Commercial Rent (Coronavirus) Bill
Paul Scully Excerpts(2 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
Before I respond to the Opposition amendments, I would first like to thank the hon. Members for Feltham and Heston (Seema Malhotra) and for Brentford and Isleworth (Ruth Cadbury) for their continued constructive engagement with the Bill and for their contributions to date.
The Bill is key to ensuring we support viable businesses that will continue to thrive and contribute to our economy in a way that does not risk the insolvency of their commercial landlords. We remain committed to these principles. The arbitration system is designed to be a quick, effective and impartial solution for rent debts that cannot otherwise be resolved, and we currently expect that all applications for arbitration will be made within six months and that cases should be resolved as soon as practicable afterwards.
Requiring a review of the arbitration process within three months of the Bill being enacted could slow down the process by adding additional steps and requirements for arbitrators that have already proved their suitability for the role. It might also delay the resolution of cases while arbitrators await the findings of the review before making awards.
Under the Bill’s existing provisions, the Secretary of State can already request a report from approved arbitration bodies covering the exercise of their functions under the Bill, including details of awards made and the application of the principles set out in the Bill in the arbitrations they oversee.
Additionally, there is a requirement for arbitrators to publish the detail of awards made, including the reasons behind them. This will show how arbitrators have applied the principles of the Bill in coming to their decisions. We will carefully monitor the position, and if there is a need to revise the guidance, such as to clarify or add new information for arbitrators, the Secretary of State is already able to do so.
I believe that requiring a review would not benefit the aims of the Bill or, indeed, the people who would want to use the new arbitration system to resolve rent disputes, and I therefore hope new clause 1 will be withdrawn.
On amendment 9, as hon. Members will be aware, the Bill defines a business tenancy as a tenancy to which part 2 of the Landlord and Tenant Act 1954 applies—that is to say it is a tenancy comprised of property that is or includes premises that are occupied by the tenant for business purposes. I reassure hon. Members that the Government intend such property to be considered occupied even if it has been mandated to close for some time in full or in part. A tenant will still be in occupation if they are operating their business remotely and intend to return, so I do not believe amendment 9 is necessary. I hope it will be withdrawn.
I should say that we also anticipate courts will take a pragmatic view of occupancy, given the underlying rationale behind the Bill to introduce a system of binding arbitration for businesses that have built up rent debt as a result of Government-mandated closures.
On amendment 13, the operation of approved arbitration bodies follows a market-based policy approach, leaving it to arbitration bodies to manage their internal capacity processes. Our engagement with arbitration bodies suggests that this is the right approach. Looking purely at the number of arbitrators disregards the fact that an arbitrator will be able to take on more than one case at a time. Although the application process will contain a question on the number of arbitrators available, we recognise that this will provide an under-representative picture of capacity in the market, so I am not able to accept the amendment.
On amendment 10, I am grateful to the hon. Members for Feltham and Heston and for Brentford and Isleworth for seeking to ensure consistency between the Bill and the code of practice. I reassure them that the Government’s intention under both the Bill and the code is for the Bill, including the arbitration system it establishes, to come into force as soon as possible. We want the arbitration system to start as soon as possible given its importance to supporting resolution of protected rent debt and a return to normal market operation. The aim remains to bring the Bill, including the arbitration system, into force by 25 March 2022. That is reflected in the code of practice, as updated on 9 November 2021. I am happy to consider whether clarification would be useful within the code. The code outlines the processes and principles that we are seeking to introduce through the Bill. It has given, and continues to give, businesses the opportunity to negotiate in line with those principles until the Bill comes into force.
The March timing is linked to the expiry of the moratorium on forfeiture and the restrictions on use of the commercial rent arrears recovery regime. The Government have been clear that they intend such measures to remain in place until the Bill is passed, if that is earlier than their expiry.
I turn to amendment 14. Clause 11 as it stands must be read with section 34 of the Arbitration Act 1996, which states:
“It shall be for the tribunal to decide all procedural and evidential matters”.
That provides arbitrators with the discretion to call for further evidence where that is considered necessary. There is also no express limit in the Bill on the types of evidence that parties can put forward to support their proposals. We are aiming for a quick and efficient process to restore businesses to normality. The aim of requiring supporting evidence is therefore to help focus participants’ minds on the most pertinent evidence that will support their proposals. It will have to be sufficient to show why the proposal is consistent with the principles and should be adopted. That will help arbitrators to resolve cases quickly. A widening of the clause could lead the paper-based arbitration process to become lengthy, inefficient and costly for the parties, who must meet their own legal and other costs.
I turn to amendment 15. As I have previously explained, clause 17 establishes the timeframe for making awards, requiring arbitrators to make an award as soon as is practicable, or within 14 days in the case of an oral hearing. While we expect that most cases will be resolved quickly, the clause also provides arbitrators with the necessary flexibility to take additional time to make decisions on more complicated cases. One or both of the parties may each simply submit one formal proposal that is final, or one or both may decide to submit revised proposals as final proposals. They may also agree to extend the time limit for submitting initial or revised proposals. That means that it is hard for an arbitrator to know exactly when final proposals have been submitted and when the clock on the 14-day time limit would start running.
Arbitrators may need to request further information after receiving proposals. It would therefore be impractical to impose a time limit. Imposing a 14-day time limit for issuing awards following an oral hearing, as the Bill does—although the time limit can be extended—is less problematic because the arbitrator will have seen the final proposals and had time to consider them before the hearing. They also have an opportunity to ask questions about them during the hearing, which would conclude on that set date.
On amendment 16, I agree that fee levels are an important consideration. The Bill adopts a market-based approach. Arbitration bodies are best placed to decide on fee levels given their experience in costing arbitration schemes to make it affordable for all and attractive enough for arbitrators to want to take on cases. The Secretary of State’s powers are intended to be used only when circumstances determine that to be appropriate. Setting a limit on fees at this point could reduce the number of arbitrators able to act, which could undermine the arbitration mechanism in the Bill. There is no evidence that such a limit is needed. However, if it is, the Secretary of State is prepared to exercise the power as appropriate based on the available evidence.
On amendments 11 and 12, I agree that it is important to encourage behaviour in line with the code of practice and the Bill’s general principles. A key aim of the Bill is to restore businesses to normality as quickly as possible. We have carefully designed the process with arbitrators to make it quick and cheap to navigate, and accessible without further support. The amendments, however, could result in prolonged arguments on costs, appeals and enforcement, delaying a return to that normality that we all seek. They could also encourage the use of legal and other support where that is not needed, lengthening the time to resolution and potentially increasing costs for all parties.
The amendments could create a situation in which one party’s viability or solvency could be endangered through having to pay costs other than arbitration fees. Widening the discretion to include other costs could also lead to an uneven playing field, especially for smaller businesses who could end up paying high legal costs for larger companies. Under the Bill, the arbitrator has discretion to deviate from the general rule of evenly splitting the costs of arbitration fees between parties where appropriate, based on the circumstances of the case, such as when one party has not reasonably co-operated.
On amendment 17, the Bill as drafted allows for a stay of debt claims that include ringfenced debt and are issued between 10 November 2021 and the Bill coming into force. The Bill enables ringfenced debt under those claims and under judgments made in respect of such claims to be subject to arbitration. I understand the concern about the date, but it is not an arbitrary date, because 10 November 2021 follows the Bill’s introduction and the Government’s announcement of the policy. The Bill seeks to introduce proportionate measures that address the interests of both landlords and tenants, whereas the amendment would allow for arbitration of protected debt which was subject to earlier proceedings or judgments when the parties could not have known that this was proposed at the time when the proceedings were issued, so reopening those situations.
Let me now deal with the technical amendments tabled by the Government and the substantive amendment that we are tabling at the request of the Northern Ireland Assembly. Amendments 1 and 2 are technical amendments to make it clear that the definition of “service charge” in clause 2 covers both fixed and variable costs, as well as costs incurred by the landlord insuring against loss of rent. That has always been our intention, and the amendments help to make it clear, ensuring that all relevant costs and charges are within the scope of the arbitration process.
Technical Government amendments 3 and 8 make it clear that the provisions of clauses 10 and 24, in so far as they relate to company voluntary arrangements or certain restructurings, apply to limited liability partnerships. That is in addition to their usual application to companies. These are minor clarificatory amendments to improve the technical drafting of the Bill.
Amendments 4 to 7 are minor and technical, and clarify the operation of arbitration and all hearing fees and expenses. Amendments 4 and 7 make it clear that the general rule is that the party that has paid fees is to be reimbursed half the amount by the other party, but where appropriate, the arbitrator may determine a different proportion, including zero. Amendment 5 makes a small correction to clause 19(6) to make it clear that except for reimbursement of arbitration or oral hearing fees, a party must meet its own legal or other costs. Amendment 6 makes it clear that costs incurred in connection with arbitration are not recoverable under an existing clause in the lease. Allowing cost recovery via the lease concerned would undermine the specific provisions in the Bill on fees, expenses and costs. It would also put the party able to rely on the lease terms at an advantage, as they could be more confident about investing money in their case, in the knowledge that the costs could ultimately be recovered from the other party. In addition, allowing this could potentially put the viability of the other party at risk, even when an arbitral award had been handed down in that other party’s favour.
I turn now to amendments 18 and 19. The Northern Ireland Department of Finance and Department for the Economy have requested the removal of the existing delegated power for them to make regulations for purposes corresponding to the purposes of the Bill, set out in clause 28. This decision was taken for several reasons, which include the availability of existing dispute resolution facilities, plus a lack of compelling evidence that rent debt in Northern Ireland is on a scale to require additional measures. The rationale for the policy in England and Wales remains strong, and this is where our evidence of rent arrears threatening jobs and business insolvency is focused. The removal of clause 28 necessitates an amendment to the Extent provision in clause 30(2), which currently refers to this provision.
Amendments 20 and 21 ensure that clause 24(4) extends to Northern Ireland in relation to company compromises and arrangements, but not company voluntary arrangements. That reflects the territorial extent of the Companies Act 2006 referred to in this provision.
I commend the amendments to the House.
Seema Malhotra
On the basis of the Minister’s comments, particularly those relating to ongoing review, and other comments relating to the amendments, I beg to ask leave to withdraw new clause 1.
Clause, by leave, withdrawn.
Clause 2
“Rent” and “business tenancy”
Amendments made: 1, page 2, line 19, leave out sub-paragraph (ii) and insert—
(ii) which is a fixed amount or an amount that varies or may vary according to the relevant costs (or a combination of the two),”.
This amendment clarifies that the expression “service charge” includes any amount payable under the terms of a tenancy for something mentioned in clause 2(2)(c)(i), whether it is a fixed amount or a variable amount (or a combination of a fixed part and a variable part).
Amendment 2, page 2, line 22, leave out from “costs”” to “in” and insert
“includes costs incurred by the landlord in connection with insuring against loss of rent or”.
This amendment clarifies that the costs of insurance against loss of rent are within the expression “service charge”, in addition to insurance costs relating to the demised premises and any common parts.
Clause 10
Requirements for making a reference to arbitration
Amendment made: 3, page 8, line 12, at end insert
“(as well as to companies).”
This is a drafting amendment to make clear that clause 10(6) (which applies provisions of the clause to LLPs) operates in addition to the rest of the clause
Clause 19
Arbitration fees and expenses
Amendments made: 4, page 12, leave out lines 14 to 18 and insert
“(subject to subsection (5A)) also make an award requiring the other party to reimburse the applicant for half the arbitration fees paid under subsection (4).
‘(5A) The general rule in subsection (5) does not apply if the arbitrator considers it more appropriate in the circumstances of the case to award a different proportion (which may be zero).’”
This amendment clarifies that the rule in the current clause 19(5)(a) (that the party paying the arbitration fees is to be reimbursed half of the amount) is the general rule, although the arbitrator is able to determine a different proportion, including zero, where appropriate.
Amendment 5, page 12, line 19, leave out “Otherwise” and insert
“Except as provided by subsection (5) and section 20(6),”.
This corrects a small error in clause 19(6). The word “Otherwise” at the start of clause 19(6) currently refers back to clause 19(5), but it also needs to take account of the provisions of clause 20(6) which makes provision corresponding to clause 19(5) for oral hearing fees.
Amendment 6, page 12, line 19, at end insert —
“(6A) Legal or other costs incurred in connection with arbitration (including arbitration fees) are not recoverable by virtue of any term of the business tenancy concerned.”
The amendment clarifies that arbitration costs are not recoverable under a tenancy term enabling recovery of enforcement costs relating to a breach of covenant under the tenancy. The parties’ rights and obligations in relation to arbitration costs are governed by clauses 19 and 20.
Clause 20
Oral hearings
Amendment made: 7, page 12, leave out lines 36 to 40 and insert
“(subject to subsection (6A)) also make an award requiring the other party to reimburse the applicant for half the hearing fees.
‘(6A) The general rule in subsection (6) does not apply if the arbitrator considers it more appropriate in all the circumstances to award a different proportion (which may be zero).’”
This amendment clarifies that the rule in the current clause 20(6)(a) (that the party paying the oral hearing fees is to be reimbursed half of the amount) is the general rule, although the arbitrator is able to determine a different proportion, including zero, where appropriate.
Clause 24
Temporary restriction on initiating certain insolvency arrangements
Amendment made: 8, page 14, line 37, at end insert
“(as well as to companies).”
This is a drafting amendment to make clear that clause 24(4) (which applies provisions of the clause to LLPs) operates in addition to the rest of the clause.
Clause 28
Power to make corresponding provision in Northern Ireland
Amendment made: 18, page 15, line 33, leave out clause 28.
The responsible Northern Ireland minister has informed Her Majesty’s Government that the powers to be conferred by clause 28 are no longer needed. This amendment would omit the clause, which would otherwise require the approval of a Legislative Consent Motion in the Northern Ireland Assembly.
Clause 30
Extent, Commencement and Short Title
Amendments made: 19, page 16, leave out lines 14 and 15.
The reference in clause 30(2) to clause 28 is no longer correct if clause 28 is left out of the Bill. The rest of clause 30(2) (which provides that Part 4 of the Bill extends to the whole of the UK) is reproduced in Amendment 20, so the whole of clause 30(2) can be omitted.
Amendment 20, page 16, leave out lines 18 and 19 and insert—
“(a) in section 24—
(i) subsections (1), (2)(c) and (3), and
(ii) subsection (4) so far as relating to a compromise or arrangement under section 899 or 901F of the Companies Act 2006,
(b) Part 1 so far as relating to the provisions mentioned in paragraph (a), and
(c) this Part.”
This amendment and Amendment 21 secure that clause 24(4) extends to Northern Ireland in relation to company compromises and arrangements, but not company voluntary arrangements. This is for consistency with the extent of the legislation covering those matters.
Amendment 21, page 16, leave out line 21 and insert—
“(a) in section 24—
(i) subsection (2)(a), and
(ii) subsection (4) so far as relating to a company voluntary arrangement,”.—(Paul Scully.)
See the explanatory statement for Amendment 20.
Third Reading
Queen’s consent signified.
Paul Scully
I beg to move, That the Bill be now read the Third time.
It is a pleasure to lead the Bill on Third Reading. I thank Members on both sides of the House for their support and for the many insightful contributions we have had throughout the Bill’s passage—I say that slightly tongue in cheek, because the Bill has gone through in good time. That is because of the collaboration we have had and the understanding of the need to pass this legislation with good speed, but there has none the less been some really constructive scrutiny. I am especially grateful to the shadow Ministers, the hon. Members for Feltham and Heston (Seema Malhotra) and for Brentford and Isleworth (Ruth Cadbury), for their positive engagement throughout.
These debates, and indeed the continued challenges presented by the ongoing pandemic, have emphasised just how important it is that we continue to support tenant and landlord businesses in navigating the impacts of the pandemic. The Bill does that by facilitating the resolution of certain pandemic-related commercial rent debts and supports landlords and tenants on the road to recovery. It is a purposefully focused and narrow Bill, addressing rent debt accrued by businesses mandated to close if that rent debt is attributable to a protected period as set out in the Bill.
The Bill establishes a temporary binding arbitration scheme for such rent debt, which will be delivered by independent arbitral bodies. There has been welcome debate about the specifics of the scheme, especially around the fees, as well as about the ability of arbitrators to determine the viability of businesses. We will continue to assess the impact of the cost of arbitration on businesses, especially small and medium-sized enterprises, to ensure that the binding arbitration scheme is not prohibitively priced. Guidance will be published for arbitrators, with comprehensive input and engagement from arbitrators themselves. Arbitral bodies will be empowered to deliver the scheme with confidence.
Following agreement on Report, we have made some technical amendments to better achieve the aims of the scheme. Those minor changes include clarifying certain provisions, including the definition of “service charge”, but we have also made a more substantial amendment in removing the delegated power for Northern Ireland to introduce similar provisions to those in the Bill. That was done at the request of the Northern Ireland Executive. They initially looked at this and wanted to be included, but as they looked further they realised that sufficient provisions were already in place. However, we are grateful for their engagement on the Bill.
The outstanding commercial rent debt still poses a significant threat to commercial tenants and landlords in England and Wales. I welcome the recognition from both sides of the House of the need for the Bill.
