Corporate Insolvency and Governance Bill

Lord Lennie Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

[Lord Fox]

My Lords, I am grateful to all noble Lords who have spoken in this important debate. I am a signatory to Amendment 15 and I thank my noble friend Lady Bowles, the noble Baroness, Lady Altmann, and the noble Lord, Lord Hain, for co-signing it. I join other Peers in acknowledging that the Government have moved in terms of listening to the previous debate and going forward, but the issue that Amendment 15 seeks to address is a serious one. If this Bill went through without the sorts of assurances that we are looking for from the Minister, or remained unamended, that would create a huge issue for pension trustees all over the country. Never mind the ones that are going into insolvency—as the noble Lord, Lord Balfe, set out so eloquently, every single pension trustee would revisit every single pledged asset and would go back to the management of their sponsoring companies to ask for cash instead. I do not need to remind the Minister that cash flow is one of the biggest challenges facing businesses at the moment; it is actually cash that is the problem. To knowingly put in a measure that will drain profitable businesses of cash would be careless, and I do not think that that is what the Government are doing. I think this is an unknowing consequence of the Bill.

To be clear, this concerns assets that have already been pledged. When the Minister spoke earlier, he seemed to be referring to assets being pledged at the time of insolvency, but these are assets which have been pledged in lieu of cash. Given that, I am a little bemused by the idea put forward by the noble Baroness, Lady Neville-Rolfe, that the Pension Protection Fund would somehow be overreaching itself in seeking to protect these funds for pensioners and that it would be giving the PPF too much power. Rather, it is merely the power to protect assets that have been signed over to the pension fund. If they were not assets such as those set out by the noble Baroness, Lady Altmann—real estate and securities—then it would be money. I do not think that the noble Baroness, Lady Neville-Rolfe, is proposing that the courts should have the power to extract money from pension funds, so why should they not have the power to protect against judges extracting assets that have been put aside in lieu of money?

The noble Baroness, Lady Altmann, put a clear question to the Minister, one that I think is very apposite to this point. Does the PPF have the power to prevent judges extracting pledged assets from pension funds and putting them into the pool of assets for distribution to other creditors? If the Minister is able to stand up and say that clearly and unambiguously—for those Members watching remotely, it does not look like he is—there is no problem. However, if the Bill leaves this House unamended or without that pledge, this issue will become a very serious one not just for the pension funds of distressed companies but for every defined benefit pension fund in the country.

[Lord Lennie (Lab) [V]]

My Lords, straight off the bat, I too welcome the Government’s movement on this specific part of this necessary Bill. There will be a sense of relief for direct benefit pension funds and their trustees, the Pension Protection Fund and the regulator. As has been said, all will now have rights of access to information about the intentions of companies and to voice their opinions about the decisions that are being contemplated; a seat at the table, access to court and so forth. This will be true throughout the UK.

When a company seeks a moratorium or when it considers other actions in a potential redundancy and insolvency circumstance, the monitor will be required to notify the pension scheme, the PPF and the regulator to have due consideration of their views about the proposed action. In the event that a moratorium comes to an end or if the monitor changes, the pension scheme trustees and the PPF must be informed. This will mean in effect that the debts owing to a direct benefit pension scheme do not rank below other finance debts. That would recognise the real status of a pension as deferred earnings and should not allow others to accelerate the debt position at the expense of pension provision, as was feared in the original text. These changes have come about due to the strength of the arguments put by my noble friends Lady Drake and Lady Warwick, the noble Baroness, Lady Bowles, on the Liberal Democrat Benches, and the noble Lord, Lord Balfe, and the noble Baroness, Lady Altmann, on the Conservative side. I congratulate them on achieving this much.

However, can the Minister provide the reassurance being sought about the value of direct benefit schemes being put at risk by the sale of assets, and ultimately the whole working of the PPF? Will he closely monitor and consult on any necessary remedial actions that may arise from his examination of this issue? The Minister can take the credit due to him for his part in bringing forward these amendments to the Bill, and they are welcome. But can he confirm that the Government will stay alert and ready to intervene on behalf of pensions and the PPF in the event that the measures in this legislation do not go far enough in protecting them?

[Lord Callanan]

My Lords, I take this opportunity to thank everyone who has spoken in this important debate, and I am grateful for Amendment 15 because it is a very important provision. I am also grateful to noble Lords for their continuing efforts to ensure that pensions are treated appropriately through this Bill. None the less, I hope that they will agree that we are now seeking to introduce specific and satisfactory provisions to deal with pensions’ interests.

I also take this opportunity to assure noble Lords that where charged property is disposed of, it can be done only with the permission of the court and where the court believes that it is necessary to support the rescue. Where the court is satisfied and gives its permission, the net proceeds must go towards satisfying the amounts secured by the charge before they can be used in any other way. From a practical perspective, this amendment is not necessary. If a company in a moratorium was going to court to seek permission to dispose of charged assets, it would at the least have had to have had a conversation with the person to whom those assets are charged. Well before giving clearance to the company to dispose of such assets, the court will of course take account of their views at the hearing.

In response to my noble friend Lady Altmann and the noble Lord, Lord Hain, we have been in detailed discussions with colleagues in the DWP, along with both the Pensions Regulator and the Pension Protection Fund, in the formulation of these amendments. We are seeking to ensure that the PPF is able to play a role in a company’s rescue plan where it is appropriate for it to do so. Let me also provide the assurance that the noble Lord, Lord Lennie, was looking for. Of course, we will continue to monitor these arrangements to ensure that they act in the fairest possible way for all the different stakeholders in the process that I referred to earlier.

On that basis, I hope that I have been able to provide sufficient reassurance to noble Lords and that they will feel able to not move their amendments when the time comes. I beg to move.