Newport Wafer Fab Sale

Kevin Hollinrake Excerpts

Thursday 15th July 2021 Commons Chamber

[Amanda Solloway]

The hon. Lady makes an important point. The Government have looked closely at the transaction and do not consider it inappropriate, but as the Prime Minister has made clear, the National Security Adviser will review it. I am happy to meet the hon. Lady or at least facilitate a meeting with the appropriate Minister.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

My hon. Friend talks about mutual respect between ourselves and the Chinese people, which I believe is correct, but the Chinese Government do not respect rules-based order, particularly in enterprise and commerce. This semiconductor plant is critical to our UK economy, particularly at a time of rising demand for semiconductors, and the 450 jobs at Duffryn are also very important. Does she agree that the protection of those jobs, that plant and the UK-owned intellectual property is critically important to her and to this Government?

[Amanda Solloway]

Like my hon. Friend, I am of course totally committed to skills, as are the Government. In fact, the Government have invested £800 million in compound semiconductor research. In 2018, through UK Research and Innovation, we established a compound semiconductor applications catapult with £50 million of funding to collaborate with large companies and start-ups to develop and commercialise new applications utilising this technology. To date, the catapult has initiated projects worth more than £100 million. The UK has over 100 companies actively working with compound semiconductors. About 5,000 UK companies, 90% of which are small and medium-sized enterprises, are designing and making electronic components, devices, systems and products. The catapult is a national body dedicated to compound development across the United Kingdom. The UK Government, via UKRI and the Welsh Government, have additionally provided significant funds to help to establish south Wales university structures such as the Institute for Compound Semiconductors.

Oral Answers to Questions

Kevin Hollinrake Excerpts

Tuesday 9th February 2021 Commons Chamber

[Kwasi Kwarteng]

As the right hon. Gentleman well knows, my door is always open, and I am very happy to meet him to discuss this issue. I recall that when my right hon. Friend the Member for Tunbridge Wells (Greg Clark) was in my place, it was a very delicate situation, but I am happy to discuss with the right hon. Gentleman ideas on how we can ameliorate it.

[Kevin Hollinrake (Thirsk and Malton) (Con) [V]]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. In my parliamentary work I have seen a number of examples of council landlords being unreasonable with tenants who are facing eviction or, potentially, insolvency when the right of forfeiture is restored on 31 March. Will my right hon. Friend set out his plans for this, but also send a message to local authorities that they should set a good example when it comes to helping businesses through this crisis?

[Paul Scully]

I have been continuing to have conversations with landlords and tenants to encourage constructive conversations to see what happens after the moratorium. Those tenants who can pay should pay, while landlords should show forbearance for the medium to long term, and that includes local authorities. In government, whether central or local, we should be setting that example.

Financial Assistance to Industry

Kevin Hollinrake Excerpts

Monday 7th December 2020 General Committees

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

I beg to move,

That the Committee has considered the motion, That this House authorises the Secretary of State to undertake to pay, and to pay by way of financial assistance under section 8 of the Industrial Development Act 1982, sums exceeding £30 million and up to a total of £300 million in respect of compensation for indirect costs of the UK Emissions Trading System or the Carbon Emissions Tax and Carbon Price Support mechanism in each case to British Steel Ltd; Celsa Manufacturing (UK) Ltd; CF Fertilisers UK Ltd; DS Smith Paper Ltd; INEOS Chemical Grangemouth Ltd; INEOS ChlorVinyls Ltd; Kimberly Clark Ltd; Outokumpu Stainless Ltd; Palm Paper Ltd; Runcorn MCP Ltd; SABIC UK Petrochemicals Ltd; Tata Steel UK Ltd; and UPM-Kymmene (UK) Ltd.

It is a great pleasure to serve under your chairmanship, Mr Pritchard. The current scheme to compensate certain energy-intensive industries for indirect emissions costs arising from the EU emissions trading scheme expires at the end of 2020. Ministers in the Department for Business, Energy and Industrial Strategy have agreed to extend the compensation schemes in line with the current framework for a further year, to the end of the next financial year. Under section 8 of the Industrial Development Act 1982, we seek the House of Commons’ approval to pay compensation in excess of £30 million to individual businesses.

The UK will announce either a United Kingdom emissions trading scheme or a carbon emissions tax as a successor to the EU ETS. That means that the motion agreed by the Commons in 2014, providing approval to spend more than the limit in section 8 of the Industrial Development Act, will no longer be valid. That is because the UK has left the EU and will no longer be part of the EU ETS. We are therefore tabling a motion to seek the Commons’ approval to ensure that BEIS can continue to compensate businesses for more than £30 million of indirect costs from the UK ETS or carbon emissions tax and carbon price support mechanism.

Energy-intensive sectors that are eligible for BEIS relief schemes employ around 350,000 workers, and they have a gross value-added of £28.5 billion, or 2% of the UK economy. Their turnover is around £134 billion, and in 2018 their exports totalled around £93 billion, which is 27% of total UK exports. Carbon pricing policies create a cost differential between the UK and other countries, and that increases the risk of carbon leakage. Carbon leakage could occur if, for reasons of cost related to climate policies, businesses were to transfer production or reallocate investment to other countries that have lower carbon pricing policies. That could lead to an increase in global greenhouse gas emissions. The Government have therefore been compensating certain energy-intensive industries for the indirect emissions costs arising from the EU ETS and the carbon price support mechanism since 2013 and 2014 respectively.

In their 2011 autumn statement, the Government announced that, to ensure that manufacturing was able to remain competitive during the shift to a low-carbon economy and to minimise carbon leakage, they would compensate key electricity-intensive businesses to help to offset the indirect emissions cost of the carbon price and the EU ETS. Cost compensation should remain as long as there are differences in low-carbon policy costs between the UK and international competitors. The Government should ensure that businesses can plan on the basis that that will be the case, while keeping the precise coverage level and conditionality of compensation and exemptions under review. The main beneficiaries are certain energy-intensive industries, particularly companies in the steel, paper and pulp chemical sector. The compensation is paid from the BEIS budget.

As I have mentioned, section 8 of the Industrial Development Act requires approval by a resolution of the House of Commons for support in excess of £30 million under any one project. In 2014, the Commons approved a motion to increase that limit to £300 million for 13 companies in respect of compensation for the EU ETS and carbon price floor. As we will move to a new scheme—a UK ETS or carbon emissions tax—from 1 January 2021, we are seeking approval from the Commons again.

Without new approval from the House of Commons, my Department would not be permitted to compensate businesses from 1 January 2021. Given the pressure facing businesses from covid-19, preparations for the end of the transition period and the continuation of relatively high UK industrial electricity prices, Ministers have agreed to the continued operation of the compensation scheme for a further year—until the end of the financial year 2021-22.

We will revise the schemes in early 2021 to assess whether—and if so, how—to continue the compensation scheme for the longer term. By that time, we will have more clarity about our future relationship with the EU carbon pricing policy. The UK’s subsidy control regime has broader Government objectives, such as the delivery of the covid-19 response and net zero commitments.

The Government recognise that energy-intensive industries need to play their part in reducing emissions, and we have introduced various policies to help them decarbonise. In the Budget of 2018, the Government announced £315 million for an industrial energy transformation fund to support industrial energy efficiency and decarbonisation projects, to bring energy costs down for industry.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The Minister is making a very strong case for the motion, but can she set out why some industries in other countries pay less than UK companies for energy? Why is that?

SMEs and the Net Zero Target

Kevin Hollinrake Excerpts

Tuesday 17th November 2020 Westminster Hall

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I beg to move,

That this House has considered support for SMEs and the net zero target.

It is an absolute pleasure to serve under your chairmanship, Ms Ghani. I draw hon. Members attention to my entry in the Register of Members’ Financial Interests on all things small business.

I am very supportive of the push to get to net zero as soon as possible. I absolutely believe that business will help to deliver that solution even faster than 2050. My principal concern in bringing forward this debate is that, in the headlong rush to get to that point, we must not treat businesses as collateral damage. We have done that in the past. When we had a change of emphasis in lending back in 2008, that happened to some good businesses, as well as to some businesses that had probably borrowed inappropriately.

I want to give an example of a business in my constituency. There is a very good business a few miles away from where I live called the York Handmade Brick company. It makes wonderful, handmade bricks, that look like old clamp bricks, for lots of houses around the country. It is a fairly small business employing about 20 people and is an award-winning company. Its processes use fossil fuels—natural gas—to fire the bricks. Now, I can see a situation where, in future, banks may look at this business and say, “That business does not sit with our ethical and sustainable goals portfolio. Therefore, it is perhaps not a business we want to support.” If that business needs to borrow some money to invest to move away from fossil fuels, for example, and move to other processes—biogas being an obvious one—what that company will need as it moves, down the line, to a different process, is money to invest. It is absolutely critical that our banking sector takes such businesses forward with us. Hon. Members might say that that is blooming obvious, but that is not always what we have seen in the past.

If we are going to get to net zero, it is absolutely vital that the private sector is taken with us. It will provide the cash and capital to invest in new processes and new techniques. We know for an absolute fact that the private sector is much better at allocating capital than the public sector—I might point to Croydon council in that regard, if Members have seen some of the recent news reports. The private sector is much better at allocating capital; in the past, the public sector has misallocated capital.

Of course, that investment will contribute towards innovation, and the solutions to climate change are about innovation. The more innovation and the more competitive free markets we have, the more our consumers get a better deal at a better price. We are seeing some interventions from shareholders in banks, who are saying, “We do not want you to invest in these kinds of industries anymore.” Shareholder action groups will get increasingly vociferous, which could be to the detriment of small and medium-sized enterprises, and even bigger companies. This is not just about SMEs: bigger companies will remember that last year, for example, there were some protests by actors from the Royal Shakespeare Company regarding BP’s sponsorship of that organisation, which led to a parting of the ways between the RSC and its sponsor. That is despite the fact that BP is working within our overall regulatory framework, and will be incredibly important in the future in making the investment we need to move from a dependence on fossil fuels to a greater dependence on renewable energy.

We have seen this with recent shareholder action in terms of things like the covid corporate financing facility, which is dispensed by the Bank of England. Again, there has been pressure from certain shareholder groups, saying that at this crucial time, when lots of businesses are in trouble because of covid, support for those businesses should have been linked to environmental objectives. How unfair would it have been, when hundreds of thousands of businesses employing millions of people are in crisis, to link those supportive measures to sustainability goals at such short notice?

My key message for this debate is that any intervention by the Government and our financiers, who are so critical to the UK economy, must be comprehensive, well considered, strategic and stable. Our interventions should be consistent over a long period of time to get to that long-term goal. Again, one example I might give is the recent news that we will bring forward the date on which we move away from fossil fuel cars—diesel and petrol cars. It was 2040; it has been brought forward to 2035, and has now been brought forward again to 2030. The motor manufacturers, of course, are gearing up for that, although it presents some real challenges for that sector during what is a difficult time anyway. What about the other businesses in that supply chain? Lots of other SMEs will have to make that change as well: those could be parts manufacturers, but they could also be forecourts. They are going to have to make massive changes over a very short period of time, so we must make these decisions in a strategic fashion.

