is a risk of a shortage in the UK, but those restrictions are made pursuant to the Human Medicines Regulations 2012, which require wholesalers to ensure, as far as possible, that the needs of patients in the UK are met.

In conclusion, my noble friend Lord Blencathra asked about Project Defend, as it is commonly known. The coronavirus pandemic has demonstrated the importance of resilient supply chains to ensure the continued flow of critical goods and to keep global trade moving. We are working closely across the Government to analyse UK supply chains for a range of critical goods, excluding food, and to help define strategies to ensure that the UK has resilient and diverse critical supply chains.

My noble friend Lord Trenchard asked about how this SI would technically operate in conjunction with the retained EU regulation. It amends the retained EU regulation, which then passes into UK law in this amended form if noble Lords agree to these regulations today.

I have my eye on the clock and am conscious that I have not done full justice to the detailed points raised by noble Lords. As I said at the beginning of my wind-up, I will write to them and place a copy of my reply in the Library. On that basis, I commend these regulations to the Committee.

Motion agreed.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

The Grand Committee stands adjourned until 6.15 pm. I remind noble Lords to sanitise their desks and chairs when leaving the Room.

Prevention of Trade Diversion (Key Medicines) (EU Exit) Regulations 2020

Baroness Barker Excerpts

Tuesday 10th November 2020 Grand Committee

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.

Committee adjourned at 6.40 pm.

Trade Bill

Baroness Barker Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Thursday 1st October 2020 Grand Committee

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

I have received a request to speak after the Minister from the noble Baroness, Lady McIntosh of Pickering.

[Baroness McIntosh of Pickering (Con) [V]]

I am grateful to my noble friend Lord Younger for explaining in some detail the negotiating mandate we have agreed with the US. Could he confirm that this extends to animal welfare, as well as environmental protection standards, which is the subject of Amendment 69?

I was a little confused when my noble friend Lady Noakes talked about tomatoes. I had not talked about tomatoes, but there we are. The Minister referred to “unintended consequences”, which I am loath to envisage, and specifically to tea, cocoa and bananas. I understand that they are largely covered by fair trade provisions for marketing in the UK. Is that indeed the case?

--- Later in debate ---

Amendment 12 withdrawn.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

We now come to the group beginning with Amendment 13. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate.

Amendment 13

Moved by

Trade Bill

Baroness Barker Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 29th September 2020 Grand Committee

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, we now come to the group beginning with Amendment 11. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate.

Amendment 11

Moved by

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank the noble Baroness, Lady McIntosh of Pickering, for her support for this amendment.

This group deals with high-level considerations—whether we should have constraints and, if so, whether they should be introduced through primary legislation should the Government wish to depart from international agreements or standards which are subject to international treaties such as UN conventions.

We are of course party to a large number of international agreements. The amendment deals in particular with provisions of international treaties that have been ratified—for example, those on the sustainable development goals, international human rights law, international humanitarian laws, the obligations relating to workers’ rights and labour standards, which we have already discussed under the ILO’s Declaration on Fundamental Principles and Rights at Work, and various others relating to matters such as women’s rights and the rights of children, although of course they are not limited to just the conventions that we have, such as the UN Convention on the Rights of the Child. So the list is very long and very important, and I am sure that no Government would wish to see us depart from any or all of them, should we be in a position to do so, simply for particular trade reasons.

Later groups will deal with our self-generated standards, and there are considerable overlaps. So in a sense this is perhaps a two-part debate, and this one will focus on the outward arrangements that we make with external agencies. But it should not constrain us, and I hope that the Minister will not keep his powder dry, as he said he would in an earlier debate on another issue.

Having said that, I suspect that the Minister’s line will be that the Government will always adhere to the rule of law and treaty obligations, but I think it is fair to point out that trust has already been broken through the Government’s own actions. Even so, it raises the question of why, if there is never to be an occasion on which we would wish to depart from our existing treaty obligations, we are talking about any constraints on the activities that the Government might wish to engage with in terms of their primary legislation agenda related to trade. However, that is for further discussion.

