Corporate Insolvency and Governance Bill

Debate between Baroness Warwick of Undercliffe and Baroness Bowles of Berkhamsted

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

[Baroness Warwick of Undercliffe (Lab) [V]]

I added my name to Amendment 13 and I set out in Committee my concerns about the Bill. As I said then, I fully support the intention behind it—that the disruption caused by Covid-19 should not be allowed to trigger the failure of otherwise financially viable companies—but I was anxious, and I remain anxious, that some of the permanent and far-reaching proposals would be damaging to pension funds and to their members in the longer term. I assumed that this damage was unintended and was caused by the speed with which this package of protective measures had had to be introduced, and I am pleased that the Government have gone some way to acknowledging this in the amendments they have brought forward.

Other noble Lords have set out in detail the problems that the Bill would cause as currently drafted. I emphasise just one point in relation to defined benefit pension schemes. The stability and effectiveness of the current system in dealing with insolvency has depended on unsecured pension debts ranking side by side with debts owed to other unsecured lenders. This has underpinned all valuation funding and covenant discussions. The super-priority status granted by the Bill to finance debts in an insolvency following a moratorium undermines that stability and endangers members of affected pension schemes, while preventing the PPF acting effectively as creditor. As I said in Committee, it also undermines the role of the regulator. However, the Government have clearly made efforts to address these concerns and go some way to addressing the issues raised by me and other noble Lords. I have been convinced that the Government want to make this work and will ensure that the PPF has access to and influence on discussions about recovery plans.

The Secretary of State will have access to considerable Henry VIII powers in the Bill and will be able to intervene swiftly if it seems that restructuring plans and insolvency procedures are being abused, to the detriment of pension scheme members. So in thanking the Minister for the way he has responded to the concerns we in this House have expressed about the Bill, I urge him to stay alert to any attempts to undermine the assurances he has given that the position of pension scheme members will not be weakened, and that their lifeboat—the protective umbrella of the PPF—will not be undermined in any restructuring and insolvency discussions.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I draw attention to my interests in the register. I support Amendment 13 and what has been said already about it. I am a signatory to that amendment, but I shall concentrate on Amendment 14. The Times this morning reports that Intu, owner of shopping centres, is seeking a standstill on loans from its banks, otherwise it will go into administration. Without commenting on the merits of the case, save to mention that coronavirus has stopped rent payments, the facts are writ large: it is all in the hands of banks.

The idea of a moratorium is as a formal standstill, a breathing space for a company to trade out of its problems, get back on its feet or at least find a way to reorganise without the situation deteriorating due to a feeding frenzy of creditors, each trying to get at the assets before someone else does. For all essential suppliers other than financial institutions the moratorium terms are that they must continue with normal supply, with no demands for up-front payments or elevated prices that would destroy cashflows and undermine the purpose of a moratorium. But not for banks: they have no constraints and are free to demand accelerated payment. So there is a feeding frenzy exclusively reserved for the banks.