Commercial Rent (Coronavirus) Bill

Debate between Janet Daby and Seema Malhotra

2nd reading
Wednesday 24th November 2021 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to wind up this debate, although I am sorry that the Minister has both had to open and close.

I want to recognise some of the contributions to this debate. My hon. Friend the Member for Chesterfield (Mr Perkins) and the hon. Member for Richmond Park (Sarah Olney) raised the important definition of viability and the considerations around it. My hon. Friend the Member for Lewisham East (Janet Daby) mentioned how we need to make sure that all our businesses are supported through the pandemic and into the recovery, which will continue at different paces for many businesses. My hon. Friend the Member for Reading East (Matt Rodda) also talked about the wider context and about supporting and championing businesses, which Small Business Saturday will be doing in the run-up to 4 December. It was eye-opening to be out with them in Southampton earlier this week. This is important in the context of what we are discussing today.

As my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) said at the beginning of the debate, Labour supports this important Bill, although we are surprised it has taken this long to introduce it following the announcement in the summer. We need to talk about the context because the growing cost of business will have an impact on how businesses pay back their rent. We have had an important set of contributions on the urgent need for reform of business rates, which the Labour party has also called for, and for it to be considered alongside a much fairer taxation system to bring in a much more level playing field between online businesses and businesses in our communities.

We are having this debate in an important week, as we know that business needs the Government to be on its side—perhaps the Minister will not be able to say anything about that. That is an incredibly important part of how we go forward and work towards the recovery—we are just at the beginning of that. The Prime Minister’s embarrassing speech to the CBI at the start of the week was an issue because confidence in the Government is knocked when the Prime Minister does not give a speech that suggests they understand the challenges businesses are facing and the crucial nature of getting the recovery right to make sure that it is sustainable.

The Bill will legislate for a binding arbitration process to be used where business landlords and tenants cannot agree on how to deal with outstanding rent arrears. It also expands on existing restrictions on enforcing business rent arrears to ensure that they cannot also undermine the arbitration process, which will be in place for six months from Royal Assent. As we have heard from hon. Members, the covid pandemic has hit businesses hard, affecting disproportionately those at the frontline in our high streets and communities, which have been forced to close or restrict trading from March last year.

Labour recognises the need for a fair arbitration process to deal with commercial rent arrears. That is why we will scrutinise the legislation in detail in Committee, having raised some of those broader concerns today, to ensure that the proposals are effective and accessible, and fairly balance the interests of relevant parties. Our principle is that no otherwise viable business should face the significant burden from rent arrears without due arbitration and a burden-sharing process. The guiding principle must also be focused on fairness and on the long-term interests we have in British businesses and supporting them to provide much-needed employment across the country.

Labour has also called for the Government to help ease the covid debt burden faced by firms across the country by creating a British business recovery agency. The reason why we would want to convert the bounce back loan scheme into a student loan-style arrangement is so that businesses would have to start repayments to the British Business Bank only when they are making money. It is important that we have an integrated set of policies on business recovery so that we do not deal with one aspect while there are crises in other areas of life for businesses.

[Janet Daby]

My hon. Friend is closing this debate brilliantly. Does she agree that this week we have been reminded of how much businesses need a responsible Government, who take speeches to the CBI very seriously?

[Seema Malhotra]

I thank my hon. Friend for her contribution. I had referenced that and she makes the point powerfully; it is important that we have a Government taking their responsibility to business seriously and showing the nation that they are doing that. The Prime Minister’s speech did more for the sales of Peppa Pig than for supporting business recovery across our country.

Rent debt is a heavy burden for landlords and commercial tenants, and we need a solution that will be in the interests of both. This is a big issue and although we do not know its full scale, the Bill’s impact assessment—the Treasury analysis—notes that the total amount of deferred rent liabilities could be about £9 billion by March next year. That is why we need a policy solution that is fair, fast, trusted, affordable and accessible, so I hope that the Minister will be able to tell us how confident we can be that the system will be in place and what the next steps will be to ensure that.

Labour also called for action on rent debt and the wider business costs in the summer. The Minister will know that before then. I had met UKHospitality, the British Beauty Council, the Federation of Small Business, the Night Time Industries Association and many of those stakeholders to discuss the ongoing commercial impact of covid. Those stories, which he and I still hear, showed the strain on and perseverance of those who have fought against the odds to keep going. As has been highlighted by the 3 million excluded campaign, far too many had been excluded from Government support and still struggle.