[Andrea Leadsom (South Northamptonshire) (Con)]

My hon. Friend makes a really good point about giving sufficient notice. He also points out that businesses will always overachieve, and he might recall that back in 2015, the announcement was made that we would be taking coal off the system by 2025. It has indeed been the case that businesses have overachieved, because coal is almost off the system and it is only 2020.

Does my hon. Friend agree that there could be some merit in the UK Government doing what many G7 countries have done, which is to create a development bank that brings in some offer of Government funding to help with the transfer towards net zero that we all want to see, and from which all SMEs could benefit?

[Kevin Hollinrake]

I absolutely agree with my right hon. Friend, and commend her on the work she did when she was in the Department for Business, Energy and Industrial Strategy as energy Minister, providing a long-term framework that businesses can work within to phase out coal over that period of time: she was very far-sighted with her interventions. I am sure that my hon. Friend the Member for Grantham and Stamford (Gareth Davies) will talk about a development bank in his remarks in a few minutes.

One other area in which we need to look at a more strategic framework is that of the green homes grants. In our manifesto, we committed to about £9 billion for retrofitting, and I think we have committed about £2 billion so far through those grants, which is very welcome. One of the difficulties, as I have communicated to the Minister, is finding installers in our area. A lot of installers are thinking that £2 billion will go very quickly and, therefore, what is the point of applying?

The Federation of Master Builders has some data on that. There have been 180 inquiries to the Federation of Master Builders and only three have completed the paperwork because it was seen as too short a timescale. If we have a longer timescale, businesses will be more likely to invest in the training and the necessary other actions they need to take to qualify as a registered installer for that grant. A long-term, stable framework will encourage much-needed investment.

I will go back briefly to 2008. I am representing here, as I often do as co-chair, the all-party parliamentary group on fair business banking. Much of our work of the past 10 years—including the three years I have been involved—has been around trying to clean up the mess of 2008, when we withdrew support from lots of SMEs, unfairly and far too quickly, and did not give them the chance to transition into a different kind of business or even rebroker their finance.

We need to learn from that in terms of a timescale and a structure for that change and forbearance, in which the APPG has much experience. We need to learn from history. Warren Buffett once said,

“What we learn from history is that people don’t learn from history.”

It would be good to have a focus on that particular episode in our banking history.

With regard to banking, I mentioned before that banks are seeing some shareholder action in the businesses and sectors they will support in future. Access to capital being the most fundamental requirement of any business, this is a hugely important topic. As such, the APPG has come up with a project called Bankers for NetZero. It is engaging with the banking sector and others. It is supported by Volans, the sustainability think-tank, and Re:Pattern, who specialise in business transformation social impact. It is developing policy recommendations to lead to COP26, looking at the regulatory environment and the part banks play in financing; engaging with businesses on net zero challenges; and looking at opportunities and obstacles for banking, while trying to formulate some evidence-based, targeted policy, and to make recommendations on legislation and regulation, in accordance with the United Nations environment programme finance initiative, or UNEPFI, for short. The key objective is that no willing SME is left behind in this vital change to our economy.

One big issue over the next few years is the expected transition of lots of businesses from dependence on fossil fuels to a completely different model. That will be at a time, of course, when a lot of those SMEs are burdened with a significant amount of debt. TheCityUK recapitalisation group report said that SMEs are currently burdened with around £35 billion of unsustainable debt, which will put around 780,000 businesses at risk.

As a result of the covid crisis, it will be very difficult for the two thirds of businesses whose leadership is more focused on being greener and better to make that transition. We know how important SMEs are to our economy: 99% of all businesses are SMEs and they employ 61% of private sector employees, that is, 5.9 million businesses in total. That is a business environment that has been a huge success under this Government.

SMEs are disproportionately positively represented in our levelling-up areas. That also fits into the Government agenda. A very high proportion of SMEs are in construction; 99% of all construction businesses are local builders. They are going to be vital to retrofitting and other measures that we require to modernise our housing stock. They employ hundreds of thousands of local workers and 70% of all apprentices. Other sectors that have a high proportion of SMEs are transport and retail.

I know the Minister’s Department is looking carefully at the next few months. In terms of immediate business support, we need to think about things such as bounce back loans. Not all businesses can access bounce back loans, which is a huge issue. Lots of our businesses are with non-bank lenders, such as Tide, which do not have access to the Bank of England’s term funding scheme for SMEs and therefore do not have the capital to lend to them. Businesses already face that challenge.

Many businesses are struggling to get the new top-ups that the Department has brought forward, which is welcome. As for the businesses that can access that liquidity, many are swamped with applications or are closed to applications from new customers. We are locking some SMEs out of support right now, and we are going to need them to provide us with the solutions to our economic challenges moving forward. There are also issues with the new measures to allow businesses to pay this debt over a longer period of time—the “pay as you grow” guidance. That will be key, as it will allow businesses to pay back the loans over 10 rather than six years.

I welcome the Government’s focus on moving forward to a greener future. The Pension Schemes Bill that was before the House yesterday certainly moves us towards the net zero horizon. Last week, the Chancellor announced a taskforce for climate-related financial disclosure for large companies and financial institutions by 2025 to report on their progress in those areas. We also have the new green taxonomy and a plethora of policies in my right hon. Friend the Minister’s Department on the clean growth strategy.

In terms of where we need to go, first we need to ensure that we have diversity in finance provision. We need to solve the non-bank lender problem. However, I would also like us to invest in a new type of bank: a regional mutual not-for-profit bank that has a much more patient approach to providing finance to SMEs. During the financial crisis of 2008 and all the way through to 2013 in Germany, lending rose by 20% because of the regional banks. In the UK, lending to SMEs dropped by 20%, showing that patient capital works much better when it is provided by a diverse range of providers.

We need a sector-specific just transition road map that looks at every different sector. If some of the current provisions for hospitality, such as the VAT cut, were extended or made permanent, that would be welcome. The British Business Bank needs a role in supporting and advising SMEs. We need to standardise just-transition restructuring, so that if businesses are seen as being in a sector that banks do not want to support, there is a proven standardised process for taking those SMEs from where they are today into the greener future. The shared prosperity fund should be used to support SMEs to make the transition and we should have a fiscal policy that is conducive to allowing SMEs to make the transition, with tax breaks, for example, to decarbonise.

My final point to the Minister—and I know he gets this—is please, please, please let us have no cliff edges, but a strategic approach and a long-term stable framework towards that net zero future.

[Ms Nusrat Ghani (in the Chair)]

Contributions are limited to four minutes.

--- Later in debate ---

[Kevin Hollinrake]

I am really heartened by my right hon. Friend’s comments on this issue. It seems that the House is in accord. I am grateful for all the contributions. There is a lot of consensus.

I love the word “ecosystem”, which the hon. Member for Leeds North West (Alex Sobel) used in this context, to describe this whole situation. What we need is a 30-year ecosystem in order to take the business community with us. There were some great examples, such as the British development bank, through to Papa Pump and whatever else—two ends of the same scale. There are lots of banks that are supportive. There is the Bankers for NetZero project. We have Barclays, Tide, Handelsbanken and Triodos, which are all keen to have a conversation on this issue and try to take businesses with us. It is so easy to look at shiny new innovative businesses, rather than businesses that currently exist and that want to make a contribution. I am very heartened by my right hon. Friend’s comments that he wants to take business with us.

When someone is in the world of business and has their own SME, it is not just a job and a business—it is their life. It is so critical to everything they do and stand for. I urge again, and I am reassured by the Minister’s comments, that there should be no cliff edges. There should be a stable framework. If we leave no one behind here, the SMEs can lead from the front—if that is not too much of a mixed metaphor—towards a net zero future.

Question put and agreed to.

Resolved,

That this House has considered support for SMEs and the net zero target.

Coronavirus Business Interruption Loan Scheme

Kevin Hollinrake Excerpts

Thursday 5th November 2020 Commons Chamber

[Owen Thompson (Midlothian) (SNP)]

I beg to move,

That this House believes the Coronavirus Business Interruption Loan Scheme is not adequately fulfilling its role for SMEs across the UK; and urges Government intervention to ensure that all businesses are provided with the financial support they need.

I thank the Backbench Business Committee for allocating time for this important debate. My co-sponsor, the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) and I applied for this debate some months ago after hearing the anguish felt by business owners in our constituencies who could not access emergency support and were left struggling to find critical funds to see them through the crisis. I know that colleagues from across all parties in this House from all parts of the UK will have heard similar tales: people who did not know where to turn when the billions of pounds they heard being brandished about were no more than fantasy figures doing nothing to help the reality faced by the businesses they had to work so hard to build. The situation has been in constant flux and the support schemes have been a movable feast—or a never-ending famine, certainly for those who have been excluded so far—so I want to reflect on the current situation and dangers going forward, rather than dwell too long on some of the errors of the past.

A rising tide of debt is making the coronavirus business interruption loan scheme an issue again. Changes to the scheme announced by the Treasury so far do not go far enough to see businesses through to the end of this crisis. The pandemic has gone far beyond anything imagined when CBILS was first announced. England begins lockdown again today and most of Scotland remains severely restricted. The feared second wave is upon us and will possibly be worse than the first. Debt and desperation are rising, yet at the same time support is being cut, withdrawn or very reluctantly extended, without due time to plan or prepare. Those excluded remain so again, and banks are getting more tetchy about lending. There has never been a more crucial time to review the effectiveness of Government-backed loans and support, and to make sure we better meet the needs of everyone across the UK.

When lockdown began, CBILS was one of the first schemes out of the blocks, with a promise of £350 billion being made available in this and other Government-backed loans. Although grants would certainly have been better than loans, I commend the Chancellor for that swift action. It is a pity that after seven months, £62 billion—less than one fifth of that figure—has actually been approved via the various loan schemes. We need to find better ways to make funds accessible to those who need them and to hope that bold replacement mechanisms for CBILS and the bounce back loan scheme, with an emphasis on grants, can be found. Those would plug the gaps in the support already in place and would help to stimulate recovery.

Flaws in CBILS quickly became apparent. It was reported on 12 April, only three weeks after the scheme was launched, that 300,000 inquiries had been made yet only 1.4% of those went on to be successfully approved for loans. Some people did not pursue loans beyond the call to the bank, whereas others gave up before completion of the heavily bureaucratic process. Some seven months later, on 18 October, 73,094 companies had been approved for CBILS out of 159,277 completed applications—that is still an approval rating of less than half of those who completed the process, never mind those who were too worried about the debt to take it on in the first place.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I thank the hon. Gentleman for bringing forward this important debate, because although there have been successes with CBILS, there are some shortcomings too and it is right that we discuss them. I accept, to a great extent, the point he makes about grants rather than loans. However, he would probably accept that grants have been made as well as supporting loans, in the form of the job retention scheme and the business rate grants.

[Owen Thompson]

I do accept that point, and it is important that some of those grants have been in place. I would far rather have seen some of the large sums available through CBILS and the bounce back loan scheme made available as grants, as opposed to loans, which add to the debt burden on business.

