Covid-19: Limited Company Directors

Owen Thompson Excerpts

Monday 25th January 2021 Commons Chamber

[Owen Thompson (Midlothian) (SNP) [V]]

It is perhaps fitting that tonight’s debate is being held on Burns night, because Robert Burns was a great egalitarian and champion of social justice, and this is an issue that at its heart is about how we treat our fellow citizens. When the Chancellor said that no one would be left behind, it was a comforting show of solidarity to all:

“A Man’s a Man for a’ that”,

as the bard would have said. But it has been over 10 months and the pleas of 3 million people left to struggle have been utterly ignored. It reminds me of another Burns quote:

“Man’s inhumanity to man

Makes countless thousands mourn!”

The reasons for people being excluded have been raised many times in this Chamber, and the case is absolutely clear. How can 10% of the working population simply be dismissed as collateral damage? On what planet does that make sense? We need the excluded, all 3 million of them. They are grafters. They are innovators. They will help to rebuild after the crisis, if we help them now. Instead, they are being ground down by poverty and despair, by a Government who claim to be business friendly.

Tonight the focus is on small limited company directors, but the issue, if not the detail of the solution, applies to all those excluded groups, and I want to emphasise again that no one should be left behind. I note today’s announcement of another proposal by the all-party parliamentary group on gaps in support. The targeted income grant scheme, costed at about £10.5 billion, would provide some support for the newly self-employed, pay-as-you-earn freelancers and taxpayers excluded by the 50:50 rule, as well as limited company directors. I welcome that contribution. After 10 months without any options drafted by the Treasury, it is getting its work done for it by the very people who have been left out, showing just how innovative and determined a group they are. I very much hope that the Treasury will take this proposal seriously and work with the excluded groups to reach solutions, not scramble for excuses to reject them.

About 2 million actively trading limited companies in the UK are micro and small companies. Collectively, they employ 7.5 million people. As the Minister knows, they fall into a separate category from the self-employed and commonly pay themselves a mixture of PAYE and dividends when their company has a profit. Many company directors found themselves unable to furlough because it would prevent them from working, which might mean the demise of the business. Some were actively excluded due to running an annual payroll with an RTI submission date after 19 March. For those who could furlough, the payments were often too low to live on because they are based solely on PAYE earnings. Many firms missed out on grants, particularly if they had no commercial premises, and discretionary grants can be a postcode lottery.

Ministers have been told time and time again of people’s plight by MPs of all political persuasions, by campaigners and by those who have first-hand experience of the difficulties. If I thought it would help, I would read out some of the heartbreaking stories I have heard, not only from my constituents here in Midlothian, but from all corners of the UK, but so far those real-life stories have bounced like water off a duck’s back. Yet despite the Treasury’s intransigence, this issue is not going away any time soon.

A parliamentary petition calling for support for limited company directors gained more than 101,000 signatures before it closed in October. Many could be watching tonight and praying that the Government do not simply trot out more irrelevant excuses for inaction. I am hoping that there will be something more solid, so I can take away more than the usual promises to listen that come to nothing. It is not enough for the Minister to tell us about what the Government have done for the self-employed or others lucky enough not to fall through the gaps. Talking of support for others suggests a continued denial of reality for those excluded and simply rubs salt in their wounds, emphasising the lack of parity and fairness.

While we are at it, let us dispel some of the myths that have been brandished to excuse inaction. Directors of small limited companies are not fat cats or wealthy tax dodgers; they have small and family businesses. Any tax advantage in partly paying through dividends was dampened long ago. Almost 1 million of this group have only a sole director, be they electricians, beauticians, shop owners or IT professionals. I also note the work of We Make Events to highlight the impact that excluding directors has had on the doubly hit events industry.

People are angry, frustrated and in despair, but we are past the time to plead the case. If the Government do not care about the human cost, perhaps warnings of the economic cost will finally cut through. It is the endgame for many businesses, and cleaning up the mess later will be far more costly than providing support now to prevent them from falling off the cliff. There are 7.6 million jobs reliant on those businesses. Many of the directors are surviving only through spiralling mountains of debt. If they go down, there will be no place for staff to go back to when furlough ends. The small-scale entrepreneurs and wealth-makers we need to lift the UK economy will, instead, be left to wither on a shrinking vine, while an unemployment cliff edge approaches.

The Treasury has had plenty of time to find a solution for all 3 million excluded, and it remains its job and its duty to do so. It has been given a head start by the worked-up proposal for a directors income support scheme—as well as the TIGS proposal I mentioned earlier—which was designed by a coalition of small business leaders, tax experts and company directors, including ForgottenLtd, the Association of Chartered Certified Accountants, the Federation of Small Businesses and Rebecca Seeley Harris of Re:Legal Consulting. It is not a fix for everyone, but it is a viable solution that would help many, and I would very much welcome support of any kind.

The DISS proposal has also received overwhelming cross-party endorsement from the gaps in support all-party group, and I am limiting my own contribution tonight to hear from a couple of colleagues on that point. I understand that the Treasury has had the proposal on its desk for six weeks now, and only just gave a full response on Friday. I know that those who worked on the proposal will want to go through the Treasury’s points fully. Indeed, they would no doubt welcome a meeting to address any concerns expressed.

I understand that there are continued concerns that the scheme is open to fraud, which seem to me misplaced at best, or exaggerated, particularly given the more gung-ho approach of this Government to so many other emergency schemes and contracts. Every scheme has a risk, of course, and it is right to minimise that risk, but it is not a reason to do nothing, as with so many previous schemes. In fact, the DISS’s very design tackles such concerns head-on.

The assumption is that the DISS will run on the same parameters as the self-employment income support scheme. It will rely not on dividends but on a company’s trading profits, which are contained in the corporation tax return, and because directors are under a strict legal obligation to provide accurate information when self-certifying, the scheme has a far higher bar to prevent fraud than many other existing schemes. It has also addressed concerns about administrative burdens, it deliberately mirrors an existing, working scheme, and it uses systems already in place and operated by the Treasury and HMRC. If the Government are still not persuaded of its merits, will the Minister pledge tonight at least to hold discussions with ForgottenLtd and other stakeholders to allow them to raise their concerns and to work together to find solutions? If there are ongoing issues, I would urge the Government not to throw the baby out with the bathwater.

Should the Government finally decide to act, let me be clear that no one scheme should be seen as a silver bullet, but simply as a first step in the right direction. Campaigning will not stop until all excluded groups receive parity. Above all else, this is fundamentally a moral issue. These people deserve to be supported in the same way that the Government have supported others—nothing more, nothing less. Nothing can justify their lives being shattered by mere technicalities. There has been no wrongdoing, and people are being punished for merely following practices set out in the Government’s own recommendations.

With that in mind, the Government’s sluggish response is almost incomprehensible. At first, the Chancellor had the nerve to paint limited company directors as fat cats not in need of support. Then the Treasury spent months scrambling for technocratic excuses not to take action. Now, thanks to the work of campaign groups and MPs, the Treasury has seen two proposals that would take the first steps towards plugging some of these gaps, while relying on the same infrastructure as other, existing schemes. There are no longer any excuses for the Government not to act. A failure to do so would simply confirm the worst fears of many—that this Government simply do not care and are willing to exclude limited company directors as a deliberate policy choice. That, quite simply, is not something that I or other hon. Members could stand by and watch.

[Mr Deputy Speaker (Mr Nigel Evans)]

We now go to Brighton for a short contribution by video link from a Member who has the consent of the Member initiating the debate, Owen Thompson, the consent of the Minister, Jesse Norman, and the permission of the Chair, myself, to participate in the debate.