Also in this group is Amendment 18, led by my noble friend Lord Hendy, and that will lead to an interesting debate. In addition, the points made by the noble Lord, Lord Alton, and his powerful Cross-Bench supporters on Amendment 33 will be worth hearing and discussing. We also have an amendment in the name of the noble Lord, Lord Purvis, about reporting arrangements in relation to trade agreements, which I think will also be of value. I beg to move.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

I call the noble Baroness, Baroness McIntosh of Pickering. No? I think the noble Baroness is unable to join us at this point, so I call the noble Baroness, Lady Bennett of Manor Castle.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I rise to speak primarily to Amendment 11, to which I attached my name, as moved by the noble Lord, Lord Stevenson of Balmacara, and in the name of the noble Baroness, Lady McIntosh. I thank the noble Lord for his very clear introduction.

We are well aware that compliance with international law is something of a sore point now, so on the basis of that sensitivity, one would hope that the Government would adopt this amendment as a matter of course. They have the opportunity, by agreeing with this amendment, to demonstrate their belief in the rule of law. However, it has to be said that we have, as the amendment includes, signed up to the sustainable development goals, but we are not on track to deliver a single one of them, even in our own country. UK trade and UK actions are damaging the push towards sustainable development goals all around the world. We need accountability and leadership, and we need a legal framework, which Amendment 11 would supply.

I will also speak briefly in support of Amendment 18, which seeks to guarantee the ILO conventions and the European Social Charter. Many years ago, I prepared a report for the ILO on child labour in Thailand. If I had needed a reminder of the importance of regulation, the rule of law and the risk of exploitation, I certainly had it with that. Given the reports that we have had from the garment sector in Leicester, those experiences are not as foreign as we might once have thought. Protecting workers’ standards around the world has impacts on workers’ standards in our own country.

I will also speak briefly in support of Amendment 33 in the name of the noble Lord, Lord Alton. In doing so, I will quote another Member of your Lordships’ House, the noble Lord, Lord Patten of Barnes, in a meeting this morning of the All-Party Parliamentary Group on Hong Kong, of which I am a co-chair. He spoke of a sense of moral values being a bigger part of our foreign policy. I very much agree. I suggest that we also need to see that in trade policy, particularly in the purchasing practices of our Government. This amendment allows democratic oversight of key government procurement.

Finally, I will speak to Amendment 45 in the names of the noble Lord, Lord Purvis of Tweed, and the noble Baroness, Lady Kramer, reflecting the need to undertake human rights and equalities impact assessments of all trade deals before and after implementation. I am very aware that noble Lords have not yet spoken to all these amendments—I am reflecting the written material —but the same argument applies as in Amendment 33, and also the comments I made in my first contribution to this Committee. “First do no harm” is a medical phrase that, if applied to trade over recent decades, would have produced far less trade and a far healthier, less poverty-stricken, more rights-respecting, less damaged world. Given the fragile state of this planet and its people, we have no alternative but to apply that principle in our future trade policies, and the amendments I have named take us some steps in that direction.

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[The Deputy Chairman of Committees (Baroness Barker) (LD)]

I call the next speaker, the noble Lord, Lord Adonis. No? Therefore, I call the next speaker on the list, the noble Baroness, Lady Falkner of Margravine.

[Baroness Falkner of Margravine (CB)]

My Lords, I intend, unusually, to part company with my noble friend Lord Alton of Liverpool and shall speak against Amendment 33. Before that, I shall spell out why I think that amendment has come about, although some of what I shall say has been covered by him.

The motivation for Amendment 33 lies in the Telecommunications Infrastructure (Leasehold Property) Bill, which we last debated on 29 June. We were given an assurance then that the Government would return at Third Reading with an amendment to give legislative teeth to human rights safeguards in the use of infrastructure. The Minister, the noble Baroness, Lady Barran, assured the House that, when the Bill returned for Third Reading, the Government would have drafted a suitable amendment. On that basis, we were willing not to test the opinion of the House. We are still waiting for that Bill to return, and the Government have spurned an opportunity to have a limited, reasonable amendment. As a consequence, we have this sweeping proposal before us, which I was surprised was found to be in scope of this Bill.