Luke Hersheson, a renowned hair stylist who is backing the “Save Our Salons” campaign, said earlier this year:

“In March this year my salons will have been closed for 260 days out of 365. Running a business for more than two thirds of a year with no income at all is incredibly challenging. When the tap is turned off salon businesses are still paying landlords, they’re still paying utility bills, insurance costs and subsidising furlough pay.”

That is a powerful statement about how businesses were struggling and yet were still wanting to do their bit in the community and support, at the frontline, our communities in getting through covid.

Ensuring that viable businesses are able to survive into the future is part of the responsibility of the Government. Members have discussed how small businesses are the backbone of our economy. We see that in all our constituencies—my constituency has more than 5,000 small businesses. We know that the almost 6 million small businesses across the country account for 99.9% of the business population, three fifths of employment and about half of the turnover in the private sector. As the Minister alluded to, many that will be affected and which may need to draw on the scheme in this Bill may well be women-led businesses and ethnic minority-led businesses. Perhaps he will tell us how he is going to make sure that the opportunities provided by this legislation will be known about by those who might need them. How is the ability to seek a reference for arbitration going to be made known to businesses at the frontline in our communities, so that they do not get to the end of six months of struggle and find that it is too late? It is crucial for our recovery to make sure that that is understood and we have that ongoing partnership between the Government and business large and small. We are going to need that to make sure that our economy starts to fire on all cylinders, which is what we want to see, in a recovery that is sustainable. We want to start to see a recovery that generates the profits and then the taxes to sustain our economy.

The challenge of dealing with rent debt that has accumulated is particularly acute because businesses are also having to deal with a wave of rising costs. Government incompetence led to Britain being harder hit than other countries by the supply chain crisis, ongoing issues and steep rises in energy prices. Those are huge blows to businesses as they approach Christmas, which should be the time when they are hoping to claw back profits in order to make up for stresses earlier in the year. The cost-of-living crisis has also seen consumer confidence knocked, as we know. Last month, it dropped to its lowest level since April, thus reducing consumer spending in all our communities. That has been compounded by the inexplicable decision by the Government to cut universal credit for 6 million families in October—returning just a small part of that was not good enough. In my constituency, this will take £18 million out of the local economy. The Government’s jobs tax, which the Opposition oppose, is also due to come in right at the time when debt protections ease and businesses are expected to pay back costs they could not afford during lockdown.

The Minister will be aware that all of those compounded pressures will cause a potential crisis for businesses come next April. We know that not all sectors of the economy will recover fast. That point was made by my hon. Friend the Member for Brentford and Isleworth. Aviation, travel and tourism, and parts of hospitality will recover at a slower pace. These measures are set to be in place for six months from Royal Assent. It will be helpful to know how Ministers plan to review whether an extension of a further six months will be required and how they will bring those considerations to the House.

The Bill strikes an important balance between the duties of tenants and of landlords and builds on the code of practice for commercial tenancies that was announced in the summer and revised most recently in November. Will the Minister respond to the points raised about how the viability of businesses is to be determined? A key task for arbitrators under the Bill will be to assess how viable businesses are. There are some relevant comments in the code of practice, but the Minister will understand the Opposition’s concern about what qualifications we can expect arbitrators to have so that they can make that assessment. How will the panel of arbitrators be pulled together? What will be the criteria for and what scrutiny will there be of their capabilities? What does the Minister really mean by “a viable business”? Over what time period will viability be assessed, given that different sectors will continue to recover at different rates? Has the Minister considered a simplified appeals system in case there are disagreements about arbitration decisions? Will he comment on the consistency of the arbitration framework? There is currently no great detail on it and there is a risk that different arbitration bodies and arbitrators will take different approaches to cases, resulting in inconsistent decisions.

Businesses are facing a difficult and now costly recovery from the pandemic, with rising costs coming downstream. I am sure the Minister will want to assure the House that he will make sure that the arbitration process is affordable. What plans do the Government have to make sure that the fees do not preclude access for those who need support?

The Bill is welcome, but it is narrow in respect of addressing the overall issues that businesses face and will continue to face as we recover from the pandemic. It will be a slower recovery for some sectors than for others. The Bill provides necessary support for businesses with their rent debt if agreement has not been reached, along with an arbitration process, which must be fair and implemented quickly. If the Conservatives really cared about business health, they would use this opportunity to go much further in the provision of support in respect of business rates reform and the other costs and supply-chain issues that are hitting businesses and consumers hard.