Oral Answers to Questions
Jeff Smith Excerpts(2 years, 1 month ago)
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Dean Russell
I thank the hon. Member for raising her concerns, and I understand the points relating to her constituents and businesses. The Government are absolutely committed to supporting small and medium-sized businesses. I am very proud that, as the first point in my portfolio, small businesses are absolutely at the top of my agenda. Having worked with small businesses for many years, it is absolutely essential that we support them. We are looking at how we can best help to support businesses, and I will gladly write to her with further details.
Jeff Smith (Manchester, Withington) (Lab)
The Minister for Climate (Graham Stuart)
We currently have more than 3 GW of installed, operational onshore wind capacity in England and 14 GW across the UK—the most of any particular renewable technology. We do not believe that the Government should prescribe the proportion of energy from any particular technology, but of course we have transformed the level of renewables since the hon. Gentleman’s party left power—when I think the figure was less than 7% of electricity. [Interruption.] Opposition Front Benchers may well groan, but it is quite clear that Labour did not deliver. It is more than 40% today—and we are.
Jeff Smith
As a direct result of the Conservative Government’s decision to cut the “green crap” in 2015, every household’s bill is hundreds of pounds higher. Does the Minister regret that mistake, and is it not long past time to reform planning laws and to get on with building the quickest, cheapest, cleanest forms of power, such as onshore wind and solar, which would increase our energy security, cut bills and tackle the climate crisis—work that the Government have been blocking for far too long?
Graham Stuart
It was this Government who passed the net zero legislation. It was this party that was the first major party to call for the climate Act, which has driven this behaviour, and it was this party that took us from 6.8% electricity from renewables to more than 40% today. It is this party that brought in the contracts for difference, which have been copied all over the world, and which see tens of millions of pounds paid to reduce bills at the moment, with the last round driving 11 GW of additional clean energy into the system. It is this party that delivers on net zero and the environment and it is that party—the Labour party—that talks about it.
Fuel Poverty in Manchester Gorton
Jeff Smith Excerpts(2 years, 2 months ago)
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Afzal Khan (Manchester, Gorton) (Lab)
No one can deny that we are in the midst of a cost of living crisis. Many of our constituents will be looking in despair at their energy bills. Some of them will, maybe for the first time, be worrying about how to make ends meet, and having to make a decision that it is unlikely any of us in this House will have to make—choosing between heating and eating.
A few weeks ago, one constituent in Abbey Hey told me:
“I have no idea how I will manage these next few months. I will only put on the heating in one room if the temperature goes below zero. I only heat my kettle twice per day and cook hot food only three times per week to save electricity.”
It is outrageous and shameful that here, in one of the richest countries in the world, anyone is forced to limit the number of times they can cook per week because they cannot afford the energy used, but this is not unusual.
Staff at Fallowfield & Withington food bank tell me people are requesting meals and ingredients that cook fast as they cannot afford to keep their cooker on for more than a few minutes. I would like to take this opportunity to put on record my thanks to Fallowfield & Withington food bank and all the other food banks working in my constituency for all their incredible work to support my constituents. I will be following closely their new collaboration with the green doctors to support residents saving on energy bills by becoming more energy efficient.
Another constituent, a lone parent with three children in Fallowfield who is working two jobs to make ends meet, wrote to me desperate for help. She told me she has no idea how she and her children can make it through the winter warm and fed. Numerous churches, schools and community centres have written to me expressing the impact of energy bills that are four to five times higher than they were last winter. Many of these places—including Manley Park Methodist church, Longsight Makki Masjid mosque and the Levenshulme Inspire centre, as well as our fantastic Manchester City Council libraries—want to remain open as warm hubs for those who cannot afford heating at home, but growing energy bills alongside inflation make this so much harder for these organisations. I am grateful to these places for remaining open for those most vulnerable in our society, and I am grateful for our food banks, their staff and volunteers.
Jeff Smith (Manchester, Withington) (Lab)
I am grateful to my constituency neighbour for giving way, and I would just like to echo his thanks for the work of Fallowfield & Withington food bank, which does a fantastic job in my constituency as well. We obviously need to tackle energy prices and bills now, but does he agree with me that the long-term strategy needs to be a massive programme of retrofitting houses to make them insulated for the future, which will not only reduce bills for the future, but tackle the climate crisis?
Afzal Khan
I thank my hon. Friend for his intervention. I agree with him, and I will be touching on that subject as well.
