Climate Change: Targets

Lord Lennie Excerpts

Thursday 27th May 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, I begin by thanking the noble Baroness, Lady Sheehan, for securing and introducing this important debate.

The climate crisis is the single greatest long-term challenge we face. We know the importance of aligning legislation with our climate change targets. We noticed recently, however, that some legislation was absent from the recent Queen’s Speech; in particular, the energy Bill was not included. Only a couple of months ago, the Minister himself said:

“The government intends to bring forward an Energy Bill as soon as parliamentary time allows. The Energy Bill will aim to enable progress to be made on commitments made by the Prime Minister in his Ten Point Plan as well as deliver policy commitments set out in the Energy White Paper.”


What happened? Will progress now be stifled rather than enabled without it? Regardless, the central challenge is whether targets are matched by the scale of action required in this decisive decade. The biggest concern is the growing evidence that there is a wide gap between rhetoric and reality. We are way off meeting our fifth and sixth carbon targets. The Green Alliance estimates that policy announcements will lead to only 26% of the reductions necessary to get the UK on track for 2030. How far off does the Minister think we are from meeting our fifth and sixth carbon budgets?

We desperately need a comprehensive plan for the massive task of retrofitting and changing the way we heat millions of homes, with the finance to back it up. The heat and building strategy was supposed to be published this year, but it has been delayed and delayed. Can the Minister promise that when it is finally published, it will contain the plan we need? The Treasury’s crucial net-zero review was due in autumn 2020, then promised in spring 2021. It is still not delivered. When will it finally see the light of day? From the underinvestment in hydrogen to the uncertainty of when 60% of our offshore wind will be domestic, the examples go on and on. Ultimately, we need a comprehensive green new deal. Only this will allow the UK to meet its climate change targets.

Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021

Lord Lennie Excerpts

Tuesday 18th May 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, like other noble Lords who have spoken in this debate, I have a strong sense of déjà vu. We are back debating the extension of measures in the Corporate Insolvency and Governance Act 2020. As we have heard, these measures include extending the

“restrictions on the use of statutory demands and winding up petitions”

from March to June. The modifications to moratorium provisions and temporary moratorium rules are extended from March to September; the small supplier exemption from termination clause provisions are extended from March to June; and the provisions suspending liability for wrongful trading are extended from April to June.

We welcome the Government extending the safety net for businesses in distress because of this pandemic. Just as we supported the emergency legislation last year, we welcome any measures to support the businesses that closed to keep us safe. As the Minister knows, we argued then that the protections in the Act should be extended over a longer period. Now, as we extend them again, I stress that this causes real uncertainty and worry for businesses in the run-up to each previous expiry date.

As the economy reopens and restrictions ease, it is right that these measures are kept under review but we must remember how many people are still being affected by insolvency. According to the most recent government statistics, there were 29,140 total individual insolvencies in the first quarter of this year—2021—with one in 424 adults having become insolvent in the last 12 months.

Throughout this crisis, we have called on Ministers to ensure that economic support matches the public health measures in place. While we have seen welcome support for workers through the furlough, there have still been gaps in support that the Government have repeatedly failed to address. In particular, we are concerned about the levels of debt facing businesses, whether through the loans they have taken, the VAT they have had deferred or the rent holidays they have had but will soon have to start repaying. These measures are welcome in staving off creditors but they just kick the can down the road. They do little to change the fundamentals facing so many firms of large Covid debt and low or no takings while the fight against Covid continues.

After the Queen’s Speech, it is also clear that the Government continue to dodge the need for wider reform of our insolvency laws, particularly in providing greater protection and support for key industries and their workers. Currently, there is no safe place to refinance or protect such a company’s assets until it might be too late, all the while leaving the company searching for refinancing while trying to retain the confidence of suppliers and customers, who risk the most should it fail.

Even if these changes do not come forward, Ministers should not be bystanders. They should intervene early—before liquidation if necessary. This would mean that workers would not lose their accrued service benefits, and would protect the supply chain. We support today’s measures but call for wider reform tomorrow.

Employment Rights Act 1996 (Protection from Detriment in Health and Safety Cases) (Amendment) Order 2021

Lord Lennie Excerpts

Tuesday 27th April 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, limb (b) workers, which this instrument relates to, can be found in any sector, but, as we have heard, they are particularly common in the gig economy. The TUC estimates that one in 10 adults—about 4.7 million people—engage in gig economy work. It can be fragile, insecure work, with one-sided flexibility. Working people need a Government who will stand behind them, not a Government who fail to protect them or who correct mistakes far too late.

