Oral Answers to Questions

Debate between Imran Ahmad Khan and Paul Scully

Tuesday 9th February 2021 Commons Chamber

[Imran Ahmad Khan (Wakefield) (Con)]

What steps his Department is taking to help businesses support victims of domestic abuse.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

Our recent report on workplace support is clear that employers’ policies can play a significant role in helping victims of domestic abuse. We will work with employers to support that role and encourage good practice, which includes employers signing up to the Employers’ Initiative on Domestic Abuse and managers downloading the Bright Sky app by Hestia.

[Paul Scully]

My hon. Friend has been a huge champion of tackling abuse, both here in this country and internationally. As set out in our recent report on workplace support, we will work across Government to raise awareness with businesses and victims’ representatives. From a business point of view, it tackles the £1.9 billion productivity stretch, and employers have a duty of care, just as with bullying, stress and mental health. Clearly, wider awareness can save lives.

[Imran Ahmad Khan [V]]

Several organisations in Wakefield, including Penny Appeal, have joined the Employers’ Initiative on Domestic Abuse, which empowers businesses to take positive action for their employees affected by domestic abuse. This is a crucial step in providing support at a time when the levels of domestic abuse have sadly risen. Will my hon. Friend kindly outline what additional steps his Department is taking to help businesses supporting victims of domestic abuse?

[Paul Scully]

The Employers’ Initiative on Domestic Abuse has 500 members so far signed up to it, covering 6 million employees. What we can do is work with other colleagues across the House to make sure that we get more signatories to the initiative and more support for employers, as well as employees, and that we can signpost the support where appropriate.

Corporate Insolvency and Governance Bill

Debate between Imran Ahmad Khan and Paul Scully

Committee stage & 3rd reading & 3rd reading: House of Commons & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[Paul Scully]

I welcome my hon. Friend’s intervention. He has spoken at length on this and he has been a champion for that change, and I would be happy to meet him to discuss that further.

Amendments 18, 19, 21, 22, 23 and 25 deal with the Cape Town convention, which is an international treaty that seeks to lower the cost of finance for various high-value, mobile assets, including, importantly, aircraft. I know the sector has been particularly impacted by the unique situation posed by the coronavirus pandemic. The insolvency provisions in the Cape Town convention and the aircraft protocol, which we ratified in 2015, are some of the key provisions that give rise to low financing costs in the airline industry. They provide aircraft creditors with greater certainty that they will be able to take steps to enforce their security if an airline debtor defaults on payments or enters into insolvency. The effect of the provisions in the Bill that the Government are amending would have been to enhance the existing protections afforded to Cape Town creditors by extending those protections beyond what the convention and the aircraft protocol require. That was done to create even greater certainty for creditors and further reduce lending costs within the industry. However, in doing so, the new provisions would also have constrained the ability of a financially distressed airline to restructure without creditor consent, either using existing tools under the Companies Act 2006 or the new restructuring plan procedure that is being introduced by the Bill.

Since the publication of the Bill, we have listened closely to the views of many, including interested stakeholders in the airline sector and the restructuring profession. Both have expressed that these provisions could create a significant hurdle to successfully restructuring a struggling airline. The Government are absolutely aware of the very significant impact that this emergency is having on the airline sector. I am also clear that the overriding aim of the Bill is to make it as easy as possible for affected companies to get the breathing space that they need to weather the impact of covid-19, which clearly applies to the airline sector. Given the extraordinary challenge of the circumstances faced by the sector, the Government have decided to remove the relevant provisions from the Bill, which will retain the ability for an airline to use a scheme of arrangement and a restructuring plan to affect Cape Town creditors’ registered interests without the consent of every individual creditor, provided that the other safeguards of those procedures are satisfied. It is complex and we know that we need to work with the airlines on this and give struggling airlines the ability to successfully restructure.

I turn to amendment 15, which deals with the temporary changes to the moratorium that we are introducing in the Bill specifically for England, Wales and Scotland. I will shortly speak to a corresponding amendment for Northern Ireland. Members of this esteemed House will be aware that one of the things that the Bill is for is to create the moratorium, which is vital to give troubled companies the breathing space, but they face significant risks when seeking to restructure, and creditors can derail rescue plans and cause otherwise viable companies to fail unnecessarily. This adversely affects the interests of the company, its creditors and its employees, as well as the wider economy. Recognising the pressing need for companies to be able to access a moratorium in the face of the immediate impact of this emergency, in addition to the permanent measures, we have also introduced temporary measures to ensure that it is as easy as possible for businesses to access a moratorium in the short term. This is done in schedule 4 to the Bill.

While the schedule 4 temporary measures are in place, it is important that these can be applied consistently to each type of entity that can obtain a moratorium. If eligibility for the temporary measures changed depending on what sort of entity was seeking the moratorium, that would patently not be the case. As drafted, there are two entities for which schedule 4 would not otherwise apply: limited liability partnerships and co-operative and community benefit societies. This amendment would add a small fifth section to schedule 4, consisting of two paragraphs to make limited liability partnerships and co-operative and community benefit societies eligible for the temporary moratorium measures. That ensures that these entities can also be brought within the scope of the schedule and make best use of the breathing space that the measures offer. It ensures that both co-operative and community benefit societies and limited liability partnerships in England, Scotland and Wales will benefit from the temporary measures that we have set out in the schedule, as well as from the wider provisions on moratoriums. There is a corresponding amendment for Northern Ireland. These time-limited and temporary changes will make sure that we best address specific issues for companies during the covid-19 emergency and ensure that the relevant entities are all equally eligible for our temporary measures on moratoriums.