No one should ever be put in such a situation. The cost of living crisis makes this debate feel timely, but it would be wrong to say that fuel poverty is new. The most recent available official statistics are from 2020, before the current cost of living crisis. They indicate that 10,364 households in my constituency were in fuel poverty—that is 24%—which was the sixth highest proportion in England and Wales, and the highest in the north-west. In some parts of my constituency, notably Fallowfield, Rusholme and Longsight, the picture is even bleaker, with nearly 40% of households affected in some areas.
I am not sure whether levelling up is still Government policy, but the statistics show significant regional inequality. The south-east has just under half the proportion of houses in poverty than the north-west—I note that the Surrey constituency of this week’s Chancellor has only 7% of households in fuel poverty, which is less than a third of the number in my constituency. There is also a racial disparity: the proportion of ethnic minority households in fuel poverty is 1.5 times that of their counterparts who identify as white. Purely anecdotally, it is notable that cities and towns such as Manchester, Bradford, Wolverhampton, Walsall and Birmingham, which have high proportions of people of south Asian heritage, are disproportionately represented in the top 50% of households in fuel poverty.
It is important to recognise that fuel poverty is more than being chilly. It is not a case of just putting on another jumper, and it has been shown that cold homes worsen respiratory conditions, cardiovascular disease, poor mental health and dementia. A review by the Institute of Health Equity led by Sir Michael Marmot indicated that diseases linked to cold and damp cost the national health service £6.9 million a day. Fuel poverty has a disproportionate impact on children. In addition to impacting on their health, according to a report from the Childhood Trust fuel poverty has a number of additional indirect impacts, such as lower rates of educational attainment, and it places strain on young people’s mental health.
Although low pay, insufficient welfare support or unemployment are factors in fuel poverty, as are global energy prices, there are structural reasons why people from less affluent neighbourhoods are more at risk of falling into fuel poverty. For example, many of my constituents, who are generally in private rented accommodation, are forced to use prepayment meters for electricity and gas. Households with prepayment meters pay what Fair By Design calls a “poverty premium”. They are forced to pay suppliers’ standard rates without being able to enter fixed-rate contracts, and unlike many others, they were immediately affected by hikes in retail energy prices. They are subject to higher standing charges that apply even if no energy is used, and they are unable to access discounts for direct debit payments or paperless billing. That leads to households simply cutting themselves off. If customers with traditional meters do not pay their bill, their energy company might be able to offer them support. If those on a prepayment meter do not have enough money, they simply do not top up, yet they still rack up more debt because of the standing charges. All that adds up, and we know that people with prepayment electricity meters are three times more likely to be in fuel poverty than those with a traditional meter.
In my constituency, Edwardian terraces are the most common form of housing. Now more than a century old, they were built long before modern energy efficient building techniques and insulation. Many residents cannot afford to improve the energy efficiency of their home, or they live in privately rented accommodation and are therefore at the mercy of a landlord. To address fuel poverty we must acknowledge the need for retrofitting—my hon. Friend the Member for Manchester, Withington (Jeff Smith) made that point earlier. Retrofitting would address not only cold homes but the UK’s carbon emissions, because 23% of all emissions come from home heating and powering. The least energy efficient houses pay over £900 per year more on their bills.
As the Minister will know, the Government previously ran the green homes grant voucher scheme which—let us face it—was a failure. It completed work on only 7% of the projected targets, and only 224 energy efficiency measures were installed in my constituency.
The average person cannot do this on their own. The estimated cost of a full-property retrofit is £25,000 to £30,000, which would be impossible for most people to pay, let alone those struggling to pay their energy bills. That is why the Government must create a scheme to get homes insulated and retrofitted. It must be a scheme that works, creates green jobs and helps working-class families to heat their homes.
We should acknowledge the work by organisations such as People Powered Retrofit which are helping to tackle the skills gap across the construction sector by offering “retrofit fundamental” courses. Such courses provide the background knowledge needed to begin green construction.
There are great local projects happening in Manchester and across the country. I draw the House’s attention to the work of the Carbon Co-op and its Levenshulme area-based retrofit scheme. The scheme shows the savings from and benefits of a street-by-street approach to home retrofits and how retrofit can be made a possibility for homeowners who may never have had the opportunity otherwise.
Jeff Smith
I am grateful to my hon. Friend for giving way again. May I add to his comments the example of the Arrowfield Road estate in Chorlton in my constituency, where Southway Housing is, alongside a new heat pumps programme, retrofitting the houses on the estate? That will make a significant difference to the bills and warmth for those houses.
Afzal Khan
I thank my hon. Friend for his contribution. The more of those schemes, the better.
