Corporate Insolvency and Governance Bill

Drew Hendry Excerpts

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

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I thank the Secretary of State for his customary and welcome thorough exposition of the Bill. I pass on my thanks, too, to the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully) for his engagement. We have been working constructively to try to ensure that we are, as the Secretary of State said, supporting businesses with the measures we are taking. It is very important to remember that people and businesses should be the laser focus of the work we are doing throughout this crisis.

It is important to consider the Bill and support it through today in a constructive manner. That is what the SNP intends to do. The Bill, although in itself a welcome step in the current crisis, should not be seen in isolation. Some very good points were made by the right hon. Member for Doncaster North (Edward Miliband) and the hon. Member for Wimbledon (Stephen Hammond). Some interventions were also very telling.

        As I have said, this Bill should not be seen in isolation. I want to touch on the impact of the Finance Bill, current business conditions and, of course, business and public confidence in the steps that need to be taken. This Bill helps with some provisions and should allow firms to apply their best endeavours to continue to trade during this pandemic emergency. As I have said, we support the Bill and the amendments to make that as easy as possible for people. None the less, as I have alluded to, the problems for the Bill lie in three other areas. Another piece of legislation—the Finance Bill—actually undermines, not just risks, these provisions and sets the conditions that could push companies to the brink. Then there are the plans to grant HMRC preferential status in the insolvency procedures, and the measures to make directors personally liable for companies’ tax liabilities. Together, these represent a significant challenge to businesses across the nations of the UK in trying to access working capital finance. While noting that it is difficult to accurately model the policy’s impact on business lending, UK Finance estimates that the policy could hit lending by well over £1 billion per annum, and possibly—because the modelling is difficult—much more than that.

        As well as having a detrimental impact on business and economic growth, restricted lending will make it harder to rescue businesses, increasing the knock-on effect of insolvency on other businesses and people. Business investment returns to creditors and confidence in the UK corporate framework all stand to be damaged as a result. Although the tax abuse using the company insolvencies measure can be mitigated through accurate legislative drafting and detailed guidance from HMRC, the policy to grant HMRC preferential creditor status should be withdrawn entirely, as its introduction may prove a hammer blow to businesses at exactly the time that the Government profess to be seeking to level up and support them as they adapt to the impact of covid-19.

        The second area of difficulty involves the economic inequities left by the gaps for businesses and Government support schemes during the covid-19 crisis. If the changes for this Bill can be pushed through sensibly in record time, there is no reason why the same urgency cannot be applied to filling the gaps that people and businesses are experiencing. We have heard today that there are substantial problems that not only exist now, with people struggling and unable to access support, but that are looming larger because of the decisions that have been made— over quarantine, for example. As I said during the statement earlier, this is not about whether quarantine is a good or bad device; it is about the fact that it will impact disproportionately on businesses involved in tourism and hospitality. That has to be addressed as we go forward.

        The issues are very clear. Firms are already finding it difficult to access cash, not least because of the UK Government’s flawed coronavirus business interruption loan scheme. I say this with the understanding that the schemes had the best of intentions—to support businesses —but, as we have already heard, they are just not working for everyone. I will not repeat the details because we have heard about that in the Chamber today. There are also big holes in the job retention scheme and the support programme for the self-employed. All of those things are critical to supporting businesses, and all of those things undermine what we are trying to do with this Bill by working collectively to ensure that these measures are taken forward as effectively as possible.

        I agree entirely that the Treasury should extend its 100% bounce-back scheme. That guarantee should cover the entire CBIL scheme. The fact that only a tiny fraction of businesses have received support underlines the need for the UK Government to introduce grants, not just loans. The UK Government should review and relax the lending criteria and speed up the process so that businesses can get vital access to cash.

[Kevin Hollinrake]

I think it is a bit harsh to say that the schemes are not working at all. About £30 billion has been lent under both those schemes—about £9 billion under the CBILS and £21 billion under bounce-back loans. The CBILS issue seems to be that, although the forward-looking viability test has been removed, banks are still assessing whether businesses can afford to make the loan repayments over that period. If we remove the requirement for banks to do that, a lot more money would go out the door under the CBILS.

[Drew Hendry]

I agree and I am willing to concede that some people have indeed been helped. I said that the scheme was introduced with the best of intentions, but the fact is that there are far too many people running businesses who have tried to access this scheme but could not do so. We have heard examples, and I could give dozens more from people who have contacted me. I guarantee that just about everybody—if not everybody—in the Chamber has had similar contact from people who have been unable to access the scheme. The fact is that it is not working as it was intended to. It is not getting through to the people who really need it, notwithstanding those who have been able to access it.

