Carcraft

Iain Wright Excerpts

Wednesday 10th June 2015 Westminster Hall

[Mr Iain Wright (Hartlepool) (Lab)]

Thank you, Mr Williams, for calling me to speak. May I begin by saying what a pleasure it is to serve again under your chairmanship, for the first time in this Parliament?

I congratulate my hon. Friend the Member for Heywood and Middleton (Liz McInnes) on securing this debate. The whole House would agree that, since arriving here just a few short months before May’s general election, she has impressed everybody with her dedication not only to the needs of the NHS, which she has particular strengths in, experience of and passion for, but to the wider concerns of her constituency. She has demonstrated that again today with her excellent speech.

I also pay tribute to the excellent remarks made by my right hon. Friend the Member for Enfield North (Joan Ryan) and my hon. Friends the Members for Stretford and Urmston (Kate Green) and for Rochdale (Simon Danczuk) on the matters affecting their constituents following the closure of Carcraft.

I welcome the Minister for Small Business, Industry and Enterprise, the right hon. Member for Broxtowe (Anna Soubry), to her new position in the Department for Business, Innovation and Skills. It is an excellent appointment. If we must have a Tory in that position—I suspect that because of democracy we do—then I am glad that it is her. I wish her all the very best in her new role of ensuring that business and enterprise are championed and that the interests of workers and consumers are given sufficient priority. Those have been a key theme of today’s debate.

Mr Williams, I hope that you, my hon. Friend the Member for Heywood and Middleton and other hon. Members will indulge me for a moment, because my brother Paul and his wife Leanne had a baby earlier today. Oliver was born at 12.10 am, weighing 7 lb 1 oz and, thankfully, looks like his mother rather than my brother. Both mother and baby are doing well. Coincidentally, today is also the birthday of my son, Jacob; he is 19 today. I wish my son many happy returns and hope that these two cousins can celebrate joint birthdays for many years to come. I thank the House for that indulgence, Mr Williams, and having dispensed with the Wright family’s birthday matters, I will respond to the serious matters that my hon. Friend has brought to Westminster Hall today.

Carcraft was once seen as the UK’s leading car supermarket, but, as my hon. Friend has said, it went into administration very quickly, without any great notice, in April, with the loss of around 474 jobs. My first concern has already been raised time and again in today’s debate: it is about the people who have worked diligently and professionally for the firm but who now find themselves without employment. It must be a very difficult time for many former employees of Carcraft, especially because the company’s fall into administration would have come as a complete shock to many of them.

Given what has already been said by my hon. Friends, what assistance can the Minister provide in this situation, whether it is financial assistance from the Government or—more likely—the removal of bureaucratic inertia to ensure that the people affected by the closure of Carcraft are given help and information, and supported to return to employment as quickly as possible? What liaison is taking place between the Minister and her counterpart in the Department for Work and Pensions to ensure that Jobcentre Plus staff are fully aware of the importance of this matter?

My hon. Friend and others provide a hugely effective bridge between national, local and sectoral organisations; we have heard about BEN a number of times today. But can the Minister set out what will be done with local authorities? Given that Carcraft was a national organisation—colleagues from not only the north-west but London have spoken today—has the Minister sought to establish some form of taskforce to provide effective liaison and deal with the issues arising from its closure, many of which will affect its former employees, whether they live in Rochdale or Enfield?

My hon. Friends the Members for Heywood and Middleton and for Rochdale made an important point about their local economies, which are very similar to that of my own constituency. My hon. Friend the Member for Rochdale will recall the debate we participated in yesterday about city regions and metro mayors. City regions are incredibly important drivers of economic success, and there is probably no greater example in relation to the so-called northern powerhouse than Manchester. However, many of the small towns close to it do not have the same economic viability and are characterised by low-wage, insecure employment—the northern powerhouse seems a long way from the people affected by Carcraft. How can we ensure, therefore, that economic success is not just confined to the cities, but spreads to smaller, neighbouring towns such as Rochdale so that work is created and people can seek alternative employment?

There are broader issues at stake here. As the hon. Member for Edinburgh West (Michelle Thomson) said, the Carcraft group incurred significant losses in recent years: £6.9 million in the financial year ending 30 September 2012; £10.2 million in the 18 months ending 31 March 2014; and, based on current draft management information, about £9.8 million in the 13 months ending 30 April 2015. Grant Thornton, which has been appointed as administrator, has stated that the company was hit by a poor market reputation, a lack of investment and a high cost base. In addition, it suffered from expensive loan note financing and an insolvent balance sheet. Those assessments of the company’s financial position and performance in the run-up to administration are pretty damning.