My first point relates to paragraph 44 of the Explanatory Notes, which has been touched on previously by the Minister, the noble Lord, Lord Grimstone. Clause 2(1) refers principally to EU continuity agreements, but I cannot see how Amendment 33 is in scope. The agreements concerned would already have been scrutinised by the European Parliament, which I do not consider normally to be lax in its duty to recall human rights implications.

I also note, as the noble Lord, Lord Alton, said, that attempts are under way for UK courts to determine whether genocide is taking place in other countries. While I know that trade with China is the object of concern of many of these amendments, they could be used much more widely. I shall turn to the unintended consequences of such amendments in a moment.

However, I oppose Amendment 33 for three principal reasons: the impossible burden of scrutiny on Parliament for such large categories of goods; the breadth of critical infrastructure included in an overly comprehensive list; and the exclusiveness of the definition of “democratic”, or “non-democratic”, thereby taking in more than half the countries of the world.

Amendment 33 is overly comprehensive, in that it seeks an interventionist role for Parliament in agreeing regulations that cover so many facets of infrastructure that it would render Parliament as an inspectorate of all commerce. If we are truly to be charged with each resolution laid before us concerned with the 11 broad areas of commercial transactions in the five years envisaged—perhaps five years more, if the proposal is rolled over—we may do little else.

Let me take the first category, which is “critical infrastructure”. Incidentally, critical infrastructure is not defined here, so I looked it up. Critical infrastructure,

“is a term used by governments to describe assets that are essential for the functioning of a society and economy”.

That is incredibly broad, and very little is not covered by it. In the UK, the Centre for the Protection of National Infrastructure is the relevant representative body. I therefore ask the proposers of these amendments to say, when they conclude, if they have consulted that body in drawing up their sweeping list of categories, given that little would not be caught by the amendment.

My more significant concern is to do with how the movers have defined what they see as non-democratic countries. The four pre-requisites are perfectly clear, and most of us would agree with them as essential to what we might perhaps define as western-style liberal democracies. Therein lies my concern. If Parliament has to approve trade measures with all those countries we consider non-democratic, we would be in danger of becoming an autarky. For example, if we apply the definition of the noble Lord to BRICS—Brazil, Russia, India, China and South Africa—they would all come into that category, bar South Africa. Take, for example, China, which is the cause of much concern around the House. So much of what China exports to us could be caught by the definition of critical infrastructure. I am sure no noble Lord is proposing that we suspend almost all trade with China—even the Trump Administration have balked at doing that.

While China is a well-known example, what of India? This Government are ambitious to do a great deal with India. They already have partnerships on critical infrastructure with Indian companies—take OneWeb as an example, which is critical infrastructure by any category. If new opportunities for trade were to arise, India would be on the so-called watch-list as a non-democratic country for its treatment of Kashmiri Muslims—in fact, for its treatment of large swathes of its Muslim minority; some 200 million people—and its treatment of women overall, or for the caste system and the treatment of Dalits, and thus would clearly come under categories (c) and (d) on the list.

Take Brazil under President Bolsonaro. It would definitely be caught by paragraphs (c) and (d), not least for its treatment of indigenous people in the Amazon, and not to speak of the rule of law. What of Saudi Arabia and the Gulf states, or even Israel? I do not want to labour the point, but by no step of the imagination could most countries in the Middle East be seen as democratic.

I also remind those concerned with such broad definitions of human rights to recall Article 25 of the Universal Declaration of Human Rights, which defines the right to economic well-being, broadly spelled out, and which might be denied to our citizens were we to agree such blanket measures against trade with other countries, or parliamentary scrutiny of trade with other countries. It is slightly disingenuous of noble Lords to claim that all they are asking for is parliamentary scrutiny. Once we open the can of worms as to what is democratic and not democratic, and once we start asking UK courts alone to rule on what is genocide or not, we are straying into an area where we are doing economic self-harm.

I know that human rights are increasingly accounted for in international trade agreements—as I said earlier, the EU is not impervious to that. However, Amendment 33 serves no useful purpose and we should rightly return to these measures in a very limited form in Amendment 68, which I will support when the time comes.