My party, the Scottish National party, also backs calls by the Institute of Directors for the Government to use the scheme to provide firms with overdrafts during this crisis. For firms still unable to access finance, it is high time—indeed, it is overdue—for direct grants and/or equity investments to be offered instead.

The final problem is public and business confidence. We are at stage four in the covid crisis at the moment. There has been a relaxation of measures for people to get out and about and do things and for businesses to start up, but that confidence evaporates if we have to go back to the restrictions and businesses are not able to do that. That will pile on the pressure for the businesses that we are trying to assist today.

I was struck by what was said by the hon. Member for Wimbledon—I hope I get this right—about one of the problems being the protection of one thing at the expense of another. That is a really good comment, because overall confidence and compliance for people and businesses will face further threat. All measures that are introduced by a Government who are, unfortunately, defined by double standards are likely to run into difficulties. This UK Government, these measures and those on public health are all being undermined by the failure to deal with the Dominic Cummings saga. No matter how much the Prime Minister bloviates, this matter has not gone away. My inbox and, I am sure, those of many others, were still full this weekend of messages from people looking for that to be addressed. I know that it is not a party thing, because I have seen the tweets and messages from people representing constituencies and parties around the House—they have all had the same messages. This matter—the principle of different rules applying—has not gone away or failed to register. We might take the comment of the hon. Member for Wimbledon and say that the protection of one at the expense of all others applies here. Observance of the rules is critical to the success—[Interruption.]

[Stephen Hammond]

The hon. Gentleman has taken a bit of latitude with what I said. I was pointing out that this was beneficial, but that we needed to consider the interests of the other and therefore their protection. He is corrupting, or misusing, my words, shall I say.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I think we might be straying a bit further afield from what we are supposed to be debating this afternoon.

[Drew Hendry]

Thank you, Mr Deputy Speaker, but I did say that this was about the ability of businesses to continue to trade and this has a material impact on the Bill, because along with the Finance Bill, which it was entirely relevant to mention today, and the support for business, this can undermine the work that we are doing on this Bill. I will rein myself in now, but I think that that is a valid point. I hope—as you know, I greatly respect you, Mr Deputy Speaker—that you will understand and accept that point.



I have a lot more to say about that. This issue has not gone away, nor has it been dealt with—but it should be if the public are to have any confidence going forward.

Finally, returning to the Bill, getting this through today to protect people and allow them to trade out of difficulties is vital. We should accept that changes need to be made. I have set out a few, and we have seen the amendments. We should work collectively to make sure that the Bill is as good as possible to protect businesses.

Corporate Insolvency and Governance Bill

Drew Hendry Excerpts

Consideration of Lords amendments & Ping Pong & Ping Pong: House of Commons
Thursday 25th June 2020 Commons Chamber

[Richard Fuller (North East Bedfordshire) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests and in particular to my roles as a director of companies.

Like the Opposition, I welcome the changes that the Government are accepting in the Bill today. I have listened to a couple of interventions from the Opposition Benches, with their strong support for Government measures to support the economy, and that is emblematic of how successful they have been. However, I would just gently warn my hon. Friend the Minister that we have made great progress so far, but there are issues, as we emerge, about how those programmes are helping certain people, while other people are not receiving that support. We need to get the economy going back to normal business principles as quickly as possible, not seek to extend Government intervention unnecessarily or for too long.

This Bill is a very timely Bill and it is a good Bill. As the shadow Minister said, there is a mixture of short and long-term issues here, but getting this on the books is really rather important for the market. May I ask the Minister, building on some other comments about the changes in the role of the Pensions Regulator and the PPF, whether he sees this as part of a longer-term view of the Government about the role of pensions regulators in insolvency, and whether this is an indication of something that may outlast and be outwith any short-term changes? I would be interested in his perspectives on that.

I am not sure if the Bill continues to relate to the primacy of HMRC as a creditor in insolvencies, but I would be interested if the Minister has any observations on that. I know that, for many businesses when they are trying to seek resolution in insolvency, HMRC can prove to be one of the most difficult creditors to deal with—and that is putting it perhaps a little lightly. So do the Government have the intention of providing, or does the Treasury have any intention of providing, any guidance on how HMRC may be treating its obligations during this particular period? For many companies, that would be a welcome piece of information as they go through what may otherwise be very difficult periods.