--- Later in debate ---

[Owen Thompson]

Yes. Charities, who spend so much of their time having to collect from the public and are now having to adapt to new ways of doing that, are among those many who have been pushed into an impossible situation, where the only game in town is what they had to take. We absolutely need to look to see what we can do to support them, to help them out of this situation.

[Kevin Hollinrake]

It is an interesting point, but how would it be fair to people who did not take a loan, or to businesses that paid back their loan, if you wrote off the debt of businesses that did not pay back their loan? How could that possibly be fair?

[Owen Thompson]

Each business took its decision about what position it was in at the time. Many would face the prospect of going out of business; the heart of our communities would vanish overnight. One swift step by the Treasury could solve that, to support and maintain our communities.

--- Later in debate ---

[Kevin Hollinrake]

It is an interesting point, and it is worth having a debate about it, but lots of businesses, including mine—I draw the House’s attention to my entry in the Register of Members’ Financial Interests—took loans on the basis of a safety net. Not only did they not need it, but they were unsure about their commercial circumstances and they will be able to pay that debt off without going bust, and intend to. Are you intending to write off the debt to my business, which I did not need, which the taxpayer has funded, even though I do not need that money, on the basis that everybody should just get free money?

[Owen Thompson]

As I say, every business took the decision about why they needed to take a covid loan or a bounce back loan. This is about ensuring that we protect the jobs and security for those businesses going forward, and making sure that our communities are protected.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I thank the hon. Member for Midlothian (Owen Thompson) and the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) for bringing forward this important debate; I agree with many points made by the hon. Member for Midlothian. I also draw the attention of the House to my entry in the Register of Members’ Financial Interests.

This is such a key debate. We live and work in a capital society, so access to capital is not just a nice-to-have; it is absolutely vital. Unfortunately, the way that banking works in our society tends to mean that access to capital is available at times when we probably do not need it or when we need it least. It is like the old adage about being given an umbrella when the sun is shining and having it taken away when it is raining. That is definitely a feature of the way in which banking works in this country. But it does not need to be like that. In fact, it is not like that in many other very successful capitalist countries, as I will mention later.

We talk about building back better, and we have an opportunity to build banking back better. There is no doubt that banking can have a commercial purpose. As somebody who believes in free markets as the best way to drive down prices and drive up service, I absolutely think that commercial banking should be a feature of our financial system, but I also think that it should have a social purpose—through both our commercial banks and another form of banking. A mutual, not-for-profit approach to banking is a key feature of the banking systems in many other countries, including Germany, the US and Japan. I will talk more about that in a second.

Let me first discuss the main topic of the debate, which is CBILS. Although there have been some gaps, to which the hon. Member for Midlothian was quite right to draw attention, there is no doubt that there have also been huge successes. Some 73,000 businesses have been supported by the scheme, with around £17 billion. I do not think that anybody ever expected that there would be demand for £300 billion of loans. There have been £40 billion of bounce back loans; there is no cap on that, and the application process is very easy. There is probably a finite market for these loans, because most businesses will try to get through without taking a loan, but they have been a tremendous success.

My business has taken one of these loans. We will never touch it and we will pay it back. But if a message was sent out to businesses, saying, “You don’t need to pay this money back. Don’t worry, we’re going to write it off”, or if the repayment were subject to certain criteria, businesses would find a way of adjusting their business cases to meet those criteria. It is moral hazard to say to companies, “You’re just going to get this money and you don’t have to pay it back.” To my mind, that would not be fair to businesses that did not take a loan, or to businesses that can and do repay their loan.

It was Government intervention, of course, that made this scheme a success. There is no way on earth that our commercial banks would have made it a success without the intervention of the Government, so I applaud the efforts of the Minister and his colleagues on the Treasury Bench. Credit should also go to the British Business Bank, UK Finance and the banks themselves, which rolled out these schemes at tremendous pace, particularly the bounce back loans. We should recognise the successes.

Inevitably in such debates we need to talk about the flaws and the gaps in the measures, and there have been some in this scheme because it was rolled out at pace. The flaws are particularly sector-based, and this strikes at the heart of the problem with UK banking. Our commercial banks look at lots of these sectors, and are attracted to some and not very attracted to others. That has been a feature of the CBILS. The performing arts sector found it very difficult to get loans. Football clubs found it impossible to get them; they will not be supported. Despite the Government guaranteeing 80% of these loans, they were still inaccessible to some sectors.

Many SME housebuilders also found it difficult to get loans. As we know, the house building sector in the UK is increasingly dominated by large business. I come from very much a small business background so I always favour SMEs in my speeches in this place, and I think we should always try with our policies to look after small businesses. Lots of the banks simply will not provide finance to SME house builders. It is a key issue, it was an issue with CBILS loans, and I really hope that the Minister will look at it and try to address it.

The hon. Member for Midlothian is absolutely right that there have been some pricing issues. In the first year, of course, the taxpayer has to pay for that—it is a feature of the loans that the Government in effect fund the first year’s interest, so the taxpayer picked up the 12% interest that the hon. Gentleman was talking about. A company called SWIG used really quite exploitative pricing. The Government have done this to some extent, but we do need to look at top-ups for people who have taken a certain size of loan and will need more. We have done that for bounce back loans but we have not yet done it for CBILS, for which the exact same dynamic could apply. Bounce back loans have been a tremendous success, but we still need to work on the basis of the fact that lots of people bank with companies that do not have access to the term funding scheme for SMEs from the Bank of England and therefore do not have the liquidity to lend their customers bounce back loans. Tide is the most obvious example: those who bank with Tide cannot access a loan, because there is no funding for Tide’s customers because the bounce back loans are so cheap, at 2.5%, and if they try to go to another bank, all the doors are closed. Those doors are closed even in respect of opening a bank account. We really need to find a solution for non-bank lenders..

I agree with the hon. Member for Midlothian entirely about forbearance: we need a standardised process for it. As I have said a few times previously, I am the co-chair of the all-party group on fair business banking. We would love to be part of the conversation, because we can inform the debate that the Treasury is having with the banks about how we standardise forbearance.

In my final minute, I wish to talk about banks having a social purpose. Banking in the UK is massively dominated by our big commercial banks: 80% of SME finance is with the big four banks. It works completely differently in different countries. Germany is a classic example, where there are 1,500 not-for-profit mutual banks. That is so important. In the UK, between 2008 and 2013, the amount of finance extended to SMEs dropped by 25% because the banks drew in their horns and thought, “It’s all too risky, thanks very much. The shareholders come first.” That was understandable, but hardly good for UK plc. In the same five-year period, lending to SMEs in Germany went up 20%. We need to make sure that that happens here. There are lots of examples of fledgling organisations that want to provide regional mutual banking, including South West Mutual and Avon Mutual. They need funding from the Government to do it.

Community development finance institutions can also play a part. They need funding from the Government to do it. All we need to do is tell the banks, as they do in the US, to lend money to these organisations, which can lend money profitably and with sensible lending conditions, but with a social purpose. They can provide more patient capital and more financial inclusion. It is a huge opportunity. Before I sit down, let me give a last example. The state of Wisconsin in the US is the size of Yorkshire—around 5 million people live there—and there are 139 mutual banks with, collectively, around £100 billion-worth of assets. They are there for that financial inclusion and making sure that lending goes to the productive economy. I urge the Minister, who is a great businessman himself, to be part of building banking back better.

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[Jerome Mayhew (Broadland) (Con)]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests—in particular, my significant shareholding in a business that has received a CBIL.

We have heard about the Government’s actions. We have heard about the enormous numbers that are involved, which were referred to directly by the hon. Member for Midlothian (Owen Thompson), and about how they are just fantasy numbers because they are outside the essence of our individual experience. It is just for the same for me. Big numbers mean little to most people, because we do not really understand them in our normal lives.

However, I have a very real experience of the transformative effect of the CBIL system. Prior to entering this place, I was the managing director of, and a significant shareholder in, a seasonal tourism-based leisure business of just the kind that we have heard so much about over the past six to nine months. It operates in 34 locations right across the United Kingdom, employing people in Scotland and in Wales as well as in England. In March this year, we had weathered our planned seasonal losses over the winter. The business had been invested in and had recruited a large number of staff, looking forward to Easter trading. It was an irony not lost on me and everyone else who was employed in the business that the lockdown was announced in the very week of our minimum cash flow in the entire year, by which I mean that we had the least amount of money to respond to an economic shock. As a result, the lockdown was an immediate existential crisis for that business, which employs up to 1,000 people in this country and 250 to 350 people in the United States of America.

Without doubt, the CBIL that we were able to obtain within a matter of weeks saved the business from the risk of collapse. It bought time. It cushioned the cash-flow blow—this crisis is primarily about cash flow—and allowed space for the business to adapt, survive, and then, I am very pleased to say, absolutely to thrive now, although I recognise that that is not the experience of an awful lot of other businesses in the sector. The Chancellor’s intervention directly saved hundreds of jobs and careers. Let us not forget now how fast the Government acted—and thank goodness they did, because without that, the economic damage to this country would have been so much greater.

In a previous debate, I highlighted what I considered to be one of the key weaknesses of the CBIL scheme. As we plan to grow out of the crisis phase and into the economic growth phase, we need our recovery to be led by businesses that have cash to invest, creating new products, investing in growth, increasing efficiencies, exploring new markets and, importantly, creating employment. To do this, they need access to cash, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) has identified, at a time when the unwinding of the CBIL loans, with their straight line capital repayment scheme after the first 12 months, means that cash will actively be withdrawn—at that stage, in a one sixth per annum phase, but most likely, in reality, between two and five years. That would be taking money out of the productive economy just at the time when we want these businesses to be investing in growth. I was therefore delighted—and impressed, frankly—when the Chancellor announced recently the increased flexibility in interest and capital repayment requirements and increased the maximum period of capital repayment from six to 10 years. At a stroke, this almost halves the capital repayment requirements for businesses, it frees up a really significant sum of money to be reinvested in growth, and it focuses exactly on the businesses that are able to do it.

However, there is one further point that I hope the Treasury will look into. Lending banks currently have their covid loans sitting on their balance sheets, albeit supported by the Government’s partial guarantee. This reduces their capacity, and their appetite, to lend further to support the business-led recovery. I ask the Minister whether the Government could develop a scheme to allow these covid loan books to be sold to institutional investors via a special purpose vehicle, because this would provide long-term, very low-risk, fixed-income investments that are sought by pension funds, for example, particularly if the resulting coupon was tax-free. I know that is an ask of the Treasury, but it would ensure the success of the scheme.

[Kevin Hollinrake]

My hon. Friend makes an interesting point, but one of the mistakes we have made in past years is allowing the sale of loan books to very aggressive companies that pursue those loans and repayments in the most inappropriate way for SMEs. Does he propose some kind of restrictions on who those can be sold to?

[Jerome Mayhew]

It would be an unwise legislator who had not learned from the financial crisis of 2008-09. It would require regulation and careful oversight by the Bank of England, I suggest, but we should not throw the policy baby out with the execution bathwater. This suggestion is something the Treasury should look into, and I encourage it to do so, because in return the lending banks would have their balance sheets reflated and their risk removed from the sector, encouraging them to support business investment and recovery further. When Government finances are stretched as never before, the suggestion has the merit of allowing the market to provide much needed capital for growth and not the Treasury.