As the hon. Member for Edinburgh West said, that raises the question of what on earth the auditors were doing; I speak as a member of the Institute of Chartered Accountants and as a former auditor myself. How on earth could the auditors allow the company accounts to be signed off, given the damning assessment we have heard? Crucially, how could the accounts have been prepared on a going-concern basis, reflecting the notion that the entity would be able to remain in business for the foreseeable future? The company had an insolvent balance sheet and significant losses over a number of years, and it was crippled by expensive debt, so how did the auditors provide it with a clean bill of health? Does the Minister think that changes are needed to the audit regime, particularly with regard to inspection? Will she take a look at that?

In many regards, the closure of Carcraft reflects many of the issues seen at City Link last year. Lessons should now have been learned from that company’s demise, and they can and should be applied to Carcraft to ensure that employees, creditors and consumers are given as much clarity as possible. Will the Minister outline what the Government have done to review the requirements for consultation on redundancies during administration to clarify what employees can expect and what company directors’ specific responsibilities are? On the various categories of creditor, does she think that a review of insolvency practice is required to change the order in which creditors—whether employees, customers with warranties or others—are paid?

All In One Finance Ltd was the finance arm of the Carcraft group. The company provided loan finance for Carcraft customers to purchase vehicles and the Carcraft “Drive Happy” package—a warranty that provided servicing, MOTs and roadside assistance. In the days leading up to administration, Carcraft customers were sold warranties, but they are no longer covered. That seems incredibly unfair: it goes against the consumer on three separate levels. First, Carcraft customers bought the warranties in good faith, even though it looks as if Carcraft knew it was on the verge of insolvency. Secondly, customers may have had insurance at a discount, as a result of mitigating factors such as having good roadside assistance, MOTs and servicing in place. However, those customers now face an uplift in insurance premiums. Thirdly, customers will face a further penalty if they break down or fail to get the servicing they paid for—they will be out of pocket yet again.

All In One Finance is authorised and regulated by the Financial Conduct Authority. Will the Minister outline what protections the FCA has in place to ensure that customers are not adversely affected? Does she think the arrangements in place are adequate, or do they need refining in the consumer’s interests, in the light of what is happening with Carcraft? Given the boom in finance and warranty provision, what is in place to ensure that the customer is protected?

I thank my hon. Friend the Member for Heywood and Middleton for bringing this important matter to the House. It is right and proper that such matters are discussed, and, in the interests of Carcraft’s former employees and customers, I hope the Minister is able satisfactorily to outline the provisions the Government will put in place to ensure they are protected.

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

It is a pleasure, as ever, to serve under your chairmanship, Mr Williams. I congratulate the hon. Member for Heywood and Middleton (Liz McInnes) on securing the debate. It is absolutely right and important that we debate these matters. This is an awful situation, and our heart has to go out not just to the employees who have lost their jobs, but to their families. Many of these workers will have families, who will also suffer as a result of the redundancies. Few things are more unsettling and unpleasant than losing one’s job, especially when it is through no fault of one’s own.

There are a number of points of concern in this case and I will deal with all of them, but first, on a lighter note, I should say that I am looking forward to doing battle—and working too—with the hon. Member for Hartlepool (Mr Wright). I wish everybody in his family a happy birthday, although I should tell him that the traditional way for people to do that is to send a card or make a phone call—he knows what I mean. I am sure his family will be celebrating at various levels this evening.

Now to serious matters. Carcraft employed 474 people before the redundancies, including 152 in Rochdale, where the head office was located. Some 407 employees’ redundancy claims are continuing. Carcraft had 10 sites across England and Wales at the time of administration, and a further site in Merseyside which closed in March. I can assure everyone that the Government are focusing on supporting those affected so that they can find new jobs, and we are paying eligible employees redundancy pay.

It is alleged that Carcraft sold cars for cash or on credit that have not been delivered and that extended warranties were also mis-sold. Those are serious allegations. There are also concerns about the ongoing validity of a number of warranties. I certainly take those matters seriously. Given everything that has been said today, as well as the activities of local Members of Parliament, who are clearly taking a keen interest, I am confident that if there is any allegation of wrongdoing, the relevant authorities will be properly informed and the police will become involved if necessary. I should make it absolutely clear that if it appears there has been wrongdoing, there will be full inquiries, and if there has been wrongdoing, people will be brought to justice in some way or another.

A number of hon. Members have former Carcraft employees in their constituency. The hon. Member for Stretford and Urmston (Kate Green), who made an interesting and valid intervention, has 15—that is the lowest number, according to the figures I have been given. The hon. Member for Heywood and Middleton has 152 constituents who have lost their jobs. The right hon. Member for Enfield North (Joan Ryan) has 37 constituents who have been affected. I mention that because those Members contributed to the debate.

