Corporate Insolvency and Governance Bill

Debate between Ed Miliband and Stephen Doughty

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

[Edward Miliband]

I certainly agree with the hon. Gentleman that it is very important that the approach is UK-wide, and I welcome that.

Let me say something about the temporary measures in the Bill. We think it makes sense to remove the threat around winding-up orders, for example, to deal with the issue around landlords. We welcome the measures that the Secretary of State put in place, but there is another way around, as it were, which is a landlord issuing a statutory demand followed by a winding-up order. We think that the suspension of personal liability for wrongful trading while insolvent makes sense as a measure, but for a strictly time-limited period. It is important, as I think is clear, that other duties continue to apply to directors.

In addition, easing the requirements on company filing deadlines and AGMs makes sense. Indeed, given proceedings yesterday in this House, the facility in the Bill for virtual proceedings at AGMs carries a certain irony. If only the Business Secretary had told the Leader of the House, perhaps we would have been spared a lot of trouble and a lot of queuing yesterday.

As the hon. Members for Dudley South (Mike Wood) and for North Antrim (Ian Paisley) have both said, there is clearly a case for a longer period than to 30 June. This is no disrespect to the people writing the Bill, but I think we can agree across the House that the temporary measures will need to be in place for longer. We would be happy to see an amendment that puts the end of September in the Bill, and one of our amendments would do that. I accept the Secretary of State’s point that the change can be made by statutory instrument.

Having given the Bill a broad welcome, I want to raise some issues.

[Stephen Doughty]

I agree with all that my right hon. Friend has said. Does he agree that some extension will be needed for some of the sectors that may be hit for longer, such as the creative industries? Many in my own patch will be affected for longer because they will be closed down for longer, and they need special assistance.

[Edward Miliband]

My hon. Friend is a brilliant champion of those industries and other industries in his constituency, and I agree with him. I will come on to the particular sectoral challenges that the Secretary of State and the Government are facing.

Let me mention the areas where we would like to see improvements made to the Bill. First and most importantly, the Government’s case on the restructuring plan provision is that it could have benefits in enabling companies to restructure and not go into liquidation and in stopping large creditors from forcing companies to do so. I accept the case. I think I am right in saying that the cross-class cram-down provisions—it is not a very beautiful phrase—apply across the EU under EU law and apply in the United States as well. What is important about the provisions is that they mean that even if a class or classes of creditors object to a rescue plan, it can still go ahead providing they are better off than in the other most likely scenario, which is often going to be liquidation. That is why protecting those without power—creditors and others—is so important.

What cannot be allowed to happen—I know the Secretary of State agrees with this—is for the RP provision, which has wide scope and is not just for companies that are insolvent, but for those who fear they might become so, to be used to ride roughshod over the rights of employees, including their pensions. Given the nature of the crisis we are in, it is essential that there are proper safeguards.

To give an example, the Secretary of State will have heard earlier the deep concerns across the House about the actions of British Airways, including sacking its employees and apparently offering worse terms and conditions. The RP provision cannot become a charter for more of that sort of action, and it is our mutual responsibility to make sure it does not become so. I know the Secretary of State shares that view.

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[Edward Miliband]

I believe I am right in saying that the hon. Gentleman knows a lot about this, and I congratulate him for his work on the all-party group dealing with the whole range of these issues, but I am talking about the situation after secured creditors and others have been dealt with. There is currently a provision for 20%, but up to a limit of £800,000. Our amendment seeks to make that 30%, and to raise the proportion, but remove the limit. We must ensure that we do all we can for employees and small businesses—my hon. Friend the Member for Manchester Central will correct me if I have got those figures wrong, but I think I am broadly right.

Two sets of issues are not in the Bill, although we would have liked them to have been included, as I believe they are missed opportunities. First, in 2018 the Government consulted on a set of corporate governance safeguards in the wake of the scandal at Carillion, and indeed at Thomas Cook, which came after that. I understand that the Bill relates to the immediacy of the coronavirus crisis, but it would have been better if the Government had acted on those vital corporate governance issues in the Bill, and we would have supported them in doing so. Given that this crisis makes corporate distress more likely, it is strange that the Government have not chosen to introduce such measures. The risk is that we will get more Carillions and Thomas Cooks, with all the consequences of that for employees.

In 2018 the Government were committed to greater accountability of directors in group companies, legislation to enhance powers for insolvency practitioners, and further raising standards by ensuring an explanation about the affordability of dividend payments. Labour supports all those measures—indeed, we have tabled amendments to insert them into the Bill—and we do not think they cut across the need to protect businesses through the coronavirus crisis. Will the Government explain what plans there are for those improvements to corporate governance? I understand that the Bill must go through at speed, but it would have been better if it contained those measures.

Secondly, like the hon. Member for North East Bedfordshire, I wish to mention late payments to small businesses, and the important role of the Small Business Commissioner. If larger companies do not make good on their payments to small businesses, that could be the thing that pushes them over the edge. We believe that the Bill could be used to strengthen the powers of the Small Business Commissioner to help businesses that are struggling with cashflow and liquidity, and such a measure would have improved the Bill.