--- Later in debate ---

I also suggest that the drafting of this leaves some things to be desired because it talks about the assessment of different sectors but makes no attempt to say how many or whether we are talking about broad or quite minute ones. It also does not say whether the report is about equalities and human rights in the United Kingdom, the other country with which we are conducting an agreement, or the whole lot. If it is the latter, I suggest that that is over the top. Therefore, I see problems with all of these amendments, whether they are in their current form—restricted to continuity agreements—or more widely.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

My Lords, in response to the noble Baroness, Lady Noakes, I note that the guidance from the Procedure Committee says:

“Members have the permission of the House to speak from a seated position when participating remotely”—


which is standing order 26—

“and they must do so when participating physically in a hybrid Grand Committee”.

So there.

[Baroness Noakes (Con)]

That is what I said.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

Yes. I now call the next speaker, the noble Baroness, Lady Stroud. My noble friend Lady Smith of Newnham will not be participating, so she will be followed by the noble Lord, Lord Judd. I call the noble Baroness, Lady Stroud.

[Baroness Stroud (Con) [V]]

I will speak in support of Amendment 33 and thank the noble Lord, Lord Alton, for his commitment to the question of who we will become as a nation when we Brexit, and not just what we can get. This is an important moment for us, and the choices we make now will define the character of Britain for generations to come. We look back at our history with moments of extraordinary pride, and the stories we tell ourselves and our children are often rooted in the choices made by many in this House to build a nation on the principles that drive prosperity, not only economic prosperity but the prosperity that comes from an ethical vitality driven by people of character.

However, when we look back, there are also moments in our history when we might have wished to have chosen to do things differently had there been a moment to pause and check the path we were choosing. This amendment ensures that such a moment is created. We are being asked to consider what checks and balances will improve the wisdom of our choices, ensure our blind spots are challenged, and that we have a moment to consider the character of the nation we are, the one we are seeking to business with, their motivation for a deal and whether we have considered its impact on us and on their people.

The purpose of this amendment is to require the Government to bring trade deals to Parliament for ratification where they involve critical infrastructure and are being made with countries that are undemocratic. As someone who believes in free trade, why am I speaking to this amendment? Without adequate scrutiny, our sovereignty, safety and security are at risk. When a nation is undemocratic, its priorities are not the same as ours, which are the creation of prosperity through freedom of speech, respect for property rights—including intellectual property rights—the rule of law, equitable market access and a strong social contract between the public, government and business. If our trading partner’s objective is not the above but rather the strength of their state—and if their stated long-term ambition is the expansion and influence of their regime—our very sovereignty and the principles and values that define us as a nation could be undermined.

There are also issues of safety to be considered. The critical infrastructure named in this amendment—for communications, health, transport, food and water among others—is essential to the British people, and even more so in moments of crisis as we have just seen. Should provision in those sectors be withheld or slowed down, real harm would be created. As we move into an increasingly interconnected, networked world, our systems have become more productive but also more exposed.

There are also security challenges that we need to face up to and consider. Chinks in our security armour do not necessarily lead to hot war escalation, but we have seen recently in the Intelligence and Security Committee’s report on Russia the subtlety and insidiousness of foreign interference. It is not just our security that we need to be wary of but that of our Five Eyes partners as well.

Britain is a global leader, so we should not underestimate our international influence. We demonstrate a standard not just for our neighbours but for emergent nations around the world. We do not want to set the standard that profit trumps national responsibility. At a time when soft power is bought and traded across Africa and the developing world, we need to demonstrate that true prosperity comes from upholding the principles and values of a democratic nation.

The amendment does not set out to block, cancel or modify existing trade agreements or to threaten or coerce our allies, neighbours and trading partners. It merely recognises that we need an effective mechanism whereby the wisdom of choices can be evaluated. The amendment is entirely reasonable. It does not argue that a trade agreement should not be reached, just that the Government should bring trade deals to Parliament for ratification where they involve critical infrastructure and are being made with countries which are undemocratic.

