Covid-19: Businesses and the Private Sector

Debate between Lord Palmer of Childs Hill and Lord Stevenson of Balmacara

Thursday 21st May 2020 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

I add my thanks to those of others to the noble Lord, Lord Dobbs, for securing this debate. Despite the limitations on speaking time it has been of high quality throughout, with many interesting insights.

Most noble Lords have singled out our magnificent health and care workers for their exemplary work during the crisis. The Motion also allows us to recognise the contribution and generosity that we have seen from businesses and the wider private sector during this crisis. The noble Lord, Lord Dobbs, called it a roll-call of honour, and I think he is right. This has included the crucial role played by corner shops; special opening hours and discounts for key workers in many retail stores; companies deciding to build ventilators to increase capacity; and, as the noble Lord, Lord Bilimoria, reminded us, companies ignoring commercial rivalries to develop services and medicines to assist those afflicted by the virus and in pursuit of a vaccine. We have just heard about the role of the CMA in that.

On the whole, businesses have stepped up when we needed them. Indeed, they could have done much more if their offer of help had not been ignored when it was made, as the noble Lord, Lord Hunt, reminded us. We thank them for their continued efforts. There really is no limit to what can be achieved if we all pull together.

As many noble Lords have pointed out, what the Government have asked from business and the wider private sector during the pandemic is unprecedented in peacetime, and they have complied. However, because of these measures, thousands of businesses face an existential threat and possible closure, with all that that means for millions of workers. This supply shock could have been disastrous in an economy that was already showing strains earlier this year, but it is a credit to the Government that they have provided a range of support measures, including the job retention scheme, various business loans and the self-employment scheme, which has worked very well. Combined with the forthcoming changes to the insolvency laws, which we support, these measures will ensure liquidity, prevent unnecessary bankruptcies and hold jobs open for millions of workers until it is safe for businesses to reopen. In this context, I agree with the noble Lord¸ Lord Fox, that the Health and Safety Executive has been given a major responsibility, and it needs to be supported now and in future.

I hope the Minister will accept that some of the measures have been improved by scrutiny here and in the other place. There are still issues to be resolved, such as schemes for SMEs that are looking to access loans with a 100% guarantee above £50,000. As several noble Lords have pointed out, additional support may need to be provided for companies operating in the tourism, hospitality and cultural industries, particularly where taking on more debt is not a viable option. What plans are the Government considering for these sectors?

Does the Minister agree that where the state has assumed responsibility for providing support to a private sector company, it is absolutely right, as the noble Lord, Lord Balfe, has pointed out, to require all such firms to make the correct tax payments when they fall due; to require that they are not registered in a tax haven; and that they should not pay dividends to shareholders while they are claiming government resources?

I turn to the recovery. Private businesses and the wider private sector will also have a significant role to play after the pandemic. It is true that businesses want to reopen and people want to return to work, but this must be done with maximum safety. It is equally important that such moves have full-hearted public support so that the great pause, as some are calling it, does not turn into a great depression. The Chancellor has said, perhaps rather chillingly, that he cannot save every business, but surely he recognises that every business that goes bust risks deepening the recession and extending the time taken to recover our economic health. We are fast approaching the point where the focus of the Treasury’s efforts has to switch from supply to demand. How are we to persuade people to spend more than they do at present on goods and services, preferably those that are not imported? To do that, people need to feel secure about their income, their employment and, as the noble Lord, Lord McConnell, said, their consumer rights, and they have to be certain that spending today is not going to take them into unmanageable debt. There are both monetary and fiscal aspects to this, and it will need careful planning and timing if it is to work. As the noble Lord, Lord Campbell of Pittenweem, said, threatening a return to austerity will not take this trick.

