United Kingdom Internal Market Bill

Debate between Jim Shannon and Lucy Powell

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Tuesday 29th September 2020 Commons Chamber

[Lucy Powell]

I strongly agree; I will come to that point shortly.

The Government’s next justification was that it was necessary to rip up the withdrawal agreement because the European Union is ripping it up itself, but we have heard differing accounts of this: the Northern Ireland Secretary said throughout the summer:

“The Government is extremely confident that the EU is working in good faith”.

Which is it? We are still not clear about that.

Perhaps the most dangerous of all the contortions relates to Northern Ireland. The shifting justifications of the Government over the last three weeks have added to the sense that they are using Northern Ireland as a pawn in a wider negotiating strategy. Remember, this is a deal that the Prime Minister told the House was

“in perfect conformity with the Good Friday agreement”—[Official Report, 19 October 2019; Vol. 666, c. 583.]

Callous or careless? Untrustworthy or incompetent? The Government are playing a dangerous game, and it is the people and businesses of Northern Ireland who risk paying the price.

[Jim Shannon]

I thank the shadow Minister for the constructive way in which she is putting forward her point of view. Does she agree that new clause 7, which was tabled by my colleagues, among others, and has some supporters in the House, is essential to ensure the viability of businesses in my constituency and across the whole of Northern Ireland whose biggest trading partner is the UK? Does she further agree that Northern Ireland cannot be left at the whim of Europe and that we must have security when these measures go before the House?

[Lucy Powell]

Yes, I do agree. I will mention that point in a moment.

For the people of Northern Ireland, this is not the latest episode in a Brexit drama; it is a profoundly worrying moment. Little wonder that the Lord Chief Justice of Northern Ireland himself, Sir Declan Morgan—a widely respected voice—said that the Government’s actions “undermine trust”. Let us remember that this issue could scarcely be more sensitive. In order to ensure the continuity of the Good Friday agreement in all its dimensions—recognising the unique circumstances of Northern Ireland sharing a land border with the Republic, and therefore the special responsibility and role that the UK and the Republic of Ireland have as co-guarantors of the Good Friday agreement—any change in the constitutional status of Northern Ireland rests on the consent of the people of Northern Ireland in their plurality. That is why it is essential that the protocol upholds Northern Ireland’s place in the internal market and that this delicate compromise builds the confidence of all communities. That is the principle behind new clause 7, which we have co-sponsored with the DUP and Alliance.

But instead of proceeding with due caution and going the extra mile to seek consensus, the Government resort to legislative vandalism. They also stoop pretty low—into “straight bananas” land—with scare stories about what the Bill is needed to prevent, some of which we have heard again today. The Prime Minister warned that the Bill was necessary because the EU wants to enforce an embargo on the transport of goods from Great Britain to Northern Ireland and are

“holding out the possibility of blockading food and agricultural transports within our own country.”—[Official Report, 14 September 2020; Vol. 680, c. 43.]

Yet nowhere in the Bill do the Government safeguard against this. Despite the many amendments at every stage, there is nothing at all in the Bill regarding the movement of goods from GB to NI.

Corporate Insolvency and Governance Bill

Debate between Jim Shannon and Lucy Powell

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

[Lucy Powell]

As my right hon. Friend the Member for Doncaster North (Edward Miliband) and I have said, we support the principle of the Bill and urge the Government to do more to support businesses, so that they can remain solvent and do not need to use these provisions. I hope the Minister will take the amendments in the constructive way they are meant. I will speak to each of them in turn and set out why we are seeking reassurances or think that the Government should consider changes to the Bill as it progresses. This has been a very truncated process, so we are relying on Ministers’ good will to take on board not just the comments I am about to make but those made on Second Reading, some of which were excellent suggestions.

I will take the self-explanatory amendments first. Amendments 3 to 12 inclusive would extend the time limits of the covid-19-specific provisions in the Bill. We welcome the retrospective nature of the provisions, but as we have discussed with the Minister, we suggest that the Government amend the Bill to extend the time limits for a number of the provisions, as they are insufficient given the prolonged nature of the crisis. Specifically, the suspension of the wrongful trading liability and statutory demands and winding-up petition measures should be extended to the same date as when the AGM and company account filing measures are valid, which is until 30 September.

Clearly, there was a sense from Government when the Bill was being drafted that on 30 June, most things would be back to business as usual. It is now clear that many sectors will not even be partially open for business again by that deadline—I am thinking particularly of hospitality, travel, tourism and the arts and their associated supply chains. They will not even have begun trading by the end of this month, let alone be getting back to any kind of solvency.

[Jim Shannon (Strangford) (DUP)]

I agree wholeheartedly with what the hon. Lady is saying. In Northern Ireland the start date for the hospitality sector, including hotels, is 20 July, so nothing will even be in place until that time. I am a wee bit disappointed that the Minister has not acknowledged that we should have a six-month extension, maybe even to the end of the year.

