Corporate Insolvency and Governance Bill

Debate between Lord Liddle and Lord Balfe

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

[Lord Liddle (Lab)]

My Lords, I would like to make three points—briefly, I hope. The first is a point of process. It would be nice if the Minister acknowledged that this is clearly not a normal Committee stage. We are grouping different subjects in a way that we would not do normally, because of the urgency of the Bill. Given that we are moving to a critical economic situation, I accept that urgency, but this is not a normal way of proceeding. As the noble Viscount, Lord Trenchard, and the noble Lord, Lord Hodgson, have just said, the Government are trying to deal with the situation by mixing things that are required for the immediate economic urgency with longer-term reforms, and, at the same time, trying to deal with the uncertainties of what they will face by including lots of Henry VIII powers in the Bill.

This is a classic example of where effective post-legislative scrutiny is needed. We should have a committee to look at how the Bill is implemented, and to bring forward proposals for reform after six months, or a year, or whatever seems reasonable. My first point is that this is not satisfactory, and we need a process of post-legislative scrutiny.

Secondly, I am not an insolvency practitioner and I have never had to deal with anything insolvent. However, I am greatly interested in questions of industrial policy. Prior to the Labour Government coming to power in 1997, I read a lot of academic pieces about our bankruptcy and corporate insolvency provisions which suggested that our law was much tougher than that of the United States, and, as a result, was a barrier to the entrepreneurship that all sides of this House want to see flourish in this country. Indeed, the Labour Government went on to reform the bankruptcy and insolvency laws.

There is of course always a tension in this. The introduction of something equivalent to the US Chapter 11 has also led to abuses, and we have all seen instances of companies going insolvent, where, on the face of it, it looks as though their boards have behaved with a great deal of irresponsibility. It would be nice, therefore, to have a statement from the Government on what they think the responsibilities are to be of the monitor that is being introduced. In whose interests will the monitor be acting? What is the public interest in these legal reforms? This is not a matter for legislation, but rather for a major speech by Ministers, which would then be taken into account in subsequent interpretation of the legislation by the courts. As someone said, I am sure that there will be a lot of that.

On my final point, I have of course a lot of sympathy with my Labour colleagues who have pointed out that the trade unions, workers and employees have not had a fair deal in these matters in the past. I would like to see their rights strengthened in this legislation, but there has to be a balance. One of the most disastrous experiences of a crisis happened in the coal industry in 1926, when the union position of “Not a penny off the pay, not a minute on the day” led to a human tragedy of awful proportions in Britain. To save their company, the workers may be prepared to make sacrifices, but their position needs to be strengthened. Again, I would like from the Government a high-level political statement to say that they accept that our culture of capitalism has to change, that we have to move in a more partnership- driven direction, and that when dealing with the details of things such as insolvency law, we should try to reflect in legislation the need for a balanced set of rights and obligations.

I must apologise to the Minister: I have another engagement, which may mean that I will not hear his reply at the end of this discussion. I will, however, be coming back to the Committee as soon as I can.

[Lord Balfe (Con) [V]]

My Lords, I begin by endorsing what the noble Viscount, Lord Trenchard, said about the way we are conducting this. We are in a very unusual time, I accept, but I hope that as soon as possible we will get back to a normal House and a normal way of dealing with Committee stages—and with everything else, for that matter.

My second point is for the Minister, who of course comes from the north-east—not a traditional Conservative area, but one that has always had a strong Conservative vote. As we move forward, one thing we need to remember is that the last Labour Government was not exactly the best thing that trade unionism ever saw. They did basically nothing that the Conservatives wanted to repeal when they came in. I ask the Minister to remember that some of the great social legislation of Britain was actually passed by the much-reviled Neville Chamberlain when he was Minister for Local Government and Chancellor of the Exchequer in the 1920s and 1930s: such things as wage councils and some basic rights. The way Stanley Baldwin handled the aftermath of the General Strike contributed tremendously to the fact that the Conservative Party ran Britain for two-thirds of the last century and is well on the way to achieving that again. I make that point in beginning.

My next point is that insolvency is a sad necessity—in a capitalist economy companies go up and down—but it is as much a sad necessity for the workers as it is for the people who own the company, and we should never forget that. The workers in any industry do not go home at night thinking, “My company does not matter”; they are often devoted servants and they are as hard-hit by insolvency as anyone else. I ask the Minister to remember that, as we move forward into the 21st century, we may well need to rewrite the historic deal between the working people and the state in the same way that we did 100 years ago. As such, I will not endorse all these amendments, but I am particularly interested in Amendment 84 tabled by the noble Lord, Lord Hendy, and supported by the noble Lord, Lord Hain, on unpaid remuneration for workers.

One of the great tragedies and wrongs of recent events has been that workers—Thomas Cook is a good example—can put in a month’s work, suddenly their company goes bankrupt and they do not even get the three weeks’ wages for which they have just worked. I ask the Government not necessarily to accept Amendment 84 but to look at a way at least to prioritise the fact that if a company goes into insolvency, wages that are more or less immediately due to the workforce are paid—taken out of the present system, as I understand they are in Germany, and paid to the workers.

I also have sympathy with Amendment 27, in the name of my good noble friend Lady Altmann, which would prevent insolvency practitioners disposing of items that are pledged to a pension fund. If items are pledged, they are pledged and cannot just be taken back and sold off willy-nilly. I think the relationship between company pension funds and company assets needs to be looked at. Certainly, my noble friend’s amendment is well worthy of us having a look at to see what we can do.

I also point to something that will come up in a number of subsequent amendments, which is the need to protect pensions. Pensions are a worker’s deferred wages: it is not some bonus pot in the distance that they can have if they are lucky, but part of their remuneration. In a funny sort of way, one of the advantages of a defined contribution scheme is that at least it generally goes to the workers as it is earned, rather than being held on to by the company, but even that needs further looking at.

My final point is that I think we need to look at how the concerns of workers can be heard by the courts. Although I and many others often refer to trade unions, it is worth remembering that the trade union movement in the private sector is incredibly weak and we have to look well beyond trade unions at ways in which working people can be represented in insolvency situations. They should have some rights to be heard, and I believe that those who judge insolvencies should at least be prepared to, and be required to, listen to what they say and, in coming to their decisions, to make their reactions to their representations part of the response: in other words, workers have a right to be heard and to be responded to.

Having said these things, I welcome the legislation. There is never a right time for a Bill such as this. I have reservations about the Henry VIII powers, but I am prepared to see if this will work. Fundamentally, I think that the Minister, with his background, understand the concerns of working people, particularly working people from outside London, and I am sure that he will do his best to strengthen the Bill in the ways we are urging him to do.