Enterprise Bill [HL]

Debate between Lord Cope of Berkeley and Baroness Neville-Rolfe

Wednesday 25th November 2015 Lords Chamber

[Lord Cope of Berkeley (Con)]

My Lords, I, too, feel that it is right for the Small Business Commissioner to have this focus on late payment from large companies, as I have said before in debates on this Bill. As many of us know from experience, this is a problem that has been with us for many years—in fact, for many decades—and all sorts of attempts have been made from time to time to improve the situation, some of which have had some effect. This is a further attempt, because the problem is still with us. If you broaden the initial remit of the commissioner too far—and I am not talking about the eventual remit, although maybe it will be larger in due course, which I would welcome—you will just give an impossible job to whoever gets the appointment. It will be a difficult job in any case, but it would become an impossible job.

Under the terms of Amendment 16, the commissioner would be required to establish a complete framework and fair operating environment for all businesses over a whole string of different methods and aspects. That is an enormous job to place on this new commissioner and the staff. Let them concentrate on one of the most stubborn problems we have had over many years. If they succeed in that, then we can begin to see the remit widen and used in a much bigger spread, which I think we would all like to see, in due course.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)]

My Lords, first, I welcome the noble Baroness, Lady Burt of Solihull, to the Front Bench and commend her for her brevity and clarity. I hope the House will not mind if I take a little time to highlight some of the issues arising in this important group of amendments. I shall begin, as one must, by reiterating the importance of tackling late payment and our commitment to doing so. The measures in this Bill establish a Small Business Commissioner, delivering on and developing our manifesto commitment.

I, too, pay tribute to my noble friend Lord Wolfson for his good payment practice at Next. We should try to encourage good practice as it helps with the cultural change we are seeking. Our aim is to build on the measures taken during the previous Parliament to drive down late payment. Some of these measures are still in the pipeline, notably the new requirement on the UK’s largest companies to publish performance data on payment which will bring the sunshine of transparency to the problem.

I am extremely grateful to noble Lords for their diligent scrutiny of the Small Business Commissioner measures in Committee. After careful consideration of the arguments, we have put forward concessionary amendments, as noble Lords opposite were kind enough to acknowledge. I hope they will bear them in mind in considering what to do today.

We all know how vital the UK’s small businesses are to our economic growth. This is something we must all reflect on as we approach Small Business Saturday. In Anna Soubry, we have a Small Business Minister who champions the cause. I am a former chairman of a Scottish SME, Dobbies, and as well as understanding the practices of much bigger companies I really believe in the need for reform. On late payment, with a good strong Small Business Commissioner becoming a vital part of the support system and with the support of this House and the other place, we can make things happen. Our assault on late payment must continue.

We are committed to making Britain the very best place to start and grow a business. The Government will play their part in assisting business where it needs it most by cutting red tape and opening up markets at home and abroad to new and innovative businesses. I should say briefly that today the Chancellor confirmed that we will extend small business rates relief for another year, and 600,000 businesses will benefit. We are funding new or extended enterprise zones, including, I was delighted to see, in Carlisle, Dorset and Ipswich. We will be providing £24 million for local growth hubs to continue to join up business support on the ground in each LEP area.

The Small Business Commissioner will build the confidence and capabilities of small businesses to assert themselves in contractual disputes with larger firms and to avoid them in the first place. He or she will work to encourage a culture change in how businesses deal with each other to promote a fair operating environment. The commissioner will handle complaints by small business suppliers about payment-related issues with larger businesses. He or she will also act as a hub of user-friendly information. He or she will provide general advice and information to assist small businesses with their supply relationships, which will be sensibly integrated with other sources of business advice. My officials will involve small business users in the design phase to ensure that the commissioner’s services are easy to use and navigate.

We arrived at this policy architecture following careful consideration of the issues and the evidence, including responses to our summer consultation and further evidence including data on late payment. Our aim has been to put forward a targeted and effective response to the most pertinent issues facing small business and to focus the commissioner on late payment so that rapid progress is made. That is the point that my noble friend Lady Wheatcroft made so well.

Small Business, Enterprise and Employment Bill

Debate between Lord Cope of Berkeley and Baroness Neville-Rolfe

Wednesday 28th January 2015 Grand Committee

[Lord Cope of Berkeley]

That is as may be, but I hope, if the noble Lord thinks that I have diverted from my previous course of action, that that will strengthen the force of the remarks that I make.