This statutory instrument represents a failure of government: a failure to ensure that workers have the same rights as before Brexit, and a failure to protect workers during a pandemic. These changes were made only following a judicial review brought by the International Workers’ Union for Great Britain against the Government, in which the High Court found that the UK had failed fully to implement two European Union directives in domestic law, as protections were applied only to employees when they should have been extended to limb (b) workers.

This instrument proposes amendments to Section 44 of the Employment Rights Act to correct this mistake and extend the right to protection from detriment to limb (b) workers if they are in circumstances of danger when coming to and going from work. I want to understand from the Minister, first, why the Government, during a pandemic, wanted to take a case concerning the health and safety of workers to the High Court. Can the Minister confirm when the Government were first made aware of the issue with implementation? How much did the court case, which the Government lost, cost the taxpayer?

Sadly, this mistake is being only partially rectified today. The EM states:

“Work is also underway to consult and extend The Personal Protective Equipment at Work Regulations 1992/2966 to all workers through an additional statutory instrument due to be laid later this year.”


Why has this not been a priority? When will the regulations be published?

Such a mistake cannot happen again. Therefore, will the Government conduct a review into the implementation of all EU directives concerning workers’ rights which are retained in domestic law to ensure the rights have not been diluted? We need insecure workers to be properly protected, so I hope the Government will bring forward their long-delayed employment Bill straight after the Queen’s Speech.

International Accounting Standards (Delegation of Functions) (EU Exit) Regulations 2021

Lord Lennie Excerpts

Tuesday 27th April 2021 Grand Committee

[Lord Lennie (Lab) [V]]

This instrument delegates current functions of the Secretary of State in relation to international accounting standards to a new UK accounting standards Endorsement Board, making the UKEB responsible for the adoption of international accounting standards for use within the UK.

We see the need to ensure that the international standards, which have now been put in place across the world, are properly placed in the UK context, particularly given the UK’s withdrawal from the EU. There is also a context in terms of being an independent body that can bring those standards forward and into the mainstream of UK accounting life in good order. With confidence behind it, the UK can be seen to be playing its part in international structures that are now the norm for those accounting standards.

While not looking to oppose the change, I have some questions for the Minister. The Explanatory Memorandum states:

“The Secretary of State sets the terms of reference for the UKEB.”


I have seen that the draft terms of reference for the board have been published, so when will the final terms of reference be published? The draft terms of reference say that the Secretary of State will appoint a chair. What advice did the Secretary of State get, and from whom, concerning the appointment of its inaugural chair, Pauline Wallace? The only activity of the UK Endorsement Board so far has been to bring itself into being, and that has been done via a rather curious route. First, the chair was appointed by the Secretary of State, and the chair then essentially constructed her own board. That is not absolutely normal practice. The board normally elects the chair rather than the chair electing the board.

The noble Baroness, Lady Bowles, produced a lot of research about the members of the board. How can the board’s independence and accountability be guaranteed? Most members appointed to the board are accountants, so there is the potential danger for the board to reflect its own view of the profession on the profession itself. How will the Government ensure that this will not happen?

The Explanatory Memorandum states that

“the UKEB will be funded by increasing the FRC’s levy on preparers of accounts using IFRS.”

How much will the levy be increased by and how much will it be raised by annually? It has been reported that the FRC expects the overall cost for the financial year to increase by £6.1 million—not the £2 million that has been stated by the Minister—of which half will cover the cost of setting up the UK Endorsement Board. I wonder whether the Minister recognises this cost.

The Secondary Legislation Scrutiny Committee drew the SI to the attention of the House. It said that the UKEB

“will operate as an unincorporated association with support of the Financial Reporting Council … We note that these changes will mean additional responsibilities for the FRC at a time when the FRC itself will be undergoing transformation into the new Audit, Reporting and Governance Authority.”

Can the Minister explain what will happen when the new audit, reporting and governance authority is set up? Will it continue to fulfil the support functions?

The UKEB’s terms of reference will be set by the Secretary of State and will require the UKEB to report at least annually to the Secretary of State on its technical decision-making and to the FRC on adherence with its governance and due process. How regular does the Minister expect these reports to be? Would once a year be enough? I hope that the Minister will be able to provide some clarity to these questions.