There is no doubt that the Government have invested massively and effectively in supporting our business community and the jobs, importantly, that they support, through the swathe of schemes that have been discussed today, most recently with the Chancellor’s announcement this afternoon of the extension of the furlough scheme. It gives me great confidence that the Government remain committed to the business sector and supporting them to lead the future economic recovery.

The Insolvency (Moratorium) (Special Administration for Energy Licencees) (Regulations) 2020

Kevin Hollinrake Excerpts

Wednesday 30th September 2020 General Committees

[Kwasi Kwarteng]

I appreciate that the hon. Member for Southampton, Test (Dr Whitehead) is not in his place, and I welcome the hon. Lady as his temporary replacement, but I detect his hand in many of her remarks; it was extremely characteristic of him to widen the scope of the debate. This is just an SI, but I was asked how many companies I thought would be insolvent. If I had a number, I would certainly never divulge it in this public forum. A lot of the questions posed by the hon. Lady are relevant, but they are not specifically tied to the nature of this debate or our specific requirement to consider the SI. I am happy to engage with her and her colleague in subsequent debates—that is an open invitation. I thank the hon. Lady for her contribution. I also thank you, Mr Davies, for the patient way in which you have chaired this debate.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Is my right hon. Friend looking at making it easier for communities to produce and distribute their own energy, and if so, would this SI affect their capability to do so?

[Kwasi Kwarteng]

I appreciate the enthusiasm of hon. Members to engage with this debate, but we have to be specific about the nature of the SI. I am absolutely happy to debate and talk to my hon. Friend individually about the scope for local communities to engage with energy provision, but the scope of the SI is, unfortunately, very narrowly concerned with the financial distress in which energy companies—as defined in the measure—may find themselves. Those companies will essentially have to pre-warn or give warning to the Secretary of State, so that the Secretary of State and Ofgem can act swiftly to address the situation. That is what the SI relates to, but I am of course happy to debate wider considerations in another forum.

Business and Planning Bill

Kevin Hollinrake Excerpts

2nd reading & 2nd reading: House of Commons
Monday 29th June 2020 Commons Chamber

[Alok Sharma]

My hon. Friend makes an important point. I know she is working incredibly hard to support businesses in South Ribble, and I am sure she is looking forward to going to the Tesco’s once it is up and running.

We also want to support the transport sector by enabling shorter-term licences for drivers of heavy goods vehicles and passenger carrying vehicles and allowing for the risk-based testing of HGVs and public service vehicles. These measures will allow goods and public transport to keep moving. We want to continue to support small and medium-sized enterprises through the quicker delivery of bounce-back loans, which have provided a financial lifeline for more than 920,000 small businesses so far. This measure is retrospective and will disapply elements of consumer credit law.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I speak as co-chair of the all-party group on fair business banking and support the suspension of the Consumer Credit Act 1974 with regard to bounce-back loans due to affordability issues, but does the Secretary of State agree that it is vital that lenders still comply with the requirement to treat customers fairly in the collection process or if there are debt issues later on and that forbearance is applied?

[Alok Sharma]

As ever, my hon. Friend raises an incredibly important point. Yes, forbearance is part of these measures, and we would expect that very much to apply.

Before I turn to the detail of the Bill, I want to thank all those across industry and both Houses who have engaged with the Government to help develop the measures in the Bill. I also thank the Local Government Association, the National Police Chiefs’ Council, the Home Builders Federation and the British Property Federation for sharing their expertise. I am pleased to say that the measures in the Bill enjoy wide stakeholder support. The LGA, the Federation of Small Businesses, the British Beer and Pub Association, UKHospitality, the Freight Transport Association, the Road Haulage Association, the Royal Town Planning Institute, the British Property Federation and UK Finance have all expressed their support.

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[Edward Miliband]

Of course there are, but just because we cannot do everything does not mean that we should not do anything. The grants programme that the Government introduced was done by sector—retail, hospitality and leisure. The hon. Gentleman makes an important point about boundaries, and some business organisations would raise that issue, but I worry that technical concerns about boundaries, which have been overcome for the grants scheme, stop us doing something that makes real sense.

[Kevin Hollinrake]

What the right hon. Gentleman says about the sector-based nature of the grants scheme highlights the problem in his argument. All MPs in this place, I am sure, have been contacted by people—in the hospitality supply chain, for example—who were not getting support. It is so difficult to take a sector-based approach. Will he concede that that is not as easy as he thinks?

[Edward Miliband]

Of course it is not easy, but the hon. Gentleman’s implication is that nothing can be done for those sectors that are obviously more affected by the public health measures.

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[Kevin Hollinrake]

indicated dissent.

[Edward Miliband]

The hon. Gentleman is shaking his head. If things can be done, they should be done, but my point is that the strength of the Government response is that it has been comprehensive. It has used the power of Government and it has not necessarily taken a one-size-fits-all approach. I am worried—we see this in the evidence that has been brought forward—about the one-size-fits-all approach.

[Kevin Hollinrake]

I speak as a business person as well as a Member of Parliament. In my view, the Chancellor made the job retention scheme very generous, continuing it a lot longer than many thought it would; and rather than have a sector-based scheme to help some people and not others, he has tried to help all employers and make it flexible for all the different categories of employer.

[Edward Miliband]

I do not disagree with the hon. Gentleman that it is important that we have had the furlough, but I disagree that it should be cut off at the end of October, because I really worry about the economic impact. We have 2.8 million people already claiming unemployment-related benefits, and I worry about the implications for these other industries.

The tragedy is that the Government have spent £22 billion on the furlough, but I fear that we will throw away some of that investment  by not recognising that specific sectors face specific challenges. I urge the Business Secretary —he knows this, as he talks to the same people that I do—to use all the powers of his office to make representations to the Chancellor to find a way of fixing that, so that we have a sector-specific approach to the furlough, including an extension beyond October.

Just as I do not believe that the furlough should be abruptly ended, I believe that there are issues of access to loan finance. As I have said, the bounce back loans scheme has been successful at getting money out of the door, but the same cannot be said of the other small business loan scheme, the coronavirus business interruption loan scheme. In the case of CBILS, only half of all applications have been approved, and the supposed freeing up of the scheme as a result of bounce back loans being made available is yet to materialise. We still do not know why 48,000 out of 98,000 CBILS loans are stuck in a holding pattern, and we do not know how many have been rejected and how many are still in the queue. One of the things we are asking for in the Bill is for the Government to publish data on the true number of rejections and the total number of inquiries.

The problem is not just with the small loan scheme. We have seen a wave of job losses in manufacturing, from Rolls-Royce to McLaren to Jaguar Land Rover. Make UK is predicting that as many as 170,000 jobs could be lost this year in the manufacturing sector alone. Any talk of levelling up will come to nought if we lose those jobs—I am sure that sentiment is shared across the House—and I urge the Secretary of State to look at the international comparisons of France and Germany, which have protected and supported strategic sectors of the economy, such as steel, aerospace and automotive, in a number of different ways. That is why our amendment to the Bill calls on the Government also to publish the true number of rejections in respect of the larger loan scheme, the coronavirus large business interruption loan scheme, and explain why 400 larger businesses have not been able to access support through the scheme. Again, we do not know whether they are stuck in a holding pattern and still waiting in the queue or have just been rejected. These sectors are calling for tailored Government support to help them through the crisis, but it has not been forthcoming. The big point is that, from hospitality to leisure to manufacturing, this is a general recession, but it was also much more acute in specific sectors, and the Government need to recognise this far more in their response.

If one part of the Government’s strategy is about shielding sectors of our economy from the sectoral recession, the other part must be about job creation and employment. We are to have a speech tomorrow from the Prime Minister. It is a shame that we do not have a Budget; I do not really understand why we do not have a Budget in what is potentially the worst recession in 300 years. If now is not the time for a Budget, I do not know when is the time for a Budget, but there is a speech tomorrow and big promises are being made about it.

The Bill rightly talks about what can be done in the construction sector. The way to help the construction sector is not just to tweak the operational hours, although that is important, but also to deliver on some of the promises the Government have made. Again, I think this view can be shared across the House; I do not often quote the Conservative manifesto approvingly—[Interruption.] —or at least not enough, but it promised £9.2 billion for energy efficiency in public and private buildings. Conservative Members all stood on that manifesto and I am sure that they support it.

We know how behind the Government are on building retrofits. The Committee on Climate Change recently said that there has been “negligible progress since 2015” and that the challenge of retrofit and renovation has gone “largely unaddressed.” We know that investing in retrofit is the ultimate win-win. This is the ideal opportunity —it would help the construction sector, not just in relation to operational hours, and could create tens of thousands of jobs—but today there are reports that it is being blocked by none other than Dominic Cummings. Apparently, he is uninterested and thinks it is “boring old housing insulation”. The Secretary of State and I have a good relationship, and I am happy to give way to him so that he can say that the £9 billion is going to happen. We need the £9 billion, so I am happy to give way. He has overruled Dominic Cummings on Sunday trading; now is the time to overrule him on this.

Let us also bring forward the £12 billion of social housing spending that has been promised. All these things are important, and they are also part of job creation. I think the idea that we need a green recovery is shared throughout the House, as least at the level of principle. Some people—assiduous readers—will have read over the weekend the Chancellor of the Duchy of Lancaster’s rather long speech, which mentioned Franklin Roosevelt 17 times. [Interruption.] I see Members nodding. Let me tell the House about Roosevelt: he put 3 million people back to work in the Civilian Conservation Corps. We need that kind of ambition on retrofit; on manufacturing low-carbon engines; on adapting our towns and cities to walking and cycling; on creating green spaces; and on reforesting and rewilding. We need what I call a zero-carbon army as part of a youth jobs fund.

We should see all these things as part of the green new deal because—this is the point—we face an unemployment emergency in this country. We should be under no illusions: a million young people are forecast to be out of work this year. We need a scale of action that matches that. That is my point. The Government measures we have supported over the past few months have recognised the power of active government in a crisis like this. My appeal to the Government is not to shrink from that now, because we are just at the beginning.

To conclude, we welcome the Bill as a step to help the hospitality and construction industry to reopen, but it is not nearly enough. The Government have shown that they are willing to take action, but we face the deepest and sharpest recession, possibly for hundreds of years, and Government power has to be continued to be used. The decisions taken by the Government in the coming weeks will determine how many jobs are lost and how many businesses survive. The commitment to do whatever it takes cannot be a hollow promise. We are calling for an extension to the furlough for specific sectors; an urgent job-creation programme with a green recovery at its heart; and real action on infrastructure, not just words. I urge the Government not to step back when our economy, our businesses and our workers desperately need support.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak after my hon. Friend the Member for Arundel and South Downs (Andrew Griffith), and an even greater pleasure to speak after my hon. Friends the Members for South Ribble (Katherine Fletcher) and for Sedgefield (Paul Howell), who made wonderful maiden speeches. It is great to hear those regional voices. They are from the north and for the north, and they will add to the compelling case to rebalance this country by further investment in the north. It is great to hear them make that case.