As I have said, we want to facilitate the passage of the Bill as it is important to protect businesses up and down the country, and we hope it can be improved in the ways I have set out. Having dealt with its specific provisions, however, let me deal with the wider context. The measures in the Bill can play a part in preventing insolvencies, but as the House knows, the number of businesses that go out of business depends on the external environment and on what the Government do in response to that. I welcome the action taken by the Government so far. There are lots of measures that we support, but we also believe there are gaps and other areas where the Government need to act.

I wish briefly to outline four sets of issues that go directly to the question of insolvency. First, I fear that the support system introduced by the Government is still not working sufficiently for our SMEs, and it risks worsening the insolvency problem. We called for the 100% underwriting of loans six weeks ago for smaller firms, and we welcomed the bounce back loan. Clearly, however—the hon. Member for Thirsk and Malton (Kevin Hollinrake) made this point—those loans do not do enough for SMEs that need more than £50,000 of liquidity.

The bounce back loan was intended to improve the working of the CBIL scheme, but I am afraid that has not happened. I have the figures for what happened to the CBIL scheme in the past few weeks—I am sure the Secretary of State is as in touch with them as I am—and the number of facilities approved each week is going down, and the gap between the total numbers of applications and approvals is widening. Somebody contacted me the other day who will not be counted in those figures. He waited two months to be told by his high street bank that he was not eligible and that there was no point in him applying for a loan under the CBIL scheme. He will not be counted in those statistics, and hon. Members across the House will have heard of similar experiences.

I know that the Secretary of State is dealing with a range of issues to do with companies in distress. As I understand it, the idea was to get rid of the forward credit check for the CBIL scheme, but that does not seem to be doing the business and we need to understand why. I personally would be open to having 100% underwriting slightly higher up the scale, but we need a solution.

Secondly, beyond SMEs, I am deeply concerned about particular sectors, with manufacturing top of the list. We have seen thousands of redundancies at Rolls-Royce, real problems in the aerospace sector, issues in the car industry and massive issues facing steel. In France, steel received support within a fortnight of lockdown, whereas here our companies are still waiting. We read stories in the Financial Times about public equity stakes being considered—the so-called “Project Birch. It sounds like an interesting idea, but I say to the Secretary of State that this is taking too long, both for larger companies and for the SMEs in the supply chain.

[Stephen Doughty]

My right hon. Friend is right to mention steel and aerospace in particular, as they are crucial providers of jobs in south Wales, and we have the situations with BA and with the steel industry. Does he agree that we need to get support to them as soon as possible?

[Edward Miliband]

My hon. Friend has been powerfully advocating for the steel industry, along with other hon. Members in all parts of the House, and there is real urgency in this respect.

Let me just say something about the CLBIL—Coronavirus Large Business Interruption Loan—scheme, which is for larger loans. We are talking about more than £45 million. I fear that this is Treasury orthodoxy, so I will not expect the Secretary of State to comment. We all know Treasury orthodoxy—I do, as I used to work there. The good news is that the Chancellor raised the limit to £200 million for the amount that companies can get, but the bad news for companies is that the CLBIL loan has to become their most senior loan—it has to be top of their list. The problem is that that means companies then have to renegotiate their other most senior loan, so they are caught in a Catch-22 situation. I suspect the Secretary of State agrees with me, but he cannot say; perhaps the Chancellor is watching. I say to the Secretary of State that companies such as McLaren have said, “We have tried to get this loan but we cannot get it because of this Catch-22 situation.” This is urgent and I urge him to get it sorted. We have had only £1 billion paid out under this scheme; 191 firms have got loans, but that is out of 579 that have applied. This is about manufacturing largely; it is about lots of large manufacturers across our country who are really in distress. There is more to be done in advancing some of the money that is already in the budget for low carbon. That is true in relation to aerospace, where I believe there is a fund—I am hoping that can be advanced— and to steel.

Let me refer to some other sectors, as one of my hon. Friends did earlier. With the public health measures that are necessary, it is obvious that sectors such as hospitality, tourism and the arts will face much greater pressures for longer; they are going to take longer to reopen and recover. To give the House a sense of the scale, I should point out that the British Beer and Pub Association has warned that up to 40% of Britain’s pubs cannot survive beyond September with the current level of financial support; that one third of jobs in tourism-related areas are estimated to be at risk; and that the Society of London Theatre and UK Theatre estimate that 70% of the 290,000 jobs in that sector are at risk. Those are dire warnings we are being given.

That brings me on briefly to the furlough scheme. It has been a really good innovation, but I do not understand why the Chancellor is pursuing a one-size-fits-all policy on that scheme, because the public health measures mean that some sectors will take longer to reopen and recover. Whether through the furlough scheme or a second wave of support, these sectors are going to need extra help. I know the Secretary of State is working on this, but I underline its importance: we are talking about thousands of pubs across our country, hundreds of theatres and arts venues, and jobs in tourism. These things are the lifeblood of our constituencies.

