Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Jeff Smith Excerpts

2nd reading
Monday 28th June 2021 Commons Chamber

[Jeff Smith (Manchester, Withington) (Lab)]

It is a pleasure to respond on behalf of the Opposition to the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill. It is a short Bill but one that will have important consequences for many businesses and individuals.

The Opposition recognise the rationale behind the Bill and we do not intend to divide the House on Second Reading, but there are elements of the proposals where the Government need to be clearer about how some of the measures will work in practice and to spell out how all businesses will be supported. Businesses and local authorities have already faced massive uncertainty this year and they should not face more. I welcome the chance to discuss the Bill to ensure that we get the detail right. We will seek further clarification and information and consider tabling amendments as the Bill makes progress.

Clause 1, as we have heard, legislates to ensure that coronavirus cannot be taken as a cause of material change of circumstance for business rates valuations, and therefore prevents rateable values for businesses being altered to take into account the impact of coronavirus. We recognise that the most effective way to provide help for businesses hit by the pandemic is not via the process of application for a material change of circumstances, and that MCCs, in the context of what we hope and trust is a temporary change in circumstances, are not the correct mechanism for determining valuations.

We also acknowledge that the demand of large numbers of appeals could put strain on the system and that the most effective use of the VOA’s time and resource is the upcoming revaluation of business rates. Indeed, as the Minister said, we supported the delay in the next business rate revaluation last year, so that it did not take place in the middle of the pandemic. It is now important that the VOA is able to effectively carry out the revaluation in 2023, so I accept the logic for these measures. It is important that, where businesses have experienced what would normally qualify as an MCC, for example, a physical change of the property or the locality, not related to coronavirus, the property owner will be able to appeal against the 27-list valuation on that basis. I would be grateful if the Minister, in responding, clarified for the record and for the assurances of businesses watching that a material change of circumstance application not related to coronavirus will still be allowed and that this is not a blanket ban on MCC claims.

We welcome in principle the announcement of additional relief to businesses that have not so far benefited from any rate relief. That is a positive step towards supporting businesses, particularly in the supply chain of the retail, hospitality and leisure sectors—businesses that have seen an economic impact but have not received relief so far.

We welcome the relief, but it is unclear how the £1.5 billion figure was calculated and we have real concerns over whether it will be enough to support all those businesses that desperately need it. We are particularly concerned that the figure may not be enough to compensate one sector that has been particularly hard hit, the aviation sector, and large airports. I know that the airports, some of which have submitted applications for MCCs, are concerned that £1.5 billion is nowhere near enough to fairly reflect the impact of the pandemic and to protect jobs and livelihoods across the worst-affected sectors. The aviation sector is united in agreement that the lack of business rates relief adds to the failings of Government to provide meaningful support to the aviation industry throughout this pandemic. If £1.5 billion is demonstrated to be insufficient, can the Minister assure the House that the Government will come forward with further funding when necessary? Will the Government give consideration to a further package of support for airports impacted by coronavirus? Has the Minister undertaken an assessment of the impact that the Bill may have on the operation of national infrastructure such as airports? Was any consideration given to exempting them from the provisions?

We acknowledge that this funding mechanism has the potential to get help to businesses more quickly than via the process of application for MCC, but the Government need to get the funding out to local authorities and businesses as quickly as possible. That is why it is a matter of real concern that the Government have so far failed to give details of how the £1.5 billion will be allocated and spent.

The original announcement of the funding came on 25 March. Three months later, there is no indication of the methodology. In answer to a parliamentary question on 18 May, the Minister said that the guidance on the distribution of the fund will be finalised once the Bill has passed through Parliament. That means it is likely that allocations of the fund will not be made until after the summer recess. That means businesses will not receive payments until September at the earliest, and that is not good enough for businesses and local authorities. Many businesses do not know whether they will qualify for the fund, given that the criteria have yet to be published. There is a genuine risk that some businesses may not survive long enough to benefit if there is not some assurance of support before the autumn.

The delay also puts local authorities in a difficult position. The Government expect them to set up local initiatives to deliver grants, but have not given them details about their individual allocations or national guidance on administering the scheme. I therefore strongly urge the Government to provide businesses and local authorities with the clarity they need by publishing an early release of the indicative funding allocations and the eligibility criteria. It will be important that this funding is kept under review to ensure it is enough to meet demand. Will any new burdens due to administrative or other costs be covered by the Government? Businesses have been through so much uncertainty in the last 18 months, it is unacceptable if the Government are going to add more confusion and delay.

We welcome that the Bill gives local councils the assurance that their income from business rates will remain reasonably stable and predictable for the immediate future. With business rates currently forming such a substantial part of local authority income, a major change could have hit local government finances hard after an exceptionally challenging period with inadequate support from central Government.

From April this year to March 2023, the VOA is conducting the next business rates valuation. We appreciate that managing a large number of MCC appeals at the same time could lead to a need for extra resources for the VOA, but we think there is already a need for extra resources for the VOA. Revaluations of business rates are slow and infrequent, and a wide coalition of business organisations has called for more frequent revaluations for a closer and more accurate link between the actual rate and the state of the economy and businesses’ ability to pay. We understand the need for the next revaluation to be moved to 2023. The VOA should be given the resources it needs to carry out more frequent evaluations.

Clauses 2 and 3 make provision relating to investigation and disqualification of directors of dissolved companies. The Opposition are pleased to see the closing of a legal loophole that for too long has allowed unscrupulous or unfit company directors to evade responsibility. It is right that the Government should have the power to investigate and disqualify directors of dissolved companies. In particular, we know that between January and March this year there were over 170,000 company dissolutions in the UK, a 25% increase compared with the same period in 2020.

That raises the suspicion that dishonest individuals may have tried to exploit this loophole to avoid repaying bounce back loans. The current way to pursue fraudulent activity in relation to dissolved companies—applying to the court to restore the company—is a lengthy and costly process. We agree that it is in the public interest to remove that barrier and deliver more accountability on unfit company directors. I do, however, have a couple of questions for the Minister on the detail.

First, how will additional investigations brought about by the change be funded? Under the Bill, the Insolvency Service can apply to a court to disqualify a director only if the director’s company has been dissolved for less than three years, so it is really important that the Insolvency Service is given the resources to carry out investigations effectively and quickly. The Government need to ensure that a lack of resources does not lead to investigations into directors of dissolved companies coming at the expense of investigations into directors of insolvent ones. Put simply, if the Insolvency Service is not adequately funded, the aims of the Bill will not be met and unfit directors could continue to get away with fraudulent actions.

Secondly, if a director is to be found culpable, how exactly will the Government go about facilitating the repayment they may owe? The disqualification regime in itself does not provide measures for repayment, so can the Minister give any more detail about how the compensation orders will work? In what circumstances might the Government aim to restore the company and begin an insolvency procedure? These are questions that need to be cleared up for the Insolvency Service, the courts and creditors to have clarity over how the Bill will work in practice.

In summary, Labour accepts the overarching measures in the Bill, but we are concerned by some of the lack of detail within. The good intentions of the Bill will not be delivered without proper funding for all the sectors affected. While those issues go unaddressed, we will continue to express those concerns as the Bill makes progress. Uncertainty is not good for businesses. They deserve clarity. The lack of detail on funding is a concern, and measures to hold directors to account will not be successful unless the Insolvency Service is fully funded. I look forward to the Minister addressing those questions in closing the debate. I have no doubt that businesses and local authorities up and down the country will be hoping he does so, too.