I will focus most of my comments on clause 12, but I welcome all measures in the Bill, particularly the aid to the hospitality sector. I have some fine hostelries in my constituency, including, I have to say, the world’s best restaurant, as identified by TripAdvisor—the Black Swan at Oldstead. It is a wonderful place, about four miles from my house, and is run by celebrity chef Tommy Banks, a local person from a local family. It has a wonderful back story. There are many, many good restaurants through my patch, and they will get lots of support through the Bill.

Clause 12 talks about bounce back loans, which have been a huge success of the Government’s and an excellent scheme that many businesses have taken advantage of; I think about a million businesses have secured a bounce back loan. The scheme gets money out the door as quickly as possible to businesses in need. It is fair to say that because of the length and depth of this crisis, not every business will get through this recession. This is the third recession that I have been involved in with my business, and it is no doubt the most difficult.

It is absolutely right that we have suspended the provisions of the Consumer Credit Act to get that money out the door quickly, so that lenders did not have the responsibility of ensuring that businesses were creditworthy for the amounts of money they were taking. The worry is what happens down the line. I am the co-chair of the all-party group on fair business banking, which has spent much of the last decade trying to fight for justice for lots of businesses that were badly treated in 2008 and post 2008. We desperately want to make sure that that does not happen again.

It was great to hear the Secretary of State confirm in his opening remarks that although the Consumer Credit Act provisions have been suspended in terms of credit worthiness, they have not been suspended in terms of collection, which should mean that lenders show forbearance if things go wrong. Inevitably, some businesses will need help to get through this, and, sadly, some businesses will simply fail, but we have to ensure that those businesses are treated fairly through the process. For our larger banks, which are regulated firms, there is now the senior managers regime, which has a requirement to treat customers fairly through the process and a requirement to stick to the Lending Standards Board standards of lending practice for business customers. That is good, because there are checks and balances that we can apply to the bigger banks.

I sound a note of caution, though. Quite a few lenders are distributing loans through this scheme that are not regulated firms, so they do not come under that regime. Additionally, I believe that some of them are not even accountable to the Financial Ombudsman Service, so if there is a dispute there is not a means of alternative dispute resolution. We have to ensure that the message goes out loud and clear to lenders that have distributed money through these schemes that they must treat customers fairly through that process if things go wrong and ensure that any restructuring gives that business every chance of staying in business and getting through this crisis.

The loan scheme has been a huge success. One of the big successes in the SME lending market over the last few years has been the emergence of FinTech sector alternative lenders, which is breaking the stranglehold of the big four banks. Some 80% of SME lending is controlled by the big four banks, and we want to see much more choice for SMEs in their borrowing decisions. The British Business Bank has authorised about 80 lenders for the CBIL scheme and about 20 lenders for the bounce back loan scheme. The difficulty is that it is not just about getting authorisation; it is also about getting access to funds. The big banks, being deposit takers, get access to something called the term funding scheme. They can borrow money from the Bank of England at 0.1%, so if they are lending money at 2.5%, 3% or 4% through the CBIL scheme, that still makes commercial sense, and they have access to moneys.

Non-bank lenders—FinTech companies such as Funding Circle, Tide and iwoca—and lots of lenders in the asset finance space do not get access to the term funding scheme. They are relying on borrowing from their normal sources—wholesale markets—and they cannot borrow as cheaply. The Government loan guarantee also specifically excludes situations where money is being borrowed from third parties. That puts these lenders in a very difficult situation. Tide had secured £500 million to distribute to UK businesses through an EU wholesale funder, but it could not provide that money because of the lack of guarantee for that lending. The Treasury is aware of that, and we need to deal with it, to ensure that the choice of finance provision is as wide as possible for our SMEs. The other way to deal with this is for the banks that can access the term funding scheme to simply on-lend to non-bank lenders, but that is not working currently. This is a work in progress, and we need to deal with it.

As a number of Members have said, bounce back loans are relatively easy to get, whereas CBILs are much more difficult to get. It is possible to move from one to the other—a company can get a bounce back loan quickly and then upgrade to a CBIL of a higher amount, to pay off the original loan. That is right and proper, but lots of businesses are not managing to get CBILs because the criteria are stricter. One reason behind that is that there are restrictions on state aid, one of which is that undertakings in difficulty cannot be supported through those schemes at the moment. The EU has said that it will drop that requirement, which is good—it is an EU requirement, and we are still bound by that currently—but we need to implement that quickly, so that more businesses can get access to the CBIL scheme and borrow as they need more money. That aside, this is an excellent Bill. I will be supporting it if we go through the Division Lobbies, and I very much welcome it.

Oral Answers to Questions

Kevin Hollinrake Excerpts

Tuesday 16th June 2020 Commons Chamber

[Alok Sharma]

We appreciate that announcements about redundancies for British Airways staff have been incredibly distressing for the employees and their families. At the end of the day, the use of the Government’s job retention schemes is preferable to making redundancies. That is why we made them available. What I would say in this case is that it is a commercial decision. We expect British Airways and, indeed, all employers to treat employees fairly and in the spirit of partnership.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my declaration in the Register of Members’ Financial Interests. It is right that the Government are requiring landlords to show forbearance to commercial tenants, but that is shifting some of the burden from the tenants to the landlords, many of whom are small and medium-sized enterprises, yet the banks are not providing a full payment holiday as they are for residential and buy-to-let. It is simply a capital repayment holiday, which is a small part of the payment. Will my right hon. Friend see what he can do about that?

[Alok Sharma]

My hon. Friend, as ever, raises an important issue. It is why both the CBILS and the bounce-back loans have a 12-month period during which interest is paid on behalf of the business. I would expect lenders to apply similar forbearance where needed in the case of existing commercial loans.

Corporate Insolvency and Governance Bill

Kevin Hollinrake Excerpts

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

[Alok Sharma]

When we first launched CBILS there were a lot of concerns about how quickly the process was moving. I have been talking to banks individually and to senior managers in the banks, and I think that we are beginning to see movement. CBILS has had over 40,000 loans out of the door, and over 450,000 bounce-back loans have been made. If there are specific banks about which the hon. Gentleman has concerns—he, like all colleagues, is concerned about retaining employment in his constituency—I would be happy to take up those issues with him individually.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Because of the success of bounce-back loans—it is a much easier process to get a bounce-back loan than a CBILS loan—lots of businesses that need more than £50,000 have gone for a bounce-back loan as an interim step, but are restricted from taking a CBILS loan, as they can only have one or the other. Would my right hon. Friend consider allowing businesses to apply for a CBILS loan for a larger amount, subject to necessary lending criteria, then paying off the bounce-back loan so that they can get access to the finance that they need?

[Alok Sharma]

My hon. Friend makes an incredibly important point. I am sure that the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), will correct me if I am wrong, but my understanding is that it is possible to transfer loans between the bounce-back scheme and CBILS. I am happy to discuss that with my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who is absolutely right—people cannot have one of each, so to speak, but I think that it is possible to make a transfer.

The measures set out in the Bill have been welcomed across the board by business representatives’ organisations such as the Federation of Small Businesses, the Institute of Directors, the CBI, the British Chambers of Commerce, R3—the insolvency and restructuring professionals trade association—and the Trades Union Congress. Some of the measures will take retrospective effect to provide as much relief to businesses as possible. To ensure that is the case, we have announced the dates from which the measures will begin.



Let me turn to corporate restructurings, and the package of permanent corporate restructuring measures, which have previously been consulted on. As colleagues know, they were consulted on in 2016, and then formed part of a wider consultation on corporate governance and insolvency published in 2018, so they have been consulted on in some detail. They will have immediate effect in helping companies get through the covid-19 emergency.

A number of time-limited provisions are there to cater for the immediate economic impact of the covid-19 pandemic. They have been added to the package and will be in place for a month after Royal Assent.

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[Alok Sharma]

My hon. Friend is of course right. By the way, I am delighted that he is back in the House, after a short absence. He brings a huge amount of experience in this area, as a result of his work in the private sector. The permanent measures have already been consulted upon, and they enjoy broad support. The temporary measures are of course temporary, and if we were to look to extend any of them, we would have to do so by way of regulation—we would have to come to the House with statutory instruments, and there would be an opportunity, if colleagues in the House felt it was not right to extend them, for them to voice their concerns. So I do think we have managed to get the balance right in this case. We want to ensure that the measures are put in place as quickly as possible, so that we are able to provide support to businesses in difficulty right now. In all the discussions that we have had with the right hon. Member for Doncaster North and his colleagues, we have always had a really constructive approach; I hope that is exactly what we will have today as well.

[Kevin Hollinrake]

I speak as a co-chair of the all-party group on fair business banking, has dealt with a lot of problems in how banks treat SMEs, facilitated by insolvency practitioners. To eliminate those conflicts of interest, the Secretary of State’s Department has committed to bringing forward measures to provide that the conduct of insolvency practitioners is overseen by a single regulator, rather than by recognised professional bodies. Can he commit to bringing forward those measures in the not-too-distant future, so that we can try to eliminate those conflicts of interest?

[Alok Sharma]

My hon. Friend the Under-Secretary of State will elaborate on some of the points that my hon. Friend raised. I would simply say that in July 2019, the Government issued a call for evidence on the insolvency regulatory framework, to determine whether any changes needed to be made. That included questions on whether there should be a single regulator. We expect to publish the Government response to the call for evidence later this year. Perhaps my hon. Friend the Under-Secretary will elaborate later.

Returning to the Bill, the package of measures has three elements. The first is a moratorium. That will give a company that is threatened with insolvency temporary respite from its creditors and a chance to arrange refinancing or a rescue. The moratorium will be for an initial period of 20 days, which can then be extended. There will be a time-limited easing of the eligibility criteria for a company to enter into a moratorium, to make it more accessible during the covid-19 response period.

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[Alok Sharma]

It is intended to apply to all suppliers—I am sure I will be corrected if I am wrong on that. As my hon. Friend has also been keen to point out, although this measure is not restricted to commercial landlords, some landlords will have particular concerns, and I can reassure him that the Government will monitor the impact of the measure and are asking lenders and investors to consider how debt obligations can be met in a way that does not put unnecessary pressure on landlords.

[Kevin Hollinrake]

In respect of commercial loans, currently the banks, when showing forbearance, are providing capital repayment holidays but only on the capital element of the repayment. In respect of residential mortgages and loans, they are giving complete repayment holidays. The monthly capital repayment is a small element of the overall payment. The banks could be much more helpful to landlords by giving a complete holiday across the whole repayment for a period of time while showing forbearance to their tenants.

[Alok Sharma]

Colleagues in the banking sector will I am sure be watching this debate and listening in, and they will have heard what my hon. Friend has said. I would be happy to have a discussion with him after this debate if there are particular points that he wants to raise or if he wants to talk about particular organisations.