As we all know, net zero by 2050 is a guideline, but we do not have until 2050 to make serious changes to our emissions. We are already seeing the detrimental effects of climate change. Just recently, we saw devastating floods in Pakistan, where an area the size of the UK was under water and overnight 33 million people became refugees in their own country. Scientists have said that the impact was worse due to climate change. That is why we must treat energy issues as environmental issues. If the whole of the UK was powered by renewables, solar would use only 2.1% of land, which is roughly the same amount currently used by golf courses. Some might say that would be a good swap.
Fuel poverty is an issue of dignity. Households deserve to eat and feel warm this winter and every winter. No one should be made to spend hours on a bus to stay warm or skip meals because they cannot afford the energy that they would use, and no child should go to bed cold.
Energy Prices: Support for Business
Jeff Smith Excerpts(2 years, 3 months ago)
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Mr Rees-Mogg
No, that is a complete misunderstanding of what is happening. We are protecting all non-domestic users, in addition to domestic users. We are protecting businesses, individuals and charities across the country.
Jeff Smith (Manchester, Withington) (Lab)
Lots of SMEs in south Manchester are still worried. I make a particular plea for small and medium-sized bakeries, such as Martins and Barbakan in Chorlton in my constituency, which have been in touch with me and are really concerned. Can the Secretary of State assure us that he is in discussion with those kinds of energy intensive small businesses? Those discussions do not have to wait for three months; I hope they are going on now.
Mr Rees-Mogg
All businesses will benefit, but obviously, the more energy intensive the business, the more it will benefit from this reduction in wholesale prices. As I said, I am very open to receive representations from right hon. and hon. Members to the review that is taking place.
Shale Gas Extraction
Jeff Smith Excerpts(2 years, 3 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Rees-Mogg
We have had an enormous amount of offshore wind come on, and it is a very important part of renewables. It has been a very effective way of getting very large quantities of power, and that has been the major concentration of Government policy in recent years.
Jeff Smith (Manchester, Withington) (Lab)
Who, specifically, will be responsible for measuring and determining local consent for fracking?
Mr Rees-Mogg
The matter will be dealt with in a governmental way, as is normally done when we seek to work out what the consents are. There are perfectly proper processes for establishing the views of local communities.
Oral Answers to Questions
Jeff Smith Excerpts(3 years, 3 months ago)
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Greg Hands
My hon. Friend will know about the North sea transition agreement, which we announced earlier this year. I share his concern about the Scottish Government’s approach to all these things. It is still very early days for that coalition, but we are watching carefully. I am sure my hon. Friend will agree that Scotland has benefited enormously from UK Government investment in renewables. On the contract for difference scheme, for example, 20 of the 58 projects that have been awarded CfDs to date are in Scotland. That represents 34% of all CfD projects and 21% of total CfD capacity. My hon. Friend is right that the UK Government are delivering for Scotland.
Jeff Smith (Manchester, Withington) (Lab)
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
The Government are carefully considering the Climate Change Committee’s progress report and will respond to it in full as part of our forthcoming net zero strategy ahead of COP26. That strategy, which will outline our path to meet net zero by 2050, will contain policies and proposals that will allow the Government to respond substantively to the report’s recommendations.
Jeff Smith
Well, it needs to, because the report was pretty damning. The Environmental Audit Committee recently made a number of recommendations to support community energy projects such as Greater Manchester Community Renewables in my constituency. Will the Minister emphasise the importance of community energy in the upcoming net zero strategy, as recommended specifically by the Committee, and put in place some practical measures to harness the potential of community energy, including support to enable groups to get investment for energy transition projects?
Greg Hands
Yes, of course we take community renewable initiatives very seriously indeed. We also take the Environmental Audit Committee very seriously indeed and I look forward to appearing before its Chair, my right hon. Friend the Member for Ludlow (Philip Dunne), in due course.
The hon. Gentleman is wrong to say that the CCC progress report was damning. For example, the report says:
“The UK has a leading record in reducing its own emissions”,
and:
“The UK has been a strong contributor to international climate finance”.
Recently, John Kerry himself, the President’s special envoy on climate, praised the UK approach.
Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (First sitting)
Jeff Smith Excerpts(3 years, 5 months ago)
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The Chair
Thank you, Mr Pegge. We will now take questions from members of the Committee, if you would be so kind as to answer. The Opposition traditionally go first, so I call Jeff Smith.
Jeff Smith (Manchester, Withington) (Lab)
Q Hi, and thanks for coming to give evidence. I am just trying to get a picture of the scale of the problem. To what extent do you think this is a problem? Are the measures in this legislation adequate to deal with the scale of the problem that you think is out there?
