Corporate Insolvency and Governance Bill

Lord Blencathra Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 9th June 2020 Lords Chamber

[Lord Blencathra (Con) [V]]

My Lords, I have never considered my noble friend Lord Dobbs to be vulnerable to anything, but that is another matter.

I am honoured to be the chair of the Delegated Powers and Regulatory Reform Committee and we will consider the Bill tomorrow. Therefore, I cannot comment on what we might conclude but I want to inform the House that we will have a very important report to make on it, which noble Lords will wish to take into account for possible amendments in Committee. We hope to publish our report on Wednesday afternoon, so the noble Lord, Lord Stevenson of Balmacara, might wish to wait to see what we have to say. However, although I cannot say what our committee will decide, I anticipate that we might draw attention to the very large number of Henry VIII provisions—10 in the first 32 pages—and the very wide range of regulatory powers.

Speaking now in a personal capacity, I can say that I support the Bill. It is important that companies that are technically insolvent can get some breathing space to restructure, with the hope and expectation that they can carry on trading and resurrect themselves.

Although I support the need to make urgent legislation, all urgent legislation inevitably has flaws, which this House normally sorts out—if we have the time to do it. This Bill of 233 pages, one of the most complex we have ever seen, was rushed through the other place—all stages: Second Reading, Committee and Third Reading —in four hours, 45 minutes. The Committee stage to consider 47 clauses and 14 schedules took just 45 minutes. Our colleagues up the Corridor scrutinised this Bill at 12 seconds per page—surely a record. I know that we have a bit more time scheduled in this House, and the Bill must get better scrutiny than it did in the other place.

In the Explanatory Notes, the Government’s justification for all the regulation-making powers is that they might have to move at speed and do not want to bother Parliament. However, Parliament has ample time and can move at breakneck speed, as we are doing with this Bill. Emergency legislation is necessary on occasion and justifiable, and it is legitimate in this case, but that does not mean that every change in the future has to be rushed through by regulations, often using the negative procedure, when for major issues an Act of Parliament should be the norm. I agree with the important points made by my noble friend Lord Hodgson.

Finally, I am concerned about the provision in the Bill that a supplier has to continue supplying goods, with possibly no prospect of payment, to a company undergoing this procedure. If the company eventually fails, the supplier who was forced to continue supplying might not get any payment or will be behind a whole list of preferential creditors. We have all had the briefing note from R3, which says that HMRC is now legally the preferential creditor. The Government cannot have it all ways; they cannot compel a supplier to supply goods and then compel him to wait behind HMRC for payment. That is very unfair and, if I were a supplier, I would use the hardship excuse every time to cancel the contract if I was going to be stuck behind HMRC for payment.

Corporate Insolvency and Governance Bill

Lord Blencathra Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 16th June 2020 Lords Chamber

[Baroness Northover (LD)]

I will speak to Amendments 71, 76, and 145, which are in my name and that of my noble friend Lord Fox.

These amendments all derive from the conclusions of the Delegated Powers Committee and relate to the often-unchecked powers the Government are seeking to take in the Bill. I thank that committee for its careful scrutiny of this and other Bills. As the noble Lord, Lord Hodgson, said, its report is devastating. There is clearly huge concern about the powers that the Government are proposing to take in the Bill, and most of the amendments in this group address those points. For example, the noble Lord, Lord Stevenson, by seeking to amend numerous places where the Government are taking powers, is challenging the Minister in each instance to justify that, and we will have to see what case the Minister makes. I also look forward to hearing what the noble Lord, Lord Blencathra, who chairs the Delegated Powers Committee, says.

The Government have argued that they need to act with speed because of the urgency of the coronavirus pandemic. However, many measures here will persist indefinitely, as the noble Lord, Lord Hodgson, made clear. We are proposing three specific changes, recommended by the Delegated Powers Committee. As all noble Lords here will know, although it may be less well known should people outside be following these proceedings, the committee’s particular concern is with so-called Henry VIII powers, named for his supposed preference for legislating by proclamation rather than through Parliament. These powers enable Ministers to amend or repeal provisions in an Act of Parliament using secondary legislation, which is subject to very limited parliamentary scrutiny. These powers thus transfer power from Parliament to the Executive: the Government.

Thus, for example, the Delegated Powers Committee notes that Clause 23 confers extremely wide powers on the Secretary of State:

“The powers include the power to make provision amending, or modifying the effect of, any Act of Parliament ever passed—including the Bill itself.”


That is an astonishing statement. The committee describes this as something that

“might be called a ‘super-Henry VIII power’.”

We therefore propose in Amendment 71 the affirmative procedure, where regulations under Clause 23 amend primary legislation, as recommended by the committee.

Amendment 76 addresses Henry VIII powers in Clause 37. The Delegated Powers Committee does not accept the Government’s argument that they need to act with speed and recommends

“that the affirmative procedure should apply where regulations … amend primary legislation.”

It outlines ways in which speed can be delivered, for example through a “made affirmative” instrument, which could come into force pending approval by both Houses within a specified period of time. Our Amendment 76 delivers the affirmative procedure.

In relation to Amendment 145, the Delegated Powers Committee notes:

“Each of paragraphs 2, 4 and 6 of Schedule 14 confer Henry VIII powers.”


It emphasises that the “made affirmative” procedure could be used and points out that the Government acknowledge this in other instances elsewhere. It recommends

“that the affirmative procedure should apply.”

Our Amendment 145 delivers that.