The second temporary measure is the suspension of the wrongful trading provisions. This will be retrospective to 1 March and will be in place until one month after Royal Assent, and again it can be extended if that is deemed necessary. Hon. Members will know that wrongful trading is an important deterrent against company directors continuing to trade when the company is insolvent and when doing so increases the losses to creditors. Directors can be made personally liable as a result. However, during this difficult period, many otherwise viable companies may become technically insolvent, particularly if they have been severely affected by a drop in demand caused by covid-19. This measure gives company directors the confidence to use their best efforts to continue trading without the threat of personal liability, should the company ultimately go into insolvency. Since the measure was announced in March, we have received much support for it from stakeholders. The Institute of Directors has welcomed it, saying that it

“will help to avert entirely preventable corporate collapses.”

The Bill also contains the necessary time-limited powers to extend these temporary provisions, should that prove necessary.

The Bill will also allow the Government to make other temporary amendments to insolvency law or the new restructuring plan to deal with the effects of covid-19, where needed. The power to amend corporate insolvency or governance legislation will allow the insolvency and business rescue regime to react quickly to the challenges we face as a result of the impact of covid-19, and that power will expire on 30 April 2021. However, due to the potential unforeseen circumstances relating to covid-19, the expiry date of this power can be extended if it is deemed necessary. If an extension is sought, the House will of course have an opportunity to scrutinise it.

The next group of temporary measures deals with meetings and company filings. These measures enable companies and other bodies, including mutual societies and charitable incorporated organisations, to hold AGMs and other meetings in a safe way, while respecting social distancing rules.

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[Edward Miliband]

I agree with the hon. Gentleman’s intervention. I once used the word predatory in relation to companies and it was rather controversial, but I think the consensus may have changed. [Interruption.] Government Members are saying it has not; it was worth a try. The hon. Gentleman makes a really important substantive point on which I think Members from all parties can agree, and it goes to the width and breadth of this provision: we have to make sure that companies cannot use it as a way to take their employees for a ride. I know from my conversations with the Secretary of State and the Minister that the intention to make sure that that does not happen is shared throughout the House, but we have to give expression to it in the Bill, and I hope the Government will indeed do so.

Let me turn to some things that are not in the Bill—

[Kevin Hollinrake]

The right hon. Gentleman touched on his amendment that would ring-fence 30% of assets for unsecured creditors; is he not concerned that if we did that, people who are willing to extend finance to businesses on a secured basis may be less willing to lend?

[Edward Miliband]

I believe I am right in saying that the hon. Gentleman knows a lot about this, and I congratulate him for his work on the all-party group dealing with the whole range of these issues, but I am talking about the situation after secured creditors and others have been dealt with. There is currently a provision for 20%, but up to a limit of £800,000. Our amendment seeks to make that 30%, and to raise the proportion, but remove the limit. We must ensure that we do all we can for employees and small businesses—my hon. Friend the Member for Manchester Central will correct me if I have got those figures wrong, but I think I am broadly right.

Two sets of issues are not in the Bill, although we would have liked them to have been included, as I believe they are missed opportunities. First, in 2018 the Government consulted on a set of corporate governance safeguards in the wake of the scandal at Carillion, and indeed at Thomas Cook, which came after that. I understand that the Bill relates to the immediacy of the coronavirus crisis, but it would have been better if the Government had acted on those vital corporate governance issues in the Bill, and we would have supported them in doing so. Given that this crisis makes corporate distress more likely, it is strange that the Government have not chosen to introduce such measures. The risk is that we will get more Carillions and Thomas Cooks, with all the consequences of that for employees.

In 2018 the Government were committed to greater accountability of directors in group companies, legislation to enhance powers for insolvency practitioners, and further raising standards by ensuring an explanation about the affordability of dividend payments. Labour supports all those measures—indeed, we have tabled amendments to insert them into the Bill—and we do not think they cut across the need to protect businesses through the coronavirus crisis. Will the Government explain what plans there are for those improvements to corporate governance? I understand that the Bill must go through at speed, but it would have been better if it contained those measures.

Secondly, like the hon. Member for North East Bedfordshire, I wish to mention late payments to small businesses, and the important role of the Small Business Commissioner. If larger companies do not make good on their payments to small businesses, that could be the thing that pushes them over the edge. We believe that the Bill could be used to strengthen the powers of the Small Business Commissioner to help businesses that are struggling with cashflow and liquidity, and such a measure would have improved the Bill.

As I have said, we want to facilitate the passage of the Bill as it is important to protect businesses up and down the country, and we hope it can be improved in the ways I have set out. Having dealt with its specific provisions, however, let me deal with the wider context. The measures in the Bill can play a part in preventing insolvencies, but as the House knows, the number of businesses that go out of business depends on the external environment and on what the Government do in response to that. I welcome the action taken by the Government so far. There are lots of measures that we support, but we also believe there are gaps and other areas where the Government need to act.

I wish briefly to outline four sets of issues that go directly to the question of insolvency. First, I fear that the support system introduced by the Government is still not working sufficiently for our SMEs, and it risks worsening the insolvency problem. We called for the 100% underwriting of loans six weeks ago for smaller firms, and we welcomed the bounce back loan. Clearly, however—the hon. Member for Thirsk and Malton (Kevin Hollinrake) made this point—those loans do not do enough for SMEs that need more than £50,000 of liquidity.

The bounce back loan was intended to improve the working of the CBIL scheme, but I am afraid that has not happened. I have the figures for what happened to the CBIL scheme in the past few weeks—I am sure the Secretary of State is as in touch with them as I am—and the number of facilities approved each week is going down, and the gap between the total numbers of applications and approvals is widening. Somebody contacted me the other day who will not be counted in those figures. He waited two months to be told by his high street bank that he was not eligible and that there was no point in him applying for a loan under the CBIL scheme. He will not be counted in those statistics, and hon. Members across the House will have heard of similar experiences.

I know that the Secretary of State is dealing with a range of issues to do with companies in distress. As I understand it, the idea was to get rid of the forward credit check for the CBIL scheme, but that does not seem to be doing the business and we need to understand why. I personally would be open to having 100% underwriting slightly higher up the scale, but we need a solution.

Secondly, beyond SMEs, I am deeply concerned about particular sectors, with manufacturing top of the list. We have seen thousands of redundancies at Rolls-Royce, real problems in the aerospace sector, issues in the car industry and massive issues facing steel. In France, steel received support within a fortnight of lockdown, whereas here our companies are still waiting. We read stories in the Financial Times about public equity stakes being considered—the so-called “Project Birch. It sounds like an interesting idea, but I say to the Secretary of State that this is taking too long, both for larger companies and for the SMEs in the supply chain.

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[Stephen Hammond (Wimbledon) (Con)]

It is a great pleasure to follow the shadow Secretary of State. During this crisis, many of us have experienced groundhog day, and we have certainly just experienced it now; looking at the right hon. Gentleman at the Dispatch Box took me back to a period before 2015.

I warmly welcome the Bill. As the shadow Secretary of State said, the Secretary of State is right to set this legislation in the context of an extraordinarily impressive set of business measures—regardless of any tinkering around the edges that is needed—that the Government have put in place to tackle the covid crisis. We are right to recognise that in normal circumstances the Bill probably would have been split into two phases. Some of the changes that it contains are permanent, and have been debated and consulted on certainly since 2016, but maybe earlier. Other changes are rightly temporary, as they are urgent measures to address the challenges faced by many in the corporate sector who would not necessarily normally be experiencing such problems with insolvency. The flexibility is therefore clearly right.

As I have said, the Bill sets out a number of permanent and temporary concepts and provisions. I will spend a little bit of time reflecting on one or two of the permanent ones, before finishing with a particular temporary issue that affects my constituency. The Bill outlines the concept of moratorium, and it is quite clear what that is. It gives the challenged business a 20-day opportunity to consider a rescue plan. That can be extended for a further 20 days if the directors ask for it, and can, as I understand it, be extended for a whole year should the creditor or the court consent. The purpose of that is clearly obvious, and all that makes a huge amount of sense. During that period the directors retain control of the company and no legal action can be taken against it without a court decision.

However, the process is overseen by a monitor, a point on which I want to raise a few issues that I hope my Front-Bench colleagues will consider or at least address later. First, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) has already raised with the Secretary of State the potential conflict of interest to do with whether the monitor is sanctioned by an independent regulatory body or is just a normal insolvency practitioner that could be taking work from one group of companies with one hand and, with the other, working against that in looking at insolvency. I hope my right hon. Friends on the Front Bench will carefully consider the point about regulation and bring something back quickly.

The second point concerns the criteria that the monitor has to use for the moratorium, the time it could take to assess whether the definition is met, and whether the criteria are too tightly drawn or could be met more quickly if they were more easily drawn. I recognise the need for the monitor to make a suitable statement about the moratorium. The current threshold is whether

“in the…monitor’s view, it is likely that a moratorium…would result in the rescue of the company”.

However, the monitor has a relatively short period in which to make that assessment. In normal circumstances there would be a huge amount of due diligence done on trading, future trading, inspection of management accounts, general financial arrangements and debt arrangements. Not only does that normally take longer than 20 days; it is potentially a costly process to undertake. Particularly given the spirit of what we are trying to do in the Bill, will Ministers consider whether it might be more effective to look at the definition of the criteria and approve a slightly lower threshold for what constitutes a company that could be rescued? That might be as simple as saying that “it is likely” that the moratorium could result in the rescue of the company, as opposed to saying that “it must”. That would be of considerable help in rescuing companies.

[Kevin Hollinrake]

I agree with my hon. Friend and support his point. I think the provision to which he is referring is proposed new section A6(1)(e) in the Insolvency Act 1986, which contains the wording:

“in the…monitor’s view, it is likely that a moratorium for the company would result in the rescue of the company as a going concern.”

Simply changing “would” to “could” would resolve the issues.

[Stephen Hammond]

My hon. Friend drafts the amendment for me. I absolutely agree, and I hope those on the Front Bench will too. That would seriously help with what we are trying to do at this stage.

The permanent measures are designed to allow as many companies as possible to be rescued and to continue trading, but these companies will be creditors of others. In that regard, we must also look at the Bill’s potentially perverse impacts. I have a constituency case, Ms Ravindran, a constituent who runs a design business. It is a small company that is owed £36,000 by an individual, and at least 10 other creditors are owed up to £200,000 in total by that particular individual and company. She is rightly concerned that the Bill will give undue protection to one rather than the other. The issue is that it will be clear to those intending to use the provisions of the Bill to protect themselves, and to enable themselves to trade through and be rescued or restructured, that they should not be undertaking activities. I would like the Minister’s reassurance that the companies seeking to be rescued will not be able to take early advantage of things such as directors loans to take money out of a business that is then likely to apply for a moratorium and thereby impact others who are debtors of that company.

There is also a potential problem that I hope the Minister will be able to reassure me about later. Under the current drafting, ongoing trading costs and scheduled debt repayments that occur during the moratorium do get paid. Those that do not get paid become a super-priority, but nothing prior to that gets paid. The concern is that the potential suppliers to a company in the moratorium period may try to game that period. They may well see a company in difficulty and decide that it is easier to put the payments due to them in the moratorium period, so that they get super priority, not in the normal supply. I suggest to the Minister that the way around that is to have a look again at whether there could be some tweaking of the definition and to consider that the Bill be amended so that only the interest and charges incurred during the moratorium, rather than the scheduled debt repayment, becomes the super priority. That would take away the incentive to game the system.

