Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021

Lord Lennie Excerpts

Tuesday 18th May 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, like other noble Lords who have spoken in this debate, I have a strong sense of déjà vu. We are back debating the extension of measures in the Corporate Insolvency and Governance Act 2020. As we have heard, these measures include extending the

“restrictions on the use of statutory demands and winding up petitions”

from March to June. The modifications to moratorium provisions and temporary moratorium rules are extended from March to September; the small supplier exemption from termination clause provisions are extended from March to June; and the provisions suspending liability for wrongful trading are extended from April to June.

We welcome the Government extending the safety net for businesses in distress because of this pandemic. Just as we supported the emergency legislation last year, we welcome any measures to support the businesses that closed to keep us safe. As the Minister knows, we argued then that the protections in the Act should be extended over a longer period. Now, as we extend them again, I stress that this causes real uncertainty and worry for businesses in the run-up to each previous expiry date.

As the economy reopens and restrictions ease, it is right that these measures are kept under review but we must remember how many people are still being affected by insolvency. According to the most recent government statistics, there were 29,140 total individual insolvencies in the first quarter of this year—2021—with one in 424 adults having become insolvent in the last 12 months.

Throughout this crisis, we have called on Ministers to ensure that economic support matches the public health measures in place. While we have seen welcome support for workers through the furlough, there have still been gaps in support that the Government have repeatedly failed to address. In particular, we are concerned about the levels of debt facing businesses, whether through the loans they have taken, the VAT they have had deferred or the rent holidays they have had but will soon have to start repaying. These measures are welcome in staving off creditors but they just kick the can down the road. They do little to change the fundamentals facing so many firms of large Covid debt and low or no takings while the fight against Covid continues.

After the Queen’s Speech, it is also clear that the Government continue to dodge the need for wider reform of our insolvency laws, particularly in providing greater protection and support for key industries and their workers. Currently, there is no safe place to refinance or protect such a company’s assets until it might be too late, all the while leaving the company searching for refinancing while trying to retain the confidence of suppliers and customers, who risk the most should it fail.

Even if these changes do not come forward, Ministers should not be bystanders. They should intervene early—before liquidation if necessary. This would mean that workers would not lose their accrued service benefits, and would protect the supply chain. We support today’s measures but call for wider reform tomorrow.