[Baroness Neville-Rolfe]

My Lords, I do not know whether it is appropriate for me to stand up before noble Lords start to talk about the amendments, but I am essentially, as noble Lords know, a practical person, keen to try to progress the Bill and to do the right thing with today’s business on pubs. I will respond to the point that has just been made on consultation and reassure the noble Lord, Lord Snape, that Jo Swinson, my friend in the other place, held a round table with pub companies and another with tenants, both for the same amount of time. Officials have also had discussions with people on both sides of the debate throughout, while always trying to be balanced and objective. Ministers, advisers and officials have also had several meetings with Greg Mulholland since Report in the Commons, although it would be fair to say that he is keen to keep his clause exactly as it is. So far, that has made progress a little difficult.

Small Business, Enterprise and Employment Bill

Debate between Lord Cope of Berkeley and Baroness Neville-Rolfe

Wednesday 21st January 2015 Grand Committee

[Lord Cope of Berkeley (Con)]

My Lords, I, too, am sympathetic to a lot of what my noble friend Lord Flight said and what the Federation of Small Businesses and others have represented to us all, or to many of us anyway.

I am particularly concerned about the position of trade creditors who find themselves involved in a liquidation, a bankruptcy or whatever. What matters to them is not 10% of the total amount owed by the company; it is the percentage of their own turnover that matters. What can be quite a small sum in the bankruptcy as a whole may be a very large sum relative to the business of the trade creditor. At the same time, I understand that in some respects the system of meetings we currently have is a rather Victorian process, carried forward. I encourage the Government to consider looking for ways in which the process can be streamlined and brought up to date.

I want to make a quite separate point which is just about relevant to this point in the Bill. It is that once we have finished with this Bill and it becomes a law, the Insolvency Act 1986 seriously needs consolidation. When we get to the stage where sections such as 246ZF and a whole lot of others will be littering the Insolvency Act and a whole lot more as a result of this Bill—quite apart from other amendments that have been made or may be made to it—it will be a terrible muddle. I realise that the legal publishers will straighten it all out for us to some extent in their consolidated publications on legislation, but the Act seriously needs consolidation. Once all this is over, I hope the Minister will urge that on the department and get the process to move, because we all know that it is a very slow process.

Part of my interest in this is that the trade creditors need to have an idea of what is going on. If they look at the Act and discover it littered with sections such as 246ZF and so on, it will be even more difficult for them to do so. As others have said throughout the debate, it is important that there is transparency. Understanding of what is going on needs to be possible, even for those who are not doing it all the time. Of course, the creditors will have guidance from the insolvency practitioners, and I share the view of them that has been expressed. I have much less experience than my noble friend Lord Leigh; I, too, am a member of the Institute of Chartered Accountants, though by no means as distinguished a one as he, but I do share that view.

[Baroness Neville-Rolfe]

I thank noble Lords for their contributions to this debate. These are important amendments that touch on the process for collective decision-making in insolvency proceedings. As I expected, the issue has attracted a great deal of interest. It was good to hear support from the noble Lord, Lord Cope, for the need to reduce needless processes and to hear what he had to say about consolidation—which, I agree with him, is one for another day.

Modern technology means that it is now possible for all creditors to make decisions remotely, online or by correspondence, which can provide greater opportunities for creditors to engage if they are unable to travel or do not have time to attend a physical meeting. Removing meetings as the default method will also lower the cost of making decisions—costs which, as several noble Lords have said, are ultimately borne by creditors.

The noble Lord, Lord Stevenson, talked about broadband. He was probably hoping that I would rise to the bait, as a previous campaigner on the rollout of broadband. We are actually making a bit of progress now on the rollout of broadband and also on mobile. The figures that he quoted from the FSB apply to small businesses still using dial-up internet access at that time, rather than not having access to broadband. However, the noble Lord made a good point. If you use a video or internet option for a meeting, you do not have to have broadband at home. I have poor broadband where I am and when I was a director of a company I often used to arrange a time to go to a local café. Sometimes you can use proxies, if that is the right thing to do on that particular occasion. You do not always have to have physical meetings; I think we are all agreed on that. The officeholder in an insolvency will have a duty to consider the best decision-making process to use. If a lot of rural creditors are involved, obviously they should avoid using an internet link-up and a physical meeting may be more appropriate.

