Insolvency

Lucy Powell Excerpts

Wednesday 28th April 2021 Commons Chamber

[Lucy Powell (Manchester Central) (Lab/Co-op)]

Well, here we are again. The Minister and his officials, who have heard me make the same speech numerous times, are in for a little treat today, because I am going to detour slightly from my usual remarks, which have centred a bit around “I told you so” on extending these provisions. Today I also want to touch on some of the wider insolvency framework issues that I think are pertinent now.

I welcome the Government’s extending the safety net for businesses in distress because of the pandemic. As I said when we supported the emergency legislation last year, we welcome any measures that support businesses that close to keep us safe. We argued then that the protections in the 2020 Act should be extended over a longer period of time. I think this is now the third time—possibly the fourth time—that we have come together to extend them, on each occasion, unfortunately, causing 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. Through the 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 Government support that they have repeatedly failed to address. There is a cash crisis facing firms with high ongoing overheads but still no income coming in and those excluded from all Government support, and little or no help for those sectors still closed and likely to be closed or uncertain for some time, such as travel, large events and weddings, and the visitor economy.

As I have said before, we are very concerned about the levels of debt facing businesses, whether that is through the loans they have taken, the VAT they have deferred or the rent holiday they have had, but soon have to start repaying. These measures are welcome in staving off creditors, but they just kick the can down the road, and 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. The bombshell that businesses face remains real, and that is why Labour has argued for a student loan-style scheme, in which covid debt can be repaid as businesses grow, so that we do not see waves of insolvencies. There is nothing in the provisions today to deal with those fundamentals.

Turning to the Corporate Insolvency and Governance Act provisions in general, it is clear that some of the issues we have warned about are coming home to roost, particularly when we look at the impact of Greensill Capital’s administration on the Gupta Family Group and Liberty Steel. The Government have consistently ducked the need for wider reform of our insolvency laws, particularly in providing greater protection and support for key industries and their workers. We argued for and sought to amend the legislation to this effect, and it is not too late for the Government to act.

It is clear from reports that the gulls are circling, and regardless of whatever judgment people make about GFG, the Liberty Steel plants are a critical asset to our economic and national security, and employ thousands of highly skilled workers directly and through the supply chain. The company must be given time to refinance, but if that is not successful, then the Government must keep every option open and have a plan for all eventualities to save the UK steelmaking capacity and its supply chain. However, our insolvency laws mean that there is no safe place to refinance or protect this 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.

In the US, they have chapter 11 to shepherd important industries facing distress. There, the authorities are able to wrap their arms around strategically important companies to allow them time to resolve difficulties, refinance or restructure. The chapter 11 process, should we have that here, would have created a better context for the refinancing of Liberty Steel, without the spotlight and falling confidence. We argued for its inclusion in the Corporate Insolvency and Governance Act 2020. Ministers could have brought forward changes on that today, but unfortunately they seem content to let the company fail first. We know that this has a high cost for the suppliers as well.

Even without changes to the insolvency laws, if there is a political will, there could be a way. Ministers should not be bystanders. They should intervene early, before liquidation if necessary, and that would mean that workers would not lose their accrued services benefit as well as protecting the supply chain. When the Minister gets to his feet, I hope that he will reflect on the wider point about how we can protect nationally important businesses in future and assure us that his Government will do whatever it takes to save Liberty Steel from insolvency.

--- Later in debate ---

[Paul Scully]

I thank Members for their valuable contributions to this debate—and, indeed, to the other, general debate I seem to have been hearing about coronavirus support beyond the regulations. Members have highlighted the importance of the measures that the regulations extend and the necessity of extending them so that businesses can continue to benefit from them.

I welcome the return to working with the hon. Member for Manchester Central (Lucy Powell). We are in a grander setting than usual, but the conversation remains. I understand her concern about the fact that we have come back to extend these regulations, but it is important to remember that they contain some important powers on things such as wrongful trading and the moratorium, and that we are holding a lot of things in stasis. It is right that we get the balance right between giving businesses the certainty that she rightly asks for and using Government interventions in these matters sparingly and continuing to scrutinise them in this place. I would rather that we come back and do our work regularly than overstep in respect of these powers and intervene too much in the economy. It is important to keep an eye on these things.

The hon. Lady raised the issue of those businesses that have been excluded, or that have been coming back with requests for more support, including the travel sector, the wedding sector and the visitor economy as well. They are all hugely important businesses and sectors that are vital for our recovery. We are working on all those areas. We have the global travel taskforce. My colleagues in the Department for Transport are working on international travel. I am working with colleagues on weddings. The Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), is working on events and domestic tourism. All of these areas will be hugely important not just for the economy as a whole, but to get our towns and cities back open again. As Minister for London, that is something that I feel and see on a day-to-day basis.