Stephen Pegge: To put it in context, the Insolvency Service estimates that there is currently evidence of misconduct or misuse of dissolution process in only 1% of cases. Given that there are something like 500,000 dissolutions a year, that might amount to only about 5,000 cases. There is some evidence that it is a rising problem and, given that the average company that is dissolved might have a loan of say £200,000, even 5,000 cases could amount to a risk to creditors of up to £1 billion. It is significant in scale because of the large number of companies, even if it is not currently a high level of risk in proportionate terms. I would emphasise that the vast majority of businesses are honest and straightforward and are not abusing this scheme.
The other factor that members of the Committee may be interested in is that quite clearly over the last year, during the covid crisis, there have been a significant number of companies that have taken finance. Given that the Government, through the British Business Bank, have provided guarantees, there would be an impact on the taxpayer if those loans were not repaid and a claim for repayment were made. Again, that is relevant to consideration.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q Thank you for your evidence today, Mr Pegge. I understand that you helped to establish the covid-19 lending schemes. The Government have suggested that some companies have been dissolved to avoid paying back Government loans given as coronavirus support. Have you seen any evidence of that? If these measures go through, do you believe, from your experience and what you have seen, that the Insolvency Service is adequately resourced to deal with the expansion of powers it would have through the Bill?
Stephen Pegge: Yes, we have seen instances of this practice being used to try and avoid liability under bounce back loans. Back in May 2020, UK Finance with the British Business Bank established the bounce bank loan fraud collaboration group. It involves attendees from the Cabinet Office; CIFAS, the UK fraud prevention service; the Treasury; BEIS; and the National Investigation Service—NATIS. The aim is for intelligence to be shared, good practice to be developed and a threat log to be maintained and fed into the National Crime Agency and the National Economic Crime Centre. In fact, this was one of the practices which had been identified through that and has led to some efforts more recently to try to intervene and intercept these cases of dissolved companies involving Companies House and BEIS.
In the meantime, it is always possible that these cases may well have got through and there is some evidence—again, reported by the Insolvency Service—that there could be around 2,000 such cases which are dissolved and where currently the powers to investigate do not exist, so it is a real problem. If it were to become a more popular route for fraud, while there are mechanisms to deal with it and creditors can object when they get notice through alerts when these situations are gazetted, unscrupulous individuals can still get through and it is important that it is closed as a loophole.
As regards the resources of the Insolvency Service, we have all been conscious that, while the number of insolvencies has been low during a period of suspension and the generous support that has been provided to businesses through public agencies and the finance industry, we would expect that to rise significantly in this next period. There is already some evidence that it will do so. It is important that the Insolvency Service is resourced sufficiently to be able to deal with this. The evidence at the moment is that they have been involved in disqualification of directors in something like 1,000 or so cases across the last year, so it is quite possible that there might be a rise in the amount of work that they will need to do. We would certainly support any investigation into what additional resources might be necessary.
Mick Whitley (Birkenhead) (Lab)
Q Welcome, Mr Pegge. Do the Government proposals address all the problems that have been identified with the dissolution process in relation to liabilities and directors’ conduct?
Stephen Pegge: This is certainly a very important contribution to addressing major issues, and it is the one that we have been most concerned about recently. We have seen, as I mentioned, real evidence of dissolution being used as an attempt to avoid liability, but I stress that in many cases dissolution is an efficient and appropriate way for companies to be removed from the register where there is no money owing and that business is ceasing, without going through the time and cost of liquidation, which obviously is available as an alternative—for solvent businesses through members’ voluntary liquidation, or in insolvent situations through creditors’ voluntary or compulsory liquidation. I am not aware of significant other means by which we need to deal with abuse of dissolution. This is the one that has been most to the fore in the evidence that we have seen of abuse, certainly through the fraud group.
Jeff Smith
Q I am trying to get a picture of the scale of the issue. You mentioned that the Insolvency Service was involved in about 1,0000 cases in the last year. I appreciate that you said that that is a low number for the year. Then you said that there may be around 2,000 cases where the powers to investigate currently do not exist. That sounds like a significant increase in work for the Insolvency Service, and I wonder whether you think that it will be able to cope.
Stephen Pegge: I am not close enough to its work and resource. One thing that I would say is that the Insolvency Service has very good experience in these sorts of investigations. I would also say that the other element of work, if it has found problems that meet the threshold of evidence and it takes action to disqualify a director, does not necessarily need to involve a court process. In most cases, the Insolvency Service will be successful in getting an undertaking from the director involved to be disqualified. It then has the powers to put that into effect, but certainly people may want to consider whether the resources are sufficient to deal with the case.