[Lucy Powell]

The hon. Member makes a good point. Businesses that are struggling to keep their heads above water need certainty, and they need to know that the lifeline measures in the Bill will not be pulled from under their feet before they even reach needing them.

The point of the suspension of the wrongful trading provisions is that lots of businesses are effectively trading technically insolvent already through no fault of their own. Just as we have seen Ministers rightly extend the furlough scheme, support for the self-employed and other measures, they should get ahead of this now. Rather than having to spend time on a statutory instrument in only two or three weeks’ time, Ministers could and should take the opportunity to get this done today by agreeing to our amendment.

Amendment 2 would extend the moratorium for small businesses from 20 days to 30 days for businesses facing insolvency. The Federation of Small Businesses has called on Government to extend the moratorium period for small businesses because it does not believe that the 20-day period in the Bill is sufficient. We support that call and ask Ministers to agree to that change.

New clause 2 has not been selected, and we will have a proper look at this in the other place, but we think that the powers of the Small Business Commissioner should be strengthened, as we discussed on Second Reading.

We have long argued for some of the permanent measures in the Bill, particularly in the wake of the Carillion collapse. However, we have some concerns about what has been left out, as I said on Second Reading. There could be unintended consequences in the restructuring proposals that are being put in place that could disadvantage small businesses, employees or other unsecured creditors, such as pension funds. The Minister and I have discussed the issue in private, and it was also raised by a number of Government Members earlier. Given the crisis and the numbers of businesses already struggling, we appreciate the haste in bringing forward the changes, but we are concerned that Members and outside bodies have not had a lot of time to scrutinise the Bill and its implications, so we think the Government could consider having a period for reflection and review.

We have included as amendments a number of omissions from the 2018 consultation. The collapse of Carillion and the consequences for workers, supply-chain businesses and the public were a national scandal and an abject failure of British corporate governance policies. There have been huge repercussions for taxpayers, with unfulfilled contracts, unfinished buildings and thousands of apprentices laid off—the taxpayer had to foot the bill for those failures of corporate governance. There is, rightfully, public anger at the failure to hold people to account for such things. As ever, it seems that in such instances the profits are taken by the private sector, but the public sector foots the bill when the risks have been taken by directors over whom they have no control. Given the economic crisis that we face and the likely recession, it is clear that in the next few months and years we will see more big corporate collapses and failures, so it really is remiss of the Government not to strengthen the corporate governance measures, as they said they would do in 2018. I wish to make it clear, especially because Members raised this earlier, that the measures in our amendment are lifted entirely from the Government’s own recommendations.

Alongside key omissions from the Bill, we have heard from academics, trade unions and other organisations about some of the sweeping powers in the legislation and the fact that there could be considerable scope for the misuse of some measures to disadvantage particular groups. The next set of amendments would seek to safeguard funds for unsecured creditors, protect pension schemes, and protect employees by giving trade unions a voice in any restructuring plans. I urge the Minister to have conversations with the trade unions and to look to add our provision—or a provision like it, as Members from both sides were calling for earlier—to the Bill as it progresses to the other place.

We have concerns about how the restructuring plan will hit employees: many more could be pushed to or around the national minimum wage and lose their rights and their wages, as we are currently seeing with what British Airways is doing. Pension scheme deficits will be left unaddressed and more workers could end up losing out from their pension schemes. If this was not an emergency Bill, we would have had a lot more time to probe Ministers on these issues in a full Committee and to discuss what could be done to strengthen the protections in the Bill.

New clause 1 would insert into section 176A of the Insolvency Act 1986 a requirement that at least 30% of the proceeds from the sale of assets of businesses in administration or liquidation should be ring-fenced for payments to unsecured creditors, who often end up losing out to larger creditors, such as banks. The new clause explores a way for unsecured creditors to be guaranteed some assets so that they do not miss out. The legislation assumes that all creditors are identical and take a hit, but we know that that is not borne out in reality. There is a case for protecting the debts of SMEs and other unsecured creditors up to a specified amount, and that should not be reduced. What assurances can the Minister give that unsecured creditors will not lose out as a result of the Bill—although I know that that is what it is designed to try to achieve—and what mitigation is in place to protect unsecured creditors, who are often in the SME sector?

The intention of new clause 4 is to make pension scheme deficits a priority creditor in the event of insolvency and therefore due to be paid before unsecured creditors. The new clause would require the Government to make pension scheme deficits a priority, meaning that they would be the first in the queue in the event of insolvency and paid before other creditors. That could make employees’ votes count and offer them some protection. It is worth remembering that pension schemes are unsecured creditors in normal circumstances. If the deficit is not addressed by companies, employees face an erosion of their pension rights and their pension value goes down. Our amendment would help them to become a separate class in their own right and not to be subsumed into the amorphous mass of unsecured creditors. Members would be able to vote on any restructuring plan. That way, there would be a clear message to past and present employees. Given the nature of this debate and the number of colleagues from both sides of the House who have raised this issue, I hope that Ministers will look at the matter.