May I ask the Minister about the extension to 30 September? That seems to be a very sensible change, but may I ask him about what happens in the event that there is a repeat lockdown that is a national lockdown? He has talked a bit about an affirmative decision here. That, it seems to me, is perhaps a bit more focused than that. Perhaps more tellingly, what happens in the instance where there is a localised lockdown in a particular county or a particular region that affects businesses there and they go insolvent? What happens to those particular businesses? I would be interested to see if the Minister has some thoughts on that.

My final observation, Mr Deputy Speaker—and you, with your great experience, may know this too—is that frequently measures that come into this House that are seen as short-term measures have a habit of sticking around on the statute book. So could I have, on the sunny-side view of the recovery of the economy, an absolute assurance from the Government that it is their intention, as these things sit, as the economy recovers, that they will implement the sunset clause, and they will come forward so that we can enable businesses to go back to the longer-term framework, some of which is in this Bill, for managing corporate insolvency?

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

Can I also thank the Minister for the collaborative and refreshing way, given his Government’s record, of engaging across the Benches to take this legislation through? I will come to my constructive criticisms in due course.

The areas I want to expand on are, basically, that we accept the Lords amendments and, within that, seek assurances from the Minister, his Secretary of State and his Government that they will work with the trade unions to ensure that workers are adequately protected, acknowledging that, while the Bill is a welcome step, the help it will give firms to get through the covid-19 crisis is going to be a drop in the ocean of the challenges they face. If this Tory Government are serious about reducing insolvency, they need to do much more. They should then support the Scottish National party’s amendments to the Finance Bill to prevent HMRC’s vulture powers from taking effect.

We welcome the technical changes made through the Lords amendments, not least the fact that the Scottish Parliament can play its full role in matters relating to clause 43. That is extremely welcome. It is also welcome to see the Government make concessions to Lord Stephen to ensure that directors will have responsibility for informing employees about moratorium arrangements and reassuring them about their conditions in the future. The Minister and the Government must provide assurances that they will continue to engage with trade unions and give an unequivocal guarantee that workers’ rights will not diminish as a result of the Bill.

The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) was very kind in her criticisms. I am going to be a bit more direct. The swathes of Government amendments required in the Lords are indicative of the Government’s ongoing failure to grasp the details of the measures they propose—that is notwithstanding the very good engagement I have already referred to by the Minister here today. It is not the way to take such important matters forward.

As I said earlier, we welcome the measures, especially the provision of a short business rescue moratorium to protect companies from creditor action while options are considered; the new court-based restructuring tool; and new rules to prevent suppliers from cancelling contracts with businesses in an insolvency procedure. They are all helpful to business, as is the temporary suspension of the wrongful trading provisions to give company directors greater confidence to use their best endeavours as they continue to trade during this pandemic emergency, without the threat of personal liability should the company ultimately fall into insolvency. Importantly, we are keeping the existing laws for fraudulent trading and potential director disqualification to deter director misconduct—so far, so good.

The main and most pressing issue, however, is that these measures do not address the mountain of corporate debt that will prevent firms from investing to rebuild the economy. With reports that less than half the bounce-back loans will not be repaid, it is high time that recipients of the bounce-back loan scheme and coronavirus business interruption loan scheme debt were offered the chance of that debt being turned into equity instead. It is simply unrealistic to expect economic growth while numbing investment, crushing productivity and adding to corporate debt.

To be serious about avoiding insolvency, much more attention will need to be paid to the breadth of effects. Even businesses that survive will face a much longer road to recovery, especially in sectors such as tourism, hospitality and the arts. Without meaningful action, jobs will be lost and communities scarred, probably for decades. The effect on those sectors and others means that the brunt will be borne by thousands of people in the gig economy and on zero-hours contracts—and disproportionately by young people.

The Minister said that he wanted to make a commitment to supporting local economies. It is important that he takes that message back to the Chancellor because, when redundancies come, businesses will focus on those who will cost them the least to release: the low paid; those with no contract; and, as I have said, younger people. I have to declare an interest here as a father who still has two teenagers in the house, and, of course, as a newly-surprised grandparent of my new grandson Cameron Hendry. I want to ensure that all young people have a future to look forward to that is not going to be hampered by decades of retrenchment. [Interruption.] Indeed, Cameron Hendry. It is a fine name, isn’t it?

To get back to the serious point, although the hospitality sector is hopeful of some meagre income in the dying embers of the season, it has effectively faced a three winter situation. It may get 15% to 20% of that which July would normally bring, and maybe a bit more in August, if it is lucky. I have been engaging with and listening to the industry’s concerns, which are similar in tourist areas across the nations of the UK.