The other point is that these are situations where dissolution has been successful. We are also looking to these measures to act, to a certain extent, as a deterrent, in order to make it less attractive for those looking to abuse the system to try it on, as it were. So it may be that this event becomes less frequent in due course.
In fact, one of the processes that is clearly available is for creditors to object to an application for dissolution—and, indeed, the Insolvency Service at the moment is also able to object—on the basis of complaints at that earlier stage, where they have evidence of doing so. And because of evidence of significant numbers of attempts here, those objections have been done on a mass basis.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
Q Good morning, Mr Pegge. Clause 2(14) states that the provisions
“have effect in relation to conduct…occurring, and in relation to companies dissolved, at any time before, as well as after, the passing of this Act.”
Do you support making these provisions retrospective and, if so, how should the Insolvency Service make use of these retrospective powers?
Stephen Pegge: As I understand it, the support for this measure was confirmed as early as 2018 and it has really been a lack of parliamentary time that has made it difficult for it to be put in place. Given that we are aware of abuse that has happened in the meantime, I support this measure being retrospective. I appreciate that that retrospectivity is not often applied to such Bills, but we are talking about a fairly high evidence threshold and about situations where natural justice would support this measure being made with retrospective effect.
Seema Malhotra
Q If a case passes the public interest test, do you think there should be the resources to deal with that? There is concern that the Insolvency Service may not have the resources, and therefore the ability to follow up on the expansion of powers in the Bill in the public interest. Has your experience been that the Insolvency Service has been able to resource any investigations that might be needed? What tools should the Government use to pursue directors of dissolved companies that they identify as culpable? Do you have a view on that?
David Kerr: In terms of resources and the ability to pursue all the cases that the Insolvency Service might wish to pursue, I guess that is probably a question for the Department. Not all the cases that are investigated will pass the public interest threshold. To the extent that there are cases that pass the test but cannot be pursued for resource reasons, I am sure the Insolvency Service would welcome any additional resources that can be made available to it. From the point of view of creditors, if actions are pursued in relation to covid-related debts and not others, perhaps the measure works against them a bit.
That comes to the second part of your question. There are two elements to this. First, there is the potential disqualification of individuals who are proven to have acted inappropriately. Secondly, and on the back of that to some extent, there is the possibility of compensation orders against those individuals, with a view to putting money back into the hands of creditors. Again, I am sure CICM creditors would wish that to be as effective for its members as for any Government debt.
Jeff Smith
Q Mr Kerr, you said that the CICM is broadly supportive. Do you have any particular concerns about the Bill? Is there anything that you think is missing from it, or could it be improved?
David Kerr: I think the point has been made about resource. I have heard comments from others on Second Reading and elsewhere about that. It would be unfortunate if the emphasis were entirely on dealing with bounce back loan fraud and if that took resources away from other directors’ conduct investigation cases. That point is not, I suppose, directly relevant to the provisions in the Bill; it is more a question of how it is implemented and taken forward. There have also been some comments about the retrospective element; the previous witness touched on that. I think these cases have to be taken within three years of the relevant date—the date of insolvency or the date of dissolution. I do not think the Department would be able to go back before 2018 in any event, and that was the date on which the consultation was conducted, so I suppose one could argue that directors have had notice of the intended provisions for the relevant period.
Those were probably the only points where there might be concerns to a limited extent, but generally I think the provision is a sensible one that gives the service powers that it does not have currently and which can only be helpful, I would have thought, to trust and confidence in the insolvency regime.
Jeff Smith
Q That is very helpful. On the three-year cut-off, are you concerned that that is likely to have implications on other investigations that the Insolvency Service carries out if it is not funded properly?
David Kerr: I was referring partly to the point that had been made by the Committee to the previous witness about whether there would be any issues around natural justice if the retrospective provisions pre-dated the consultation. I do not think that, in practice, that would happen. Going forward, the compensation laws that might be sought can be obtained after the disqualification order or undertaking, so there may be more than three years available to the service from the date of dissolution. There has to be a cut-off. I do not think there is any suggestion that the provisions of the disqualification have to be changed in that respect, merely that they would be applied to these circumstances. They have proved to be satisfactory since 1986 in relation to director disqualification in the insolvency proceedings, so I have no reason to believe that, going forward, those time limits will not be effective in relation to dissolved companies.
Seema Malhotra
Q Are any sanctions that are currently available to use against directors who may have dissolved companies to avoid liabilities not being used as much as they could be?