I thank the Clerks of the House for expertly steering the legislation through the House. I also thank my private office—Rhianna Patel and Guy Brindle—and the officials who have worked on the Bill: Charles McCall, Carl Creswell, Jessica Barnaby, Radhika Sundaram, Hamza Shoaib, Geraldine Haden, Jane Chelliah-Manning, Matthew Beese, Henry Hutton, Louise Dobrin, Sarah Machen and Jahan Meeran.
This Bill demonstrates the Government’s commitment to supporting the orderly resolution of commercial rent debt accrued during the pandemic, and I am pleased to have supported its passage. On that basis, I commend it to the House,
Draft Small Business, Enterprise and Employment Act 2015 and Pubs Code Etc. (Amendment) Regulations 2021
Paul Scully Excerpts(2 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I beg to move,
That the Committee has considered the draft Small Business, Enterprise and Employment Act 2015 and Pubs Code Etc. (Amendment) Regulations 2021.
It is a pleasure to serve under your chairmanship, Mr Gray.
The Pubs Code was introduced in 2016 to regulate the relationship between large pub-owning businesses and their tied pub tenants in order to address concerns about the treatment of some tenants. Under a tied tenancy, the tenant typically agrees to purchase beer and other stock from the landlord in return for a lower rent and other benefits. That arrangement means that both landlord and tenant have a shared interest in the success of the pub, and they should work in partnership to achieve that. It also means, however, that tenants are prevented from sourcing cheaper beer and other products if they want to, even when circumstances change.
The Pubs Code was introduced to create a number of rights and protections for tied tenants including better information prior to signing a contract; no upward-rent-only reviews; no tied gaming machines; and a right, at certain points, to break their tied arrangement and opt for a free-of-tie tenancy through the market rent only, or MRO, process.
The code regulates contractual arrangements that have been entered into freely by tenants and landlords. That sort of intervention by Government is only made when Parliament finds there is a clear public policy case for doing so. In this case, the intervention was justified in the light of evidence from tenants to several Select Committees suggesting that the tied model was subjecting tenants to abuse. The Government are committed to ensuring that tied tenants under the code are treated fairly and lawfully, and that there is a system for redress where alleged breaches of the code can be raised with the Pubs Code Adjudicator, the PCA.
The tied model is not inherently bad, and in most cases it works well. I have heard from tenants who are positive about their tied arrangements and welcome the partnership with their pub-owning business. It is therefore crucial thar the code strikes the right balance between protecting the tied tenant and the right of the pub-owning businesses to realise the value of their investments. The statutory requirement to review the operation of the code every three years provides an opportunity to review that balance.
The first review concluded with the publication of the Secretary of State’s report in November 2020, which found that although there had been improvements, some tied pub tenants found it hard to exercise their rights to test the free-of-tie alternative. The restrictive timetable for the process was cited as a significant issue. The most significant changes introduced by the measure before the Committee are those designed to improve how the MRO process works in practice.
The MRO process enables the tied tenant to request a proposal from their pub-owning company setting out the terms for a free-of-tie tenancy where the tenant would pay a market rent. In most cases the rent would be higher than under a tied arrangement, but the tenant would no longer be required to buy products from the pub-owning business. The statutory instrument will improve that process by, first, requiring that the initial MRO proposal from the pub-owing business includes a rent proposal, so parties can negotiate both terms and rent at the same time. Secondly, it introduces a single resolution period of up to three months. Unlike the current process, which gives tenants only 14 days to decide whether to refer a MRO proposal to the PCA, that period allows the parties time to negotiate the proposed free-of-tie terms and the offered rent. The tenant can end that period after 21 days and refer the free-of-tie terms to the PCA or the proposed rent to an independent assessor should they feel the need.
Finally, the SI makes other changes and clarifications to the MRO process following the introduction of the resolution period. For instance, if there are procedural defects in the MRO proposal, such as omission of the rent offer, the tenant has 14 days to refer those defects to the PCA.
Harriett Baldwin (West Worcestershire) (Con)
I welcome the update that the Minister is outlining, but will the amendments cover the situation that I discovered in my constituency during the pandemic when pubs were closed? I found that it was the pub-chain owner that was pocketing all the grants that were very generously provided by the Chancellor, whereas the tenant was suffering from absolute lack of business.
Paul Scully
My hon. Friend raises an important point. I do not want to start a wider debate that stretches too much from the SI, but when a tied tenancy works properly shared prosperity should occur. The pandemic proved the success and failure of the Pubs Code in that many pub-chain companies gave a lot of market discount and rent discount over and above what might have been expected from normal negotiations. They did so because they do not want empty pubs and it is in their interests. When arrangements work in both parties’ interests, the process works, but I acknowledge that there have been cases where matters have not worked well. The SI provides expressly for re-referral to the PCA where the tenant considers that the pub-owning business’s revised response is still not MRO-compliant.
Schedule 1 to the SI uses powers in the Small Business, Enterprise and Employment Act 2015 to amend the qualification period for a business owning tied pubs to come into the scope of the Pubs Code. It would change the requirement from having owned 500 or more tied pubs for six months in the previous financial year to three months. No new pub-owning businesses have reached that threshold but hon. Members will be aware of the merger and acquisition activity that is a feature of the pub sector. By determining the qualifying period by reference to the previous financial year, the Act provides an important safeguard, reflecting the need for business planning and budgeting. However, currently tied tenants may wait for nearly 18 months after their landlord reaches the 500 tied pub threshold before gaining the rights and protections of the code. For example, if a pub company increased its tied pub estate to more than 500 such pubs through acquisitions in October 2022, it would not come under the code until April 2024. Under the proposed amendment, the maximum period would be reduced to 15 months. For example, a pub company that increased its tied estate in October 2022 would now come under the code in April 2023.
That change may also result in a pub-owning business that reduced its number of tied pubs to below 500 remining regulated by the code for a longer period. That means the minimum period of full protection for the remaining tied tenants increases from six to nine months.
The amendments in schedule 2 relate to the comparison period used to determine whether a significant price increase for a tied product or a tied service has occurred. That is one of the events that allows tied tenants to request a MRO proposal and acts as a disincentive to pub-owning businesses to raise beer and other prices significantly under the tie. The Government are cautious about changing the arrangements, but there is a case for amending how the comparison period is calculated. In effect, the code created a 56-week comparison, potentially capturing two annual price increases and that raised complications for the more traditional 12-month business planning cycle. The proposed change amends that comparison period to a 52-week period, while continuing to disincentivise price increases and providing protection for tenants.
In terms of notification in relation to extended protection, that protection applies where a tied pub is transferred to a landlord that is not a regulated pub-owning business under the code. Tenants with extended protection benefit from the provisions of the code for a limited time, with the exception of the right to a MRO proposal. Currently, the PCA has no direct knowledge of such transfers. The Government propose that a regulated pub-owning business must inform the PCA when it is transferring a tied pub in circumstances that mean that the tenant will enjoy extended protection. That will allow the PCA to contact the new owners to raise awareness of their tied tenants’ rights and protections.
The SI will make helpful and important changes to improve the operation of the Pubs Code, in particular by allowing the parties a meaningful period in which to negotiate and reach a resolution. I ask the Committee to approve the instrument.
Paul Scully
I will remember to heed your words, Mr Gray, and not be tempted to drift into a wider debate—
Paul Scully
I will not tempt you to intervene.
I agree with the hon. Member for Sefton Central about the importance of pubs to our communities and the social value they offer, so it is really important that we get the balance right. I think the code was drafted in such a way that we can balance the rights and protections of tied tenants against the property rights of pub owners to ensure that they can operate the tied pub estate and secure rents on their investment while keeping the pubs in full flow for and on behalf of the community.
On parallel rent assessment, we share the aim to achieve informed decision making. I take the hon. Gentleman’s point about who actually responded to the consultation but stakeholders reinforced their concerns about additional complexity for tenants and the possible increased cost associated with providing a parallel rent assessment. Stakeholders provided valuable insight into the recruitment processes, the additional support provided particularly for tenants new to running a tied pub and the use of break clauses during the early stages of the tied agreement to enable the parties to end the commercial contract. We are working with the PCA on its tied tenants’ survey to find out more about tenants’ understanding of the terms. As the hon. Gentleman said, it is not only about people accessing the proper process in the first place, but their Pubs Code rights and what informed their decision to enter into a tied tenancy agreement in the first place.
Bill Esterson
My question about parallel rent assessments was trying to tease out how a tenant can make such a judgment call and what is the best way forward financially. What is the Minister’s answer to the question that many tenants pose about how they can make that judgment call without being given a parallel rent assessment, so that they can then compare between the tied and non-tied option?
Paul Scully
Doubts were expressed about the parallel rent assessment by tenant representatives as well, but I take the point that we must understand exactly what type of information prospective tenants need to enter into that relationship. That is why we will work with the PCA on its tenants’ survey to get to grips with that and achieve that understanding before we go further.
We believe that the amendments to the Pubs Code are proportionate in terms of improving the practical operation of the code. I appreciate the Opposition’s support for our pubs and achieving the right balance for all parties, notwithstanding the hon. Gentleman’s wish to go further on parallel rent assessments. We believe that the proposed changes improve things for tenants without placing undue constraints on pub-owning businesses, particularly at such a difficult time for the tied pubs and the hospitality sector. I am pleased to commend the measure to the Committee.
Question put and agreed to.
Reducing Costs for Businesses
Paul Scully Excerpts(2 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I have run many, many businesses over the last 25 years, and in welcoming the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) to his place, one thing I particularly agree with him on is mental health. I know what it is like to run a business in normal times. It is stressful enough for entrepreneurs who risk their homes and their own livelihoods to pay other people in normal times. In these particular times, it is right that we stepped up to support entrepreneurs to protect jobs, to protect livelihoods and to protect those businesses. Insolvencies were at a 40-year low at the height of the pandemic, and putting that £408 billion of support out there gives us 408 billion reasons to get this next bit right, to make sure that we can shape the recovery.
We have just heard the extraordinary claim that the Labour party has suddenly become the party of business. But we also heard from my hon. Friend the Member for Sedgefield (Paul Howell) about Labour Members’ woeful attendance at the Business, Energy and Industrial Strategy Committee, where they cannot be bothered to scrutinise the Department. Also, at oral questions in this place, the employers, the entrepreneurs and the people who are giving jobs are portrayed as the bad guys time and again by those people across the way. We also heard that Labour is apparently the party of the workers, yet in Wales, it is fining people for going to work.
We heard from my hon. Friend the Member for Stourbridge (Suzanne Webb) about the 50,000 more companies that have been formed since 2010. These are the fundamental roots that allow us to be able to pivot to a good solid recovery, because the fundamentals behind the UK economy remain strong as we look to power through our growth.
My hon. Friend the Member for Grantham and Stamford (Gareth Davies) was right to pay tribute to local authorities. We have heard other examples where things have not worked so well, but we have worked in partnership with local government to make sure that we can get the support to businesses, and we will continue to do so with the discretionary grants and the grants to hospitality and leisure. We need to be able to work collaboratively with local authorities.
My hon. Friend the Member for Hertford and Stortford (Julie Marson) was also listening to businesses. She talked about unprecedented events. I think the word “unprecedented” has been used an unprecedented amount of times in the last two years. I loved her analogy about the Government being the groundsman who sets the pitch for the game ahead. Unfortunately, the Labour party would set a pitch that would just take spin, because there is no plan behind what it is saying. The wicket that we would prefer would allow entrepreneurs to make a good start, to build a solid innings and to hit boundaries so that they could scale up quickly with the support that we need to be able to give them.
My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) talked about energy issues and supply issues. Yes, we are feeling them here and we must tackle them, but they are indeed a global issue. I am pleased that he again raised the issue of regional mutual banks, because that diversification of funding will have a longer-term view beyond the initial response that the Government are giving for businesses.
I was pleased that my hon. Friend the Member for Clwyd South (Simon Baynes) contrasted Wales with the UK Government. We can see the direct comparison. This is not just talk; we can see the direct comparison between what is happening in England and Wales, where that business support has dissolved.
Sir Alan Campbell (Tynemouth) (Lab)
claimed to move the closure (Standing Order No. 36).
Question put forthwith, That the Question be now put.
Question agreed to.
Main Question accordingly put.
Oral Answers to Questions
Paul Scully Excerpts(2 years, 11 months ago)
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Mr Gagan Mohindra (South West Hertfordshire) (Con)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
In addition to our £400 billion package, including grants, loans, business rates relief, VAT discounts and the rent moratorium, we are providing a further £1 billion for hospitality businesses and an extra £100 million in discretionary grants—a lifeline for many small businesses.
Mr Mohindra
Great British pubs are the heart of our community, especially in rural constituencies such as mine. I recently hosted a roundtable with several pubs in South West Hertfordshire, at which they expressed their concerns about the next few months after a tough December. Will the Minister confirm that he will do all he can to encourage people to return to their local pub? Will he commend publicans for their hard work making their businesses covid-safe, indoors and out?
Paul Scully
I thank my hon. Friend for his support for our pubs. It is important that we save our pubs one pint at a time; they play a crucial role in our high streets, our communities and our wellbeing. I am working, through the hospitality recovery strategy, to champion pubs at the heart of our communities, many of which have been supporting the vulnerable during the pandemic. We will showcase the value of the excellent work of pub landlords to make venues covid-secure, including with good ventilation.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
My nightclub in Brighton, Revenge—[Laughter.] It is not mine personally, although I do like to frequent it. It has seen a 60% fall in its patronage because of the latest variant. It is really struggling, but it has been told that it is not eligible for the latest round of grants because it has received previous grants, including the recovery grant. That is a real problem for our night-time economy and for many businesses. Will the Minister confirm that any business in the night-time economy or hospitality sector is eligible for the latest round of grants that he has released?
Paul Scully
I thank the hon. Gentleman for his reference to that aptly named nightclub in Brighton. Clearly, opening nightclubs is a big challenge because of ventilation, but they are eligible for discretionary grants: councils have £100 million for discretionary grants to support them.
Mrs Maria Miller (Basingstoke) (Con)
The café and restaurant owners I met in Basingstoke before Christmas saw their bookings plummet in the key pre-Christmas weeks, so they will really welcome the extra support that the Minister speaks about. The newly recognised personal care sector—hair and beauty—was similarly hit. Will he support that sector as well: the hairdressers, barbers and beauty businesses that make up our high streets?
Paul Scully
I support the personal care sector, which I have engaged with regularly over the past few weeks. My right hon. Friend refers to the hospitality sector, cafés and the like. The grants that we are now offering equate to the levels we were offering when those businesses were closed, in recognition of the chilling factor affecting the number of events booked in the lead-up to Christmas—that is the rationale behind it. The care sector can also get discretionary grants from the local authority.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Tory failures on the economy now show all too clearly that the Tories are no longer the party of business. Business taxes and costs are rising, revenues and profits are falling, and businesses face a cliff edge in March as support is withdrawn. Yet when hospitality businesses were losing, on average, £10,000 a week, the Chancellor was in California, with the Business Secretary nowhere to be seen. Does the Minister agree that hospitality businesses, hit hard by covid and Government chaos, need more than the one-off grants finally announced, and will he now back Labour’s calls for the Government to consider extending the VAT discount for hospitality?
Paul Scully
This Government continue to be the Government and the party for businesses, and that includes the hard-pressed hospitality sector, which is such a crucial part of the ecosystem of our high streets, our cities, and our coastal and rural areas. The Secretary of State and I spoke to hospitality sector representatives of all kinds within hours of the announcement of the move to plan B ahead of Christmas, and we will continue to support them as best we can.
Karl MᶜCartney (Lincoln) (Con)
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
The flood recovery framework is in place to determine where communities and businesses need support from central Government in severe flood events. The guidance has recently been reviewed and refreshed, to learn from previous years. The framework includes the business recovery grant, which BEIS administers as part of a Government core package of support for communities and businesses.
Emma Hardy
Flooding is now inevitable: climate change means that it is going to happen. It is not a question of if but a question of when, and small and medium-sized enterprises are disproportionately affected by the devastation of flooding. The Flood Re insurance scheme does not cover small businesses, meaning that many are left without insurance. I am pleased to hear that the flood recovery grant system is being looked at again, but will the Minister now consider talking to SMEs to design a scheme that is ready to go from the moment flooding happens? As I say, flooding is not a question of if but a question of when.
Paul Scully
The Flood Re scheme does not include businesses, as the hon. Lady says, and there are no plans to extend eligibility because that market operates differently from the household insurance market. The scheme is bespoke. I appreciate that SMEs are disproportionately affected compared with bigger businesses, but I suggest that the hon. Lady engages directly on this with the Department for Environment, Food and Rural Affairs.
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
Will the Minister look at the opportunities to manage Britain’s longest river, the River Severn? We believe that, if an holistic solution were found to managing Britain’s longest river, there would be a gross value added uplift in the west midlands of more than £150 billion. These figures are being presented to DEFRA. Will he and his Department also take an interest and work with me, as chairman of the all-party parliamentary group on the River Severn Partnership, on trying to find a solution to managing Britain’s longest river?
Paul Scully
It is important not to wait until flooding happens, as we have heard, but to manage it actively. Organisations such as Living With Water in the constituency of the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) have done very good things in proactively tackling flooding.