Current hotel occupancy rates seem to be below 10%. In my own constituency, the owner of the Kingsmills Hotel Group, Tony Story, told me that his company will have to bear the cost of an additional 15% to 20% per room for electrostatic spraying and hospital-grade cleaning in his hotels. That experience has been reflected by other smaller hotel owners across the sector.



They need the Minister, his Secretary of State and his Government to implore the Chancellor to extend furlough support in the sector beyond this year. As it stands, because of the changes—because of the contribution they will have to pay towards furlough—they will lose more money opening their businesses than when they were closed. It makes no sense to punish them in that way. The furlough scheme has been of great help; we have mentioned that many times and supported it. That is why it is important that it continues in order to avoid insolvencies that may come out of this.

--- Later in debate ---

[Drew Hendry]

I am grateful to the Minister for his kind comments. I would say in passing that there has to be at least one good Cameron mentioned in this House.

I have asked about a range of things, in addition to the HMRC issue, that are not within the Minister’s direct power. One of them was supporting minor changes to borrowing powers to allow the Scottish Government to take decisions themselves to support economies locally. That is important, as he said. Will he take that forward with his colleagues in order to make sure that we can have those measures taken in Scotland?

[Paul Scully]

I am grateful to the hon. Gentleman. Clearly, these are all things that we will continue to look at.

The hon. Gentleman talked about the hospitality sector. Let me reassure him that the Government recognise that this sector is particularly hard hit by closure. I have regular conversations with representatives of the hospitality sector, including, most recently, only yesterday. They were very pleased and optimistic about the fact that we have now been able to change the rules within England and start giving them the certainty that they need to reopen. I look forward to successful reopening in England and, in time, in Scotland as well. It is so important that we work with the hospitality sector. The three winters issue that he described has been raised with me and I do appreciate it.

This shows the interlinking of the economy. I also hold the position of Minister for London. The hon. Member for Richmond Park (Sarah Olney) talked about culture. With regard to the hotel sector in London, people do not tend to go to a hotel just to sleep in another bed—they come, they sleep and they go because of the theatres, the restaurants and the culture around the area. It is therefore important that we get each of these sectors up and running. That is why we have these frequent discussions and work as collaboratively as we can. That also gives us the understanding we need in order to inform our support. A range of hospitality bodies and companies were consulted on the safer workplaces guidance, for example.

The hon. Member for Richmond Park talked of striking a balance, which is what we have tried to do in this Bill. I am grateful to her colleagues for making the point so clearly that measures are needed for longer. I hope she will agree that the Government have taken on board those concerns. She also spoke about the theatre sector. I know the Orange Tree. I tend to know the Orange Tree pub next door a little bit better than I do the theatre, but I know the great work that it does in the community. I will take her concerns back to colleagues.

Let me take this opportunity to thank the House of Commons Public Bill Office and the House Clerks for ensuring that this vital piece of legislation could be expedited through the House and consequently come into force as a matter of urgency. The support they have provided has been invaluable. I thank the officials who have brought this legislation into existence: my Bill team of Andy Ormerod-Clarke, Muneera Lula, Jess Bradbury, James Roddy and Alice Roycroft. All those in the teams in BEIS and the Insolvency Service—there are too many mention—have worked tirelessly, across weekends and in the evenings, to make sure that we could bring this to bear as quickly as possible. I want to mention the lawyers who have worked day and night, some of them with very young children, to draft this legislation: in particular, Jo Ashida, Denise Fawcett, Samihah El-Gindy, David Anderson, and our lead parliamentary counsel, Diggory Bailey.

I pay tribute to the policy leads, some of whom have worked in this area for many years, and who have worked with outside experts to make sure that we had the measures right: Steve Chown, Simon Whiting, Laura Bardsley, Rob Mak and many, many more. Colleagues from HMT, the Department for Digital, Culture, Media and Sport, the Ministry of Housing, Communities and Local Government and the DWP have also been invaluable. I pay tribute to all the organisations and representatives of businesses, consumers, workers, shareholders, investors and insolvency experts who have engaged with us in developing these proposals.

I conclude by mentioning those for whom this Bill is intended: the millions of business owners up and down our country who are keeping Britain moving. I say to them: please keep it up. Let us keep moving and let us bounce back our economy as and when the limitations and the restrictions are lifted.

Lords amendment 1 agreed to.

Lords amendments 2 to 116 agreed to.