--- Later in debate ---

I hope I have provided sufficient reassurance to noble Lords, and I ask that Amendment 11 is withdrawn and that Amendments 18, 33 and 45 are not moved.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

I have received a request from the noble Baroness, Lady Cox, to speak after the Minister.

[Baroness Cox (CB) [V]]

My Lords, I will speak very briefly, just to put on record the issues I would have highlighted in my speech if I had not ineptly failed to identify the amendments to which I intended to speak, for which I apologise. I will have much more to say when we reach Amendment 68, on genocide, at later sittings.

It is a privilege to speak in support of Amendment 33. On 29 June I spoke in support of an amendment, also moved by my noble friend Lord Alton, to the Telecommunications Infrastructure (Leasehold Property) Bill, saying:

“This is not about China or Chinese companies … It is a conflict of values between … democratic societies and repressive, cruel regimes”—[Official Report, 29/6/20; col. 529.]


such as China—and I would add today, as they are especially relevant, Turkey and Azerbaijan.

China is undertaking religious persecution of Muslims and Christians, using slave labour and incarcerating Uighurs in concentration camps, as noble Lords have already heard. There is also the enforced sterilisation of Uighur women in four prefectures, which would violate the 1948 Geneva convention.

The United States has banned imports, including cotton and computer parts, from five regions in China, claiming that these extraordinary human rights violations demand an extraordinary response. This is modern-day slavery. As I finish my brief resumé, for the protection of our national security, our national interest and our values, I believe Amendment 33 is essential and Parliament should have the right to ratify trade agreements.

--- Later in debate ---

Amendment 11 withdrawn.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

That concludes the work of the Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.

Committee adjourned at 7.28 pm.

Corporate Insolvency and Governance Bill

Baroness Barker Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

[Baroness McIntosh of Pickering [V]]

My Lords, I have no substantive remarks to make, other than to congratulate my noble friend Lord Howe on taking on board the comments made by the committee.

[Baroness Barker (LD)]

My Lords, a number of Members of your Lordships’ House may wish to claim that it was the force and power of their oratory that caused the Government to think again, but I have a sneaking suspicion that the mere prospect of the noble Baroness, Lady Fookes, leading a band of opposition rebels was enough to concentrate minds—and I am very glad that it did. There was broad consensus around the House that the powers taken within the legislation were far too broad. I am glad that the noble Earl, Lord Howe, has come back and talked in detail about those which have been ceded and those which have not.

Towards the end of his remarks, the noble Earl said that the Government had retained some regulation-making powers to address the needs of different sectors, should it become apparent that regulations need to be made to save businesses in certain sectors. That is the issue to which I draw attention, following on from the remarks of the noble Baroness, Lady Anelay of St Johns. Like me, she has an interest in what happens in the charity and social enterprise sector. Welcome though the letter from the Minister was—exactly as the noble Baroness just said, it talked about charities with wholly owned subsidiary trading companies which give back their profits to the charity—a number of charities have different company forms, and there remains a lack of clarity in the Bill about some of those entities.

I am very pleased that the noble Lord, Lord Callanan, and his officials have talked to me about this. The Bill applies to those charities which are companies limited by guarantee—it is mostly community interest organisations that will fall within this—but it will not apply to charities that are unincorporated, nor to excepted charities and royal charter charities. There is also a big consideration around the extent to which the Bill will apply to community benefit societies, mutuals and co-ops. I am not asking the Minister to reiterate the detail of that today. I merely draw attention to the fact that there may be matters to which it is necessary to return when the Government make regulations under the Bill.

I signalled to the noble Lord, Lord Callanan, one of the issues that has been drawn to my attention by the museum sector. We have a number of independent museums—not the large museums set up under an Act of Parliament, nor those associated with local government—and they are typically charitable companies. They have a very big fear. If they are in danger, and a number of them currently think that they may well be, their collections immediately become part of the assets of any insolvency procedure. The big concern is that, if there is no exemption for those assets in regulations, later on this year a large part of Britain’s cultural heritage may suddenly come up in a fire sale. That would be extremely damaging, not just to those organisations but to the local economies that they support as part of the tourism sector and so on. All they are asking is that, when it comes to making regulations under the Bill, there be consultation with them and with the charity lawyers, accountants and insolvency practitioners who have expertise within what is, I know, a very niche but important part of company law.