Again, I suggest that my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) works with DEFRA. I am happy to see what more I can do in that regard.
Munira Wilson (Twickenham) (LD)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
BEIS and the Department for Digital, Culture, Media and Sport sponsor the hospitality and entertainment sectors, both of which support the night-time economy. Alongside the £400 billion package of grants, loans, business rates relief, VAT discounts and rent moratoriums, we are providing £1 billion-worth of grants and £100 million-worth of discretionary grants.
Munira Wilson
Although the night-time economy has clearly been thriving in Whitehall, especially at the height of lockdown, many bars, clubs and pubs across the rest of London are unfortunately struggling to stay afloat, and many of them employee my constituents. The Night Time Industries Association suggests that its members have lost, on average, £45,000 over the festive period, so the grants do not touch the sides. Will the Minister commit to providing further financial support to this sector by reintroducing the 100% business rates relief and the emergency 5% VAT rate?
Paul Scully
The business rates relief and VAT relief continue, but the grants the Chancellor has offered equate to the grants we previously offered when the same businesses were mandated to close, in recognition of the chilling effect. Clearly we will continue to work with the hospitality sector, which wants to stay open and trade normally. That is why we are learning to live with covid, in contrast with, for example, Labour-run Wales, where the hospitality sector has remained hampered by further restrictions.
Sir David Evennett (Bexleyheath and Crayford) (Con)
I welcome all the support the Government have given to businesses and all the work the Minister has done personally in this area. However, hospitality and the night-time economy in Bexleyheath town centre still face real challenges with staffing as well as finance. Will my hon. Friend continue to meet representatives of these sectors to take their views on board and see what more can be done, particularly on staffing?
Paul Scully
I absolutely agree with my right hon. Friend. Interestingly, we now have 400,000 more people in work than before the pandemic, which is testament to the plan for jobs and the plan for growth, but we need to address the record number of vacancies. We need to match them with the people in work who want to work more hours, and we will do that between the Department for Work and Pensions and my work in BEIS. There will be a cross-Government approach to make sure hospitality can thrive.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
The Minister knows that Newcastle’s night-time economy is absolutely core to our city’s appeal and character. But we know that businesses in the night-time economy have accrued massive debts during this period. They are struggling with the continued uncertainty that omicron is bringing. We know that the night-time economy—our nightlife—is what makes Newcastle great and discretionary grants are welcome, but we know that some areas are impacted worse than others and have less discretionary ability to spend that on the night-time economy. So, will the Minister look at specific, targeted support for that sector, for those areas that really need it?
Paul Scully
We are trying make sure that the cities can open in full. That is a return to work, a return for students, a return to domestic travel, and a return to international travel. All those people contribute to that ecosystem of hospitality, and indeed the night-time economy, so cities have a particular view that we need to approach. We will continue to flex and work with businesses as they open up fully to pay down their debt and to trade as normally as possible to ensure that the hospitality sector—the night-time economy—can thrive in Newcastle.
Laura Trott (Sevenoaks) (Con)
Fleur Anderson (Putney) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
This party of business will not let businesses sink or swim. We will continue to engage with businesses around the regions and around the sectors to understand exactly where they need to change and to help them in their transition.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
I point out to the Secretary of State that HSBC, a British-registered bank, is being reported as having invested in Xinjiang Tianye, which is a subsidiary of Xinjiang Production and Construction Corps, which has been sanctioned by our allies the United States for committing atrocity crimes, including slave labour and genocide. Will he call in the bank and ask it to explain itself, as it is in breach of the modern-day slavery rules?
Andy McDonald (Middlesbrough) (Lab)
Paul Scully
Consequential losses are included in the scheme, which is why we have an independent panel to add that expertise and ability to help those claimants to support their evidence for compensation.
Alicia Kearns (Rutland and Melton) (Con)
At more than 2,000 acres, the Manor Farm solar park proposed for Rutland, the smallest county in England, is eight times larger than the existing solar plant. Can the Minister reassure me that when it lands on his desk, he will listen to the voice of Rutlanders and ensure proper scrutiny to protect our agricultural land and outstanding local biodiversity?
Nick Smith (Blaenau Gwent) (Lab)
The Treasury has benefited hugely from the miners pension surplus over the years. Even though the Prime Minister pledged in the 2019 election that no miner would be left behind and out of pocket, they have been. Will the Government look again at giving miners their fair share or is that another example of the Prime Minister saying one thing and doing another?
Paul Scully
The success of the current pension arrangements means that a pensioner in the scheme is 33% better off than they would be in a normal pension scheme. We continue to believe that the arrangements agreed in 1994 with the scheme’s trustees work well and are fair and beneficial to scheme members and taxpayers.
Kevin Hollinrake (Thirsk and Malton) (Con)
Regional mutual banks are key to the success of small and medium-sized enterprises in the world’s most productive economies, including Germany and the USA. Will my right hon. Friend meet me to discuss that important opportunity?
Barbara Keeley (Worsley and Eccles South) (Lab)
For the last two months, people in Eccles in my constituency have had to wait weeks and weeks for their mail. Postal delays have meant people missing urgent hospital appointments, not receiving prescriptions and suffering hardship after not receiving their bank cards. It is unacceptable that Royal Mail has done so little to fix this problem. This appalling level of service is causing harm to my constituents. Will the Minister take action to ensure that Royal Mail resolves these letter delays?
Paul Scully
I know that Royal Mail responded directly to the hon. Lady’s concerns in December 2021, and I responded just yesterday. However, I will continue to look at this, because covid sickness absences still remain, and Royal Mail is rotating deliveries so that its customers receive their mail as frequently as possible. There is clearly more that we can do, and I will ensure that we monitor that as best we can.
Paul Howell (Sedgefield) (Con)
We all know the challenges those in the automotive sector have had in the last few years, but it is more than just them; it is the supply chains as well. Can I encourage the Secretary of State to come and visit Gestamp in my constituency, which supplies everybody from Volvo to Jaguar Land Rover, Nissan and so on, to understand its efforts in research and development, and how we can help it to develop its business?
Professional Qualifications Bill [Lords]
Paul Scully ExcerptsWednesday 15th December 2021
(3 years ago)
Commons ChamberRead Full debate Professional Qualifications Act 2022 View all Professional Qualifications Act 2022 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 36-I(Corrected) Marshalled list for Report - (8 Nov 2021)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to follow the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). I thank everybody who has spoken during the debate. [Interruption.] Yes, all the people in this extensive debate.
This Bill will support trade through allowing regulations to implement trade agreements and allowing our own professionals to enter new markets. It will also support our work to meet domestic need, such as addressing national shortages, while ensuring that professional standards are maintained and regulator autonomy is protected.
My right hon. Friend the Secretary of State rightly noted the relevance of the Bill to supporting international trade for our world-leading services sectors. Provisions on the recognition of professional qualifications can make it easier for UK professionals to provide services overseas—for example, by making it easier for regulators to agree recognition agreements with overseas counterparts. With trade partners, the Government would look to agree provisions that could require regulators to operate routes to recognition. Our deals with Norway, Iceland and Liechtenstein, for example, include this type of measure. But I can reassure the House that in any agreement regulators’ existing autonomy to set standards and assess them against these deals would be maintained. Regulators are not obligated to enter into recognition agreements with counterpart regulators overseas.
Turning specifically to the UK-EU trade and co-operation agreement, this secures continued market access across a broad range of key services sectors, including professional and business services. It also includes the framework to agree professional-specific arrangements on the recognition of professional qualifications. BEIS has established a recognitions arrangement team that provides advice and support to regulators if they pursue these arrangements. The hon. Member for Sefton Central (Bill Esterson) talked about legal services, in particular. The TCA with the EU secures continued market access across a broad range of key services sectors, but on legal services we negotiated unprecedented provisions for UK lawyers to practise in the EU using their UK title in both UK and international law.
The UK proposed ambitious arrangements on professional qualifications with the TCA, but regrettably the EU did not engage with them. However, on legal services we do, as I say, have unprecedented provisions. The Bill is also consistent with our other international commitments, including the common travel area with Ireland. The Bill does not alter the Government’s determination to uphold our CTA commitments. The Government are also working closely with the Irish Government and regulators to ensure that UK and Irish professions have continued routes to recognition.
The hon. Member for Sefton Central, and others, talked about skills and skills shortages. I thank him for his point on that. However, it is important to be clear about how the Bill fits into the Government’s overall skills strategy. The Bill allows regulations to be made requiring a regulator to be able to receive applications, assess individuals’ qualifications and experience gained overseas, and decide on whether to treat them as if they had the required UK qualifications or experience. That can be done only where there is a clear unmet demand for the services of a regulated profession.
Separate from the provisions of the Bill, the Government can, when necessary, consider short-term measures to deal with skills shortages, as they have in the case of HGV drivers. The Bill also plays its part in making sure that aspiring and qualified professionals can find the information they need to access professions, including transparency requirements for regulators to have clearer information online, and it provides for an assistance centre to help professionals directly.
But neither the Bill nor such short-term measures take the place of our domestic skills strategy. Our lifetime skills guarantee will enable anybody to acquire the skills to do those jobs wherever they live and whatever the stage of their life. The Skills and Post-16 Education Bill currently going through Parliament will set up the country for success by giving people the skills and the education they need for work. It puts employers at the heart of the skills system to make sure that local skill provision meets local needs, so that people can thrive where they live.
I will respond to the points raised by the hon. Member for Midlothian (Owen Thompson) on concurrent powers in the Bill and securing legislative consent motions for the devolved Administrations. I want to reassure the House that the Bill has been carefully designed to respect the devolution settlements. The inclusion of concurrent powers ensures that professions that fall within devolved legislative competence but are regulated on a UK-wide basis can be dealt with efficiently and appropriately under the Bill by the relevant and appropriate national authority.
The UK Government are working hard to seek common ground with the devolved Administrations. The devolved Administrations rejected our previous proposal of a formal duty to consult before regulating in areas of devolved competence, but we have now offered to place on the face of the Bill a stronger duty to consult. The amendment would require the Secretary of State or the Lord Chancellor to consult with devolved Administrations before making regulations under the Bill that contain provisions that could be made by devolved Administrations themselves, and then to publish a report on the consultation to be agreed with those devolved Administrations.
We have also offered to table an amendment to carve the Bill out of schedule 7B of the Government of Wales Act 2006, allowing the Senedd to remove UK Ministers’ concurrent powers if they deem that to be necessary. The Welsh Government will still be required to consult with the UK Government on the removal of those powers.
The Government’s approach demonstrates our commitment to transparency and scrutiny, and to preserving the balance of the devolution settlement while maintaining a coherent approach across the UK. Let me make it clear: it is not the Government’s intention to make regulations in relation to matters on which the devolved Administrations could legislate without seeking their views.
I hope that hon. Members from across the UK can support the Bill. We will continue to work in collaboration with the devolved Administrations and devolved regulators to ensure an approach that works for all parts of the UK. I look forward to discussing the Bill in Committee, and I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).
Professional Qualifications Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Professional Qualifications Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 20 January 2022.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) shall be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Andrea Jenkyns.)
Question agreed to.
Professional Qualifications Bill [Lords] (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Professional Qualifications Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:
(1) any expenditure incurred under or by virtue of the Act by a Minister of the Crown; and
(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Andrea Jenkyns.)
Question agreed to.
Marriage and Civil Partnership (Minimum Age) Bill (Money)
Queen’s recommendation signified.
Resolved,
That, for the purposes of any Act resulting from the Marriage and Civil Partnership (Minimum Age) Bill, it is expedient to authorise the payment out of money provided by Parliament of:
(a) any expenditure incurred under or by virtue of the Act by the Secretary of State, and
(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Tom Pursglove.)
Question agreed to.
Postmasters with Overturned Convictions: Settlement Funds
Paul Scully Excerpts(3 years ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
With permission, Madam Deputy Speaker, I will make a statement on the latest steps that the Government are taking to ensure that swift and fair compensation is made available to postmasters whose Horizon-related convictions are quashed.
The House is very well aware of the terrible impact felt by the many postmasters affected by issues with the Post Office’s Horizon IT system. These distressing consequences have been widely documented both in the courts, in the 2019 group litigation order judgments, and in the more recent Court of Appeal judgments, as well as in the media. I have met postmasters personally to hear how their lives and the lives of their families have been affected by these events. No one who has heard these stories could fail to be moved by the impact that these events have had on individual postmasters’ lives and their fight for justice over a number of years. I pay tribute to colleagues on both sides of the House who have supported postmasters in their efforts to expose the truth and see justice done.
Today I would like to take the opportunity to update the House on the latest steps the Government are taking to ensure that fair compensation is paid to postmasters with convictions that have been quashed due to Horizon evidence being essential to their prosecution. In the first instance, we worked with the Post Office to deliver interim payments of up to £100,000 for each eligible postmaster. I informed the House of the Government’s decision to provide funding for these interim payments last July. Government funding was necessary because the Post Office does not have the necessary funds to deliver the appropriate compensation. That is why it turned to the Department for Business, Energy and Industrial Strategy, as its 100% shareholder, for funding of these interim payments.
I am pleased to report to the House that the interim payments are progressing well. The Post Office has received 66 applications for interim payments. Of these, 62 offers have been made, and of those, 50 have been accepted and payments made. Payments made to date have all been for the maximum interim amount of £100,000. I am pleased that these interim payments have helped to deliver an early down payment on the compensation due to affected postmasters in advance of full and final compensation packages being agreed. But that is only the first step. It is right that the focus now shifts to the agreement of full and final settlements. That is why the Government have been working with the Post Office to agree funding to facilitate the Post Office making final compensation payments to postmasters. As I announced in a written ministerial statement to the House yesterday, the Government have now agreed to provide funding for that purpose. We are working with the Post Office to enable the final settlement negotiations to begin as soon as possible.
To be clear, the Post Office is not proposing a new compensation scheme to deliver full and final settlements. The Post Office is instead proposing to follow a process of alternative dispute resolution in which it will aim to agree an appropriate level of compensation with each postmaster, recognising the individual circumstances of each case. The Government support the Post Office in its aim of reaching fair settlements with postmasters via alternative dispute resolution, as we believe that this will lead to speedier delivery of compensation for postmasters.
I am not in a position to give significant detail today about this process, as the final detailed approach to these negotiations will need to be discussed and agreed between Post Office Ltd and individual postmasters and their representatives. I am sure that colleagues will agree that it is important that the Post Office listens to postmasters’ views and that these are taken into account in how these negotiations proceed.
While it will be for the Post Office to negotiate settlements directly with claimants and their representatives, the Government will work closely with the Post Office to ensure that fair compensation is delivered. Given the impacts on so many individual lives, it is right that the Government stand behind the Post Office and provide this funding to ensure that fair compensation can be made to individuals who were wrongly prosecuted and convicted on the basis of unreliable Horizon evidence. While compensation cannot change what is past, it can provide a degree of recompense for past wrongs.
In addition to providing compensation, it is important that we learn lessons so that something similar can never happen again. That is why the Government have set up the Post Office Horizon IT inquiry and put it on a statutory footing to ensure that it has all the powers it needs to investigate what happened, establish the facts and make recommendations for the future. The inquiry has recently set out the full list of issues that it is investigating, and core participants have started to share key documents with the chair, Sir Wyn Williams, and his team. We will co-operate fully with the inquiry to ensure that the facts of what happened are established and lessons learned. I commend this statement to the House.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I thank the Minister for his statement, and for providing advance sight of it before he came to the Chamber.
I believe we are in unanimous agreement across the House that the Horizon scandal has been a shocking injustice. In fact, I believe it is no exaggeration to say that it is one of the greatest scandals of modern times. It is a scandal that has blighted the lives of hundreds of sub-postmasters, but also their families and those who have worked with them. I join the Minister in paying tribute to those postmasters who have been relentless in their quest for justice, as well as all those in this House, including my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), and, in the other place, Lord Arbuthnot, for their work in this area.
Given that forensic accountants first went in to discover the truth in 2010, the Minister will appreciate how frustrating it has been for many people to see how protracted this fight for justice has been. Innocent hard-working people wrongly spending time behind bars is simply unconscionable, but to add insult to injustice, the Post Office then attempted to cover up its mistakes by shredding documents and then attempting to bury those seeking justice in endless legal battles. There is, frankly, no condemnation strong enough for such behaviour.
The Government are right to make this announcement. However, I think we must be clear that the Government are not paying this compensation out of the goodness of their heart, but quite simply because there is no other choice to take, given the unambiguous position and the finding in the Court of Appeal. Although we welcome the announcement, I want to press the Government on some key matters that I think need resolving to ensure that all those affected receive the compensation they deserve and that nothing like this can ever happen again.
First, will the Minister confirm that compensation is for everyone, including those who had civil as opposed to criminal processes against them? Surely the Government accept that justice must be available to all affected, not just those who faced criminal prosecution. Further, how many settlements does the Minister envisage being made in totality?
Secondly, will the Minister confirm that the compensation will not affect the Post Office’s core funding, day-to-day operations or viability in any way, given the vital role it performs in all our communities?
Thirdly, the Government must acknowledge that all those involved in the initial mistakes and subsequent failures must also bear some responsibility, so will the Minister confirm that none of those involved have been rewarded with top senior jobs elsewhere?