The intention of new clause 5 is to require mandatory discussion with trade union representatives once a company has entered the restructuring process. I understand that US evidence shows that restructuring plans often hit employees hardest, and many of the provisions in the Bill are based on US-European models. Wages can be reduced and employment terms changed. Many employees end up on zero-hours contracts or, as we have seen recently with BA, are sacked and then offered worse terms and conditions when they are re-employed. Pension rights are also reduced, and that could happen in the UK. I am sure that Ministers do not wish that to be an unintended consequence of the legislation, so we hope that the Minister will look at our idea, or a similar idea, and see if it can be introduced in the other place. I hope he can provide reassurance on that, not least because my boss, the shadow Secretary of State, is particularly agitated—and rightly so—about this issue.

I hope that the Minister will consider the amendments in the constructive way in which they are tabled. A number of Government amendments have been tabled, and they seem reasonable. We have not had a lot of time to study them, but I am grateful to the Minister for arranging a briefing with his officials. I look forward to his providing us with a bit more detail and assurance as the Bill proceeds.

Corporate Insolvency and Governance Bill

Debate between Jim Shannon and Lucy Powell

2nd reading & 2nd reading: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[Lucy Powell (Manchester Central) (Lab/Co-op)]

It is a pleasure to be on the Front Bench and at the Dispatch Box again as the shadow Business Minister, although I would have much preferred to make this speech safely and socially distanced in sunny Manchester—no offence.

I reiterate the thanks of my colleague, my right hon. Friend the Member for Doncaster North (Edward Miliband), to the Minister, the Secretary of State and their teams for all the engagement we have had on the Bill. Our objective, as the Opposition, is to be constructive, and to ensure that businesses get the support they need now and in the long term, to keep the number of insolvencies in the coming weeks and months as low as possible. As my right hon. Friend said, we support the overarching objectives of the Bill. However, we hope the Government can give us some reassurances in Committee. Many others today have voiced similar concerns.

I thank many colleagues from across the House for their speeches in this interesting debate. Obviously, the highlight was the maiden speech of the hon. Member for Heywood and Middleton (Chris Clarkson), who was a bit nervous about coming last out of his intake; but as a fellow Mancunian, I reiterate that the best was definitely saved till last.

Although we back the Bill today, we are clear that it should be the last resort for many businesses. There is much more for the Government to do now to support businesses so that, as my hon. Friend the Member for Bristol North West (Darren Jones) eloquently put it, the measures debated today are not necessary. Every previously viable business that needs to call on these insolvency changes because of our decision to shut down the economy for public health measures, is a business that has been failed. Ministers have recognised the huge scale of the situation, with the unprecedented support they have established to retain jobs and support businesses. That has been the right thing to do and we have supported it. However, as we enter the end of the lockdown phase, the challenges ahead are becoming clearer. More must now be done to rescue more businesses, and ensure that the recovery is as short and strong as possible. We must stop a second, and possibly a third or fourth wave of insolvencies arising from unmanageable debts and creditors. Any business that goes bust as a result of public health measures will lengthen and deepen the recession and leave long-lasting scars on unemployment levels and the wider economy.

Labour Members firmly believe that the cost of not doing all we can now to save businesses will be far higher than the cost of action today. Ultimately, the taxpayer will pay for the cost of failure, through lost tax revenues and higher unemployment over many years, not months. The Government need to renew their support package over the coming period, as it is now clear that the easing of lockdown will be longer and more complicated than was predicted at the start of this crisis. That is why we suggest that the temporary measures in the Bill should be extended today, rather than waiting until later.

Preventing insolvencies today, in and of itself, will not stave off insolvencies tomorrow, if the Government do not take a long view and ensure that businesses do not face a cliff edge. A second wave of support and sector-specific action is also required. Critically, if the recovery is based on unmanageable debt, it will be no recovery at all. In the immediate rescue phase, businesses and business organisations are asking for more discretionary grant funding to support the hardest hit businesses that have so far missed out, more flexibility with the furlough scheme, simplification of the CBIL scheme, and many other measures that have been mentioned today. Those include more clarity and joined up working on business critical issues such as quarantine measures, safety in the workplace, childcare, and shielded employees. The Government must not fall into complacency and think that their actions so far have been sufficient, because a second wave of support is urgently needed.