David Kerr: None that I can think of immediately.
Jeff Smith
Q Thank you Dr Tribe, that was a very helpful overview, and pretty unqualified support for the principle of the Bill. It did seem that your main concern is about resourcing it. You said that until appropriate funding is handed out to the Insolvency Service, the Bill will, at least, be a deterrent. Do you have a view as to the nature of the problem, and the funding that the Insolvency service would need to actually make this work?
Dr Tribe: It is my impression that this new work to deal with directors of dissolved companies who have potentially behaved in an unfit manner would be subsumed into the general run of business of the disqualification unit at the Insolvency Service. They prioritise the most egregious cases, or those that help send out a public protection signal to the public. In the interim, I think this kind of work would fall into that part of their function. My point about hammering out or ensuring funding is in place is partly in response to some comments on funding made on Second Reading of the Bill. Since the Companies Act 1928, and perhaps most famously in the Cork report of 1982, this question of whether the disqualification regime is properly funded has always existed. Its lack of efficacy between 1928 and 1982 was put down to a lack of resourcing.
That point is very important, because in essence this is the system that protects the limited liability form, the engine of capitalism that drives through our commercial activities. Unless the Insolvency Service is able to properly resource and ensure that this work is undertaken, we have a problem when we try to pursue those who are responsible for the loss of between £16 billion and £27 billion. This potentially unknown—we will find out when the PwC report comes in—and potentially large gap will need to be addressed in terms of where the money went and who was responsible for causing that money to be dissipated.
Jeff Smith
Q Thank you, that is helpful. Just as a follow-up, are you concerned that there might be a focus on making use of these new powers at the expense of current work on other insolvent companies?
Dr Tribe: Not necessarily. Going back to my prioritisation point, the Insolvency Service obviously has finite resources that it needs to deploy in the best way possible—I suppose that is a problem for many public bodies— if other types of abuse manifest over time. The most obvious and recent problem is the bounce back loan phoenixism problem, but in due course other things might come about that require us to tinker with our corporate and insolvency law so that we have an effective system that maintains trust and confidence in it. What the Insolvency Service wants to do in terms of prioritising threats to the system will depend on its internal guidance.
Seema Malhotra
Q Dr Tribe, I want to ask first whether you have a view about the existing sanctions that are available to use against directors who may be abusing the dissolution process—perhaps powers that are currently available but are not used as extensively as they might be. That is one of the challenges that critics of this legislation may make.
Secondly, are there any other more general problems with the dissolution of companies that are important to discuss at this time while changes are being made? Should changes be made to the eligibility criteria on dissolutions? What steps need to be taken prior to dissolution?
Dr Tribe: I will take the first question first. I think you are drawing attention to the compensation order regime, and you did so on Second Reading, too. There is some interesting research by Dr Williams at Cambridge in 2014, who looked—he sort of future-gazed—at how successful the compensation system might be. In that research, he highlighted that some of the directors in small closely held companies, which he argues the regime mainly targets, might end up being adjudicated bankrupt—they might go through the bankruptcy process, I should say—in due course. That would mean, of course, that any pursuit of those individuals would run into another layer of difficulty in trying to get to the value that might be there for the insolvent estate of the company or dissolved company that we are dealing with. His work future-gazed in that way at some of these issues.
It is true to say that, on the compensation regime, we saw one case in 2019, the Noble Vintners case, where insolvency and companies court Judge Prentis made a 15-year disqualification order. That is right at the top of what we call the Sevenoaks scale, after the case in which Lord Justice Dillon set out the various types of malpractice and where they fall on the scale, from two years up to 15. In the Noble Vintners case, it was the most unfit behaviour on the facts of that case that you could have —up at the 15-year period. Then, of course, that was followed by a compensation order that recouped for creditors just over half a million pounds—£559,000.
There has been some success with the compensation scheme. It is in its early days, in a certain sense. Although the reforms came in in 2015, there was a delay in implementation. You are right to say that we should pause for thought and mull over how effective that is. That takes us back to the resourcing and funding point, for one thing. Secondly, it takes us to the idea of that prioritisation agenda and how fruitful a claim that you are going to bring might be to get compensation. It is a power that exists and should exist. It goes some way—as you can see from the case of Noble Vintners—to getting value back into the insolvent estate for the creditors. It is a positive thing for creditors, and something that the disqualification regime did not do until that reform in 2015. Of course, it provided a protection mechanism, but in terms of getting value back into the estate, that is a good reform. That is your first question.