Fourthly, as the Minister referenced the Post Office Horizon IT inquiry, what information can he give the House on the likely timescales that we can expect for further information as to its findings and report?
The shattering reality of this scandal will be felt in families and communities for years to come. The Government have made and taken the right step today, but I believe it will be one of many if we are ever to make amends for this most insidious injustice.
Paul Scully
I welcome the hon. Gentleman to his place. He is right that we are not making the funding available from the goodness of our heart; we are doing so because it is the right thing to do. I do not think anybody—as well as being a Government Minister, I am a constituency MP and a human being—can read these cases and listen to those involved, and fail to be moved by what has happened over the last 20 years. The hon. Gentleman has asked a number of questions, so let me try to go through those.
A number of schemes are available, including the historical shortfall scheme, which the Post Office made public and wrote to a number of people about. About 2,500 people came forward, which was more than the Post Office thought would. That scheme is going through its process at the moment, and the Government are ensuring that it is pushed forward as quickly as possible. The Post Office has also written to 640 postmasters whose prosecution is believed to have had Horizon as a primary part; we will see what happens in terms of people coming back from that. The Court of Appeal will work through those appeals and the Post Office will go through the compensation process.
On the 555 who pioneered this work, I have said in my conversations with them and in correspondence that the settlement was full and final. However, I recognise what they have done and that none of this would have been possible without their work, and I will continue to work with them to see what we can do.
On the core funding that the hon. Gentleman talked about, this money is from government—it is from taxpayers—and it is separate. We have not paid for the Post Office’s litigation costs. Compensation will not come from core funding.
The hon. Gentleman asked about the time of the inquiry, and I would expect Sir Wyn Williams to give an update on that as soon as possible. Clearly, we want it to go through as quickly as possible, but we want to make sure it is thorough. There is a lot of documentation and complexity after two decades, as the hon. Gentleman can imagine.
Mr Andrew Mitchell (Sutton Coldfield) (Con)
I am grateful to my hon. Friend for his statement. Will he reflect on the fact that this extraordinary miscarriage of justice has been made worse by the fact that the Post Office could use public money to overwhelm these honest and decent postmasters and postmistresses, so that their legitimate recompense is all, or at least partly, gobbled up by massive legal fees? On behalf of the Government, the Minister will want to reflect on why it has taken so long for them to acknowledge and accept what Members on both sides of the House have been calling for, for years and years—none more so than our former colleague the right hon. Lord Arbuthnot. Will the Minister say a little more about what will be done to hold to account those who so shamefully led the Post Office, and so grievously let down the honest men and women who worked for them?
Paul Scully
I thank my right hon. Friend. As I said, the 555 sub-postmasters who were part of the High Court case performed a massive public service by exposing the wrongdoings within the Post Office, and I recognise the deep frustration at the fact that because they agreed that the settlement with the Post Office would be a full and final one, they do not qualify for these compensation schemes. I have met some of those people and, as I said, I will continue to work on what more we can do.
On the people who may be found liable, it is important that Sir Wyn Williams does his work, in an independent inquiry. I may have my own views, but it is not right for me, from this place, to be directing in one way or in one shape or form. I am hoping that he will get his work done quickly and as thoroughly as possible.
Ms Anum Qaisar (Airdrie and Shotts) (SNP)
I thank the Minister for advance sight of his statement. I begin by paying tribute to all those hard-working people who have been fighting for justice. I welcome the announcement from the Minister, but we must be clear that the Department will ensure that losses made by the Post Office as a result of former postmasters’ class action over the Horizon accounting software will not affect decisions on postmaster pay. I welcome his comments on that. The Horizon case has spanned decades, under consecutive Labour, Liberal and Tory Ministers, and is a stain on the Post Office. Given the issue of postmaster remuneration, with postmasters on less than the minimum wage at times, repayments to postmasters must not, after benefiting shareholders, hurt the postmasters themselves.
We in the Scottish National party were at the forefront of calls for a statutory judge-led inquiry, and Scots postmasters have also subsequently called for an inquiry. The Post Office attempted to appeal its loss in the first trial, which covered the contractual relationship between the Post Office and sub-postmasters. Judge Fraser found that there was a culture of secrecy and confidentiality generally in the Post Office, but particularly in respect of the Horizon accounting and retail system, which sub-postmasters used to run branches. This scandal has been widely reported for more than a decade. It is hard to understand how, in a company entirely held by the BEIS Secretary, this was allowed to continue for so long, and how the Post Office justified refusing to give information on those they were prosecuting in disclosure for fear that it would help the defence. What steps have Ministers from this Administration or previous Administrations taken to question the continuation of these prosecutions? What support will be given to those who continue this campaign?
Hundreds of postmasters running their local community businesses have been affected by this scandal. Many have lost their businesses. There must be full compensation, but can the Minister assure the House that the costs will be paid entirely by the UK Government, so that this is not used as another excuse to make cuts impacting postmasters, who have had to deal with this issue for years? Lastly, can the Minister confirm that all those responsible for the multitude of failings will be held to account?
Paul Scully
I fully expect the first and third of the hon. Lady’s questions to be dealt with by the statutory inquiry led by Sir Wyn Williams. It is important that he has the space, without my breathing down his neck, to look at this independently and objectively. We can agree that this scandal needs to be righted, and it must never happen again. In terms of the costs, the point of this statement and my previous statement about interim payments is that the Government will be supporting the compensation schemes financially. It is important, given its social value, that the Post Office has a real future, but it will only have a future if we sort out the past.
Lucy Allan (Telford) (Con)
I thank the Minister for his statement and for the work he has done in getting to this stage. I also thank the Prime Minister, who has been engaged in this as well. The people who orchestrated this miscarriage of justice have paid no price. A series of Ministers who came to this place, read out their script, looked the other way and did not ask any questions contributed to the suffering, too, and we should all acknowledge that. I do not include the current Minister in that category.
The 555 sub-postmasters who so bravely took on the Post Office through the group litigation, paid for Mr Justice Fraser’s judgment. Surely they should be allowed to be compensated on an equal footing, because it is they who exposed the wrongdoing. We should be thanking them and ensuring that they are compensated equally. Does the Minister agree?
Paul Scully
What I have said is that everyone who has been wronged by this should have full and fair justice and full and fair compensation, and I absolutely acknowledge the role of the 555 in pioneering to get us to this position. I will continue to work to see what more we can do to work with the 555 to ensure that they are fully included in what I have just said about justice and compensation.
Mr Kevan Jones (North Durham) (Lab)
First, I thank my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) for wiping me out of the campaign, or not recognising my contribution to the campaign over the past few years. I first got involved in this campaign 10 years ago. My constituent Tom Brown was accused of stealing £84,000, which he paid back. After two years, the Post Office dropped the case having bankrupted the individual. He was one of the 555, and without them and the discovery that went along with that, the deceit, the cover-up and the downright lies would not have been exposed. He will now only get £20,000. The Minister has moved this on more than his predecessors, but these people need access to that justice. They only settled because the Post Office used £100 million of public money to force them to the negotiating table. They cannot be left high and dry; they were the people who got to the truth around this. They need fully compensating, even if they just get back what they paid back. In Tom’s case, that is £84,000 that the Post Office has that was never missing and is still in their coffers.
Paul Scully
I recognise the right hon. Gentleman’s work over the past 10 years and the conversations we have had on this. I just let him know that I very much hear exactly what he is saying. I totally empathise with what he is saying, and I will continue to work to that end.
John Redwood (Wokingham) (Con)
I am grateful to the Minister for changing the policy. I have been a long-standing critic of past Governments and Ministers for not telling the Post Office to apologise and pay up, and I encourage him today to ensure that the Post Office apologises properly, and pays up quickly and generously.
Paul Scully
My right hon. Friend is absolutely right. We will ensure that we lean into the Post Office to ensure that they deliver all compensation schemes quickly and equitably so that we can get this issue sorted out. The Post Office has acknowledged that it has done wrong, but the inquiry will detail the questions that it needs to answer over the next few months.
Andrew Gwynne (Denton and Reddish) (Lab)
May I pay tribute to the fortitude and persistence of Della Ryan, the former sub-postmistress at Dukinfield? Sub-postmasters and mistresses were ostracised, persecuted and prosecuted by the state. They lost their businesses, their mental health and physical health deteriorated, and some lost relationships. Compensation is a drop in the ocean compared to the decade of hell that they have been through, but how many people does the Minister expect to receive compensation? Some 555 took part in the litigation, but he said that only 66 had so far made applications for compensation. Why is there such a big gap?
Paul Scully
The 66 people who have applied are those who had been convicted. There is clearly a wider group who have lost money, as we heard earlier from the constituent of the right hon. Member for North Durham (Mr Jones). There are various compensation schemes for people who have had shortfalls and for those who have had convictions overturned—the 66 people I mentioned. The hon. Member for Denton and Reddish (Andrew Gwynne) is absolutely right that we need to acknowledge not just the financial losses—as bad as they are—but the impact on mental health, the strains, people’s ostracisation from communities, and, in some cases, the deaths.
Paul Howell (Sedgefield) (Con)
As a member of the Business, Energy and Industrial Strategy Committee, I have listened to some of the harrowing tales about what has gone on in this situation, and I am sure that the issue will come back to the Committee at a later point.
One of the biggest failings was the attitude of the Post Office throughout, including the culture of denial. Will the Minister assure us that the Post Office itself has been challenged to ensure that that culture changes and we do not see such a situation again? As has been said, the sooner that we can get payments to these people, the better. We cannot let it drag on forever; it must be as quick and prompt as possible.
Paul Scully
I look forward to coming to my hon. Friend’s Select Committee next month to discuss the issue further. The Post Office has acknowledged that there have been wrongs in the past. There still remain issues that we discuss, but discussions can become too legalistic, when what the wronged postmasters actually want is more empathy; we will continue to work to that end. As my hon. Friend says, we want to ensure that we bring this matter to a swift and fair end.
Stephanie Peacock (Barnsley East) (Lab)
Postmasters were criminalised by a culture that assumed that technology could not fail and workers were dishonest, so will the Minister tell us what steps the Government are taking to ensure that a scandal like this cannot happen again?
Paul Scully
These questions have been addressed not just in the original Justice Fraser report, which talked about the technology and the Horizon software; Sir Wyn Williams also has technical advisers to his independent inquiry to give him advice on the recommendations that he may want to make. We will indeed ensure that the software, which has been improved—there have been iterations since the last of the prosecutions—continues to improve. Indeed, I would expect it to be replaced at some point.
Mr David Davis (Haltemprice and Howden) (Con)
The Horizon scandal obviously ruined many hundreds of lives, and the whole House will welcome the Government stepping in to meet the bill for compensation. However, the involvement of the Treasury in previous compensation schemes—Equitable Life comes to mind, but others too—has not always been wholly beneficial. Does my hon. Friend agree that we must not allow arbitrary Treasury rules to limit the compensation paid to these postmasters, whose lives have often been completely ruined by the process—not simply the financial process, but the emotional and social damage?
Paul Scully
My right hon. Friend makes an important point. Clearly the Treasury has these rules to make sure it gets the best value for taxpayers’ money but, none the less, some things go beyond that. We have talked about the human cost now and umpteen times over the past 20 years, and it is important we get this right.
Gareth Thomas (Harrow West) (Lab/Co-op)
On the watch of the former Post Office managing director Mr Alan Cook, now the very well-paid chair of Liverpool Victoria, I understand more than 160 sub-postmasters were prosecuted and almost 60 went to prison. I hope the Minister is able to say how many of those sub-postmasters will be compensated and whether Mr Cook has been invited to give evidence to Sir Wyn Williams’s inquiry.
Specifically, does the Minister share my view that, for that record as well as his ill-judged effort to demutualise LV=, there are questions as to whether Mr Cook is any longer a fit and proper person to run a major business?
Paul Scully
I will not comment on Alan Cook, if the hon. Gentleman does not mind, but I recognise what he says about this statement, previous statements and Liverpool Victoria. Such issues will be a matter for Sir Wyn’s inquiry.
On the convictions, the Post Office has received 66 claims for interim payments and has made 62 offers, of which 50 have been accepted. There are people with convictions that they believe to be unsafe, and the Post Office has contacted 640 people. The Criminal Cases Review Commission has said those people can go directly to the Court of Appeal to seek the overturning of those convictions. We will see how many come forward, but it is difficult for me to give an exact figure.
Jason McCartney (Colne Valley) (Con)
I have been contacted by a constituent who was among the 555 litigants in the civil proceedings brought against Post Office Ltd back in 2018-19. Of course, as we have heard, those litigants are excluded from the current compensation schemes. What redress, support and compensation does the Minister think my constituent and the other original litigants actually deserve?
Paul Scully
I have said that the majority of them are pioneers, and I need to do more work with them. I say “the majority” because some of the 555 were convicted themselves and will potentially have unsafe convictions, so they will be eligible for the interim payment of £100,000 and will move on to the wider compensation that we are discussing today.
Aaron Bell (Newcastle-under-Lyme) (Con)
The Horizon scandal is one of the worst we have seen, and the wider Government—not just the Post Office—particularly need to learn the lessons on how to treat IT evidence. I welcome the statement and the approval of these funds, but does the Minister agree that the Post Office must now make significant cultural and organisational changes to repair the relationship with postmasters and to make sure that such a situation can never be repeated?
Paul Scully
I appreciate my hon. Friend’s words and, yes, the Post Office must do that, and it is. Nick Read, the chief executive, has come a long way to give the Post Office that future by resetting the relationship with postmasters and sub-postmasters. There is clearly more to do, but we will best provide that future by giving sub-postmasters the confidence and trust they need by righting the wrongs of the past.
Mark Pawsey (Rugby) (Con)
In a Select Committee evidence session in 2019 we heard from postmasters affected by the Horizon debacle, and we heard harrowing accounts of small family enterprises—often a husband and wife—working through the night to go through the books to find losses that did not exist because the computer system did not work. I welcome the interim compensation payments that the Minister has announced today. Will he say a bit more about the Government’s role? In their response to the Committee’s report, the Government acknowledged their own responsibility
“to have visibility of and challenge Post Office Ltd’s major operational and strategic decisions to ensure the sustainability of the network is maintained and that good corporate governance and financial stewardship practices are upheld.”
On that basis, does he believe the Government should have grasped the situation earlier and acted more decisively? What improvements are being made to make certain that postmasters are never again placed in this position?
Paul Scully
First, I believe we now have robust monitoring not just of the compensation schemes but of the future relationship with the Post Office and postmasters. That is exactly what Sir Wyn Williams’s inquiry is there to find out—not just the Post Office’s role, but the Government’s role. If we have fallen short of expectations, I expect to put my hands up and say we got it wrong.
Duncan Baker (North Norfolk) (Con)
As a former postmaster—I think probably the only one in the House—I really welcome this statement. It ought to be placed on the record that the Minister has done more than anyone else in his position to doggedly pursue this issue, and many, many people out there who are affected will be very grateful for this news.
I want to touch on two aspects. On the £100,000 that has been paid to those who have had their convictions quashed, will there be a cap on the amount paid out as compensation? Can he give any further reassurance on when the full and final settlements will be made?
Paul Scully
I appreciate my hon. Friend’s kind words. The £100,000 has gone out as interim compensation. The full and final compensation will not be capped but will be worked out on an individual basis, because everybody is an individual and we have heard so many different examples of that.
As for people in different types of compensation schemes, we want to get this done as quickly as possible. I hope and expect that the historical shortfall scheme will be done by the end of next year. I will continue to work with everybody on this matter, because it is so important. I know that they want this sorted out tomorrow; there are complications, but people continue to suffer and I will do everything I can. My new year’s resolution—I will make it early—is that I will get this sorted out as soon as I can.
Postmasters with Overturned Convictions: Funds for Full and Final Settlement
Paul Scully Excerpts(3 years ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
This House is aware of the distressing impact that problems with the Post Office’s Horizon IT system have had on the lives and livelihoods of many postmasters.
The Court of Appeal handed down a landmark judgment on 23 April 2021 which quashed the convictions of 39 postmasters whose prosecution had relied on Horizon evidence. Seventy-two convictions have now been quashed to date, and several others are in progress. There are potentially hundreds more postmasters whose convictions have relied on Horizon evidence and may seek to have their convictions quashed.
We want to see these postmasters with quashed convictions compensated fairly and swiftly. So far, the vast majority of postmasters who have had their convictions quashed have each received an interim compensation payment of up to £100,000 while they wait for the next steps in the proceedings.
I am pleased to confirm that today the Government are making funding available to facilitate Post Office to make final compensation payments to postmasters whose convictions have been overturned. We are working with Post Office to finalise the arrangements that will enable the final settlement negotiations to begin as soon as possible. By providing this funding, Government are helping Post Office deliver the fair compensation postmasters deserve.
With the Secretary of State’s status as sole shareholder in the Post Office, my Department continues to engage actively with Post Office Limited on this and will maintain strong oversight of the compensation process.