Let me deal now with the customers. Any administration affects the customers of the failing business. Many consumers had continuing loans or direct debits with Carcraft, and they will of course be worried about where that leaves them. Some consumers will have cars or services that they have partly paid for, and they will be wondering what rights they now have, given all that has occurred. The advice is clear: they should contact the administrator—we have heard that Grant Thornton has been appointed. They may also wish to review their position with Citizens Advice or other advisers. I understand that some loans taken out by customers with Carcraft’s finance arm, All in One Finance, are now owned by another finance company. The Government—that is, my officials—have spoken to the administrators, who have informed us that the majority of straightforward hire purchase agreements on Carcraft cars were provided by third party finance companies. Those customers are being advised to contact their provider directly about repayment.

[Mr Wright]

Should those customers continue with direct debit payments? What would the Minister’s advice be about that?

[Anna Soubry]

It would be absolutely wrong of me to give any advice, because I do not know the answer to that question. I can make full inquiries and write to the hon. Gentleman, but I do not know the answer. Some loans were retained by the Carcraft group, and what happens to them will depend on the type of loan that the customer had. I understand that borrowers are being notified about that.

Additionally, as we have heard, Carcraft provided an MOT, servicing, warranty and roadside assistance package known as a “Drive Happy” plan. The administrators are not able to provide for continuation of that service and have informed my officials that they intend to contact all affected customers with such a plan, to make arrangements to reduce monthly payments so that they will no longer be paying for that service. If any consumers are worried about their payments or how services might be affected, they should speak to Citizens Advice or other advisors who can explain their options and give them the quality advice they obviously need.

Hon. Members have raised concerns about directors’ conduct, and there are obvious concerns about the effect of Carcraft’s closure on jobs and the local economy. I will talk briefly about the actions that Government can take if director malpractice is suspected. Whenever a company enters administration, the conduct of its directors is looked into by the administrators. If evidence of unfit conduct is found, a director can be disqualified from acting as a director for between two and 15 years. My officials have been proactive in contacting the administrators to discuss the directors’ conduct in this case; we have already raised the matter with them.

As I set out in my response to the written question of 27 May from the hon. Member for Heywood and Middleton, the Insolvency Service made early contact with the administrators to discuss the circumstances surrounding the closure of Carcraft’s business, including the conduct of the directors. The Insolvency Service takes those matters seriously, as do all Governments. The Government are also talking to the Financial Conduct Authority, which regulates the financial services part of the Carcraft group. If there is cause for concern, it will be identified and investigated and any appropriate action taken, as I have explained. It is too early in the administration of Carcraft to form a view on the directors’ conduct, but I would mention that last year the Insolvency Service disqualified more than 1,200 directors in circumstances where their conduct fell short of the high standards that we expect of them. That of course means that they cannot do such work, which is a genuine punishment and says that their conduct does not entitle them to occupy what is an important role in any business.

As for redundancy payments, one of the hardest-hitting consequences of any insolvency is the risk of job losses and the impact on people’s lives. Although it is little consolation for the nearly 500 staff involved, they can claim certain outstanding payments, including up to eight weeks’ arrears of pay from the Government’s redundancy payments service, which has a maximum £475 a week. To make that happen as quickly as possible, the Government have already set up a dedicated team for former Carcraft employees, and to date 407 people have made use of the service—I am assuming that that is from around England and Wales. Their claims are being processed and moneys owed will be paid out as soon as possible. I want to make it clear that if any hon. Members have a single constituent who is not receiving the money they are owed, as a matter of some urgency they should not hesitate to write to me or to grab hold of me around the parliamentary estate. I take such matters extremely seriously. It is bad enough for someone to lose their job, but then not to have money that is owed to them is completely unacceptable.

--- Later in debate ---

[Anna Soubry]

I am grateful to the right hon. Lady, but that is the way I work. Some hon. Members will know that they can just come up and badger me; I do not have a problem with that, and if necessary I will go and badger whoever needs badgering. I imagine that it is very busy at Grant Thornton at the moment, which may be a reason it has not replied to the right hon. Lady’s request. If there are any problems, I do not have a problem with people coming to me.

We have set up our dedicated team, and that is the right approach. Claims are being processed, and 321 people have received or are about to receive their payment. The Government are in close contact with the administrator to make sure that there are no unnecessary delays in that payment. The redundancy payments service can be contacted either by phone on 0330 33100200 or by email to [e-mail].

Where an employer proposes to dismiss as redundant 20 or more people at the same establishment within 90 days or less, the employer has to consult employee representatives about the dismissals and must also notify the Secretary of State of the proposed redundancies. A call for evidence is currently out for comment on what happens where employers are facing an insolvency situation and on how stakeholders think outcomes—forgive me, Mr Williams; I should have changed these words, as I do not like the word “stakeholders”. The question for comment is how anyone with an interest thinks that outcomes—results, in good plain English—might be improved in such circumstances. We want to hear from people. I would urge anyone with suggestions, including hon. Members, to contribute. Responses to that will be considered and next steps will be identified.