Your second question was on dissolution problems. I think you might be driving at the process of dissolution and how the registrar at Companies House deals with dissolution. After the directors have signed their form, made their declaration, paid the £10 and noted that there is going to be a striking off and that is published in the London Gazette, there is a period of two months where all the parties that should be informed—shareholders, creditors, employees and pension managers, for example—might know of this potential dissolution and should then, therefore, perhaps act on it as creditors. Some of the witnesses who have gone before me may have addressed this, particularly those from the credit community. In due course, as part of a wider analysis of what Companies House and its function is, that step in dissolution may be looked at.
As I said earlier, there are approximately half a million dissolutions per year, and many of those are for very good reasons in terms of, as I have said, maintaining the integrity of the register and getting rid of companies that have been through the insolvency processes but then get dissolved as well. The guidance for the Bill and some other sources note that among those half a million dissolutions, there could be about 5,000 that are potentially problematic that we would want the Insolvency Service to be able to investigate. Obviously, 5,000 is a lot more than the current levels of disqualification under the current provisions. Over the past decade or so, there have been about 1,200 a year, so you can see there is quite a significant upshift in the work that the Insolvency Service might have to do.
A Companies House review perhaps in due course mulling on what its function is—is it a regulator, is it a repository of information?—might look to dissolution, but in the short term I think you have this £17 billion to £26 billion problem, and there seems to be a loophole that needs to be closed.
Paul Scully
Q It was about the fact that Carillion obviously has a large supply chain within it, and you have been dealing with and writing about cases with complex supply chains. What confidence can this measure to close that loophole give to SMEs in particular?
Dr Tribe: Thanks for that clarification. If we can ensure that any vehicle that is used in any form of creditor relationship with different entities has an individual put-off effect by going down this dissolution route that we have identified, it will hopefully increase confidence in the way people use the corporate form. The more loopholes we can close down that have caused us to think the form is being used inappropriately, the better.
Unfortunately, phoenixing, as we have discussed, has been going on for literally decades, and perhaps in the future we might be back here again with some other problem that has arisen because of nefarious activity.
Jeff Smith
Q I will just ask one final question. We have had some written evidence suggesting that the current regime is adequate. If you do not mind my quoting from it, it says:
“Applying the current controls properly, putting dissolved companies into liquidation and publicising that new policy will be a far more effective deterrent...That requires no new legislation at all.”
Do you have a view on that?
Dr Tribe: The trouble is that to get to that liquidation point, you have to go through the restoration stage. I think that submission might have also talked about the idea of restoring an entity to the register and then going through that insolvency route. I think the Insolvency Service did 33 of those in 2019—pre the bounce back loan issue and pre corona, obviously. Each one of those 33 will have cost it court fees, process fees at Companies House and so on, which means there is this extra layer of procedure that it has to get through before it can ultimately investigate the unfitness activity. I think the dissolution reform in this legislation ensures that that extra layer of bureaucracy—getting the companies back on the register, through restoration, then going through the insolvency processes—is cleared out, and we move straight to the enforcement section.
The other problem with restoration is that you perhaps undermine the integrity of the register itself if you take 33 companies off it, but you then want to put them back on because you need to go through the steps that we want for enforcement and so on. It is an interesting point, but I think you have a quicker public protection mechanism process that you can do now that gets you to a less costly enforcement outcome.
The Chair
If there are no further questions, I thank you, Dr Tribe, for giving evidence this morning. It is much appreciated. I thank all the witnesses for appearing this morning.
Ordered, That further consideration be now adjourned. —(Paul Scully.)
Oral Answers to Questions
Jeff Smith Excerpts(3 years, 10 months ago)
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Kwasi Kwarteng
I am absolutely open and prepared to work with the hon. Member. I have visited him in my capacity as Under-Secretary of State in the Department for Exiting the European Union. I think we also met when I was Minister of State. I am very happy to work with him and discuss his ideas about regeneration and growth.
Jeff Smith (Manchester, Withington) (Lab) [V]
Kwasi Kwarteng
I am absolutely aware of that issue. It is almost inevitable that we will be asked by the CCC to include those contributions in our budgets. As COP26 hosts, we will obviously want to hold ourselves to the highest standards, in terms of carbon emissions.
Oral Answers to Questions
Jeff Smith Excerpts(4 years ago)
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Kwasi Kwarteng
It is correct that a complaint must be made within six years of the date of the breach, as we would expect mis-selling to become evident within six years, but we have to take everything, as the hon. Lady knows, on a case-by-case basis. We will explore the relevant facts of each case, and then we can work out whether an eligible complaint can be made within the relevant timeframe. I am very happy to meet her individually to discuss cases as they arise, because we have to take each on a case-by-case basis.