Face-to-face meetings of creditors are currently used as the default method of consulting creditors and making decisions. For a long time, insolvency officeholders and creditors have travelled to meet in the same room so that they may agree an appointment, remuneration, or how to deal with an asset, but these meetings are usually poorly attended. Professor Elaine Kempson reported that only an estimated 4% of creditors attend them. In today’s digital world we have to question whether holding a meeting that few or no creditors attend is effective. If creditors want a face-to-face meeting they will be able to require one to be called. As I have said, they bear the ultimate cost and benefit from any reduction in what have been referred to as eye-watering fees. If our proposals are accepted, creditors will not be required to be in a specific location at a particular time in order to participate in the voting process. Instead, they will have other options available, including making increased use of different sorts of communication technology.

Turning to the individual amendments, I will respond first to Amendment 61ZC. The duty to maximise returns to all creditors is very important, but business rescue is, rightly, the primary aim in administration. In many administration cases, the administrator is not required to consult creditors on the proposals; for example, where there is insufficient property to make a distribution to unsecured creditors other than out of the prescribed part. Amendment 61ZC would extend the power given to smaller creditors and would allow 10% of the total number of creditors to require that they should be consulted on the administrator’s proposals as opposed to 10% by value—so moving from value to number. Allowing a decision procedure to be required by a certain number of creditors would be a significant step, so we cannot take it lightly.

The insolvency industry and other stakeholders will no doubt wish to express opinions on this matter, and I was interested to hear from the noble Lord, Lord Stevenson, that the Federation of Small Businesses has already expressed an interest in a slightly different approach. In view of the various comments that have been made both here and at the very useful open meeting we held, I think that we should give some further consideration to the general issue of thresholds and return to it on Report.

Amendment 61ZD would have a significant effect on the use of deemed consent and decision-making processes. The deemed consent procedure as described in Clause 120 allows officeholders to consult creditors in uncontentious matters without the need for a formal decision-making process. Once notified, creditors must object by a deadline or the proposal will be passed. The amendment would mean that where the insolvency practitioner officeholder had identified that a face-to-face meeting would not lead to an additional cost saving, deemed consent could not be used. The effect of the amendment would seem to stand in the way of the point of this measure, which is about reducing red tape, and I hope that we might be able to find other solutions to deal with the essentially probing nature of the amendment.

Amendment 61CA would prevent the use of the deemed consent process where a liquidator is appointed in creditors’ voluntary liquidation proceedings. In practice, the creditors often nominate the same person as liquidator of the company. As I have said, the deemed consent procedure is intended to be used where decisions are not contentious; uncontroversial liquidator appointments would be a good example. The amendment would mean that even in routine cases an active decision would need to be sought from creditors in all cases. I worry that these amendments would undermine the Government’s—and I think stakeholders’—objective of cutting red tape.

Finally, I will address the question of whether Clauses 119 and 120 should stand part of the Bill, along with Amendments 61ZE, 61DA, 61LA, 61UB and 61XA, which have been suggested to Schedule 9—I think that I am making my noble friend Lord Cope’s case for him here. I have already set out why it is important that the process of decision-making in insolvency proceedings should be modernised. I reassure my noble friend that we are not seeking to abolish meetings but merely to ensure that they are used only where enough creditors want them. Amendments 61ZE, 61DA, 61LA, 61UB and 61XA would prevent the clauses from operating in the various insolvency procedures by removing important changes made by Schedule 9.

Turning to Amendment 61UA, the relevant provisions on representation of corporations are already being amended by paragraph 55 of Schedule 9. The result will be that when a creditor decision is made through any decision procedure, a corporation will be able to authorise others to act as its representative. That seems okay to me. Amendment 61VA is also concerned with thresholds. The risk we see here is that a minority of vexatious creditors might create mischief in a bankruptcy by requiring decisions on the removal of the trustee to be taken, endangering the smooth running of the process. As I have already said, we will revisit our thinking on the question of thresholds, reflect on that and come back. I hope that the noble Lord will feel able to withdraw his amendment and that noble Lords will withdraw their opposition to these important clauses.