Corporate Insolvency and Governance Bill

Darren Jones Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[Darren Jones (Bristol North West) (Lab)]

I welcome the measures in the Bill, which will support struggling businesses during this difficult economic period, but, as other Members have said, this short-term relief needs to be followed quickly by a comprehensive recovery plan for the British economy.

For British businesses, this is a moment of genuine crisis. More than one in five companies across the economy, and an overwhelming majority of those in the worst affected sectors, have already been forced temporarily to cease trading. Survey after survey and the cases we have all encountered in our constituencies shed light on the depth of the anxiety that businesses and their employees are carrying about the coming months. I think there is an understanding across the House, therefore, that failure to act would have meant hundreds of thousands of fundamentally healthy businesses going under altogether, and that that would have been unacceptable.

In that context, the Bill’s time-limited provisions are a matter of necessity. The measures on wrongful trading, statutory demands, winding-up petitions and greater flexibility on governance constitute meaningful, if in some respects temporary, respite for struggling businesses. However, the urgency of responding to this crisis must not blind us to the deeper challenges that we face.

The measures we are debating will postpone the threat of insolvency, but giving workers and businesses real security about the future will require a more ambitious and better-targeted package of support. A significant majority of businesses that have continued to trade are currently reliant on some form of Government help. The success of that model has been its ability to deliver a one-size-fits-all remedy at pace, but the slowdown so far has been marked not just by its severity but by its unevenness.

The Business, Energy and Industrial Strategy Committee heard last month from the retail sector, for which the challenge is especially stark, with as many as a fifth of independent non-food retailers expecting to close for good and often in no position to take on additional debt. Tomorrow we will hear from the manufacturing and energy sectors, including aerospace, automotive and steel, whose needs are self-evidently of a different order, with a small number of major companies providing a significant percentage of British exports, but often reliant on a vast supply chain of small and medium enterprises, themselves in distress and in need of bespoke support. So as the economy reopens, the key measure of success for preventing insolvencies will be the Government’s ability to get help where it is required, on a sectoral basis, with a whole-supply-chain view.

[Richard Fuller]

It is a pleasure to serve on the Committee of which the hon. Member is Chair. I am interested to hear him talk about the differential impact on different sectors. He mentioned retail. Does he think that the Government’s policy to close retail was wrong?

--- Later in debate ---

[Darren Jones]

I do not. The public health emergency had to be dealt with, and understandably, it had consequences for the economic emergency we find ourselves in. Retail was one example that we heard from. However, I declare my constituency interests in the aerospace sector and in the transport sector, where evidently there will be a longer tail of damage to their business prospects than to other sectors of the economy that might be able to open sooner rather than later.

That is why we need a comprehensive recovery and growth plan, which, I understand from the Prime Minister at the Liaison Committee hearing last week, will be with us before the summer recess. That plan will need to take a strategic view on what the British economy should look like in the future, and what capacity, skills and production we therefore need to protect now—with, of course, the net zero transition baked in.

On corporate governance, which the Secretary of State noted today has been part of the longer-term thinking of this Government, I worry that the Government’s determination to act quickly in the Bill has come at the cost of bringing forward long-awaited reforms, as was so eloquently posited by the hon. Member for Huntingdon (Mr Djanogly). The failings that led to the collapses of Carillion and Thomas Cook, for example, and the impact of those failings on their employees, suppliers and customers, as well as the taxpayer, were the subject of extensive work by the BEIS Committee under the leadership of my hon. Friend the Member for Leeds West (Rachel Reeves), and that work underpinned serious reform-minded proposals to protect employees and the smaller suppliers, which too often suffer most.

In response to the Government’s 2018 consultation, Ministers also made repeated commitments to strengthen governance before the point of insolvency, for instance by better incentivising shareholders to take responsibility for performance.

I do not wish to set a panacea standard for the Bill, which I of course recognise needed to come forward quickly, but there was a welcome opportunity for the Government to have a bit more to show to bear out its claims of seriousness on this issue. With that in mind, I am curious to hear what commitments Ministers can make today to ensuring that the anticipated legislation on “Good Work”, following the Taylor report, and parallel legislation to reform the Financial Reporting Council into the Audit, Reporting and Governance Authority, are introduced to the House as soon as possible.

Relatedly, the BEIS Committee’s work in the last Parliament on curbing runaway executive pay and requiring proper reporting of the gender pay gap, alongside the question of how investment decisions on behalf of British savers and pensioners should be made in such a way as to bring society-wide benefits, in line with the stewardship code, constitute a challenge which I hope Ministers will rise to, if not in the Bill, then in the short future.

I understand the Government’s hesitation to reinvent the wheel with this specific piece of legislation, but I would welcome a clear statement of intent from Ministers today on the importance of rigorous corporate reporting—including on executive pay and the gender pay gap—and the centrality of building environmental, social and governance principles into investment decisions. I agree with other hon. Members that there have been many businesses acting in the best possible good faith in very difficult circumstances, but all of us recognise, as has been debated in the House today, that some businesses might be pushing that good faith too far, and where businesses are acting in bad faith, especially when in receipt of British taxpayers’ money, there ought to be at least consequences for the worst examples.

I appreciate the Government’s determination to act quickly, but moments of crisis should broaden, not constrain, our ambition to create a better future. The Bill will come as a genuine relief to businesses in the most difficult shape, and I of course support it. But its caution should be a matter of regret, and any such continued caution could yet be the undoing of the Government’s recovery efforts in the long term. In that spirit, I gently urge Ministers to be bold as well as decisive—so that the Bill forms the start, not the end. I look forward to further discussions on this topic before our Committee.

[Mr Deputy Speaker (Mr Nigel Evans)]

I call Chris Clarkson to make his maiden speech.