We have heard from a number of colleagues, notably my hon. Friends the Members for Aberavon (Stephen Kinnock) and for Cardiff South and Penarth (Stephen Doughty), and the hon. Members for Folkestone and Hythe (Damian Collins), and for Strangeford (Jim Shannon)—

[Jim Shannon]

It’s not Strangeford!

[Lucy Powell]

Sorry. Strangford. It’s just that the Member of Parliament reminds me of that—no, I’m only joking.

The economic emergency we are in is affecting different sectors of the economy in different ways, some particularly and devastatingly harshly. This will be a sectoral recession, and the Government response must reflect that. We have raised with Ministers the serious issues facing our manufacturers, car manufacturing, steel makers, the aerospace and defence industry, aviation and tourism, the hospitality industry, and other areas such as football. The crisis is also affecting supply chains in those sectors, and we have already seen job losses at premier British companies such as Rolls-Royce and McLaren. There have been layoffs in the airline industry, despite the furlough scheme, and despite warnings from many industry bodies about the failure to provide adequate support and liquidity to business now. Will the Government step up with the more urgent response that is needed for those sectors, which so many Members have asked for today?

Project Birch has potential, but talking must quickly be followed by action. The promise of jam tomorrow will not pay the bills today. The feedback I get from businesses, especially some of our most important and largest employers, is about how slow the discussions with Government are, compared with the urgency of the cashflow problems. For example, our world-leading aerospace, aviation, tourism and travel sectors now face what could be a final blow from the confusion and mixed messaging about quarantine measures.

As the former Prime Minister Gordon Brown said, and as the hon. Member for Hitchin and Harpenden (Bim Afolami) has warned, the scale of the debt that companies are taking on to survive this crisis is huge. We will see a debt-laden recovery, with demand unlikely to return to normal quickly for many. Coupled with that debt, the recovery is likely to be weak, deepening its economic impact, and with insolvency spread over the months ahead.

Once companies have to start paying back loans, further insolvencies are likely to follow, with recovery choked by high levels of unemployment, and low levels of confidence. Are the Government exploring with business organisations and the finance sector ways to mitigate the month-13 problem of Government backed loans with a more long-term solution, as was suggested earlier?

Finally, we need to do more to increase and generate demand through a green recovery plan, as the hon. Member for North Antrim (Ian Paisley) described, and to address the youth unemployment crisis. The Government must seize the opportunity to bring forward pipeline projects to put British businesses at the forefront of the green and digital revolution.

Turning to some of the specific measures in the Bill, we support both the permanent changes to insolvency law and the temporary changes to insolvency law and corporate governance, but with some caveats. A balance must be struck between allowing businesses to survive through the crisis and not removing essential protections for creditors, pension funds and employees. The trade unions and others here today have raised some serious concerns about this, with good reason, and I will say more on that in Committee.

We believe that there must be no revision of the directors’ duty of care to their employees and suppliers. The Bill must ensure that SMEs and smaller suppliers are protected when larger companies go into administration. As the hon. Member for Dudley South (Mike Wood) and others have said, the temporary measures need to be extended today.

The Bill is a big missed opportunity to address corporate governance accountability, as the hon. Member for Huntingdon (Mr Djanogly) outlined. The collapse of Carillion was a national scandal. Yet again, corporate greed and very shaky indebted finances led to the taxpayer paying the price of directors’ failures. While those directors and shareholders reaped all the gains during the good times, the collapse of Thomas Cook more recently exposed these failings further, with the taxpayer once again footing the bill for failure. We had a conversation earlier about equity stakes, but the taxpayer in effect does have an equity stake in many businesses—but only in paying for the costs of failure, not in reaping any of the rewards of success. Ministers consulted on changes to insolvency law after these collapses, and some of these changes are in the Bill, but, inexplicably, other important ones are missing.

Over the coming months, as the recession takes hold and complex financial arrangements are pushed further towards breaking point by the new loans that these companies have, we are no doubt going to see the collapse of more household names and large corporates. Why have the Government not taken this opportunity, which we stand ready to support, to bring forward the long-awaited reforms on tackling bad corporate governance and protecting creditors, employees and, ultimately, the taxpayer? We also think it is a missed opportunity to have given the small business commissioner more powers and teeth, as the hon. Member for North East Bedfordshire (Richard Fuller) seemed to agree.

This is a speedy process for this Bill. It is a very large Bill, and we are expediting its passage through both Houses very speedily, so we are relying on Ministers to take on board some of the concerns raised today in the spirit of us working together. We will come back to some of these missed opportunities in Committee, but, to close, I urge the Minister to press his colleagues, including the Chancellor, to do more now to protect companies from insolvency. This Bill provides a small and important safety net and breathing space, but much more needs to be done and more quickly to prevent businesses from needing that breathing space in the first place. I hope that the Government will heed the warnings of business and provide further support so that the recession to come does not leave deep and lasting damage to our economy and employment.