[HCWS473]
Commercial Rent (Coronavirus) Bill (Fourth sitting)
Paul Scully ExcerptsTuesday 14th December 2021
(3 years ago)
Public Bill CommitteesRead Full debate Commercial Rent (Coronavirus) Bill 2021-22 View all Commercial Rent (Coronavirus) Bill 2021-22 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Notices of Amendments as at 10 December 2021 - (10 Dec 2021)
The Chair
Before we begin, I have a few reminders for the Committee. Please switch electronic devices to silent or off. No food or drink is permitted during sittings of the Committee, except for the water provided. Members are encouraged to wear masks when they are not speaking, in line with Government and Commission advice. Please give one another and members of staff space when seated and when entering and leaving the room. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. That may be done at home or in the testing centre on the estate. Hansard colleagues would be grateful if Members emailed any speaking notes to hansardnotes@parliament.uk.
Clause 13
Arbitration awards available
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
As usual, Mr Hosie, it is a pleasure to serve under your chairmanship.
The clause sets out what awards an arbitrator may make following a reference to arbitration. It provides clarity to arbitrators and parties considering arbitration about the criteria for successful referral.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is pleasure to serve under your chairship, Mr Hosie.
Subsection (3) requires an arbitrator to dismiss a reference if they find that the tenant’s business “is not viable” and
“would not be viable even if the tenant were to be given relief from payment”.
Will the Minister say more about what constitute viable and unviable businesses? Groups representing the hospitality sector, for example, have made it clear that the seasonal nature of their businesses should be reflected in the viability test. As well as being provided with guidance, arbitrators should also have the right level of flexibility.
Paul Scully
I am happy to give the hon. Lady that assurance. The reason why we do not have a specific definition of what constitutes viability or affordability is that businesses models vary greatly, including with seasonality, and within and between sectors. Under clause 16, which we will consider later, we include factors that the arbitrator should consider when assessing the viability of the tenant’s business.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Clause 14
Arbitrator’s award on the matter of relief from payment
Question proposed, That the clause stand part of the Bill.
Paul Scully
The Bill contains principles that are key to ensuring that rent debt is resolved in a proportionate way for tenants and landlords. The clause sets out how arbitrators must consider those principles when making an award under the Bill.
Seema Malhotra
I have a couple of questions about the clause. First, will the Minister clarify why the Government have chosen to make the repayment time under subsection (7) 24 months? Has he concluded that that will be sufficient time for businesses to repay what they owe, even if further covid restrictions are put in place? The current circumstances are a cause for concern to businesses that have seen revenues drop while costs continue. Secondly, reflecting the concerns of stakeholders including the Pubs Advisory Service, will the Minister clarify whether subsection (2) implies that the arbitrator will consider only the final proposal when making the award, or will they consider all proposals made by both parties in the round?
Paul Scully
In awards that give tenants time to repay the debt, tenants will have no longer than 24 months to do so. That recognises that additional time to repay may help businesses to recover and start to trade as normal, while ensuring that the issue of rent debts does not drag on unnecessarily. As for how it works, the scheme uses a key aspect of pension arbitration, by which each may propose a financial solution to pay protected rent, and the arbitrator will select the proposal that is most consistent with the principles set out in the Bill, assuming that one at least follows those principles. Otherwise, the arbitrator must make whatever award the arbitrator considers appropriate when applying the principles.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clause 15
Arbitrator’s principles
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 1—Review of awards—
“(1) The Secretary of State must no later than three months following the day on which this Act is passed conduct a review to assess whether sections 15 and 16 of this Act have been interpreted consistently by approved arbitration bodies.
(2) In conducting a review under subsection (1), the Secretary of State shall have regard to published awards.
(3) If a review under subsection (1) identifies material inconsistencies in the interpretation of sections 15 and 16 of this Act, the Secretary of State must issue further guidance or amend existing current guidance to arbitrators about the exercise of their functions under the Act.”
This new clause would require the Secretary of State to conduct a review of awards to assess whether sections 15 and 16 of the Act have been interpreted consistently and publish or amend guidance as necessary.
Seema Malhotra
New clause 1 is a probing amendment. It would require the Secretary of State to conduct a review of awards to assess whether sections 15 and 16 of the Act have been interpreted consistently and to publish or amend guidance as necessary. We have heard issues raised about the interpretation of viability of businesses and making sure there is enough experience with arbitrators to ensure a consistent approach to resolving rent debt. In tabling the new clause we are seeking a review. It is helpful to know if the Secretary of State is seeking feedback on how the system is working and whether there are inconsistencies identified, which may require further guidance to be given to arbitrators about the exercise of their functions under the Bill. That is in the interest of strengthening the regime and trust in it among tenants and landlords alike. I would be grateful for the Minister’s comments on what feedback process he is expecting to see otherwise, so that we can make sure there is learning through the system and that it works effectively.
Paul Scully
We are committed to the principles in the Bill. That is why we have included them in the legislation. We will require arbitrators to follow them in their work. Arbitration bodies will only appoint arbitrators that are considered suitable to carry out arbitration as set out in the Bill. These bodies also have the power to oversee any arbitration when an arbitrator is appointed.
The arbitration system is designed to be a quick, effective and impartial solution to rent debts that cannot otherwise be resolved. Requiring a review of the arbitration process within three months of the Bill being in force could slow that process down. It may add additional steps and requirements for arbitrators who have already proven their suitability and impartiality for the role. It may postpone the appointment of arbitrators, further delaying cases if arbitration bodies must await the findings of the review before acting.
If new or revised guidance were required following a review, it would take additional time to produce and would not be in place for many cases referred to arbitration. We currently expect that all applications to arbitration would be made within six months and that cases should be resolved as soon as practicable afterward. Under the Bill’s provisions, the Secretary of State can also request a report from approved arbitration bodies covering the exercise of their functions under the Bill, including details on awards made and the application of the principles set out in the Bill on arbitrations they oversee.
There is a requirement for arbitrators to publish details of awards made, including the reasons behind it. That will show how arbitrators have applied the principles in the Bill to come to their decision. If there is any need to revise the guidance, for example to clarify or add new information for arbitrators, the Secretary of State is already able to do so. In summary, the Bill already contains several ways of monitoring the application of its principles. If the need arises, guidance can be updated to ensure that arbitrators have the information required to carry out their work. I do not believe that a required review would benefit the aims of the Bill. Therefore, I hope the hon. Member will withdraw her new clause.
Seema Malhotra
On the basis that there are other mechanisms that the Minister will—I use the word will—be using to ensure that there is feedback from the system, we will not push the new clause to a vote today. However, I do think it will be important to keep this under review. I expect that on Report in the new year, when circumstances might be different, we may want to look again at some of these amendments.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16
Arbitrator: assessment of “viability” and “solvency”
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause is important because it relates to the key principles of viability and solvency that underpin the arbitration process. Arbitrators must ensure that an award maintains or restores a business’s viability as long as it is considered that it would be preserving a landlord’s solvency.
Seema Malhotra
Subsection (2) lists factors to which an arbitrator may have to have regard when assessing landlord solvency, so far as the information is known. Could the Minister confirm whether further details about this evidence will be released by the Government? Again, I am just asking about consistency in the arbitration process.
Subsection 3 states that the arbitrator must disregard the possibility of either party borrowing money or restructuring their business. We support this measure and think it will contribute to ensuring that the arbitration process is fair. However, if would be helpful to hear some clarification on the regulations outlined in clause 16, and what further guidance will be forthcoming.
Paul Scully
I have talked about the fact that in this clause there are a number of factors when assessing the viability of a tenant’s business. I would also point the hon. Lady to the code of practice, which is not only for the use of the arbitrator, but for people who fall outside the scope of the Bill. It contains a non-exhaustive list of evidence that can be considered when determining viability and affordability, including existing and anticipated credit debt balance; business performance since March 2020; the tenant’s assets, some of which may be liquid, others of which may be plants or machinery; the position of the tenant with other tenancies; insolvency of a major customer; unexpected retentions or knowledge of a lack of working capital; or loss of key personnel or staff redundancies. Further factors can be found in annex B of the code of practice.
Question put and agreed to.
Clause 16 accordingly ordered to stand part of the Bill.
Clause 17
Timing of arbitrator’s award
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause establishes the timeframe for making awards, requiring arbitrators to make an award as soon practicable or, in the case of a normal hearing, within 14 days.
Seema Malhotra
We recognise that both businesses and landlords will benefit from prompt solutions to rent debt. Can the Minister explain why a different time frame is appropriate for the making of the award depending on whether an oral hearing is held or not? It would also be helpful if he could explain what
“as soon as reasonably practicable”
means in this context. What would be a reasonable period of time for the award to be made?
Stakeholders have suggested to us that under the pubs code, awards and adjudications can take up to a year to be published. Presumably the Minister can confirm that this would certainly not be reasonable. He has talked in general terms about time limits before, but given that there is no stipulated time limit under clause 17(1), what recourse would the parties have where no award is forthcoming in a timely manner?
Paul Scully
Although the applicant making a reference to arbitration must submit a formal proposal, there is the option for the respondent to also submit a formal proposal. Both parties also have the option to submit revised proposals. In addition, some cases may be more complex than others, and the arbitrator may need to ask for further information. The Bill therefore provides that the arbitrator must make the award as soon as reasonably practicable, which will allow for any additional work required because of the complexity of the case. I assure the hon. Lady that we are indeed hoping and expecting such cases to be resolved within a matter of months rather than, as she described in relation to the pubs code, anywhere approaching a year.
When there is a long period, there is a clear date on which the hearing concludes and evidence has been given, so that is why the Bill provides that the arbitrator has 14 days from the day on which the hearing concludes to issue such an award. Some cases that go to oral hearings may have added complexities, so the arbitrator may need more than 14 days to consider arguments, facts and evidence that have arisen. There is a discretion there for the arbitrator to extend the time limit if they consider that it would be reasonable, in all circumstances.
Mick Whitley (Birkenhead) (Lab)
Will there will be any retrospective payments? In the bundle of evidence some companies submitted, they say that they have been pressed for their outstanding debt. If this Bill goes through, does that mean that any retrospective payments will be made by the arbitrator?
Paul Scully
I will write to the hon. Gentleman if I am getting this wrong, but I think the arbitrator can take the whole situation into account, including what has been paid and the evidence that has been given, when making the final judgment. I will write to the hon. Gentleman if that is not as full an answer as he wants.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18
Publication of award
Question proposed, That the clause stand part of the Bill.
Paul Scully
The arbitrators will be required to publish awards and the reasons for making them in the interest of transparency, but they will also be required to exclude confidential information for anything published, unless notified by the person to whom the information relates that they consent to its publication. Landlords and tenants can ask for confidential information to be redacted.
Seema Malhotra
We support the clause and the exclusion of confidential or personal information that may cause harm or concern. Labour believes that the arbitration process established under the Bill should be subject to appropriate transparency, with appropriate safeguards for commercially sensitive or other confidential information. The publication of awards should also support a consistent approach being taken across cases heard under the regime.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19
Arbitration fees and expenses
Seema Malhotra
I am pleased to move amendment 4, which relates to limits on arbitration fees, and speak to amendment 5, which relates to the accessibility and affordability of the process. We recognise that parties have to meet their legal and other costs, but we believe that arbitration fees and expenses should be proportionate to the arrears that are the subject of the dispute, and that they should not create a significant cost for the parties. I am sure the Minister recognises the harmful effect that a high arbitration cost would have on businesses that are already struggling, and it is only those in very difficult circumstances that are going into the process in the first place.
Clause 19 gives the Secretary of State the discretion to specify ceilings for arbitration fees in secondary legislation. We believe the Secretary of State should make such regulations to provide a cap, which would be the effect of amendment 4. We have also tabled amendment 5, which
“would require the Secretary of State to consider the accessibility and affordability of the arbitration process when specifying limits on arbitration fees.”
That is to ensure that, when setting new limits, the Secretary of State explicitly takes into account how the limits will affect the ability of business tenants and landlords to enter the arbitration process. I hope the Minister recognises the importance of ensuring that arbitration is not too costly for either landlords or tenants, particularly as businesses are again seeing falls in revenues at this stage. There is a cross-party desire to tackle rent debt, but we want the arbitration process to work. For that, businesses must be able to afford to enter the process.
I would be grateful if the Minister could respond to a concern raised by a stakeholder about the fees and costs that the arbitration bodies may apply. I understand that there is a £750 fee associated with a complaint under the rules of certain arbitration bodies. Would such a cost be included within the cap? I thank the Minister in advance for his response.
Paul Scully
As the clause stands, the Secretary of State will have the delegated power to make regulations specifying limits on the fees and expenses of arbitrators, but if the power is exercised, approved arbitration bodies will still have the discretion to set fee levels up to the cap limit. We have adopted a market-based approach that enables arbitration bodies to set fee levels for themselves, because they are best placed to decide, given their experience of costing arbitration schemes to make them affordable for parties and attractive enough for arbitrators to take on cases. The Secretary of State’s powers are intended to be used only when circumstances determine that it is appropriate.
We have designed the arbitration scheme to be affordable, and we are working with arbitrators to agree the cost schedules, which may answer the hon. Member’s question. Setting fee levels at this stage would be counterproductive, because we do not know what the market rate is while discussions are ongoing. A market-based approach is the optimum way to ensure that, on one hand, there is enough capacity in the system to deal with the case load and that, on the other hand, fees are affordable. Hon. Members have also asked that an express requirement be inserted that would require the Secretary of State to have regard to the accessibility and affordability of the arbitration process when specifying those limits. As I said, affordability is an important consideration in our discussions. It will be an important factor that will determine accessibility. We will take it into account when deciding if and how to exercise this power.
Paul Scully
Clause 19 concerns the fees and expenses of the arbitrators of approved arbitration bodies. We want to make sure that we have capacity and that it is affordable. If the cost does indeed prove to be a barrier, we can cap the fees to ensure that it remains affordable.
Seema Malhotra
Notwithstanding the concerns we have just raised, which we will continue to pursue, we support clause 19.
Question put and agreed to.
Clause 19 accordingly ordered to stand part of the Bill.
Clause 20
Oral hearings
Question proposed, That the clause stand part of the Bill.
Paul Scully
Being mindful of European convention on human rights considerations and the right to a fair trial, it is important that landlords and tenants have the option of a hearing. Any hearing would be in public unless the parties agreed otherwise. An oral hearing would add time and costs to the arbitration process, and the parties would be responsible for meeting those costs. This clause is important, as it gives the parties the right to an oral hearing and establishes the process for doing so.
Seema Malhotra
Labour generally supports these measures, but it would be helpful to understand whether the Minister expects oral hearings to be the exception rather than the rule. As the Chartered Institute of Arbitrators made clear in evidence about the business arbitration scheme, there was an assumption against oral hearings, with a document-only approach, which keeps costs and time low and, as it would say, allows for a more efficient process. Will guidance set out when oral hearings might be necessary or appropriate? We would like to understand more about the cost of oral hearings. Can the Minister say what he might expect the cost of oral hearings to be? Would he explain what action the Government will take to ensure that all hearings are affordable?
Paul Scully
I can reassure the hon. Lady that we would expect oral hearings to be very much the exception, because we want to make sure that we get through the process for landlords and tenants as quickly as possible. Under clause 21, the Secretary of State will provide arbitrators with guidance on the process of the scheme, including in relation to their function and exercise under the Arbitration Act 1996, as modified by the Bill.
There are a number of areas, such as what evidence the parties should provide when attending any oral hearings, where there is a risk of being too prescriptive, as what is relevant may differ between cases. Guidance would therefore be more helpful than strict rules. However, the ability to go for an oral hearing will very much depend on the arbitrator’s skills and experience, and will take into consideration the landlord and the tenant—as I said, they do have a right to a fair trial. The costs would depend on the complexities of the case.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21
Guidance
Seema Malhotra
I beg to move amendment 6, in clause 21, page 13, line 3, leave out “may” and insert “must”.
This amendment would require the Secretary of State to publish guidance on the exercise of arbitrators’ functions and the making of references to arbitration.
Seema Malhotra
I will speak briefly to these amendments, which relate to viability. As we have outlined several times, we are asking how arbitrators would assess viability, and what skills and experience they would have to do that. We have tabled these probing amendments to seek guidance with information on the interpretation of viability.
There is benefit in having some flexibility, while still commanding the confidence of both sides, so that judgements can be made with the information available, but there is also a question of trust. We need confidence that the definition around viability will be interpreted consistently across arbitrators and arbitration bodies. Amendment 7 would reflect the concerns of stakeholders that guidance must address the meaning of viability and the timeframe over which it would be assessed.
Paul Scully
As the clause stands, the Secretary of State already has a delegated power to issue guidance. Hon. Members have asked that amendments be made to place a duty on the Secretary of State to issue that guidance. As I have explained, it is not necessary to require the Secretary of State to issue guidance, and it is neither necessary nor appropriate to be more prescriptive in the clause is.
Clause 16 already sets out a list of evidence that the arbitrator must have regard to when assessing viability. We have also set out a detailed, non-exhaustive list of the types of evidence that tenants, landlords and arbitrators should consider when assessing the viability of a tenant’s business, and the impact of any relief on the protected rent debt on the landlord’s solvency in annex B of the revised code of practice.
We are in ongoing discussions with arbitration bodies and landlord and tenant representatives to gauge what further guidance they need. We want to be informed by those discussions in deciding whether further guidance is needed and, if so, what precisely it should contain. If further guidance on viability is needed, we are prepared to produce it, but that is clearly covered by the clause as it stands.