Amendment 17 is related and ensures that the temporary modifications that have been made to the moratorium process can be applied to limited liability partnerships and certain types of registered societies in Northern Ireland. It inserts two paragraphs to the temporary measures in Schedule 8, so it largely mirrors what we see in the previous amendment.

Amendments 20 and 24 are minor and technical amendments, intended merely to make a clarificatory point to ensure that it is crystal clear that at the point when a company proposes a restructuring plan coming out of a moratorium, the company should contact all creditors with an explanatory note of a proposed restructuring.

Similarly, amendment 16 deals with an erroneous repeal of the Northern Ireland provisions. The provision being repealed is still needed, so the amendment rectifies that and I therefore commend it to the House. I turn briefly to one amendment raised by the hon. Member for Manchester Central (Lucy Powell). It seeks to make any pension scheme deficits a priority creditor in the event of an insolvency. I have to say that I can understand where her intentions are coming from in this proposed amendment. I am sure that, in recent years, we can all remember one or two high-profile insolvency cases—we have heard of some today—which feature large deficits owing to the pension scheme, and we can appreciate the uncertainty that that brings.

However, as always, when insolvency occurs, there is a balance to be struck when considering the order in which those owed money are paid out of the available assets. There are seldom enough funds to pay all creditors in full in insolvency cases. To ensure fairness, the law requires that available funds be distributed in a certain order. Secured creditors are paid out first for the sale of any property to which their charges attach. Without that, securities, banks and others who funded business activity would be less likely to do so, or would charge more to cover the increased risks they bear. It is essential that the insolvency system helps to give investors, lenders and creditors confidence to take the commercial risks necessary to support economic growth. Unsecured creditors are paid once the secured creditors and preferential debts, which include employees’ remuneration, have been dealt with, and they share the funds that are left. For limited amounts of unpaid pension contributions, which are preferential, any deficit to a pension scheme ranks alongside all other unsecured creditors, which will inevitably include trade suppliers, some of which will be small and micro companies. Therefore, the level of debt owed to a pension company can be very large—we know that. To raise the priority of these creditors and pay them ahead of not only unsecured creditors, but also, as the new clause would seem to suggest, preferential creditors such as employees for unpaid wages and floating charge holders would really upset the balance that has existed for a long time.

New clause 5 seeks a future review of trade union involvement in company restructuring and to commit the Government to specific proposals in spite of what that review might show. It does not seek to amend or improve the debt finance restructuring provisions in the Bill being taken forward as those most needed at this moment in time. The permanent restructuring provisions introduced by the Bill have been the subject of a considerable period of consultation and engagement dating back to 2015. The process included the then Government’s review of the corporate insolvency framework public consultation in 2016 and extensive public engagements since then, with a wide range of stakeholders. There were no strong or widely made calls at that time for trade unions to be given a formal role in the new processes proposed. The design of the new restructuring provisions already includes strong protections for employees. For example, a company in a moratorium will be required to continue paying wages and salaries during the moratorium. If they are not paid, the moratorium will have to come to an end.

In addition, the measures allow employment tribunal proceedings to continue during the moratorium, despite the fact that other types of legal processes are to be prevented during the moratorium. In cases where employees are creditors of the company that they are employed by, and so a party to a new restructuring plan in that capacity, they will benefit from the comprehensive set of general creditor protections built into the new measure.

On corporate governance reform more widely, the Government are implementing a number of reforms already enacted that strengthen the voice and interests of employees in company decision making, be they members of a trade union or not.

The Government also intend to put forward a further consultation on audit and corporate governance reform, taking into account the recommendations of three independent reviews of audit, the views of the Business, Energy and Industrial Strategy Committee and a recent industry development, so we do not believe that a separate review is necessary.

At this point, Madam Deputy Speaker, I am not able to accept any of the amendments, apart from the Government amendments that are in my name. I hope therefore that hon. Members will therefore withdraw their amendments.

[Imran Ahmad Khan (Wakefield) (Con)]

On a point of order, Madam Deputy Speaker. It has come to my notice that certain Members of this House, including well-known Members such as the hon. Member for Brent North (Barry Gardiner), have flagrantly flouted the law and joined the protests outside, boasting that they have broken social distancing measures. I am not going to talk about the legality of this, because that, I presume—I may be mistaken about this—is a matter for the police. What I am discussing here, and what I wish to bring as a point of order, is my concern for the community that makes up this parliamentary estate: the hardworking and dedicated staff, and, indeed, as a subsequent thought, even my fellow Members. I feel that we are going to be placed at risk when there has been such advertised and self-publicised breaking of the law. Vectors of the disease we are fighting, and which the Government are fighting, will be, if he returns to this House, allowed access to spread among the hardworking staff here. Are there measures to prevent such Members, who have flouted the law and are now possibly more likely to be contagious or infected by the disease, re-joining this House until they have undergone a period of self-isolation to ensure that we do not suffer a threat because of their aberrant behaviour?