Thirdly, I want to raise with the Secretary of State the issue of the “month 13 problem” of insolvency. This is a bit further off, but it is still an issue. Even if the Government fix their loan schemes and provide the sectoral support required, the more debt there is weighing down companies, the greater the danger of insolvency down the line—this debt overhang is also bad for our economy when it comes to recovery. [Interruption.] I hear the hon. Member for North East Bedfordshire muttering about borrowing from a sedentary position, but I am talking about private debt. The Federation of Small Businesses has been suggesting for some time that loans need to become income contingent. It has suggested a student loan-type approach. In other words, when businesses get to a certain level of financial health, they can start repaying the loans. There may be other ways forward, such as converting the loans into equity, but we are going to need solutions for these firms.

The Government's Plan for Brexit

Debate between Ed Miliband and Stephen Doughty

Wednesday 7th December 2016 Commons Chamber

[Edward Miliband (Doncaster North) (Lab)]

It is a privilege to follow the right hon. and learned Member for Rushcliffe (Mr Clarke).

This debate might appear just to be about this House, and the rights of this House and whether we get a plan. It is not. And it is not about whether we were for leave or for remain. It is about a deeply divided country. The truth is that we are divided between people who voted leave and fear being betrayed, and people who voted remain and fear a deep sense of loss.

In case we have forgotten, after all this is over—I suspect it will take more than two years—leavers and remainers will have to live in the same country. That is why I believe that the way we conduct this debate, as my right hon. Friend the Member for Leeds Central (Hilary Benn) said, is absolutely crucial and all of us, however we voted in the referendum, should be seeking to unite the country and not divide it. What does that demand?

First, I believe we need to honour the result of the referendum. It was a referendum that, as the House knows, I did not seek, and it was close, but it was clear and it needs to be respected, in my view. We are leaving the European Union; I could not put it any plainer than that. That is my starting point. But unifying the country takes a lot more than simply saying “Brexit means Brexit” or even “red, white and blue Brexit”.

There are hugely significant and material choices to be made by the Government and our EU partners, which will have implications for our country for decades to come. That is why it is good that the Government have said that they are going to publish a plan. I looked up the “Chambers Dictionary” definition of a plan, and it is this:

“a thought-out arrangement or method for doing something”.

That seems to me to be more than a series of hints, to use the words of the hon. Member for Bedford (Richard Fuller). What the Government have committed to—there should be no doubt about this—is the thought-out arrangement that they favour for Brexit, and they have committed to produce that to the House before the negotiations begin.

We know the key questions that need to be answered. Do we remain in the single market or not? Do we remain in the customs union—that has been debated today—or not? If Brexit is outside the customs union, as seems to be the Government’s position—maybe, although there are four different options and we do not know what they are—what is the best estimate of the economic impact of that on our country and every one of our constituencies and constituents? The reason this matters is that these are not nit-picking or procedural questions; they are questions that will affect millions of people and businesses up and down the country. There are not simply matters of procedure.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

My right hon. Friend is absolutely right to say that this is not nit-picking. A key issue in my constituency is the funding for the South Wales Metro, which was due to come from European funding. The First Minister is going to Europe to see what he can get for the next two years, but this is a huge area of uncertainty, and it will affect hundreds of thousands of people in south Wales.

[Edward Miliband]

My hon. Friend puts it very well.

What about the plan on immigration, including for citizens of this country who want to go and work or live abroad in the future? What is the vision? I think the Secretary of State for Exiting the European Union, who is no longer in his place, was nodding and saying that they would produce a plan on our approach to crime and terrorism, foreign policy, climate and energy policy, in respect of which Governments of both parties have taken a leadership role in Europe. What is the future for that? We do not know at the moment, so it must be in the plan.

Our motion is not a request for every dot and comma of the negotiations, to use the Prime Minister’s words, to be included. We are talking about basic and fundamental questions about the Government’s vision of our economy and place in the world, post-Brexit.

As my hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) said, the plan must be produced in January—soon enough for Parliament and, crucially, the British people to debate it properly. I had some time on my hands, so I looked up the consultations on which the Government have embarked since the 2015 general election. There were 1,200 in all, and they include everything from consultation on the code for small sea-going passenger ships to one on the regulation of traffic signs. The Government consult a lot. Are we seriously saying that the issue on which they are not going to consult the British people is the post-Brexit arrangements for our country? I would point out that this is less of a niche issue than the regulation of traffic signs—important though that issue is.

Here is the thing. The Government said that they want to bring the country with them. That is really important, and those words were echoed by the leader of the Scottish Conservative party, who said that we have got to listen to the voices of the 48%. But a Government cannot take the country with them if they do not tell the country where they are seeking to go before the negotiations begin.

I have no greater authority to cite on this than the current Prime Minister. In 2007, she wrote a very interesting pamphlet with somebody called Nicholas Timothy, who I believe is her chief of staff. It is called “Restoring Parliamentary Authority: EU Laws and British Scrutiny.” I am told that it has been taken off the relevant website, but fortunately the House of Commons Library has a copy. It says:

“Our feeble system of scrutiny undermines Parliament’s ability to check or restrain the Government’s action in Europe…We therefore need a system that gives Parliament real powers over ministers, enough time to scrutinise, and the transparency to restore public trust in the process.”

I could not have put it better myself.