Turkey: Free Trade Agreement

Lord Lennie Excerpts

Tuesday 27th April 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, I join the chorus of approval of and appreciation for the International Agreements Committee for its excellent report on the UK-Turkey trade agreement. I thank the noble Lord, Lord Purvis, for securing today’s debate. The parliamentary scrutiny of such agreements is crucial and an important part of what has come to be known as the Grimstone rule, the current rule by which we are able to scrutinise trade agreements, as agreed during the passage of the Trade Bill. As the Minister said in February, the Grimstone rule includes the commitment for the Government to,

“facilitate requests, including those from the relevant Select Committees, for debate on the agreements.”—[Official Report, 23/2/21; col. 724.]

I therefore thank the Minister and the Government Whips for demonstrating how quickly a debate can be organised.

Just as scrutiny is necessary, clarity about how quickly debates can be arranged is also necessary. This would allow Ministers to inform partners and businesses of accurate timelines for ratification and allow them to plan accordingly. Parliament is just doing its job today, and it is in the Government’s power to improve the Grimstone rule to clear up any uncertainties.

Turning to the detail of the agreement, we believe that it is very important from the economic point of view. As we heard from my noble and learned friend Lord Goldsmith and the noble Viscount, Lord Trenchard, Turkey is our 19th largest trading partner. In 2019, trade in goods and services between Turkey and the UK was worth £1.87 billion. It is welcome that the agreement will allow the key imports and exports to continue. However, the committee states:

“It is therefore not a comprehensive free trade agreement: it does not cover services trade, investment, substantive public procurement provisions, or digital trade.”


Moreover, we do not know its full economic impact, like many of the new continuity agreements or even the UK-EU FTA. Why do Ministers have an aversion to publishing economic impact assessments of agreements that they negotiate?

The UK-Turkey trade agreement does not roll over the EU-Turkey customs union, but introduces new rules of origin requirements, as we heard. These changes have certainly been felt by business. SMMT has said that automotive businesses have reported significant challenges since the agreement was provisionally applied and faced additional burdens related to origin certificates. The IAC asked the Government to provide an impact assessment of additional costs on UK businesses as a result of these changes. In response, the Government have said:

“if traders fulfil the Rules of Origin requirements, then the tariffs they are charged will stay the same as previously. The very few exceptions where there are minor changes to tariffs … will have minimal impact on trade flows.”

What are these exceptions? What trade flows in which sectors could be affected? When will updated business guidance on rules of origin be published?

The other notable differences are in human rights and workers’ rights, as we have heard. The agreement does not include provisions on human rights or workers’ rights, with the Explanatory Memorandum stating that the agreement

“covers trade in goods only”.

I remind the Minister that the International Trade Union Confederation has named Turkey as one of the world’s top 10 worst countries for workers. The International Agreements Committee’s report said:

“We regret the absence of any reference to human rights and workers’ rights in the Agreement and call on the Government to explain how it proposes to uphold its vision of ‘values-driven free trade’ in respect of the UK-Turkey relationship.”


We share that concern. What is becoming abundantly clear from the Government’s approach is that they have sought to do the bare minimum to replicate the human rights requirements in existing EU trade agreements.

This all raises the obvious question of whether the Government still believe in the principle that the UK has supported and which has been adhered to by the EU since 2009—that all trade agreements should contain as an essential element a human rights clause. The Minister told the House during the passage of the Trade Bill that trade does not have to come at the expense of human rights. So what happened here?

As the IAC noted,

“the UK-Turkey Agreement is not intended to be permanent”

and the Government aim to develop an “enhanced” agreement following a review within two years. As part of this, why will not the Minister accept the committee’s recommendation for the Government to hold an early public consultation?

Since the agreement was negotiated, the Government have published their integrated review, which outlines how they want to work with Turkey going forward, stating that it should be a partnership on a

“focused set of interests where we can find common cause, such as values, free trade and a commitment to transatlanticism.”

Values and trade are to be considered equally when the Government look to improve the economically important agreement for businesses and workers alike—and there is significant room for improvement.

Audit and Corporate Governance

Lord Lennie Excerpts

Tuesday 23rd March 2021 Lords Chamber

[Lord Callanan (Con)]

I do not agree that the audit market is in crisis. Some worthwhile improvements can be made, which is what we are proposing. The noble Lord will see that a full impact assessment is attached to the proposals.