Jeff Smith (Manchester, Withington) (Lab)
The Secretary of State for Business, Energy and Industrial Strategy (Alok Sharma)
At this last Department for Business, Energy and Industrial Strategy oral questions of the year, I take this opportunity to thank my brilliant ministerial team, our brilliant Parliamentary Private Secretaries, our fabulous Whip and the outstanding civil servants for the huge effort they have made this year to support business and procure 357 million doses of the most promising vaccine candidates.
Since the previous oral questions last month, the Department has led on the Prime Minister’s 10-point plan, which is our blueprint for a green industrial revolution, and the energy White Paper. We have also been central in setting the UK’s ambitious nationally determined contribution, as well as helping to organise the climate ambition summit on 12 December. The pace and energy of delivery will continue in the new year, because our businesses and people across the United Kingdom deserve no less at this challenging time.
Jeff Smith
Rate relief for hospitality venues is welcome, but many are racking up huge rent debts while they are closed and getting only a third of the support they got earlier in the year. Have the Government had any discussions about a model of sharing the rental debt burden among tenants, landlords, banks and the Government, because without more help, many of these businesses will close?
Alok Sharma
The hon. Gentleman raises an important point, and of course we have dialogues with landlords and tenants. As he will have heard, the rent moratorium has been extended to 31 March, and he will also know that because the rates holiday continues, that is money that does not have to go out, which can be used for other purposes.
Oral Answers to Questions
Jeff Smith Excerpts(4 years, 1 month ago)
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Kwasi Kwarteng
The provision of credit, as I have suggested to some of the hon. Gentleman’s colleagues, has been very generous during this covid-19 period. Obviously, we can refine the process and we are very open to listening to ideas from hon. and right hon. Members about how we can do that. I would like to point out that, last year, in his constituency of Midlothian, we issued something like £49 million-worth of credit. Many of the companies in his constituency have been very grateful and very happy to receive that money.
Jeff Smith (Manchester, Withington) (Lab)
The Secretary of State for Business, Energy and Industrial Strategy (Alok Sharma)
Last week, at the CBI’s annual conference, I reaffirmed our desire to build back better through levelling up across the country. We are developing a new strategy for growth, a refreshed and reinvigorated industrial strategy that puts the UK at the forefront of economic opportunity. We want to broaden the geography of our economy while taking a more strategic approach, supporting research and innovation in areas where the UK has the potential to both lead and change the world. We will work with industry as our plan for growth takes shape in the months ahead and is published in the new year.
Jeff Smith
Any help for business, like the local restrictions support grant, is welcome, however limited, but nightclubs and much of the night-time industries have been required to close since 23 March, with no sign to an end of their problems. So should the grants not be backdated to that date, rather than starting on 1 November?
Alok Sharma
I am delighted that the hon. Gentleman welcomes the support that is being provided. He also knows that, for areas that were in tier 2 or tier 3 before the new restrictions came into force, there are backdated payments to August equivalent to up to £2,100 a month.
Oral Answers to Questions
Jeff Smith Excerpts(4 years, 2 months ago)
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Ellie Reeves (Lewisham West and Penge) (Lab)
Jeff Smith (Manchester, Withington) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
Ministerial colleagues and I have engaged closely with affected sectors throughout the covid-19 pandemic. Recently, I have had meetings with representatives of the retail, hospitality, consumer goods, weddings, nightclubs and events sectors, and small and medium-sized enterprises across the UK.
Paul Scully
That is something that I continue to engage with the Treasury and with businesses on, to understand it and to see what more we can do. I am someone who has in the past been a company director and paid myself through dividends, so I understand the position of those in the creative sector, who are doing much the same thing. We will work together to see what more we can do.
Jeff Smith
I used to work in the nightclub industry, like 70,000 people in the UK. Clubs are currently shut down on Government advice and are getting no support on rent, rates or other overheads. Loans are no good because they are just building up the debt. These are businesses that will be not just viable, but thriving businesses and good employers if they can get through the covid shutdown. What are the Government going to do to help them to get through this crisis?
Paul Scully
I have met nightclub representatives and people who run nightclubs. I have met with Sacha Lord and other people who work with the elected mayors. We have set up a nightclub taskforce to work with the Night Time Industries Association and other owners to try to work our way to a covid-19-secure nightclub, when we can start to open up the economy. Many nightclubs have actually repurposed to be able to open as bars and other areas of industry.