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

Lucy Powell Excerpts

Monday 19th October 2020 General Committees

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

It is a pleasure to serve under your chairmanship, Mr Efford. I think it is the first time I have done so. It is good to be here. While we are very supportive of the regulations, we could have saved all Members here time—in fact, I was nearly late—because we tabled an amendment to the Corporate Insolvency and Governance Bill that would have made these extensions. We pressed Ministers, both in private and during the passage of the Bill, to extend the time periods, because we foresaw that businesses would need this help for longer.

We welcome the extension to the provisions, and indeed called for it. It is absolutely right that companies should continue to benefit from these provisions while experiencing financial difficulties at this unprecedented time. It is now clear that they will be living alongside those difficulties for a lot longer than was foreseen when the Bill was first drafted. We agreed at the time that emergency legislation was required, and we worked closely with the Government to bring it about, but we made it clear during the passage of the Bill that any previously viable business that was forced to call on any provision of the legislation would have been fundamentally failed.

The Minister spoke about those viable businesses; many businesses now feel that they have been left on the scrapheap, and have been consigned to being unviable, when in normal times they would have been very viable indeed.

I have a few questions about some of the measures. Does the Minister think that we will be here again in a few weeks’ or months’ time to extend these provisions further, at the end of December 2020—or March 2021, for some of the provisions? If so, would it not have made sense for us to have done that here and now, and just extended some of these provisions further?

A particular worry to us, and something I know the Institute of Directors has raised with the Government and with us on a number of occasions, is that the one measure that it is particularly concerned about, the suspension of wrongful trading, is not being extended. That was included in the original Act, but it is the only temporary measure from the Act that is not being extended. That will open the door for aggressive creditors, suppliers, the banks, financial institutions and others to threaten struggling businesses whose cash flow has been damaged by the continuing crisis.

Although there are issues with a moratorium on wrongful trading, it is important in this difficult time that businesses that might be seen as not viable, but that are viable in normal times, are given the discretion of a moratorium on wrongful trading. Can the Minister tell us the rationale behind that? Why was that measure right in June, but not now? I do not really understand. Those businesses are severely impacted by the lack of safety net for them at the moment, just at the time that they need that extra support—the extension of the furlough, the extension of sector supports, of cash grants and so on. It is all being pulled away from them at the wrong time, and the new measures coming in from the Chancellor are much reduced from those that were available earlier in the year,.

As we see regional and local lockdowns—I have yet to see whether that will come into my own area in the next 24 hours—businesses will need more support than is currently on offer from the Government. The cash grants are worth about one third of what they were back in March and April. Without that support, we will need to reconsider the wrongful trading provisions that are now leaving many businesses hanging in the wind. Hopefully the Minister can reassure us on some of those points.