Insolvency Act 1986 Part A1 Moratorium (Eligibility of Private Registered Providers) Regulations 2020

Luke Hall Excerpts

Monday 20th July 2020 General Committees

[The Chair]

Before we begin, Members may remove their jackets, if they want to. Please stay as socially distanced as you are, if you can. That will be perfect.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Luke Hall)]

I beg to move,

That the Committee has considered the Insolvency Act 1986 Part A1 Moratorium (Eligibility of Private Registered Providers) Regulations 2020 (S.I. 2020, No. 652).

It is a pleasure to serve under your chairmanship, Mr Efford. Welcome to your first Committee as Chair. I look forward to serving under you today and in the future.

The regulations were laid before this House on 29 June 2020. The Corporate Insolvency and Governance Act 2020 introduced a range of measures, both permanent and temporary, to assist businesses. The Act gives companies the flexibility and breathing space that they need to continue trading during this difficult time.

The regulations relate to the moratorium provisions contained in the 2020 Act. The measure gives struggling businesses a breathing space in which to explore their rescue and restructuring options free from creditor action. During the moratorium, no legal action may be taken against a business without leave of the courts. The measure ensures that businesses that are struggling are given the opportunity to survive.

Private registered providers of social housing already have special arrangements for dealing with financial difficulties. Those arrangements are set out in the Housing and Regeneration Act 2008 and the Housing and Planning Act 2016. The regime includes a 28-day moratorium to allow a provider in difficulty, working with the regulator of social housing, to resolve its problems.

This statutory instrument disapplies the moratorium powers applied under the Corporate Insolvency and Governance Act for private registered providers, given that the separate housing moratorium already exists to support them should they get into financial difficulty. The arrangements we have in place, combined with the economic regulation of the sector by the regulator of social housing, make this new moratorium unnecessary, because specific moratorium proceedings are already operational for this sector.

A private registered provider in financial difficulty would have two potential routes to follow and, in turn, that could lead to two moratoriums operating alongside each other and possibly conflicting with one another. That might undermine the ability of the regulator of social housing to support a private registered provider facing financial difficulty, thereby limiting its ability to protect tenants. We seek to avoid that situation.

The housing association sector benefits from a no loss on default record, meaning that no lender has lost money because of a private registered provider failure. That is important because it allows private registered providers to borrow cheaply to build the homes that we need. Ultimately, that strong financial performance protects tenants, because their homes are not put at risk.

Financial problems are rare, but the housing association sector has changed significantly in recent years. The level of private finance has grown from £48 billion in 2012 to more than £100 billion in 2020. That is why it is vital for us to maintain a clear and robust regime to support private registered providers facing financial difficulties.

The insolvency arrangements that we have in place today reflect extensive engagement with the regulator of social housing, lenders, private registered providers and their representative bodies. The regulations will ensure that those arrangements remain unaffected by the new moratorium provisions.

The regulations extend to Great Britain, but their practical effect is on arrangements for private registered providers registered with the regulator of social housing in England. However, because we also want the exemption to cover stock held in England by private registered providers registered as legal entities in Scotland and Wales, the territorial application is wider. It is worth noting that no such organisation currently exists.

In conclusion, the regulations are important and necessary to maintain arrangements that allow the regulator of social housing effectively to support a private registered provider in financial difficulty. They ensure a clear regulatory framework that applies to a private registered provider in financial difficulty. That will continue to safeguard investment in social housing and to protect tenants. I commend the regulations to the Committee.

--- Later in debate ---

[Luke Hall]

I thank the hon. Lady for her comments. She asked only one question, about the plural of moratorium, which I will categorically fail to answer. I welcome her constructive comments in her first SI Committee as shadow Minister rather than as a Whip.

The occasions on which this legislation will be necessary are rare. The disapplication of the moratorium that was introduced by the Corporate Insolvency and Governance Act 2020 means that there is only one moratorium available to private registered providers, avoiding the potential for two moratoriums being in play together. The moratorium from housing legislation ensures that the regulator has the tools it needs to maintain lender confidence as far as possible and to protect tenants should insolvency occur.

Question put and agreed to.