I want to talk about the important matter of the support that workers who have been made redundant are being offered by the Government in finding new jobs. We are helping them by ensuring that there is support to help them back into work. My colleagues at the Department for Work and Pensions have made contact with the administrators to advise them of the services available to Carcraft’s former employees. DWP will also support employees through its rapid response service. Depending on each individual’s circumstances, that can include help with CV writing and interview skills, help with identifying transferable skills and skills gaps linked to the local labour market, and training to update skills, learn new ones and gain industry-recognised certification that will improve employability. It all sounds marvellous, but if it is not out there happening in the real world, I would again urge hon. Members to badger me. We would then find out more and contact the responsible officials in the DWP. It sounds great, but it means nothing unless it is actually happening for the people who have lost their jobs.

Although the loss of jobs at Carcraft comes as a severe blow to employees and their families, overall the employment rate in Rochdale has been on the rise since 2011. Rochdale and the Greater Manchester area have also benefited from heavy investment in recent years. I do not really want to get into a party political squabble about all this, but I wanted to give some facts and figures. Two regional growth fund awards have been made to Heywood and Middleton, and that is just some of the £111 million of regional growth fund money that has been allocated to projects in the Greater Manchester area. The Growing Places fund supports key infrastructure projects designed to unlock wider economic growth and create jobs. Greater Manchester benefited from this fund, receiving £37 million.

Greater Manchester’s growth deal, announced on 7 July last year, sets out a £533 million investment programme that will support further economic growth in the area. That investment will go to the life sciences investment fund, creating apprenticeships and maximising skills investment, as well as providing major investment in local infrastructure. The growth deal also brings forward £140 million of additional investment from local partners and the private sector and will create at least 5,000 jobs by 2021. If it does not, I imagine that many hon. Members here will be holding the Government to account, and rightly so.

As well as this investment in the Greater Manchester area, the Government are committed to creating jobs and reducing unemployment across the region. The Government’s long-term economic plan—

[Mr Iain Wright]

Oh.

[Anna Soubry]

I know, I just read it out. Do forgive me.

Our brilliant economic plan—in all seriousness—seeks to rebalance growth across the regions. We have the determination to build what is called the northern powerhouse, although I am not sure it should not be called the north of England powerhouse. Creating this powerhouse enables the northern region to reach its potential as a driving force in the UK economy and rightly gives the north a powerful voice. Even I, a representative from a constituency in the east midlands, can say that, and I promise hon. Members that I am not saying it through gritted teeth. This is an exciting new development in the way that we do growth, and I believe that it is welcomed by everybody. We are putting the emphasis on that in the north and, indeed, in all cities.

I saw a presentation on productivity, which we know we have problems with. The evidence is clear that one way to get real growth and improve productivity is to make real investment in our cities and turn them into magnets that attract investment. I was shocked to hear that some rents in great cities such as Glasgow are higher than in parts of Manhattan. We have to sort this all out. Cities are wonderful places and they can be the magnets that attract all the investment, including public money, to bring the growth and the jobs that we all want.

[Mr Wright]

I was trying to make this point in my speech. City regions are important. Cities are important as drivers for economic prosperity. Rochdale is a good example, relative to Greater Manchester. How do we ensure that the city region approach, with Greater Manchester and particularly the city of Manchester driving forward economic growth, spreads to areas like Rochdale?

[Anna Soubry]

I will be corrected by Rochdale Members if I am wrong, but in my view they are part of the Greater Manchester conurbation. Rochdale Borough Council is part of the coming together of all the councils. These things only work when everybody comes together. If a few councils do not want it, it is not going to happen. When all local representatives—the chambers of commerce, and borough and district councils as well as city councils—are working together, buying into it, it will work. I cannot imagine that Rochdale Borough Council would not let its people benefit from the northern powerhouse. It has to be done like that because it cannot be imposed by Government. It has to be agreed and driven by local government. That is what has happened in the north and around Manchester.

There are some PPI claims against Carcraft and those are likely to be an unsecured claim in administration and can be pursued through the administrator, which is Grant Thornton. I wanted to address that point in particular, although a number of points were raised. I will, of course, write to any hon. Member on any point that I have not answered.

Although the closure of Carcraft will have caused anxiety and worry for all involved, I hope that I have reassured the hon. Member for Heywood and Middleton that assistance has been, and will continue to be, provided both for former employees and for consumers and that the Government’s wider economic policy will help ensure job creation and opportunities in the region.