That said, I add my support to the noble Baroness, Lady Fookes, and her Amendment 48. What she is asking for seems entirely reasonable.

[Lord Holmes of Richmond [V]]

I am pleased to speak in support of Amendment 48 from my noble friend Lady Fookes. As ever, she makes a point that is pertinent and clear, and that is absolutely required at this stage. In doing so, I also congratulate my noble friend Lord Blencathra and the members of the Delegated Powers Committee on all their work in this area. As other noble Lords have said, the Government are in listening mode on this. That can be only a good thing, and it is largely down to the persuasive power of my noble friend.

--- Later in debate ---

[Lord Bourne of Aberystwyth [V]]

My Lords, I support Amendment 40 in the names of the noble and learned Lord, Lord Wallace of Tankerness, the noble Baroness, Lady Taylor of Bolton, the noble Lord, Lord Pannick, and my noble friend Baroness Fookes. I share the concern about the retrospective nature of some of the amendments. I accept that in extremis, in rare situations, retrospective legislation may be justifiable, but I would welcome the Minister addressing why it is felt to be appropriate here.

At Second Reading I expressed my concern that the offence of wrongful trading is being disregarded in relation to matters that are not Covid-19-related. It is quite reasonable, as the noble and learned Lord, Lord Wallace of Tankerness, has just indicated, that there should be some mitigation of the provisions in relation to Covid-19-related deaths. However, if the insolvency is not due to Covid-19, it is hard to see why the provision should be suspended. This provision, brought in as a result of the recommendations of the Cork committee in the 1980s, was widely welcomed as tackling conduct by directors acting—or in some cases, failing to act—with malfeasance, resulting in companies having substantial debts and doing damage to employees and shareholders. I can see why that may need to be suspended for Covid-19-related deaths, but this goes further. That is why I support this amendment, which would minimise the effect of the suspension of wrongful trading. It would be suspended not in relation to broader activities but only to those concerning Covid-19-related deaths.

However, of greater concern, as we have just heard, is the retrospective nature of this part of the Bill. I would welcome the Minister addressing these points. In any event, the Government have gone further on wrongful trading than they should have. They are seeking to punish creditors who have debts that could well be enforced, as they have nothing to do with the Covid-19 emergency.

[Baroness Barker]

My Lords, I thank the noble Lord, Lord Callanan, for listening to what was clearly a compelling speech by me in Committee and bringing forward Amendment 39, which extends from 30 June to 30 September the period during which the relaxation of judgment in relation to wrongful trading will apply. I say this not because of any wish to encourage wrongful trading or to see people who trade wrongfully not properly held to account by a court, but because I know from experience of helping companies trying to get through periods of instability—charities, in my case—that they simply may not know at this point whether they will be wrongfully trading next month.

Corporate Insolvency and Governance Bill

Baroness Barker Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 16th June 2020 Lords Chamber

[Lord Callanan]

I thank all noble Lords for tabling amendments on this important topic. I first clarify to the noble Lord, Lord Lennie, and others that I thought it would be helpful to email noble Lords last night to inform them of my intention to table an amendment on Report because, under the new procedures, I was not able to stand up at the start of this grouping to tell people in advance. I thought it would be helpful to give people advance notice of this to stop them asking for all the things that we were going to do anyway. I thought that it might have played some part in curtailing the debate on this.

I start by reminding the House that both the moratorium and the restructuring plan are not insolvency events—they are company rescue procedures. Where the company itself can be saved as a going concern, obviously, the returns to all creditors and stakeholders of the company will be better.

I turn specifically to Amendment 20 for Great Britain, tabled by the noble Baroness, Lady Drake, and others, and Amendment 39 for Northern Ireland. I do understand the intentions behind these amendments. However, removing financial services contracts from the list of liabilities for which a company does not have a payment holiday when it enters a moratorium would mean that the company does not have to pay these liabilities during the moratorium.