The hon. Lady talked about Greensill and Liberty. Clearly, there are concerns here that need to be addressed, but, obviously, speculation about Liberty Steel and other businesses can in itself cause uncertainty to investors, employees, and people seeking to work with those companies. We are monitoring the situation. We are engaging with Liberty Steel, and we are engaging with the unions. I know that the owners of Liberty Steel are seeking a market solution, but we will continue to monitor that situation. We are also engaging with the sector, with trade unions and with the devolved Administrations to make sure that we can develop a long-term, sustainable future for the UK steel industry, because it clearly has an incredibly important role in the UK.

I say to my right hon. Friend the Member for South Northamptonshire (Andrea Leadsom), erstwhile Secretary of State for Business, Energy and Industrial Strategy, that we want to make sure that, within our Department, we are building on her excellent work in the areas of audit reform and corporate governance. She rightly pointed out some significant failures, including BHS and Carillion to name just two, and we want to make sure that we can work on that within our audit reform work. We have already published a consultation to enhance the UK’s audit control and regulation, and we will make sure that we have full debates in this place as we bring those proposals forward for scrutiny in Parliament and in terms of legislation.

Let me turn now to the hon. Member for Aberdeen North (Kirsty Blackman). I would like to pass on my thanks to others who noted her comments on depression in a previous debate. It is so, so important to speak out. I really welcome her personalised appeal to people, making sure that they know that it is okay not to be okay. They were wise words, and words that we must all take on board. There has been a mental health aspect to the lockdown. Obviously, business uncertainty plays a part. There are lots of businesses, small and large, that I see and hear from on a day-to-day basis, which are incredibly stressed and incredibly worried. I valued her words.

The hon. Lady talked about companies struggling to get back on their feet. Clearly, that is the case. I do not want to get into a wider debate about coronavirus support, but we realise that, with many of these measures, there is the risk of cliff edges, and we will continue to work through those and to flex to make sure that we can support businesses. She talked about smaller organisations as well, especially around tech and IP. Yes, we must make sure that we are working on those, too.

Over the past year, businesses have faced an exceptionally challenging time, with many unable to trade, or their ability to trade at full capacity restricted owing to social distancing measures. These regulations will provide the much needed support for businesses as we continue with the Government’s four-step road map out of lockdown, allowing them to concentrate their best efforts on reopening or continuing to trade and building on the foundations for economic recovery in the UK. We want to get to that economic recovery.

Finally, let me answer the hon. Member for Sefton Central (Bill Esterson). When he was looking to throw this open to a wider debate, I think he missed the strengthening of our prompt payment code, which was done in consultation with the signatories to the payment code, and indeed the fact that we have got more to sign up to that as well. When he was looking for a wider debate about coronavirus, he also missed the plan for growth, which does exactly what it says on the tin. It looks beyond these measures. It is a plan and, funnily enough, it is a plan for growth, which goes beyond 30 June. Careful consideration has been given to extending these temporary measures, and the Government will continue to monitor the situation closely.

I thank hon. Members for their valuable contributions to the debate. I commend the regulations to the House.

Question put and agreed to.

Ordered,

That the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 (S.I., 2021, No. 375), dated 22 March 2021, a copy of which was laid before this House on 24 March, be approved.

[Lucy Powell (Manchester Central) (Lab/Co-op)]

On a point of order, Madam Deputy Speaker. During Prime Minister’s questions today, the Prime Minister claimed that

“last night our friends in the European Union voted to approve our Brexit deal, which he opposed.”

That is totally incorrect. You will remember, Madam Deputy Speaker, that in an extraordinary sitting of this House of Commons on 30 December 2020, the Leader of the Opposition and the whole Labour party voted for the Brexit deal agreed by the Government and the EU. As limited as it was, we backed it and avoided a no-deal scenario. Do you agree, Madam Deputy Speaker, that it is vital that the Prime Minister returns to the House today to swiftly correct the record?

[Madam Deputy Speaker (Dame Rosie Winterton)]

I am grateful to the hon. Lady for her point of order. I hope she will appreciate that it is not really a point of order for me, but I am sure that the Treasury Bench will have heard what she has said and will report it back in the usual way, through the usual channels. The hon. Lady has obviously also placed it on the record by raising the point of order in the way that she has.

We will have a short two-minute suspension for cleaning before the next business.