Insolvency Act 1986 Part A1 Moratorium (Eligibility of Private Registered Providers) Regulations 2020

Lord Wood of Anfield Excerpts

Friday 24th July 2020 Lords Chamber

[Lord Wood of Anfield (Lab) [V]]

My Lords, I support this tidying-up exercise to remove a clash of moratorium provisions for private housing providers between, on the one hand, the housing Acts of 2008 and 2016 and, on the other, the new provisions in the Insolvency Act 1986 as amended by the Corporate Insolvency and Governance Act 2020.

I am unclear as to whether the slight messiness that these regulations aim to clear up was anticipated during the legislative passage of the recent insolvency Act, but given the fact that only 322 of the approximately 4 million companies in the UK are privately registered providers of housing, there could arise legal, financial and policy confusion from having two separate moratorium regimes applying to this small but important area of economic activity. Also, given that the new provisions do not offer greater protection for providers faced with Covid-related financial difficulties than the existing provisions, the regulations seem, at least to me, to be sensible and proportionate.

I will not detain the House for long because colleagues such as the noble Baroness, Lady Bowles, has much greater practical experience and expertise in this area than I do, but this is a subject that I have been interested in for some years and I have a couple of brief comments and questions to offer.

First, I commend the Government for their reform of the insolvency regime that has given rise to the need for these regulations. For years, Governments led by both main parties have been urged to borrow from the American insolvency regime that was brought in during the late 1970s. This new regime has learned from the American example and has stopped a situation, the curse of administrators in our system, in which a minority of creditors have had the power to stop a much-needed corporate restructuring process that could save both the company and many jobs. It may have taken the Covid crisis to propel the introduction of this new rescue culture to our insolvency laws, but the Government deserve credit for making it happen and for acting swiftly.

I want to ask about one of the few important objections that was raised on the Bill as a whole when it was proposed earlier this year: the concerns of pensioners’ organisations and pension funds that the new insolvency regime may make the process of recovering unpaid pension contributions more difficult. How are the Government seeking to allay those concerns now that the new regime is up and running? Could it be an area where further rule changes will be required, or are Ministers happy with the operation of the new rules with regard to the differential impact on different types of creditor?

The origins of the legislation lie, of course, in the effects of Covid on corporate viability, but they also give rise to a question I have about the permanence of the new insolvency regime. This has been puzzling me for the past two or three months. Which aspects of the new rules prompted by the Covid crisis are designed to be permanent in this new regime and which ones are temporary? For example, as I understand it—and I hope that I will be forgiven if this is wrong—the suspension of the wrongful trading rules which are designed to give directors a vital breathing space free of liability is, I believe, valid until the end of September. Will it be extended or made permanent? Similarly, what about the rules limiting the ability of creditors to present a winding-up petition? That change is excellent and in my view much-needed, but it is also temporary. Will it be made permanent?

I turn now to the specific regulations set out by the Minister. I have a couple of questions about the practical consequences of having one set of insolvency moratorium provisions for UK plc as a whole and a separate provision for a small subset of providers of social housing. As I have said, I understand the pragmatic reasons for this, and given where we are, this seems a sensible way forward, but I have a genuine question here. Are there any companies with holdings across economic activities that may result in some of their activities falling under the provisions of the 1986 Act while their housing activities fall under the separate moratorium procedures of the Housing Act? The answer may well be no, but this mixed regime problem is an issue elsewhere in corporate regulations, so I want to check on it.

Related to this, and lastly, I want to ask about the question of secondary legislation arising from the two separate bodies of primary law that underlie these two separate moratorium processes. Clearly, the fact that a small group of private social housing providers will be regulated under a different legal regime means that the rules may diverge, and indeed they already do so. That is not a problem in itself, but there may be good regulation principles in an ambition not to let that divergence grow over time. How will the co-ordination of secondary legislation under two separate bodies of law be achieved, particularly given that, as I think I am right in saying, they will be under the leadership of two different government departments and two different ministerial leads? Is this an issue of concern and, if so, how do the Government propose to ensure that that co-ordination happens?