The Government need to come up with a rescue plan to drive up demand and reduce business uncertainty for the long term, a strategy that focuses on sustainable high-quality jobs and growth. As the noble Lord, Lord Dobbs, said, we particularly need to reach out to young people entering the workforce this year and guard against this becoming a lost generation. However, I believe that recent polling suggests that the public also want something else. They do not want the economy simply to return to where we were pre-pandemic. They want a new deal, with growing support for a green new deal. What could that be composed of? As the noble Lord, Lord Hendy, said, surely we first need to learn the lessons of recent months and get real about the sort of income levels and support that those who have borne the brunt of the pandemic will need in future. It is after all the lowest-paid workers whom we have relied on most, as well as our key workers, and they need a new inclusive approach to employment laws and protection if we are to tackle their insecurity.

But the climate emergency is a challenge that we can simply no longer afford to ignore. I read recently, in an FT editorial last weekend, that

“governments should use their spending power to help stimulate a recovery from the virus that does not lock in a fossil-fuelled economy.”

Such a strategy could create an army of zero-carbon workers planting trees, rewilding our countryside, restoring natural habitats, insulating our existing housing stock and office buildings, and working on green energy technologies. This could help us to achieve our zero-carbon target much earlier than the Government are currently planning, provide people with much-needed job security after a period of such turmoil, and benefit everyone’s financial security through lower energy bills. The public should look back on the support that they have given business over this period with pride, but it would be strange if that investment were not used to return benefits to the public good.

My noble friend Lord Liddle called for a public/private partnership while my noble friend Lord Desai suggested a sovereign wealth fund. I hope that both ideas have been given serious consideration. Another way, which would follow on from the support given to the banks in the 2009 crisis, is that the Government should be willing to consider taking an equity stake in firms that they have supported, particularly where there is a compelling economic, security or environmental reason. Other countries are already doing this—for example, the French and US stimulus packages allow for the Government to take equity stakes in airlines that receive aid—but we could go much further by taking government stakes in line with long-term green new deal goals. We can invest in new technology companies to power the fourth industrial revolution or require energy-intensive industries such as steel to switch to alternative manufacturing methods.

I doubt that many people think the global supply chain will return to its shape pre Covid-19. Indeed, some commentators are saying that globalisation will enter a new phase after the pandemic that will demand a new sustainable trade policy more capable of dealing with the demand and supply shocks caused by Covid-19. Coronavirus has cruelly exposed global inequality, so different priorities for trade need to reflect a reoriented world. A sustainable trade policy could focus on securing opportunities for all sizes of businesses, human and employment rights, consumer interests and climate protection for the whole world long term. It would also provide a proper role for Parliament, something that we will return to in round 2 of the Trade Bill.

Business and the wider private sector have contributed greatly to the work of combating Covid-19. We welcome their contributions. We have supported the Government as they have tried to deal with their concerns during the crisis, and there is more to come. The noble Lord, Lord Dobbs, said it would be a tragedy if we ended this crisis with greater poverty. I agree with him that we must now work with business and the wider private sector to secure the recovery with a green new deal that shares the benefits of cleaner inputs and more sustainable outputs for the benefit of us all.

[The Deputy Speaker (Lord Palmer of Childs Hill) (LD)]

I call the noble Lord, Lord Callanan. Lord Callanan, you need to unmute.

Deregulation Act 2015 and Small Business, Enterprise and Employment Act 2015 (Consequential Amendments) (Savings) Regulations 2017

Debate between Lord Palmer of Childs Hill and Lord Stevenson of Balmacara

Thursday 30th March 2017 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister very much for that detailed explanation. I welcome the streamlining and digitising of the system, which is well overdue.

I raise two points, which I hope the Minister can answer. On the European Convention on Human Rights, the Minister for Small Business says:

“In my view, the provisions of the”,


various regulations,

“are compatible with the Convention rights”.

Can the Minister be a little more definite on what legal opinions the Government have taken on these regulations post-Brexit, which is around the corner? The Minister for Small Business just gives her view rather than the legal view, which the House is entitled to hear.

