Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020

Alan Whitehead Excerpts

Monday 11th January 2021 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Rees. I do not think that this afternoon’s proceedings will detain us overlong; as colleagues who have taken part in past debates on statutory instruments that extend measures in the Corporate Insolvency and Governance Act will know, the Labour party fully supports measures to protect businesses from insolvency and to extend the duration of the temporary measures to restrict the use of statutory demands and winding-up petitions until the crisis that businesses face has abated. We agree with the Minister that the measures needed to be extended from their previous expiration date of 31 December 2020 to 31 March 2021.

However, although we certainly support the regulations, I think it fair that we take this opportunity to say to Ministers, “We told you so.” When the Act was debated on the Floor of the House, we urged Ministers to give the measures a longer deadline than proposed. We did so again, and they have since been extended. Ministers should have been more realistic when drafting the Bill and taking it through the House, and ensured that the next safety net for businesses during the pandemic was more robust and realistic. Indeed, initially these measures were not going to be extended, while others were extended; we are glad that Ministers heeded our calls to include these measures in the extension.

Of course, the reason Ministers did not initially extend the measures is that they were, to be frank, complacent about tackling the virus. They thought—wrongly and, I am afraid, regretfully—that the public health emergency would be over and that the measures would not need to be extended. If only they had been right—for the sake not just of our businesses but of our communities, too.

The Government must ensure that businesses have a safety net, as they continue to operate in very challenging circumstances. It must be comprehensive, long term and based on business need, not a last-minute scattergun approach or a sticking-plaster solution. Many businesses face a cash crisis as a result of the pandemic, with trading levels terrifyingly low compared with 2019-20. That is particularly true in the hospitality industry and its associated supply chain, where thousands of businesses are still struggling under very tough restrictions.

As the crisis has dragged on, we have had further national lockdowns to accompany the local restrictions in place. Even otherwise open businesses have experienced huge falls in demand, including those associated with aerospace, the automotive sector, airlines and many others. In order to save jobs and livelihoods, Ministers must do all they can to keep afloat key employers in sectors that are vital to our recovery. I think we all agree that measures such as the furlough scheme are welcome, but as we have argued, if businesses go bust, there will be no work for furloughed workers to go back to.

These extensions will go some way to protecting businesses from predatory creditors. However, although they provide temporary relief, I am hearing from business organisations—I am sure the Minister is, too—that they have many concerns about the cliff edges that businesses will still face when all the measures come to an end at once in March. The Minister said that she is thinking about steps to ensure that there is no cliff edge in March as far as these measures are concerned. What thought has she given to ensuring that businesses will not face a cliff edge in March, such as they did at the end of December? As I am sure the Minister will be aware, many firms are hanging on by their fingertips, particularly given the frankly inadequate support they receive if they close, which is worth less than that provided in March last year. Even with the new one-off grants announced last week, businesses are getting less than was offered in March, while operating in a much tougher climate.

I think we all agree that the best way to recover our economy is to save businesses and jobs now. However, rather than just talk the talk, Ministers need to walk the walk and ensure that there is a proper plan in place for businesses to recover and for our economy to grow and come out of this. Although the measure under discussion is a very welcome element in that wider plan, I am sure we all agree that we need a longer-term plan to ensure that this represents not a further cliff edge but the start of a process to ensure that businesses can recover and trade well and profitably in the future. I look forward to hearing the Minister’s comments on how that can best be done.