[Lord Lennie (Lab) [V]]

My Lords, further to the question of my noble friend Lord McKenzie, can the Minister confirm that any annual report on the state of the City, as proposed in the report of the noble Lord, Lord Hill, will clearly outline how the dominance of the big four accountancy firms has been reduced?

[Lord Callanan (Con)]

The big four accountancy firms are important to the regime but we want to introduce more possible competition into it, which is why we are introducing the proposals for shared managed audit to try to bring up the capacity of medium-sized companies.

Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021

Lord Lennie Excerpts

Monday 22nd March 2021 Lords Chamber

[Lord Lennie (Lab) [V]]

My Lords, as we have heard, this instrument proposes changes to address concerns about pre-packs. In the current context of the pandemic and a potential wave of insolvencies, we need to ensure that the regulations alleviate these concerns effectively. We have constantly pressed the Government to take action against the abuses that were occurring in pre-pack cases. There was a flurry of high-profile pre-pack sales last year, along with corresponding concerns. For example, it was reported that unsecured creditors of Monsoon Accessorize were owed more that £132 million after its founder bought it back out of administration in a pre-pack deal.

The Government have said that despite voluntary measures that were introduced for an independent review of pre-pack sales in 2014, there are still issues with transparency, so this instrument requires that if a person intends to acquire a business or assets from a company in administration and is connected to the insolvent company, they must seek an independent opinion from an evaluator on the purchase, unless creditors have approved the sale. The instrument also sets out certain requirements for the person acting as an evaluator, such as the need for indemnity insurance. It prevents a person from obtaining multiple evaluator reports—opinion shopping, as was said—in the hope that one might prove favourable.

The Government have said that

“the mandatory referral to an independent third party will provide creditors with greater assurance that such a sale is appropriate in the circumstances of the insolvency.”

As we have heard,

“there’s still some way to go if these reforms are going to improve stakeholder confidence in pre-pack administrations.”

The trade body R3 has said that the legislation unfortunately risks critically undermining, rather than improving stakeholder confidence in pre-packs. Without ensuring the integrity of the evaluator involved by maintaining a list of approved evaluators, the Government will undermine confidence in the wider regulatory framework around pre-packs, effectively outsource responsibility for ensuring the suitability of the individual evaluators to the market and add unnecessary complication to business rescue efforts.

R3 also said that

“there is no framework in place to ensure qualifying criteria for the Evaluator position are being met.”

Can the Minister explain why this is the case? Does he believe that the new requirement for an evaluator to have a professional indemnity will be sufficient to secure the confidence of the wider business community?

The regulations also place a new requirement on administrators who must be

“satisfied that the individual making that report had sufficient relevant knowledge and experience to make a qualifying report.”

This means that the administrators will effectively be charged with ascertaining the suitability of individual evaluators. What happens if the evaluator may be purposefully or successfully misleading? If there is not a central register of evaluators, to whom does an administrator complain if they have been misled? How can inappropriate evaluators be reported and to whom should they be reported?

The British Property Federation has said:

“It is … disappointing that the regulations allow a sale to proceed despite a negative opinion. A negative opinion should mean the sale cannot proceed.”


Why have the Government not taken this approach? Where the case is not made, an administrator will still be able to proceed with the sale to a connected person but will need to provide an explanation of why they have proceeded. What should be included in this explanation of allowing the sale? Have the Government considered maintaining a list of approved evaluators? How will the Government ensure that all evaluators have relevant business experience to give an opinion on whether a case has been made by an individual or connected party for pre-pack sales?

The government report from last October said:

“The government does not, therefore, propose that the power to ban connected party sales in administration should be used.”


Can the Minister say how this conclusion was reached?

We need clarity in these regulations about how they work in practice, especially if the withdrawal of government Covid support results in a wave of insolvencies and the increased likelihood of pre-pack deals. We are grateful in this House to have the knowledge and experience of the noble Lords, Lord Mendelsohn, Lord Hodgson and Lord Vaux, and the noble Baroness, Lady Neville-Rolfe, in this area. We need clarity across the piece.

Financial Reporting Council (Miscellaneous Provisions) Order 2021

Lord Lennie Excerpts

Thursday 18th March 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, I thank the Minister for introducing this and my noble friends Lord Davies and Lord Sikka for their comments, particularly the comment made by my noble friend Lord Davies about the monetary not the monitors, and the comments of my noble friend Lord Sikka about freedom, secrecy and independence. I thank the noble Baroness, Lady Wheatcroft, for her examination of the FRC being unfit for purpose and its gender gap issues.