The other points I take up with the Minister are the non-requirement of creditors meetings and the streamlining of methods. That is absolutely ideal and it is the way to reduce the costs, but there is no mention in this legislation or the Minister’s introduction of the statutory instrument of the not insubstantial insolvency fees coming out of the carcass of an insolvency. I am a registered chartered accountant, though I have never been an insolvency practitioner, but I have seen, sadly, many of my clients being subject to bankruptcy and insolvency. The one thing that I have always thought a little worrying was that the insolvency practitioners’ fees—with all insolvency practitioners—come out of the carcass of that insolvency before anybody else gets a dip into it. By streamlining it in the way we have, I wonder whether the Minister and the Government’s civil servants have looked at the attitude of creditors to the size of and, sometimes, lack of change in the level of insolvency fees. It tends to happen in smaller bankruptcies that, after the insolvency practitioner has charged their fees—at a not insubstantial hourly rate, particularly in London—there is not much left.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I too thank the Minister for her very full introduction to this. I was involved in the passage of the Deregulation Bill 2015 and the Small Business, Enterprise and Employment Bill 2015, so I have some background and previous on this. I do not think the noble Lord, Lord Palmer, was involved, but he might be advised to read Hansard for both those Bills because extensive discussion of the points he raised took place on the primary legislation. It is not irrelevant for him to be referred to that because a number of very important points were made along the lines of the ones he made. Good responses were given by the Government at that time, which I recommend to him.

There was one point in what the noble Lord said that it would be useful to put on the record again. A lot of the Minister’s statement was concerned with making the case that these changes, which are in practice quite narrow, will make a huge difference to the insolvency arrangements. At the end of my remarks I will come to a couple of points on the broader picture here.

In truth, the main debates we had on the Bills that led to this statutory instrument were about the rule of 10. A lot of weight and some cost savings were put on the idea that control of the liquidations and insolvencies mentioned in the statutory instrument had passed too far away from creditors across to insolvency practitioners. Indeed, the question of fees still needs to be addressed. The arguments used and the decisions that came up did not back up that assertion.

Ultimately, the proposal was to abolish the meeting of creditors, at which some exercise by creditors could be played out in full. The point was made by so many people around the business and many insolvency practitioners that the creditors’ meeting was really the meat of any insolvency. I am sure that the noble Lord, Lord Palmer, would say the same, even though he is not a direct practitioner: it is only when you get the creditors around the table with the IP person that you get the chance to work out exactly what will come and how much will be paid to each of them.

There was also an assumption behind the Bill that was not borne out in practice, which is that all creditors are equal, that somehow the decisions would always be accepted by a group of creditors if they were brought together and that that could therefore be replicated in a virtual space. That is not the case. In most small business insolvencies there is usually a major creditor—usually a bank—that is completely intransigent. The problem is not one of trying to resolve how much is divvied up between them, but trying to get the bank to agree to terms that do not freeze out the smaller creditors, many of whose businesses will suffer if they cannot get the proceeds from the insolvency.

The compromise position that we came up with of a rule of 10 was that you could have a meeting if it was 10% by value of the creditors, 10% of the number of creditors or 10 creditors. It was an uncomfortable compromise. I am sure that the Box would agree that we did not find a very good position on this, but it was the best way of trying to balance those competing issues that I have identified. The overbearing behaviour of the single big creditor, the difficulty of trying to reach out to the smaller creditors and the position of the insolvency practitioner as the person who ran this all play against the creditors being in control. We should not underplay that point.

It is true that the new technologies will help. The noble Baroness did not mention the change in the language, but it is quite striking in these regulations, with a move away from “meetings must be held” to “processes may be carried out”—from the negative, “You are in problems if you do not do it this way”, to the permissive, “If you do it this way, there is a recognition of how it will happen”. That will prove more beneficial in the long run than much of what we have been talking about. Nevertheless, we broadly support what has happened. These are the natural consequences of the discussions held during the passage of the Small Business, Enterprise and Employment Bill and the Deregulation Bill. They are appropriate and I am extremely grateful to see that they will be brought in on 6 April.