There is clearly an understanding about why changes are proposed in the Bill to the termination of supply contracts. We all know that currently a supplier could use contractual terms to cease supply. Therefore, ensuring that a company that has entered into a moratorium or a restructuring procedure, as defined by the Bill, is not forced to rely on the usual contractual terms is clearly right, but there are some other circumstances. Again, have we thought clearly enough about the protection to the supplier? My right hon. Friend the Secretary of State rightly talked about some of the protections that are there, but it is clear that the non-payment of those debts to the supplier could put that supplier into insolvency as well, because it may not be able to get the protection from the court fast enough.

I think that the definition of what constitutes hardship to the small or medium-sized supplier or the company in the rescue package might clearly present some—I was going to use the phrase “wriggle room”—legal possibilities that should not be contemplated. Beyond the definition of hardship, should there not at least be a legal obligation in the restructuring plan that requires a supplier’s status to be given legal protection? I think that is quite important, and it inevitably means some reconsideration of the named cross-class clampdown proposals as well.

A lot has been said about the supplier and making sure that it continues to supply, and, hopefully, the company getting those supplies is then rescued. Again, however, in some circumstances not every company entering the restructuring procedures will actually be rescued. It simply will not happen. What happens then? As I understand it, the supplier is given the super priority status, but—and this leads into another point I want to make in a moment—will Her Majesty’s Revenue and Customs, or indeed other financial providers, want to be given super super priority status over and above that of the supplier? The provisions to ensure the continuity of supply are welcome, but I ask my hon. Friend on the Front Bench to reflect on whether he can reassure us about the protections to the suppliers.

That leads directly to my next point, which is that the Bill reintroduces the concept of making HMRC a preferential creditor. I am very concerned that all the good work that my right hon. Friend the Secretary of State is doing in this Bill could be unwound by doing that. It could have a really negative impact on business rescuing and lending across the UK.

Do not take my word for it: R3, the industry insolvency practitioner, directly makes that point. It goes against a policy, which has encouraged lending to small businesses, that has been in place for some 18 years.

[Kevin Hollinrake]

That is a very important point. I think the legislation is covered under clause 95 of the Finance Bill, which makes HMRC a preferred creditor once again. The real concern is not just that lenders will be less willing to lend on that basis—that is a concern because you go above lenders with a floating charge—but that HMRC may be less willing to show forbearance to businesses that are seeking protection and time to get through these problems.

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[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I thank the Secretary of State for his customary and welcome thorough exposition of the Bill. I pass on my thanks, too, to the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully) for his engagement. We have been working constructively to try to ensure that we are, as the Secretary of State said, supporting businesses with the measures we are taking. It is very important to remember that people and businesses should be the laser focus of the work we are doing throughout this crisis.

It is important to consider the Bill and support it through today in a constructive manner. That is what the SNP intends to do. The Bill, although in itself a welcome step in the current crisis, should not be seen in isolation. Some very good points were made by the right hon. Member for Doncaster North (Edward Miliband) and the hon. Member for Wimbledon (Stephen Hammond). Some interventions were also very telling.

        As I have said, this Bill should not be seen in isolation. I want to touch on the impact of the Finance Bill, current business conditions and, of course, business and public confidence in the steps that need to be taken. This Bill helps with some provisions and should allow firms to apply their best endeavours to continue to trade during this pandemic emergency. As I have said, we support the Bill and the amendments to make that as easy as possible for people. None the less, as I have alluded to, the problems for the Bill lie in three other areas. Another piece of legislation—the Finance Bill—actually undermines, not just risks, these provisions and sets the conditions that could push companies to the brink. Then there are the plans to grant HMRC preferential status in the insolvency procedures, and the measures to make directors personally liable for companies’ tax liabilities. Together, these represent a significant challenge to businesses across the nations of the UK in trying to access working capital finance. While noting that it is difficult to accurately model the policy’s impact on business lending, UK Finance estimates that the policy could hit lending by well over £1 billion per annum, and possibly—because the modelling is difficult—much more than that.

        As well as having a detrimental impact on business and economic growth, restricted lending will make it harder to rescue businesses, increasing the knock-on effect of insolvency on other businesses and people. Business investment returns to creditors and confidence in the UK corporate framework all stand to be damaged as a result. Although the tax abuse using the company insolvencies measure can be mitigated through accurate legislative drafting and detailed guidance from HMRC, the policy to grant HMRC preferential creditor status should be withdrawn entirely, as its introduction may prove a hammer blow to businesses at exactly the time that the Government profess to be seeking to level up and support them as they adapt to the impact of covid-19.

        The second area of difficulty involves the economic inequities left by the gaps for businesses and Government support schemes during the covid-19 crisis. If the changes for this Bill can be pushed through sensibly in record time, there is no reason why the same urgency cannot be applied to filling the gaps that people and businesses are experiencing. We have heard today that there are substantial problems that not only exist now, with people struggling and unable to access support, but that are looming larger because of the decisions that have been made— over quarantine, for example. As I said during the statement earlier, this is not about whether quarantine is a good or bad device; it is about the fact that it will impact disproportionately on businesses involved in tourism and hospitality. That has to be addressed as we go forward.

        The issues are very clear. Firms are already finding it difficult to access cash, not least because of the UK Government’s flawed coronavirus business interruption loan scheme. I say this with the understanding that the schemes had the best of intentions—to support businesses —but, as we have already heard, they are just not working for everyone. I will not repeat the details because we have heard about that in the Chamber today. There are also big holes in the job retention scheme and the support programme for the self-employed. All of those things are critical to supporting businesses, and all of those things undermine what we are trying to do with this Bill by working collectively to ensure that these measures are taken forward as effectively as possible.

        I agree entirely that the Treasury should extend its 100% bounce-back scheme. That guarantee should cover the entire CBIL scheme. The fact that only a tiny fraction of businesses have received support underlines the need for the UK Government to introduce grants, not just loans. The UK Government should review and relax the lending criteria and speed up the process so that businesses can get vital access to cash.

[Kevin Hollinrake]

I think it is a bit harsh to say that the schemes are not working at all. About £30 billion has been lent under both those schemes—about £9 billion under the CBILS and £21 billion under bounce-back loans. The CBILS issue seems to be that, although the forward-looking viability test has been removed, banks are still assessing whether businesses can afford to make the loan repayments over that period. If we remove the requirement for banks to do that, a lot more money would go out the door under the CBILS.

[Drew Hendry]

I agree and I am willing to concede that some people have indeed been helped. I said that the scheme was introduced with the best of intentions, but the fact is that there are far too many people running businesses who have tried to access this scheme but could not do so. We have heard examples, and I could give dozens more from people who have contacted me. I guarantee that just about everybody—if not everybody—in the Chamber has had similar contact from people who have been unable to access the scheme. The fact is that it is not working as it was intended to. It is not getting through to the people who really need it, notwithstanding those who have been able to access it.

My party, the Scottish National party, also backs calls by the Institute of Directors for the Government to use the scheme to provide firms with overdrafts during this crisis. For firms still unable to access finance, it is high time—indeed, it is overdue—for direct grants and/or equity investments to be offered instead.

The final problem is public and business confidence. We are at stage four in the covid crisis at the moment. There has been a relaxation of measures for people to get out and about and do things and for businesses to start up, but that confidence evaporates if we have to go back to the restrictions and businesses are not able to do that. That will pile on the pressure for the businesses that we are trying to assist today.

I was struck by what was said by the hon. Member for Wimbledon—I hope I get this right—about one of the problems being the protection of one thing at the expense of another. That is a really good comment, because overall confidence and compliance for people and businesses will face further threat. All measures that are introduced by a Government who are, unfortunately, defined by double standards are likely to run into difficulties. This UK Government, these measures and those on public health are all being undermined by the failure to deal with the Dominic Cummings saga. No matter how much the Prime Minister bloviates, this matter has not gone away. My inbox and, I am sure, those of many others, were still full this weekend of messages from people looking for that to be addressed. I know that it is not a party thing, because I have seen the tweets and messages from people representing constituencies and parties around the House—they have all had the same messages. This matter—the principle of different rules applying—has not gone away or failed to register. We might take the comment of the hon. Member for Wimbledon and say that the protection of one at the expense of all others applies here. Observance of the rules is critical to the success—[Interruption.]

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[Damian Collins (Folkestone and Hythe) (Con)]

I start by congratulating my hon. Friend the Member for Heywood and Middleton (Chris Clarkson) on an excellent maiden speech. It made me feel slightly nostalgic, because I made my maiden speech—I was trying to work it out— 10 years and one week ago. In addition to that, I made my maiden speech immediately following the hon. Member for North Antrim (Ian Paisley), who has just spoken. The right hon. Member for Doncaster North (Edward Miliband) opened for the Opposition on that occasion as well, so there are a lot of similarities even though we are talking about a different topic today.

I rise to speak in support of the Bill. It has a lot of practical and important measures to support businesses, particularly in my coastal constituency which has many businesses in the hospitality sector. They are particularly badly affected because trade cannot resume as normal. As many Members will know, businesses in the hospitality sector do not necessarily make all their money at an even pace every month throughout the year. They are effectively losing much of the summer season when they would usually seek to raise the revenue that sees them through the rest of the year. Extra financial support at this time is therefore particularly important for businesses in that sector and I welcome it strongly for that reason.

I would like to speak about one sector that is not covered by the provisions in the Bill. I do not believe it is covered by any of the measures that have been put in place so far. It does have rather unique circumstances, but I believe it is a very important sector because of the unique role it plays in our national life—professional football. Professional football clubs are unusual businesses. They have very high turnovers but operate at very small margins. Many people would say that the big clubs in the premier league have a huge amount of money that they spend on players, but most of the income they receive is tied up in the contracts of the players who play for them. They do not necessarily have very much cash.

Clubs in league one and league two are particularly vulnerable because their revenues do not come from broadcasting. Most of the income for big clubs such as Manchester United, Manchester City or Liverpool comes from people around the world watching them play on television. For them to play behind closed doors and receive that broadcasting money gives them the money to succeed. However, for clubs that play in tier 3 and tier 4 in league one and league two, the vast majority of their income comes from playing live in front of spectators. Without that income, they have no revenue. What they have is a series of fixed costs.

The reason professional football clubs have fixed costs is that, unlike almost all other businesses in this country, they cannot restructure their debts and finances by going into administration. They are bound by the laws of their leagues to pay all their football debts in full, including player salaries and transfer fees. Unless they can meet all those costs, they will be expelled from the league. This is an application of a rule that has been the subject of court cases by HMRC and of much debate on matters to do with football club insolvency in this House in my 10 years here. That is a rule called the football creditors rule. It is a rule created by the football leagues for competition reasons to ensure that clubs cannot over-extend themselves, buy better players that they cannot really afford, go into administration to clear their debts and then resume. They have to be consistent in what they can afford through the season, but it does mean that they do not have the option of restructuring their debts. Their obligations and major outgoings are largely going to be the fixed costs of paying players.

