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

Baroness Bowles of Berkhamsted Excerpts

Friday 24th July 2020 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, a few weeks ago, I thought I had seen the last of the Corporate Insolvency and Governance Act—CIG, for short—at least for while, but here it is again, or rather not here as this is an eligibility exclusion.

As a starting point, let us look at what the social housing sector is not getting. The main features of the CIG moratorium were to enforce continuity of supply by negating supplier termination clauses during the moratorium, with debt relating to ongoing supply going up the creditor pecking order in a subsequent insolvency.

There was also a new restructuring plan process that could be enforced on minority creditors, potentially making restructuring arrangements easier. There was quite a lot of concern that the changes to the priorities in the event of a subsequent insolvency handed too much power to financial institutions, which are probably the main beneficiaries of enhanced priority. This, it seemed, was going to be the price for having a moratorium.

There ends my familiarity with the legislation relevant to these regulations, so I went through parts of the Housing and Regeneration Act 2008 and the Housing and Planning Act 2016 to see what the social housing sector had instead. I soon discovered that there is both a moratorium and other detailed provisions that impose objectives that do not appear in the CIG moratorium. I agree that it would be complicated to try to blend the two together, although I share other noble Lords’ concerns about when both are in the same holding company. I am not sure that I found all that much in common, other than the fact of a moratorium and creditors having to agree to extensions of the moratorium after the first period. There were bits that could have been contradictory if both co-existed without amendment.

The Explanatory Memorandum says that the Government consider that the CIG moratorium provisions are unlikely to offer greater protection for private registered providers or their tenants. I agree with that. The moratorium possibility already exists, seemingly without having to buy it from financial institutions with enhanced priority. I am unsure whether not having the restructuring option is a loss, but with something as important as social housing, being cautious about new provisions must be right. If that provision proves useful and relevant in due course, maybe ways to extend just that part could be found.

That leaves the matter of essential supplies and the triggering of termination clauses. I presume that something has worked over time, and perhaps the Minister can enlighten me; it may well be that I have missed some provisions, or that this is where the regulator funding comes in. But broadly, it seems reasonable and maybe safer to keep with the present bespoke system for social housing and exempt it from the new, more general arrangements.

I could stop there, but since we have been given a bit more time than usual in recent times, I will pose a couple of questions about how the social housing system moratorium works, because I found my curiosity piqued. There is an important objective—in the Housing and Planning Act, I think it was—of keeping social housing in the regulated sector, although there are also conditions in other parts of the legislation that the position of creditors could not be made worse. I wondered how those twin criteria were met in practice, and, if banks were major creditors, how they were kept at bay long enough to find the right arrangements, not least because, like other creditors, they would have to agree to any extension to the moratorium. Maybe the regulator has the knowledge to be able to act quickly, or other powers or provisions can be used. I noted that there were potential restrictions on disposals.

The Explanatory Memorandum also mentions that the regulator can give financial assistance, which seems a key point in enabling continuity of operations. What level of assistance can be given, and does it have to be recovered? I have strayed somewhat from the regulations in hand, so if the Minister has not got a brief for those questions, I would be happy to have a written reply.