It is essential that arbitrators maintain flexibility in assessing the viability of a tenant’s business, including the types of evidence required to make those assessments, so that they can be made in the context of each individual business’s circumstances. If guidance is too prescriptive, there is a risk of depriving arbitrators of that necessary flexibility, potentially resulting in unfair arbitration outcomes.
Seema Malhotra
I thank the Minister for his remarks. That was a very helpful set of comments, in light of what he has also outlined in relation to the ongoing discussions, which we are pleased to hear of—indeed, we have had discussions as well—as that is important.
Looking particularly at the pubs and hospitality sector, and other businesses with great variation in income, their repayments may need to happen over a more reasonable period of time. It is helpful to know that the Minister is considering where there may be differences between sectors, and recognises a system that takes into account the circumstances of individual businesses, because they can differ in how they are affected by slowdowns and so on.
I thank the Minister for his comments. It is certainly an area that we will keep under review. We will not press our amendment to a vote today. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause provides the power for the Secretary of State to issue statutory guidance to arbitrators or to tenants and landlords.
Seema Malhotra
We support the clause standing part of the Bill.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Clause 22
Modification of Part 1 of the Arbitration Act 1996
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 1 be the First schedule to the Bill.
Paul Scully
The clause introduces schedule 1 to the Bill. Rather than include a detailed procedure for the arbitration process in the Bill, part 1 of the Arbitration Act 1996 will apply by virtue of section 94(1) of that Act. The long-standing arbitration procedures that are well known to arbitration bodies and arbitrators will apply to arbitrations under the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 8 in schedule 2, page 19, line 3, at end insert—
“whether against the tenant or a person who has guaranteed the obligations of the tenant”.
This amendment would clarify that the definition of “debt claims” includes claims against guarantors.
That schedule 2 be the Second schedule to the Bill.
Paul Scully
The clause and schedule 2 cover a temporary moratorium on enforcement measures.
The difficulties of paying commercial rent during the pandemic are best addressed through negotiation. The Bill provides a system to resolve protected rent debt when negotiation has not worked. It has been designed to consider both parties’ circumstances in the exceptional context of the pandemic. If the landlords could pursue other enforcement methods in respect of the respected rent, parties would lose the opportunity to resolve the debt by mutual arbitration applied by the Bill’s arbitration system. That is why the clause introduces a temporary moratorium on enforcement measures detailed in schedule 2.
During the moratorium period, landlords may not make a debt claim, exercise the right to forfeiture or use the commercial rent arrears recovery—CRAR—power to seize goods in respect of unpaid protected rent debt. They may not recover protected rent debt from the tenancy deposit while the temporary moratorium is in place. If they have done so beforehand, the tenant cannot be required to top up the deposit in that period. If the tenant makes a rent payment without specifying the period it covers, the payment must be treated as relating to unprotected rents before protected rents.
Schedule 2 also enables the arbitrator to consider protected rents under a debt claim issued between the Bill’s introduction and its coming into force, or a judgment on such a claim. It also treats rent payments made after the end of the protected period, when closure or other relevant restrictions are lifted, as for unprotected rents before protected rents.
I emphasise that the Bill’s moratorium and other remedies are temporary. We want the market to return to normal swiftly. Under the clause, the temporary moratorium applies only until arbitration is concluded or, if neither party applies for arbitration, until the application period closes. The temporary moratorium also only prevents access to remedies in relation to protected rent debt. If the tenant in scope of the Bill has failed to pay rent attributable to a period before 21 March 2020 or after the protected period ended, the landlord can take action in respect of that debt. Clause 23 and schedule 2, which the clause introduces, are important to give viable businesses an opportunity to resolve protected rent debt by mutual agreement through the Bill’s scheme.
Ruth Cadbury (Brentford and Isleworth) (Lab)
I will speak to clause 23 and schedule 2, as well as amendment 8, which I tabled with my hon. Friend the Member for Feltham and Heston.
The clause prevents rent debts from being collected during the moratorium period, which begins on the day the Act is passed. As we have said previously, we welcome efforts to put a moratorium on the enforcement of protected rent debts, and the clause outlines a number of protections to stop landlords collecting rent arrears debts, including by preventing the making of a debt claim using commercial rent arrears recovery powers or using a tenant’s deposit. The measures have been broadly welcomed by businesses and we support them.
The provisions on the moratorium period cover the period
“beginning with the day on which this Act is passed”.
Last week, Kate Nicholls of UK Hospitality told the Committee that as soon as the Bill is enacted, communications should go out to ensure that commercial tenants are aware of the arbitration process. That point holds for small businesses and independent businesses. I very much hope that the Government will take steps to ensure that the Bill and the protections in it come into force as soon as possible and, equally, that tenants as well as landlords are aware of the protections.
Schedule 2 sets out in more detail the process by which landlords are prevented from making a debt claim and ensures that landlords are unable to take civil proceedings during the moratorium period. We support those provisions, although we know from the feedback we heard during the witness sessions last week the importance of ensuring that tenants are aware of the moratorium period and of the ability to enter into arbitration. Businesses absolutely need to be made aware of the measures.
The schedule outlines in further detail the various definitions used in the Bill, reaffirms that landlords are not able to make a debt claim against protected debts during the protected period, and outlines how parties can apply for debt claims to be stayed while arbitration goes on.
I want to outline the important issues that we raised about the arbitration process. The process should be fair and transparent, and it needs to have the widespread confidence and support of tenants and landlords. As the witnesses in last week’s evidence sessions said, it is crucial that smaller tenants and landlords should not be made to suffer as the result of an expensive or long-running arbitration process in which they are at risk of being muscled out by the greater power of larger organisations. We welcome the arbitration process and the relief that it will bring, but the process itself needs to be fair, and it needs to ensure a balanced playing field.
Schedule 2 also outlines the fact that a landlord may not use the commercial rent arrears recovery power for protected debt, which we welcome. It also seeks to ensure that a landlord is prevented from enforcing a right to forfeit the tenancy in relation to the non-payment of rent. Subsection 9 prevents a landlord from using a tenant’s deposit. We welcome that provision as part of the wider package of protecting tenants and ensuring that landlords cannot seek to get around the spirit of the arbitration process and the protections around arrears.
Amendment 8 seeks to clarify that the definition of debt claims includes claims against guarantors. It aims to provide extra clarity about whether the protections given against county court action are also provided to the guarantors of tenancies. We have received written testimony from experts in the arbitration field and from the head lessee of the Subway chain, who express concern that guarantors and former tenants were not included in the implications of the legislation. I am sure that the Government want to see, just as we do, that the protection against rent arrears action is spread across all the businesses impacted by covid, as well as those that have given the additional support that new and small businesses so often need, such as their guarantors. Of course, many small businesses are franchisees of chains such as Subway, and its head lessee’s evidence must count for a lot of organisations where there is a head lessee and a franchise system.
We do not want to see a back door created whereby tenants are protected from enforcement but the guarantors are still liable. We also heard evidence from the guarantor of a nightclub in Surrey. We have two issues here: the guarantors and the head lessee. It is crucial that the Government ensure that the guarantors of tenants are also protected against debt claims during the prescribed six-month period. We do not want to see the common-sense measures circumvented if landlords are able to go after guarantors with no limit. As I say, the amendment is specifically about guarantors, but we also have concerns on behalf of head lessees.
Paul Scully
I thank the hon. Member for her comments. Indeed, I agree with her. She said that she wants the Bill to be passed as soon as possible, so I am speaking as quickly as I can to make sure that we can get that done.
On the communications, we have already given plenty of notice. The original announcement was in June. The policy statement and the code of practice were published. We have hosted webinars with key stakeholders, and we will continue to engage with them. The hon. Member is absolutely right. We want to make sure that this measure is known by all so that they can take advantage of it. If they are unable to settle their rent debts between themselves, we can bring this to a head quickly through arbitration and get back to a normal free market as soon as possible.
On the amendment, I can reassure the hon. Member that we will take full note of written evidence that comes in, but paragraph 2 of schedule 2 already prevents claims against guarantors. It prevents the landlord from making any debt claim in respect of protected rent within the moratorium period specified by the Bill. The provision in question is not limited to claims against tenants, so it does not need to state expressly that it covers claims against guarantors.
Question put and agreed to.
Clause 23 accordingly ordered to stand part of the Bill.
Schedule 2 agreed to.
Clause 24
Temporary restriction on initiating certain insolvency arrangements
Question proposed, That the clause stand part of the Bill.
Paul Scully
Both parties are expected to engage with the arbitration process and must comply with any award made. They may choose to settle the matter by negotiation ahead of arbitration, but other processes that enable the arbitration system to be avoided should not be available. That is why clause 24 prevents a party from proposing or applying for a company or individual voluntary arrangements or certain other restructuring arrangements with their creditors.
Ruth Cadbury
Just as we welcome the actions in clause 23, we welcome clause 24 placing restrictions on the ability of either a landlord or a tenant to enter into specific insolvency arrangements when the matter relates to protected rent debt. That is a welcome move, as we do not want to see viable companies going into insolvency because of rent arrears.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25
Temporary restriction on initiating arbitration proceedings
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause prevents either party from invoking alternative measures that have not been designed specifically for debts related to the pandemic.
Ruth Cadbury
We heard in testimony last week that the vast majority of landlords and tenants have been able to reach agreements on rent arrears, and it has generally been a productive and straightforward process. The clause ensures that the tenant or landlord cannot unilaterally start arbitration proceedings and must go through the referral process, requiring the other party also to make submissions in writing. I am interested to hear what steps are in place for businesses, and especially small businesses, when a larger landlord or tenant refuses to enter arbitration fairly.
Paul Scully
If both parties wish to resolve their unpaid protected rent debt by an alternative form of arbitration, they may agree to do so. In terms of the arbitration itself, the businesses—either the landlord or tenant—can act unilaterally.
Question put and agreed to.
Clause 25 accordingly ordered to stand part of the Bill.
Clause 26
Temporary restriction on winding-up petitions and petitions for bankruptcy orders
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 3 be the Third schedule to the Bill.
Paul Scully
Clause 26 and schedule 3 temporarily prevent landlords from petitioning, in relation to protected rent debt, to wind up businesses in scope of the Bill or petitioning for bankruptcy for businesses that are individuals, such as sole traders, that would otherwise be viable. The clause and the schedule support viable businesses by allowing debts to be resolved by mutual agreement or by the Bill’s arbitration system, which considers both parties’ circumstances in the exceptional context of the pandemic. As with the other temporary restrictions in part 3, the restrictions detailed in clause 26 and schedule 3 apply only in relation to protected rent debt.
Ruth Cadbury
We welcome the measure in clause 26 as it will prevent landlords from going through a back-door method of targeting businesses unfairly. We also support schedule 3 as it will ensure that viable businesses are protected and can enter into the much-needed arbitration process. Paragraph 3 of schedule 3 ensures that bankruptcy orders in relation to rent arrears made before the day on which the Bill becomes law shall have no power. This will prevent businesses that will be helped by the legislation from being declared bankrupt, which we support as it will protect otherwise viable businesses.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 27
Power to apply Act in relation to future periods of coronavirus control
Question proposed, That the clause stand part of the Bill.
Paul Scully
The measures in the Bill are a response to the unprecedented impacts of the pandemic and will support commercial tenants and landlords to resolve their rent debt. To ensure that we are prepared for a future situation of a further wave of coronavirus giving rise to further business closures, we are including a power to reapply the provisions in the Bill. This will enable the Government to reapply any and all provisions in the Bill so that we can take a targeted approach to respond to the specific circumstances of any future period of coronavirus.
Ruth Cadbury
Given the past few days and the news of business revenues plummeting, we of course welcome the clause. We know that many businesses are already feeling the pinch, as we have seen in the news. There is already worry and concern in the sector about staff shortages and rising supply costs, and on top of that businesses are concerned about customer numbers. The Government appear to rule out any return of covid-related support for businesses, but at least the clause offers some relief in respect of rent arrears. Although we welcome the inclusion of a power to ensure that businesses do not get punished for rent arrears in the future if they are forced to close, I take this chance to remind the Government that businesses are feeling the pinch, even if they have got over the outstanding revenue losses from the previous almost two years. We know that customers are cautious in the face of the new variant, and that businesses will be impacted, so we support the clause.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28
Power to make corresponding provision in Northern Ireland
Question proposed, That the clause stand part of the Bill.
Paul Scully
The Bill will not apply directly to Northern Ireland. Instead, this enabling power was requested by the Northern Ireland Executive. It is intended to allow them to introduce the measures in the Bill at their discretion. The arbitration scheme remains an option for Northern Ireland while they assess their need for those measures. We will of course continue to work closely with our counterparts in the Northern Ireland Executive.
Ruth Cadbury
We welcome clause 28, but our comments and concerns about businesses in England and Wales apply just as much to those in Northern Ireland.
Question put and agreed to.
Clause 28 accordingly ordered to stand part of the Bill.
Clause 29
Crown application
Question proposed, That the clause stand part of the Bill.
Paul Scully
The Bill will bind the Crown where the Crown is a landlord under the business tenancies in scope of the Bill. I commend clause 29 to the Committee.
Ruth Cadbury
Clause 29 is a straightforward clause, setting out that the Bill binds the Crown. We have nothing further to add.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Clause 30
Extent, commencement and short title
Question proposed, That the clause stand part of the Bill.
Paul Scully
This clause sets out the territorial extent of the Bill, which has been carefully considered, and the continued engagement of the devolved Administrations. It reflects the differing needs of each part of the UK and ensures that the tenants and landlords that will most benefit from this measure can access it. It extends to England and Wales, with limited provisions extending to Northern Ireland and Scotland.
Ruth Cadbury
We have nothing further to add on clause 30, Mr Hosie. However, this is the last time that we will speak in this Committee, so I will take the opportunity to thank all those who have provided expert submissions to the Committee, who have spoken in the last week and who have sent written submissions. I thank Members for their attendance, and I thank the staff who have administered the Bill so smoothly and enabled us to finish so quickly.
I conclude with an overarching point. Some of the submissions that we have received, particularly this week, from expert bodies with significant legal and other professional expertise in the area of landlord and tenant law, arbitration and settlements still express significant concerns about the detail of the way the Bill is drafted. I hope that between now and Report and Third Reading, the Government will look at their comments, meet them and address some of the detailed and expert points that they raise. I fear that they probably know what they are talking about.
Paul Scully
I echo the hon. Lady’s thanks to you, Mr Hosie, to the Clerks and to everybody for making this happen. We want to ensure that we get the Bill into legislation as quickly as possible, but that does not mean that we will rush it and not have further consideration. Beyond the passage of the legislation through Parliament, we will continue to engage with stakeholders, including arbitration services, landlords and tenants, to ensure that we get it right. It is so important that we get this enacted now, so that landlords and tenants can get the benefits when they need them—now, not when it is too late.
Question put and agreed to.
Clause 30 accordingly ordered to stand part of the Bill.
Bill to be reported, without amendment.
Subsidy Control Bill
Paul Scully ExcerptsMonday 13th December 2021
(3 years ago)
Commons ChamberRead Full debate Subsidy Control Act 2022 View all Subsidy Control Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 13 December 2021 - large print - (13 Dec 2021)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I thank hon. Members across the House for the informed debate on the Bill and will try my best to respond to their comments in the few moments that I have.
A number of amendments have been tabled on the topic of transparency, which I take really seriously. My Department is working on a programme of improvements for the subsidy database. To name just two examples, we are resolving the technical glitch that meant that subsidies were uploaded with a zero value. Additionally, we are developing an update to add the data for upload to the information published on the database. Officials will actively look at further improvements over the coming months and in advance of the new regime coming in.
The Government intend to review again the evidence collected as part of the consultation alongside that provided by witnesses to the Committee about the transparency provisions. We will reflect carefully on the points raised so far and engage further on our findings with parliamentarians in both Houses as the Bill progresses. I know the strength of feeling in the House on this matter, and we will consider carefully what further action we could take to address those concerns if they come back in the Lords.
I start with the amendments that would reduce the threshold at which subsidies are uploaded. The transparency provisions seek to minimise the administrative burdens and costs to public authorities while ensuring that information is available on subsidies that must meet the substantive subsidy control requirements. That is an important tool to aid interested parties to challenge potentially harmful subsidies. However, the amendments would create an additional administrative burden for public authorities, including small local authorities. Paradoxically, they could make it harder to identify in the database the most potentially harmful subsidies that are eligible to be challenged in the Competition Appeal Tribunal. Many small subsidies will also be publicly available via other transparency tools. Such data may not be perfectly formatted, but it does go far wider than subsidies.
In relation to services of public economic interest, there was broad support from consultation respondents for the application of different transparency measures. The contracts must meet the specific requirements set out in clause 29. That is why the database requirements are different for those subsidies.
John Penrose
May I just caution my hon. Friend? I think the paraphrase of his argument about the size of the subsidy database is that big databases are less transparent than small ones. That is clearly bonkers and not right, and I do not think it stands up to any scrutiny. He may be arguing that that is okay because other databases will have the information and that it can all be compared and contrasted, but that works only if the data is in a common format that allows for mutual searching, and there is no such plan for that. May I gently caution him about pushing that argument too far? I do not think it will stand much strain in the Lords.