There have already been a number of warnings that we will see this summer, because of the financial distress of lots of clubs, the mass release of a large number of players. It has been estimated that up to 1,400 players may be released without being re-signed. We had a small foretaste of that in Scotland last week when Dunfermline Athletic released 17 players.

More troubling over the next few weeks will be the fact that many smaller clubs supplement their income during the summer months when they are not playing through advance sales for the following season. Advance sales of season tickets normally come through in June, which is also when advertisers will make bookings, as will people taking out matchday hospitality packages. That money comes in in June and July and keeps the clubs going while they are not playing, but it is not going to come through now because these would be advance sales for a season that has no start date and no one knows how long it will be before things go back to anything like normal. That affects the whole hospitality sector. As I said, it is less of a problem for those in the premier league, because as long as they are playing on television, although there will be some loss of income because the package is not quite the same as it would normally be, they will still be getting their money in that way, whereas other clubs will not. There is a severe danger that some clubs will simply run out of cash in the next weeks.

[Kevin Hollinrake]

My hon. Friend is making an important point. Is he aware that some banks have a blanket restriction on lending money to football clubs and are applying that restriction to CBILS as well, so even though the Government support is not supposed to have a sector-based restriction, this is being applied to football clubs?

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak after my hon. Friend the Member for Strangford (Jim Shannon); we have spoken in many debates on business issues before and he is a huge champion of business. It was also a pleasure to listen to the maiden speech of my new colleague, my hon. Friend the Member for Heywood and Middleton (Chris Clarkson). It is great to have another Conservative northern Member of Parliament to champion the cause of the northern powerhouse. He neglected to mention Yorkshire, and particularly north Yorkshire, in his list of areas in the north that will contribute to the recovery, but I will have a word later. It was a fantastic speech.

I draw the House’s attention—of course, in all these types of debates—to my entry in the Register of Members’ Financial Interests. I am still involved in business to this day. I am also the chair of the all-party group on fair business banking, which has talked about many of these issues over the last months and years. In my view, the CBILS and BBLS are a huge success, but there are problems, particularly with the CBILS, in terms of making sure that banks do allow money to go out the door based upon the business being a viable business on 1 March. There are still issues about banks assessing the ability of the business to pay the loan back over a period of time. In particular, there are sector-based issues—football clubs being one and house builders being another. Banks seem to be translating from a standard lending policy into a CBILS lending policy, which cannot be right. That was never the intention of the Government scheme.

On the Bill, I am a strong supporter of the measures being brought forward by my right hon. Friend the Secretary of State, particularly on the moratorium and the opportunity to restructure. That has been planned for some time to give businesses breathing space. Irrespective of the covid crisis, at any point in time, many businesses can be salvaged through this process. It has happened in the US for many years—it is known as chapter 11—and it is absolutely the right thing to do.

I will not talk in detail about the Bill, because many others have, but I will talk about some of the things that I think we need, as well as this legislation, that would make a significant difference. There are some outstanding issues that the Minister and the Department are aware of and they have consulted on some of them, particularly about moving from a self-regulation basis for insolvency practitioners to a single, truly independent regulator. There are some very important issues that we have seen over recent years in terms of conflicts of interest that will carry on despite the Bill. The moratorium and the opportunity to restructure will help to some extent, but the conflicts of interest will carry on. This is particularly because most insolvency practitioners who are appointed to carry out work on an insolvent business are appointed by the major creditor, which tends to be the bank. It is a panel appointment by the bank and clearly, people rarely bite the hand that feeds. So if most of the work that the insolvency practitioner—who is supposed to work independently of any individual creditor and in the best interests of all creditors—is getting is from the banks, they are more likely, in our experience, to work in the interests of the bank.

It is even worse than simply the facts of what happens in the insolvency. On many occasions, we are talking about large accountancy practices, such as KPMG, Deloitte, Ernst and Young, who are appointed by the banks prior to insolvency, for example, to carry out a supposedly independent business review—paid for by the business but instructed by the bank. They have been brought in to do an independent business review, which is supposed to give a fair representation of the business, and that accountancy practice then becomes the insolvency practitioner and can earn hundreds of thousands of pounds of fees in the insolvency, which is a clear conflict of interest.

This issue has been brought up for decades in this House. I found two debates in 1999 when this conflict of interest was mentioned. It is something we need to deal with. This has featured in many of the issues we have seen over the last decade or so, particularly around the last crisis, where we had tens of thousands of businesses that were put into administration by the banks—this is a matter of public record—particularly by RBS and Lloyds Banking Group. Tens of thousands of businesses were put into insolvency inappropriately. A fair percentage —around 20%—of those businesses were viable, but there is not one instance of an insolvency practitioner deciding to sue the bank and saying, “Your business has gone into receivership as a result of creditor misconduct.” In other words, the bank is forcing the business into administration. Never has there been a case in which an insolvency practitioner who is supposedly independent and working for all the creditors has said, “There is something wrong. We need to take the bank to task.” There has not been one instance. We have pushed for information, and we have received emails from accountancy practices saying, “We would never sue a bank—we would never litigate—because of the conflict of interest.” There is a huge conflict of interest, and huge sums lie at the heart of this.

We are talking about thousands of businesses in this situation. This is systemic for every bank and almost every insolvency practitioner, but I should like to discuss a particular case, because it reveals the nature of the issue. We are talking about tens of thousands of businesses, and we have to understand that there are tens of thousands of people—individuals—whose life’s work has been taken from them, along with hundreds of thousands of jobs. These are very serious issues.

The case I wish to raise is that of Arthur Holgate and Son. This is not a sub judice issue, and I have obtained consent from the business to discuss it. It is a tangible example of the problems that arise. It was a family-owned business that ran caravan parks and turned over about £2 million. It was a significant business that, like a lot of other businesses, sold a swap that put it in danger, which increased the cost of loan servicing a great deal. That became the matter of a redress scheme, because of the inappropriate sale of complex financial instruments to businesses that were not sophisticated.

When that came to light, with a route for redress, the business approached the scheme and was offered £300,000 in compensation, despite the fact that its losses totalled £1.4 million. Ultimately the business failed and went into administration. It was taken off the owners—it had been in the family for generations—but it was one of the few businesses that we have come across that had the financial wherewithal and tenacity to get this thing through to court. On the courtroom steps, compensation was settled at about £10 million by Barclays bank.

We need to look at the actions of the insolvency practitioner as well as the actions of Barclays bank. Despite the fact that the insolvency practitioner is supposed to work independently, it did not do so. It colluded in bringing about the failure of the business and as a result the distribution of assets from the business effectively went to them and to the banks. Deloitte was the insolvency practitioner. This is not an isolated case: Deloitte was fined this year for its administration of Comet—many Members will remember that—and it was given a £1 million fine for failing to manage a conflict of interest in that case. We need to deal with this, as we are not dealing with it in the legislation.

Deloitte was brought in to undertake an independent business review for the bank to see whether the business was viable and able to get through its financial difficulties. It charged the business £50,000 for that work, which was paid after the business was declared insolvent on a preferred creditor basis, which is against the law.

There are many concerns, but the most disgraceful part of this case was the correspondence between Barclays and Deloitte. Barclays effectively told Deloitte to ignore the directors, although they were running the business and knew it best. In fact, I can quote from one of the emails sent internally in Deloitte, which said: “Be careful of swallowing the Paul Holgate line”—Paul Holgate being one of the directors of the business—“that it’s somebody else’s fault”. He kept saying to them, “It’s not our fault that we are in this position. This is because the bank sold us a swap.” He was right, but Deloitte deliberately did not put that information in the business review and did not even mention the swap at that point in time or when the insolvency happened. Another email sent internally in Deloitte said, “We do not want to appear critical of the bank.” That is because of the conflict of interest, and it cannot be right.

We must put a Chinese wall between consultancy work that a bank requires an accountant to do and that very accountant then being able to do the insolvency work, because there is a clear conflict of interest. In this case, there were fees of £400,000 for Deloitte to carry out the insolvency work. Had it just done the £50,000 report and said, “This business is fine. It’s actually your fault because of the swap. If you settle that problem, the business will carry on trading fine,” Deloitte would have got £50,000, and that would have been it.

[Jerome Mayhew]

My hon. Friend talks very persuasively about this, and I have found myself nodding along to everything he has been saying for the last several minutes, but he keeps on referring to a conflict of interest, when surely what he is talking about is better named corruption.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. Before the hon. Gentleman answers the intervention, although he has not spoken for an inordinately long time—indeed, other Members have spoken for much longer—he has spoken for well over 10 minutes, and I have to ask him to conclude pretty quickly, because it is in the interests of everyone that the Minister is able to answer the debate. Members have asked questions, and we must have time for that.

[Kevin Hollinrake]

Thank you, Madam Deputy Speaker. I will try to move on quickly.

A lot of this information is supplied by the then business owners. Deloitte actually perjured itself in court on many of these issues. All this arises because of the conflict of interest. Deloitte should have sued the bank, but that simply does not happen. This stuff happens because of the unholy alliance of vested financial interest, which we must eliminate.

The moratorium will help tremendously, but we also need to do what the Department has said it is keen to do: move away from self-regulation, which is how the sector is currently regulated. We need to recognise professional bodies and move to a single regulator—an ombudsman. We must put a Chinese wall between the accountancy practices that do the consultancy work and the insolvency practitioner.

We must also give individuals more power. In my view, we should allow the business to challenge the appointment of an insolvency practitioner and the approach of an insolvency practitioner, to effectively recognise creditor misconduct within the insolvency process, and let them take their complaint to a tribunal there and then. In Comet’s case, it was eight years down the line before the situation was resolved. It must happen there and then. We must have an ombudsman supported by a tribunal that can support businesses who feel that the insolvency has been carried out incorrectly.

There is one final thing I would like to say. I completely support the removal of the right of forfeiture from landlords and the suspension of winding-up orders. Some businesses, particularly very big businesses, are abusing that privilege—I would name Boots and WHSmith —by effectively saying to landlords, “We’re not even talking to you.” That is completely inappropriate. Ideally, those measures should come with the condition that a company cannot take dividends if it is benefiting from those measures. With that, I will happily conclude.

Leaving the EU: Workers’ Rights

Kevin Hollinrake Excerpts

Tuesday 29th October 2019 Commons Chamber

[Andrea Leadsom]

I am grateful to the right hon. Lady for raising that very important point. She is right that the EU has discussed the gig economy and enhancing the rights of working parents. It is true that the EU has introduced proposals in the transparent and predictable working conditions directive, but it is not true that those proposals go further than the good work plan. For example, we brought forward a statutory instrument in March this year under which the right to a written statement on day one for every worker will come into force in April 2020, whereas under the EU’s proposals, if it does introduce that directive, it will not take effect until the summer of 2022, so the UK is bringing forward workers’ rights further and faster than the European Union.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The Prime Minister championed the London living wage and a much higher national living wage. Does that not demonstrate his commitment to increased workers’ rights?

[Andrea Leadsom]

My hon. Friend is absolutely right. This Prime Minister has been extremely keen to ensure that all workers get a fair deal. He has presided over the intention to bring the national minimum wage to £10.50 at a greater speed than was previously envisaged. We will bring forward measures to ensure that that can be put into force as soon as we can.