I am sure that, as ever, the Government will pay close attention to what the Delegated Powers Committee said, especially since these powers cause such disquiet across the House. They are also an especial target of those three notable lawyers, the noble and learned Lords, Lord Hope and Lord Judge, and the noble Lord, Lord Pannick, whose names often seem to represent not the stages of grief but the stages through which Governments proceed when they defend, then amend, such powers. I am sure that the Government will pay close attention to the committee’s report; I trust, therefore, that they will find all three of the amendments I have outlined here acceptable.

[Lord Blencathra (Con) [V]]

My Lords, I will move that Clause 1 do not stand part of the Bill but I have no intention of seeking to delete the whole clause. I use this mechanism to draw attention to the Delegated Powers Committee’s recommendations on the excessive Henry VIII powers in the Bill. I am honoured to chair that committee.

Last Wednesday afternoon, we published our report. We drew the House’s attention to a number of concerns about the use of the delegated powers in the Bill. I am grateful to my noble friend Lord Hodgson, who referred to our report with great approbation in speaking to his amendments in the first group. I am also grateful to the noble Lords and noble Baronesses who high- lighted other parts of our report and some of our recommendations.

In our report, we draw attention to

“New Part A1 of the 1986 Act, inserted by clause 1 of the Bill”.


That clause alone contains 10 Henry VIII powers allowing the Bill to be amended when it becomes an Act. I will not list them today; the noble Baroness who just spoke mentioned three of them in particular. There are also further Henry VIII powers in Clauses 23 and 27 and Schedule 1. As we reported, the powers in proposed new Part A1

“are all designed to be permanent changes to insolvency law. The justifications offered by the Government involve: ensuring that the provision remains ‘fit for purpose’; the need to act quickly; the undesirability of taking up Parliament’s time unnecessarily.”

We say in our report:

“Ensuring that something remains ‘fit for purpose’ means little more than that the Government want to be able to change the provision by regulations if their policy changes. In our view”—


it has always been Parliament’s view—

“the presumption should be that where something needs changing which Parliament has enacted”

in an Act of Parliament,

“Parliament should enact the changes by primary legislation”

in another Act of Parliament

“rather than ministers make the changes by secondary legislation … As for legislating quickly, this is often best avoided”,

as we have seen time and again that urgent legislation usually needs amending sooner rather than later to plug gaps or correct mistakes.

The report continues:

“And where legislation is needed quickly, the coronavirus outbreak has shown that Parliament is capable of legislating quickly”


when necessary. It goes on:

“As for not taking up parliamentary time unnecessarily, this is a matter primarily for Parliament. Parliament’s task is to scrutinise the Government, including the scrutiny of major legislation that has been drafted in haste and which confers wide-ranging powers on the Government.”


I have heard the criticism today that our hybrid procedure is not the perfect way to do Committee or Report work, but no one has said that we do not have the time to do some scrutinising. I believe that in our hybrid procedures we still have ample time to do more scrutiny of Bills before Parliament.

My committee concluded that

“the Government have not demonstrated the need for the Henry VIII powers”

we identified, adding:

“We recommend that they be removed from the Bill.”


But we did not stop there. We also recognised the need for speed and flexibility and recommended that many of the regulations the Government may need to make should be done using the “made affirmative” procedure. We all know that all Governments under all Administrations prefer to bash things through on the negative procedure with no scrutiny; it is great if you can get away with it, and I did it myself when I was a Minister. The justification is always speed and that they cannot wait for an affirmative resolution. That is sometimes true, but the “made affirmative” procedure allows for exactly the same speed as the negative procedure but also allows parliamentary scrutiny afterwards.

We said in paragraph 22 of our report:

“However, another procedure exists under which an affirmative instrument may be made and come into force before it is approved by both Houses. This is known as the ‘made affirmative’ procedure. Under this procedure, the instrument is able to come into force as soon as it is made, but it will automatically cease to have effect if it is not approved by both Houses within a specified period of time. The period specified for approval is usually 28 days or 40 days, subject to extension for periods of dissolution, prorogation or adjournment for more than four days.”


We said in paragraph 23:

“Regulations under the ‘made affirmative’ procedure can be made and laid as expeditiously as regulations subject to the negative procedure.”


I suspect that many government departments are simply fixated on affirmative and negative and do not know that the “made affirmative” procedure exists. If they know it exists, they will still try to get away with the negative procedure.

None of these are a proper substitute for a real Act of Parliament to amend another Act of Parliament, but at least the “made affirmative” procedure is far better than changing any Act of Parliament without any parliamentary scrutiny at all. I therefore conclude by asking my noble friend to remove these excessive Henry VIII powers from the Bill.

[Baroness Taylor of Bolton (Lab) [V]]

My Lords, I share many of the concerns that the noble Lord, Lord Blencathra, has just outlined. I will say a few words as chair of the Constitution Committee. I thank the Minister for calling and arranging to listen to some of the concerns that I thought the committee might have before Second Reading. He will therefore not be surprised by the amendments tabled, particularly Amendments 66 and 70.

First of all, I think everyone on the committee, myself included, recognises that there is an urgent need to protect businesses during this current pandemic, as other speakers have said today. As a committee, we are of course always concerned about the fast-tracking of legislation, but these are exceptional circumstances and we understand why things have to be done in an emergency.

However—and this is a big “however”—the problem is that the Government are fast-tracking not just the emergency measures required but the permanent measures. This is where the main difficulties arise, which are extremely problematic for everyone in the Committee. It is the reason that we have tabled Amendments 66 and 70. I will say a few words about each.