The regulations impose new duties and regulatory requirements on the Financial Reporting Council, which is currently the independent regulator responsible for regulating auditors, accountants and actuaries and setting the UK’s corporate governance and stewardship code. These regulations impose specific duties on the FRC relating to freedom of information, the Regulators’ Code and the public sector equality duty. However, as Sir John Kingman’s review in December 2018 made clear, it was an institution with “leaks and creaks” and required fundamental reform.

We were first promised a new audit, reporting and governance authority in 2019, but the Government have since dithered on that promise. The Minister in the other place today published a White Paper to try to put an end to corporate scandals. We will examine it closely in due course and respond in detail, but it appears at the outset that the Government are rowing back from the proposals to tighten corporate reporting requirements. When exactly do the Government intend to legislate? The SI does not give much hope that it will be any time soon, and the White Paper consultation is set to run until July 2021.

I have some initial questions about the new proposals. The new regulator will be established as a company limited by guarantee. How was this decided? The Government note that the largest audit firms are already working with the Financial Reporting Council to implement the CMA recommendations on a voluntary basis by 2024. How is that work progressing? The Government disagree that the regulator intervening to take over the running of an audit firm, albeit on a temporary basis, would be proportionate or effective. How did the Government reach that conclusion, and what advice did they receive on that issue?

In 2017, the Department for Business, Energy and Industrial Strategy concluded that the FRC’s work should comply with all relevant public body guidelines. In 2018, the Government commissioned an independent review that recommended that the regulator be subject to the Freedom of Information Act. A couple of years ago, the FRC voluntarily adopted compliance with the codes, so the SI will not fundamentally change the FRC’s approach, but it is welcome that the compliance is to be put on a statutory footing.

However, with the disbanding of the FRC and its replacement with ARGA, are we not passing this SI somewhat too late? Labour supports the changes but wonders why they are being made now, on the very same day as consultation proposals to give birth to the new audit, reporting and governance authority are published.

Corporate Insolvency and Governance Act 2020 (Coronavirus) (Change of Expiry Date) Regulations 2021

Lord Lennie Excerpts

Thursday 18th March 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, I thank my noble friend Lord Sikka and the noble Baroness, Lady Neville-Rolfe, for their contributions to this debate, and I thank the Minister for introducing the new regulations. I do not imagine he thought they would be quite as controversial as they appear to be.

However, the regulations extend the Secretary of State’s powers to modify, temporarily, corporate insolvency or governance legislation in response to coronavirus until 29 April 2022. We repeatedly said during the passage of the Corporate Insolvency and Governance Act 2020 that we supported the changes the Government were making. We called many times for the end date of provisions to be delayed in order to support business through this difficult period. Businesses are still in distress, and the lockdown and business disruption will continue beyond the original date in the provisions—the end of April this year.

The system of business support that was set up for three months has not proven adequate for the length of time that the crisis is continuing. In truth, we do not yet know whether all the restrictions will be lifted after 21 June, when social restrictions are due to be ended. BEIS has said that the one-year extension reflects that, while there is a vaccination programme, with national lockdowns and other restrictions on normal trading continuing, the future impact of the pandemic on business and the insolvency regime remains at least uncertain. The Minister mentioned this in his introduction, but can he clarify whether the other measures in the Act will be extended, such as on wrongful trading?

It is only sensible to maintain the option of further extending the measures in the Act in this way: we have the worst economic recession of any country in the G7. Although the Covid support measures that the Government put in place have given business a stay of execution, we are concerned that we may still see a wave of insolvencies as support is withdrawn and the safety net dissolves.

Global Navigation Satellite System

Lord Lennie Excerpts

Wednesday 10th March 2021 Lords Chamber

[Lord Lennie (Lab) [V]]

Following on from the questions from my noble friends Lord West and Lord Stevenson, does OneWeb have a proven PNT capability? How is the Cabinet Office-led review progressing, who is being consulted and when will its findings be published?

[Lord Callanan (Con)]

That is the third time that this question has been asked. Government investment in OneWeb was for cutting-edge telecommunications capability based on market analysis. We have always been clear that PNT services were not the rationale for this particular investment.