The purpose of excluding these contracts from the payment holiday is to ensure that the moratorium does not affect existing financial services legislation or the operation of the financial markets, and that financial markets participants continue to have legal certainty to facilitate the efficient functioning of those markets. Not excluding them could have potentially severe consequences for the operation of the markets and, in turn, the stability of the financial system and the availability and cost of these products.

In addition, it is important to recognise that financial services firms are a key part of making the moratorium provisions work. Critically, they are not excluded from the moratorium, as I said on the last grouping, where they are a creditor to a company in distress so that they continue to support those companies. It is recognised that not excluding financial services contracts from the payment holiday definition could remove the incentive for these firms to continue to provide finance. That could leave companies in financial difficulty in a far worse-off position than they would otherwise be.

I understand the purpose of these amendments, and the concerns that many noble Lords raised during this debate and at Second Reading on the super-priority of financial services debts in the moratorium. In discussions with the various stakeholders, it has become clear that unpaid financial services debts that have been accelerated for payment during the moratorium receive this super-priority status. We would not want this to provide an incentive for financial services firms to jeopardise the rescue of businesses during a moratorium by accelerating financial services contracts for payment, so as to benefit from this super-priority of their debt in a subsequent insolvency. I will therefore table an amendment on Report to address this issue, and I thank noble Lords who have raised it with me.

I turn to Amendments 27, 63, 64 and 118. Again, I understand the intentions of these proposals. We can all agree that recent high-profile insolvency cases that featured large deficits owed to the defined benefit pension scheme were worrying. We all recognise the uncertainty that this brings for employees, both past and present, in such cases. Again, I assure the Committee that the Government recognise the need for safeguards around these pension schemes and have been working closely with key stakeholders over the last few weeks on these issues. We have reflected on the concerns raised, so I confirm that it is our intention to table amendments on Report to ensure a greater role for the Pension Protection Fund and that pension protection is made clear in the Bill. Again, I am grateful to noble Lords for their engagement on this issue. Both the amendments that I have mentioned will be tabled tomorrow to give noble Lords the opportunity to study them in advance of Report.

Let me address some of the points made. Initially, the noble Baroness, Lady Drake, and I think the noble Lord, Lord Fox, asked—he may not have done so—whether pension schemes can be crammed down. The protections that apply generally will cover a pension scheme included in a restructuring plan proposal. There are strong protections, including a high threshold for class support of 75%, and where cross-class cram down is requested and none of the members of a dissenting class are worse off than they would have been under the next most likely outcome. Importantly, even if all the statutory requirements are met, the court can refuse to sanction a restructuring plan if it is fair and equitable for it so to do.

My noble friend Lady Altmann and, on this occasion, the noble Lord, Lord Fox, asked about the debt priority of pensions and whether the current ranking is appropriate. When insolvency occurs, there is a balance to be struck in considering the order in which those owed money are paid out of the available assets. There are seldom enough funds to pay all creditors in full in an insolvency. To ensure fairness, the law requires that available funds be distributed in a certain order. Unsecured creditors are paid once the secured creditors and preferential debts, which of course include employees’ hard-earned wages and salary, have been dealt with; they share the funds that are then left over. Any deficit owed to a pension scheme ranks alongside all other unsecured creditors, which will inevitably include trade suppliers, some of which will be small and micro companies. I confirm to the noble Lord that this legislation has not changed the existing provision and that it carries on.

With those explanations, and with the notice I have given of the proposed government amendments on Report, I hope that I have provided sufficient justification for the noble Baroness to withdraw her amendment.

[Baroness Barker (LD)]

I thank the Minister for his reply. I had the pleasure of taking part in the legislation that set up the Pension Protection Fund in this House many years ago and I remember that we spent a considerable amount of time—much more than we have done today—looking at the issue of moral hazard and questions of timescale and decision-making. Whatever the Government come up with in the context of this Bill, people will be forced to make decisions that in ordinary circumstances they would take over several months in which they could weigh up competing claims for priority. They will have to do that very quickly.