Paul Scully
All I would say is that it is easy to hide something in plain sight, but the subsidy transparency database is being developed under the Cabinet Office’s standard system for all Government databases. I have talked before about interoperability, and we would expect to be able to link those databases and to scrape them in the future.
Dr Poulter
I echo the transparency concerns raised by my hon. Friend the Member for Weston-super-Mare (John Penrose). I welcome the Minister’s commitment to allowing the other place to look at this area, but, to reassure some of us, will he please outline the transparency tools that already exist?
Paul Scully
I am not sure in terms of transparency tools. What I am saying is that we will ensure that the database is eventually interoperable with other databases. We clearly want the subsidy database to have enough easily accessible, searchable fields to allow people to make meaningful use of the data.
I turn to the amendments that seek to reduce the time period to upload subsidies to the database for both tax and non-tax subsidies to one month. The risk of a deadline as short as a month is that public authorities are more likely to make mistakes. Although it is possible to correct data, that creates an additional administrative burden for public authorities. Inaccurate or otherwise poor data would also undermine public confidence in the database.
A short deadline is particularly challenging for tax subsidies, which are often calculated from the information provided in a tax declaration, which the beneficiary is entitled to change within the 12 months following its due date. That is true, for example, of the Government’s research and development subsidy scheme for small and medium-sized enterprises, where quarterly uploads to the database are planned for the hundreds of subsidies above £500,000 that are awarded every year. Significantly more resource would be required to upload to the database more frequently and to make corrections to previous uploads as required. I note the proposal to require an initial upload of a tax subsidy as an estimate. However, I believe that more changes and revisions to the database would cause confusion.
On auditing the database, I share hon. Members’ desire to make the database as accurate as possible, and my Department is already taking steps to improve data quality. However, a new obligation to subject the database to a routine audit is unnecessary because the system already incentivises accurate entries. Public authorities may not have fulfilled their obligation to make an entry on the database if that entry is not accurate, so the limitation period for a challenge would not start until a correct entry was made. Public authorities must therefore take responsibility for their own data. Ultimately, it would not be a good use of taxpayers’ money to have central Government officials independently verifying every piece of information provided by public authorities. As for the requirement to include the subsidy upload date in the list of requirements for the database that may be included in regulations, I entirely agree that that is useful data. As I have said, we are currently developing an update so that that is part of the publicly available information on the database.
Let me now deal with amendments that raise important points about the nature of the subsidy control regime, and especially about the role of the subsidy advice unit. The SAU’s job is to be an impartial adviser in respect of the most potentially harmful subsidies and schemes. The regime places clear duties on public authorities that are awarding subsidies. It will be for those authorities to assess whether they are compliant with the regime. That is not the SAU’s job. It will only review public authorities’ assessments in a relatively small number of cases that have the potential to be the most distortive. New clause 3 would require the SAU to monitor and investigate subsidy activity, and amendment 9 would require it to list all subsidies annually, whatever their size, along with an assessment of their compliance. Both would involve a fundamental shift in the unit’s role, to an intrusive, investigatory one.
I fully expect that there will be high levels of compliance with the regime, and that public authorities will take their statutory duties seriously. Of course, failure to fulfil these duties would expose public authorities to legal challenge, and would create unnecessary uncertainty for beneficiaries. Members will appreciate the resource burden that monitoring and assessing all subsidies would involve, and will recognise that not only is it entirely disproportionate to the risks that the amendments seek to address, but it would distract from the SAU’s proper focus.
Amendment 26 would allow the CMA chair to make appointments to the subsidy advice unit to bring greater experience in relation to Scotland, Wales and Northern Ireland. The CMA’s staffing is an internal matter, but I note that job vacancies for the new unit are currently being advertised in all four capitals of the UK.
Amendment 8 proposes that subsidies granted under schemes should be open to challenge in the Competition Appeal Tribunal. Schemes represent an important efficiency for public authorities. They allow similar or identical subsidies to be given on the basis of a single, comprehensive assessment against the principles. A scheme should not be made unless the public authority believes that the subsidies given under it will be consistent with the principles. It would therefore be unnecessary for subsidies granted under schemes to be eligible for review by the tribunal. However, if there were a question as to whether a subsidy given under a scheme really met the terms of the scheme, that subsidy could be challenged in the tribunal on the basis that it should be treated as a stand-alone subsidy.
Let me deal next with the amendments relating to the role of the devolved administrations. The UK Government have engaged regularly with the DAs on the design of a UK-wide subsidy control regime, and we will continue to listen carefully to their views. None the less, it is important to reiterate that subsidy control is a matter reserved to this Parliament. That is because we need a UK-wide regime to prevent distortions harmful to competition, and to facilitate compliance with our international obligations. I fundamentally believe that the amendments are inappropriate for a reserved policy matter. The Secretary of State will act in the interests of all parts of the UK.
Amendment 12 concerns who can challenge a subsidy decision. I can clarify that: the devolved administrations, or local authorities, would generally be able to apply for the review of a subsidy when people in the areas for which they are responsible might be adversely affected by it, but there is no reason for the DAs to be able to challenge subsidies that have only a tenuous connection with the interests of people in those areas.
Amendment 10 would allow the devolved administrations to create streamlined subsidy schemes. All public authorities in the UK will be able to use such schemes, but they will function best when they apply throughout the UK. In any case, all public authorities will be free to create subsidy schemes for their own purposes, and primary public authorities, such as the DAs, will be able to create schemes for the use of local authorities and other public bodies within their remit. As for amendment 27, the Bill already requires the Secretary of State to consult such persons as they consider appropriate before issuing any guidance. Attaching a formal consent mechanism to this clause risks delaying the issuing and updating of guidance.
New clause 1 would exempt agricultural subsidies and schemes within the scope of the World Trade Organisation agreement on agriculture from the requirements of the new domestic regime. Having agriculture covered by the same single, coherent framework as other sectors will protect competition and investment within agriculture, while securing consistency for public authorities and subsidy recipients. The Bill’s design ensures that public authorities are empowered to give subsidies that best fit their local needs, whether that means supporting innovation in pharmaceuticals or innovation in farming. I therefore do not agree that agriculture should be exempt from the regime.
Let me now turn to the amendments dealing with net zero.
New clause 2 would require the Secretary of State to report annually on the impact of all subsidies granted in the previous year on the environment and climate change. This would represent a significant administrative burden, not least on smaller public authorities, and would discourage them from granting subsidies in the first place. There are also long-standing existing obligations on public authorities to collect this information in specific circumstances, and therefore this amendment is unnecessary.
Amendment 11 would add another principle to schedule 1 centred on net zero, but net zero is not inherent to all subsidies. A great number of subsidies will not have a meaningful impact on the UK’s emissions. A requirement for public authorities to assess all subsidies against net zero is therefore disproportionate.
Amendment 16 would add an explicit net zero test to the balancing test principle in schedule 1. The terms of the balancing test are not limited to negative effects on trade or investment within the UK, or to international trade and investment, so this amendment is also unnecessary.
Finally, on levelling up, amendment 18 would establish that streamlined subsidy schemes can be made for the purpose of supporting areas of deprivation. The Bill allows the Government to create streamlined subsidies for any purpose, not least for levelling up, so this amendment is unnecessary, but I certainly commit to ensuring that streamlined subsidy schemes collectively support public authorities in delivering levelling-up objectives.
The first subsidy control principle specifies that subsidies should pursue a policy objective that either remedies a market failure or addresses an equity rationale. Clearly, relative economic deprivation would fall into that category, so these amendments are unnecessary.
I am grateful for the constructive engagement of hon. Members on both sides of the House, but I cannot accept the amendments tabled for this debate. Consequently, I ask hon. Members not to press them.
Finally, I thank the team that prepared the Bill: Jamie Lucas, Jess Blakely, Carmen Suarez, Jane Woolley, George Kokkinos, Hannah Swindell, Sam Naylor, Joe Smith, Matilda Curtis, Dharmesh Jadavji, Steve Huntington, Kerry Mattingly, Anthony McDonough, Tim Beaver, Christian Garrard and Josephine Sherwood.
Question put, That the clause be read a Second time.
Commercial Rent (Coronavirus) Bill (Third sitting)
Paul Scully Excerpts(3 years ago)
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The Chair
Before we begin, I have a few preliminary reminders for the Committee. Please switch electronic devices to silent. No food or drink is permitted during sittings of the Committee except for the water provided. I encourage Members to wear masks when they are not speaking, in line with Government and House of Commons Commission guidance. Please also give each other and members of staff space when seated and when entering and leaving the room. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. That can be done either at the testing centre in the House or at home. Hansard colleagues would be grateful if Members emailed their speaking notes to hansardnotes@parliament.uk.
We now begin line-by-line consideration of the Bill. The selection and grouping for today’s sitting is available in the room. It shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or similar issues. Please note that decisions on amendments do not take place in the order that they are debated but in the order that they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause to which the amendment relates, and decisions on new clauses will be taken once we have completed consideration of the existing clauses of the Bill. Members wishing to press a grouped amendment or new clause to a Division should indicate when speaking about it that they wish to do so.
Clause 1
Overview
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to serve under your chairmanship, Mrs Murray.
Many businesses are still on the long road to recovery following the pandemic, particularly in the sectors that have been hit hardest, such as hospitality and retail. The most recent data indicates that rent collections for this year’s third quarter are much higher than they were for last year’s third quarter, but they are still not at pre-pandemic levels. An estimated total of just under £7 billion of rent was deferred over the pandemic.
Although we have provided an unprecedented package of support to businesses, we have also been clear that we expect landlords and tenants to come together and negotiate. Agreements have been reached for many businesses, but for others negotiations have stalled, leaving rent arrears to build up, which could threaten many of the valued jobs that those businesses provide.
The statutory arbitration process that the Bill introduces should be used as a last resort, where landlords and tenants have been unable to reach their own agreements. For those tenancies, the Bill will ring-fence rent debt accrued during the pandemic by businesses required to close, and set out a process of binding arbitration that will resolve rent disputes and help the market return to business as usual. The Bill will temporarily restrict remedies available to landlords in relation to rent debt built up during the pandemic. To respect the primacy of the landlord-tenant relationship wherever possible, the arbitration process will not be available where legal agreements are reached between landlords and tenants over the payment of a protected rent debt.
I commend the clause to the Committee.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship today, Mrs Murray.
I am grateful to the Minister for his opening remarks, in which he set out why the Bill is needed. Indeed, some of the estimates of the deferred rent debt that has been built up are around £7 billion, with some as high as £9 billion. That is why we called for action earlier this year, so that there was clarity about how some rent disputes would be resolved, and resolved fairly, because we know that the impact of the pandemic is ongoing.
I have concerns that may be outside the scope of the Bill, unless we decide to accept some amendments on Tuesday. In the light of the announcements yesterday and the guidance coming out today, there may need to be a review if there is a risk of further rent arrears if income drops for businesses in the period ahead. So I hope that there will be ways in which we can keep matters under review, in the light of recent developments.
Clause 1 indeed provides an overview of the Bill, and it is in part 1 of the first three short parts. Part 1 is about “Introductory Provisions”, including important definitions; part 2 provides the framework for statutory arbitration between landlords and tenants; and part 3 provides for the ongoing restrictions on “Certain remedies and insolvency arrangements” in relation to protected rent debt.
Importantly, clause 1 also confirms that nothing in the legislation affects the ability of parties to a business tenancy to reach a negotiated settlement outside the arbitration process. That is important because the arbitration process is a backstop; it is a last resort. It is preferable—in terms of time, cost and the relationship between the parties—that they can be supported to reach a negotiated settlement without the need to resort to arbitration.
Labour will continue to encourage landlords and tenants to negotiate settlements, and it is good to see that most of them have already done so; indeed, that was an important part of the feedback from witnesses this week. It is a sign that most commercial landlords and tenants have worked closely together to get through the crisis, and I pay tribute to them for doing that, because it is a recognition that we have all been in this together and that everybody needs to play their part in bringing flexibility where it is needed.
UK Hospitality estimated that around 60% of its members reached agreement with their landlords on any outstanding debt, but there is an estimate that around one in five have yet to reach a negotiated settlement. Perhaps some settlement discussions are still in progress.
We support clause 1 and we will vote for it to stand part of the Bill.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
“Rent” and “business tenancy”
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause provides clarity with regard to which payments owed by a business tenant to their landlord under their tenancy contract will be considered to be rent for the purpose of the Bill. Rent includes contractual payments owed by the tenant to the landlord for occupation and use of the property, as well as payments collectively described as service charges and interest on any unpaid amount. Including both service charges and interest on any unpaid amount within the definition of rent will allow the arbitrator to consider a broad range of arrears that may be owed by the tenant to the landlord, rather than only the payments for occupation and use. The arbitrator will then consider whether relief should be awarded in respect of some or all of the amount owed.
The definition of business tenancy in the Bill is broadly consistent with the definition of business tenancy under section 82 of the Coronavirus Act 2020, which served to temporarily prevent landlords from evicting tenants. However, the Bill focuses on business tenants and their immediate landlords.
I commend the clause to the Committee.
Seema Malhotra
I thank the Minister for his opening comments on the clause.
Clause 2 defines the key terms that are central to the operation of this legislation, notably rent and business tenancy. Rent is stated to include the cost of using the premises and service charges, as well as interest on unpaid amounts relating to either, with VAT included. We have no concerns about this definition; it seems sensible and we hope that it is widely accepted.
Business tenancy means a tenancy to which part 2 of the Landlord and Tenant Act 1954 applies. That Act applies to any tenancy where property is or includes premises that are occupied for the purposes of business. The Minister will have heard the concerns of the British Retail Consortium, raised on Tuesday, about the definition of the business tenancy. It has concerns that any tenancy contracted out of the 1954 Act would fall outside the scope of these protections. Will the Minister confirm the assurances that he gave the British Retail Consortium on that point?
As Kate Nicholls of UK Hospitality said in her evidence, also on Tuesday:
“It is important that this piece of legislation sits within the existing canon of property law”––[Official Report, Commercial Rent (Coronavirus) Public Bill Committee, 7 December 2021; c. 5, Q3.]
and that definitions are consistent with that existing canon. Subject to meeting the BRC’s concern about business tenancies, the definitions in clause 2 would in our view meet that test. I look forward to the Minister’s response. We support the definitions and will support the clause.
Paul Scully
Yes, I can confirm that tenancies to which part 2 of the 1954 Act applies are covered by the Bill, including where parties have agreed to exclude certain provisions of part 2 of that Act. I should also say, in reply to the hon. Lady’s earlier comments about future powers and what would happen in another coronavirus situation. The Bill does indeed contain a power that allows the provisions to be applied again in the event of future closure.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
“Protected rent debt”
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause defines “protected rent debt”, a key concept of the Bill, so that landlords and tenants have certainty about what is in the scope of arbitration. The definition for protected rent includes rent that is owed to the landlord under the tenancy if the tenancy was adversely affected by coronavirus, and excludes rent that the tenant owed to the landlord either before the pandemic or after businesses were allowed to open for business. That is in line with the Government’s expectation that the market should now return to normal, with the contractual arrangements once again adhered to.
The clause also states that if all or part of the protected rent debt was satisfied by the landlord by drawing down from the tenancy deposit, the sum that was paid for the deposit should be considered protected rent debt and should still be considered unpaid.
Seema Malhotra
I thank the Minister for his opening comments on clause 3, which defines “protected rent debt”. Rent is protected if the tenant was adversely affected by coronavirus within the meaning of clause 4 and the rent is attributable to a period that is protected within the meaning of clause 5.
Subsection (3) states that rent consisting of interest due on an unpaid amount is
“attributable to the same period of occupation…as that unpaid amount.”
That means that if a tenant is paying interest on rent due, the interest is also considered to be from the same period of occupancy as the rent. Subsection (5) sets out that if rent due is only partly attributable to a period of occupation, only the rent due that is attributable to that period qualifies as protected rent. That means that if there is rent due that is attributable to occupation by the tenant both outside and within the protected rent period, only that which was within the protected period is regarded as protected rent. It is likely there will be some confusion around that. Perhaps the Minister intends to have clear examples and guidance so that those who use the legislation will be clear about how they need to do their calculations.
Clause 3 does clarify what is meant by protected rent debt. We support the definition and will vote for the clause.
Paul Scully
Indeed, guidance will be really important to ensure that arbitral services and bodies have all the information that they need to make a correct definition. As the hon. Lady says, including interest is important, otherwise the burden of meeting interest under punitive contractual rates would defeat the object of the Bill.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4
“Adversely affected by coronavirus”
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clause 4 is essential. It establishes which businesses can access arbitration, the Bill’s temporary moratorium, and other measures. We appreciate that the pandemic has been difficult across the economy, but we are seeking to target this measure at those businesses most directly affected so that we can resolve cases quickly, providing businesses with certainty while protecting jobs in our most vulnerable sectors, such as hospitality, retail and leisure. That is important not only for eligible businesses, but for the individuals who contribute to them.
