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.