I recognise that the Minister said that he intends to publish his amendments tomorrow, but will he undertake to have a virtual meeting with the many Members of your Lordships’ House who are clearly well versed in this subject, perhaps on Thursday, in order for there to be time for considered amendments from the Opposition on Report? The Minister is likely to find that there is not a great distance between his Benches and ours on this matter, but there may be some questions of nuance and technicality, and it would be good, for better legislation, if there could be a discussion on Thursday.

[Lord Callanan]

Without giving a specific commitment about Thursday, because I have a number of things in my diary, not least because I am answering further Questions in this House, I will attempt to ensure that the forum mentioned by the noble Baroness takes place before Report. Noble Lords who take an interest in this matter will get the opportunity to talk to me and the various Bill officials who are handling what is, I am sure she will accept, a complicated area of law.

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Moved by

[Baroness Barker]

47: Clause 10, page 63, line 21, leave out “30 June 2020” and insert “30 September 2020”
Member’s explanatory statement
This amendment would extend the relevant period for the suspension of liability for wrongful trading in Great Britain.

[Baroness Barker]

My Lords, following on neatly from the noble Lord, Lord Stevenson of Balmacara, those noble Lords who took part in the Second Reading debate will know that my experience is in the field of charitable companies and their subsidiary trading companies, CICs, friendly societies and so on. This amendment would not apply in particular to any one set of companies, but it acknowledges that there are different types of companies and that their incomes are derived in different ways. Given that, the impact of the period of wrongful trading or the relaxation of the wrongful trading regulations will have a different effect on some companies.

I do not want to rehearse the arguments I made at Second Reading, but we know that in the past three months, charities have lost £4 billion-worth of income and a lot of them are staring insolvency in the face. However, for them, as for commercial companies, all may well change within the next four weeks. We know, for example, that in fields such as entertainment, if a change is made to the social distancing rule—the physical distancing rule, as it should be called—that may have a direct impact on the viability of some companies.

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[Earl Howe]

My Lords, I am most grateful to noble Lords for these amendments, which seek to extend the period of time that the range of temporary measures contained in the Bill will continue to operate. The temporary measures contained in the Bill are all necessary to ensure that otherwise viable companies are given the space to recover, if that is possible. I entirely understand noble Lords’ desire to ensure that the measures continue for as long as they are needed. As I am sure they appreciate, the Bill contains provisions enabling these temporary measures to be extended, and I can reassure them that the Government have every intention of making use of this provision if the protections are needed beyond their present expiry date.

The temporary measures all have significant impacts on the normal working of various parts of insolvency legislation and the business community. The point that needs to be made here, though, is that the term of extension for one measure may not be desirable, or needed, for another. We therefore think it is right that any consideration of an extension, and for how long, should be done on an individual basis rather than in the round, taking into account all the circumstances and potential impacts.

My noble friend Lord Hodgson’s amendment is slightly different from the other amendments in this group, in that it would extend backwards the period to which restrictions on winding-up petitions and orders apply, to include circumstances where petitions were filed after 23 March 2020, when lockdown began. As currently drafted, the restriction on winding-up petitions applies retrospectively from when the Government announced their intention to legislate. It seeks to avoid unfairness by ensuring that the restriction on winding-up petitions applies only in cases where the person presenting the petition would have known of the Government’s intention to legislate in this area. I hope my noble friend will agree, on reflection, that it would not be appropriate to place such a requirement on anyone before they could have known about it. That is why we have chosen to apply the provisions in respect of windings up from 27 April 2020—the next working day following the Government’s announcement of the change in policy.

I will write to the noble and learned Lord, Lord Wallace of Tankerness, and the noble Lord, Lord Howarth, in answer to their questions on retrospection, but for the reasons I have set out, I am not able to accept these amendments. I therefore hope that the noble Baroness, Lady Barker, will feel able to withdraw her Amendment 47 and that, in due course, the other amendments in the group will not be moved.

[Baroness Barker]

My Lords, in view of the hour I will simply say that I am not surprised by the noble Earl’s answer. There is something to be said about the winding-up provision specifically running longer than 30 June, but at this hour I will withdraw my amendment.

Amendment 47 withdrawn.