Clause 4 provides that a business that was adversely affected by coronavirus and its rent may be in scope if it was required by regulations to close all or part of its business or premises for any of the time while closure requirements were in place: from 21 March 2020 until 18 July 2021 for England, or until 7 August 2021 for Wales. If a business was subject to a closure requirement for any period within those times, it meets the test, regardless of whether it was allowed to carry out other limited activities such as takeaways. Without that targeted approach, we could see rent issues from the pandemic unresolved for a significant amount of time, so I urge the Committee to support the clause.
Seema Malhotra
I thank the Minister for his remarks. As he described, clause 4 clarifies what is meant by businesses “adversely affected by coronavirus”. It states that a business can be categorised as adversely affected if part or all of it was obliged to close due to coronavirus restrictions during the relevant period. It also states that any specific limited activities that the business was able to take part in during its forced closure can be disregarded as immaterial for the purposes of the Bill. We think that is very important, otherwise we will have situations in which one side or the other says that a business is not eligible for the scheme for the purposes of arbitration, so we support having that clarity in the Bill.
The clause also defines the relevant period as 21 March 2020 to 18 July 2021 for businesses in England, and 21 March 2020 to 7 August 2021 for businesses in Wales. We do not object to those dates—there are clear reasons why they have been chosen, given that Government policy changed around those times. My only concern is that the tail end of recovery has been slower in some sectors, such as aviation, travel and tourism, than in others. The dates on which some businesses were able to reopen and start to do much better did not apply in the same way to all businesses in all sectors.
Although we have not tabled any amendments to those dates and we support clause 4, it will be important for the Minister to keep this Bill under review, bearing in mind that there has not been an equal recovery for businesses. If concerns are raised with him about businesses that may or may not be eligible, but have been impacted by coronavirus closures or consequences, it is important that some amendments could be made in due course, should they be required.
Paul Scully
I think we all acknowledge the fact that this is not a perfect science: some businesses that were suffering through the lockdown will continue to have a slow recovery. This is a focused Bill dealing with a particular kind of ring-fenced debt, and we want to make sure that we encapsulate this issue, so that we do not make the Bill and the process of arbitration too big in a way that benefits nobody. I think the Bill is proportionate, and will have the right effect.
In terms of a long tail of recovery, we obviously need to look at the support from a holistic point of view, and at the additional measures that we have put in place to support businesses, including the sectors that the hon. Lady mentioned. Importantly, we will continue to flex. I have been on calls today, and over the past few days—especially with plan B being announced—with representative organisations, and people from hospitality in particular, which is hard pressed. We will continue to listen and respond.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
“Protected period”
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clause 5 sets out the protected period from which rent can be referred to arbitration. The Government are committed to supporting landlords and tenants to resolve rent that has built up. For the arbitration scheme to do so, the parties and the arbitrator must be clear on from which periods rent can be referred to arbitration. Closure requirements and other restrictions were lifted at different times for different types of businesses as part of the appropriate road map out of restrictions, and the reducing of alert levels. That is why the protected period runs from the start of closure requirements until the last day that a business was either required to close or subject to another specific restriction on how it could operate or use its premises.
The period is not affected by general restrictions that applied to all businesses and requirements to give or display information, such as requirements to display information about the wearing of face masks, but where particular types of businesses were subject to a restriction under coronavirus regulations, the period takes account of that restriction. It is intended to take a clear and appropriate approach to the rent debt that may be referred to the arbitrator. The arbitrator will not necessarily award relief in respect of all debt relating to the period, as the appropriate relief will depend on the circumstances, but I urge the Committee to support the clause.
Seema Malhotra
I thank the Minister for his remarks. Clause 5 defines what is meant by the protected period and specific coronavirus restrictions for the purposes of the Bill. He has outlined the dates for the protected period, and that a specific coronavirus restriction means any requirement other than a closure requirement that regulated any aspect of the way that a business was to be carried on. Requirements to provide information on premises, or requirements that applied more generally to businesses, are not included under the specific coronavirus restrictions.
Clearly, as we have discussed, many businesses continued to experience significant covid impacts beyond the end of the protected period. However, we recognise the need to strike the right balance between the interests of landlords and tenants, and therefore the need to limit the protected period to one that is clear about how arbitrators will look at and assess claims and that is clearly aligned with policy. I hope that the Minister will have heard the reflections of stakeholders, including Andrew Goodacre from the British Independent Retailers Association, that businesses that were not forced to close—essential businesses—may still have suffered significant economic consequences.
We want to ensure that there is fairness, and that all viable businesses that suffered an impact will be supported to continue through the ongoing recovery. Overall, we support the measures and definitions in clause 5, and will support it standing part.
Paul Scully
The hon. Lady is right: this is a focused Bill, looking at the first period of the pandemic. However, as I have said, we will continue to listen to various sectors and work with them to ensure that we can recover equally.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
“The matter of relief from payment”
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause sets out the two questions that the arbitrator must decide before considering what, if any, relief should be given to the tenant. That is important because it ensures that arbitration capacity and relief are targeted at those who need it most, namely those whose rent has been impacted by closures and restrictions within the ring-fenced period. The first question is whether there is any protected rent debt. The second is whether the tenant should be given any relief in respect of the payment of that debt and, if so, what type of relief.
The clause also sets out clearly the types of relief that an arbitrator can award in respect of protected rent debt: writing off part of or all of the debt; giving more time to repay the debt; or reducing or writing off any interest on the debt. Setting those clear boundaries will help arbitrators to reach awards quickly and provide adversely impacted businesses with the certainty they need to recover from the pandemic.
Seema Malhotra
I thank the Minister for his opening remarks. Clause 6 clarifies references to the matter of relief from payment—that is, the subject to be dealt with by an arbitrator under the legislation. It relates to whether there is protected rent debt and, if so, whether the tenant should be given relief from the payment of that debt. The Minister has outlined what that means but, to summarise again, it is the writing off of the whole or part of the debt, giving time to pay the whole or part of the debt, and reducing any interest payable on the debt. It is right that arbitrators are given the flexibility to provide for a form of relief that is appropriate for the specific circumstances of a case. Indeed, one or more forms of the relief may be appropriate depending on the circumstances of the landlord and the tenant. We support these measures and clause 6 standing part of the Bill.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7
Approval of arbitration bodies
Question proposed, That the clause stand part of the Bill.
Paul Scully
The arbitration scheme will be delivered by independent arbitration bodies. The clause gives the Secretary of State the power to approve arbitration bodies for that purpose. Arbitration bodies will have to demonstrate that they are suitable before being approved. Further information on what constitutes “suitable” and how to become an approved body will be published on gov.uk.
The Secretary of State can also withdraw approval status if the body is no longer suitable to deliver arbitration services. The Secretary of State must notify the body if that is the case, and the body will have an opportunity to make representations. Under the clause, a list of approved arbitration bodies must be maintained and published by the Secretary of State, enabling parties to a dispute to know to whom an application for an arbitration may be made. The clause is therefore crucial to enable a high-quality, independent and accessible service to be delivered to landlords and tenants.
Ruth Cadbury (Brentford and Isleworth) (Lab)
It is a pleasure to serve under your chairship, Mrs Murray. When the Government create a dispute resolution process, as the Bill does, it goes without saying that there needs to be arbitration bodies. We naturally support the clause—although we have a couple of amendments coming up—as it is inevitable and clear. However, I want to address a point in subsection (7), which states:
“The Secretary of State must maintain and publish a list of approved arbitration bodies.”
We hope that the list will be easily discoverable and regularly updated. On subsection (6), we hope that the Government will ensure that the process of removing arbitration bodies that are not up to scratch is done transparently and speedily. It is absolutely essential that both parties to arbitration—landlords and businesses—have confidence, that the process is fair, and that arbitrators are trusted and appropriately experienced. Although we seek Government reassurance on that, we will support clause 7.
Paul Scully
I reassure the hon. Lady that we want to ensure that everything is transparent and easy to find. People are hard pressed and have to contend with the survival of their businesses, so it is really important that we give them as much information as possible. Indeed, we want to ensure that, should we be required to remove any arbitration services from the list, we do so in an open and speedy way, not least because we want to get through the process as quickly as possible—there is no point in dragging it out—for the benefit of landlords and tenants.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8
Functions of approved arbitration bodies
Ruth Cadbury
I was speaking to the wrong amendment, Mrs Murray. I apologise to Committee members and staff.
I beg to move amendment 1, in clause 8, page 6, line 25, at end insert—
“(2A) The Secretary of State must by regulation specify the meaning of ‘qualifications’ and ‘experience’ for the purpose of this section.”
This amendment would require the Secretary of State to specify by regulation to meaning of qualifications and experience in section 8.
Amendment 1 would require the Secretary of State to specify by regulation the meaning of “qualifications” and “experience”. A fair arbitration process is crucial for businesses, landlords and all involved to have faith in the new system. The Bill states that there is a list of approved arbitrators who are appointed
“by virtue of their qualifications or experience”.
Our straightforward amendment would require the Secretary of State to specify just what those qualifications and experience should be.
During the Committee’s first oral evidence session, we had witnesses who focused on the importance of financial qualifications for the arbitration, because most cases will focus on the financial situation for the parties. One witness had an alternative view, however, and suggested in their written evidence that arbitrators should be legally qualified due to the complex nature of some cases and the need for a fair, transparent process.
When the Bill was introduced, we said that it was crucial that businesses have faith in the whole of the arbitration process. Equally, we said that it was important that the process is transparent and fair. That is why our amendment would require the Secretary of State to outline just what the necessary qualifications and experience should be. That would reassure all those involved in the process that it is being overseen by trusted and qualified individuals and groups.
Paul Scully
I think that we all agree about the importance of having the right arbitrators in place to carry out this important work. The Bill already contains steps to ensure that arbitrators will have the necessary qualifications and experience. First, the Secretary of State may approve an arbitration body only if it is considered suitable to carry out its required functions. If the Secretary of State considers an arbitration body not to be properly carrying out its functions, including those relating to the assessment of qualifications and experience, the Secretary of State can withdraw approval.
Secondly, the arbitration bodies themselves are required to maintain a list of arbitrators that are suitable to work on cases that fall under the Bill by virtue of their qualifications or experience. It is right for the arbitration bodies, as the experts on this matter, to determine which arbitrators are suitable given their qualifications and experience. Arbitration bodies that have demonstrated an interest in becoming approved bodies are widely recognised and respected in the field of arbitration, and they are experienced in assessing arbitrators through their accreditation services. That will ensure that we do not unfairly exclude arbitrators by setting in legislation definitions that are too narrow.
However, we recognise that we should not take a one-size-fits-all approach to arbitration, so the Bill provides that arbitration bodies have the flexibility to appoint arbitrators to cases that match their specific qualifications and experience. Furthermore, if an arbitrator does not possess the qualifications required for a particular case, the arbitration body is required to remove them from that case.
The Bill already ensures that arbitration is carried out by suitably qualified and experienced arbitrators. I hope that hon. Members agree that the arbitration bodies are best placed to make this judgment, notwithstanding the clear evidence that we heard of the kind of experiences that we, landlords and tenants expect of arbitrators. I therefore request that the amendment be withdrawn.
Ruth Cadbury
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clause 8 sets out the statutory functions of arbitration bodies approved by the Secretary of State to carry out arbitration services. It is key to enabling the arbitration market to deliver the system that is required to efficiently resolve outstanding rent disputes. The arbitration bodies will be given powers to appoint arbitrators to a case, as well as to remove them if they are deemed unsuitable on certain grounds. The clause also provides that arbitration bodies will oversee cases and set fees for arbitration services, subject to any cap on fees that may be imposed by the Secretary of State under clause 19, as well as dealing with financial arrangements.
If grounds for removal exist, an arbitration body must remove the arbitrator from the case—for example if an arbitrator does not possess the qualifications required for the arbitration. That is integral to the delivery of the arbitration process. It also provides for reporting, to enable the Secretary of State to have clear sight of the progress of the arbitration process.
Ruth Cadbury
We have no further amendments to the clause, and we have no further comments to make at this point.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Clause 9
Period for making a reference to arbitration
Ruth Cadbury
Amendment 2 covers a much wider issue around trust and transparency: the way in which Parliament has full, open access to decision making. The amendment is similar to amendments that Labour colleagues have introduced before in other pieces of legislation that we have otherwise been supportive of on the whole, as we are of this Bill.
Amendment 2 would require regulations to be made according to the affirmative procedure. It would ensure that Parliament can fully scrutinise the extension of the existing six-month period in which businesses can go through the arbitration process. The Bill requires regulations to go through the negative procedure, which means that they would be discussed or stopped only if there was an objection. Our amendment would make the procedure affirmative, meaning that Parliament would have to approve them.
In recent days, we have seen that the Government’s approach to public health issues and, indeed, to the wider impacts of coronavirus can change rapidly, and it is crucial that MPs and parliamentarians are able to debate, scrutinise and assess such changes. Our amendment therefore calls for both Houses to approve any extension to the arbitration process, to ensure that it works for businesses and landlords across the country.
Paul Scully
I thank the hon. Lady for her summary of the amendments. The Bill aims to resolve protected rent debt quickly and support commercial tenants and landlords to return to normal operations as soon as possible. We encourage landlords and tenants to resolve unpaid debt between themselves. The arbitration process is designed to allow for negotiation and for the parties to make considered proposals to lead to appropriate outcomes.
The timeframe for making references to arbitration will encourage a speedy resolution of the disputes in scope, and is meant to deal with a particular set of circumstances at a critical time. We believe that six months is enough time to allow eligible tenants and landlords to apply for the arbitration process. However, if there is evidence that the six-month period is not enough, the Secretary of State can, using the power in clause 9, extend it to allow more time for the eligible parties to apply. Any evidence that the power is needed is unlikely to become available until well after the Bill comes into force; it may not become apparent that such an extension is necessary until close to the expiry of the six-month period. The length of an extension would depend on the circumstances, but would be based on feedback from stakeholders. It would be only for as long as is absolutely necessary.
I appreciate the interest in transparency shown by the hon. Member for Brentford and Isleworth, and I reassure her that the decision to extend would be based solely on evidence from tenants, landlords and arbitrators. Officials will continue to monitor the process if issues with the time period arise.
Regulations to extend the application period may need to be made relatively quickly in order to react, so it is important that the Bill remains flexible in case more time is needed. It remains important for the Government to work with Parliament. None the less, we want to make sure that the process can be resolved as quickly as possible, without any undue delay or concern that landlords and tenants will not have their case heard as quickly as possible. We therefore consider the negative procedure to be appropriate in the circumstances. I welcome the hon. Lady’s contribution, but I hope in this instance that she will withdraw the amendments.
Ruth Cadbury
If the two amendments are being considered together, I would also like to speak specifically to the other one.
Ruth Cadbury
Thank you, Mrs Murray, that is very helpful. Amendment 3 would require the Secretary of State to prepare, publish and lay before Parliament a report giving reasons for any extension to the period for making a reference to arbitration. Like amendment 2, amendment 3 is crucial in improving and expanding the scope of parliamentary scrutiny. It calls for the Government to publish a report setting out the reasons given for any extension of the existing six-month arbitration process.
As we said on Second Reading, it is crucial that the Bill has the support of businesses and that the arbitration process is transparent and open, which should include any extension of the period in which rent arrears can be brought into arbitration. Our amendment therefore calls for the Secretary of State to publish and lay before Parliament the reasons for extending the arbitration process.
Paul Scully
I hope that, in my opening remarks, I made clear our reasons for asking the hon. Lady to withdraw the amendment.
Ruth Cadbury
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Paul Scully
The purpose of the clause is to specify the time limit for which arbitration under the Bill will be available. It will encourage landlords and tenants to engage and attempt to resolve in-scope disputes in a timely manner. There is a power for the Secretary of State to extend the time limit if it is required. The arbitration process should be seen as a last resort and our strong preference is for landlords and tenants to negotiate using the updated code of practice.
Before either party can make a reference to arbitration, on notification by the applicant that they intend to make a reference, the parties are expected to offer solutions with supporting evidence to try and resolve the matter, meaning arbitration should be a last resort. Under the Bill, parties will have six months to make a reference to arbitration to give them time to go through those steps. The Secretary of State has the power to request reports from approved arbitration bodies to enable him to monitor their progress and also has a delegated power in the clause to extend the six-month period, should monitoring suggest that it is necessary to do so.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Requirements for making a reference to arbitration
Question proposed, That the clause stand part of the Bill.
Paul Scully
A party that wants to take their dispute to arbitration must first go through a process of notifying the other party and allowing the other party to respond. The clause sets out the timings and the steps to take. The intent is to give both parties enough time through a period of up to at least 28 days from the date of initial notification to try and reach an agreement pre-arbitration.
Arbitration provided by the Bill cannot be used where tenants are subject to or debt is under certain legal compromises or arrangements for debt recovery. That is because the Bill aims to focus specifically on unagreed rent arrears and to encourage negotiations where possible.
Ruth Cadbury
I thank the Minister. Again, we do not propose to amend or oppose the clause. I appreciate that the Government have put these measures in place for a reason and we welcome them. I would like to know whether the Government have made any assessment of how many businesses would be unable to go to arbitration on the basis of these limits.
Paul Scully
I am not aware that we have made a specific assessment. We have made assessments on the businesses that come within scope and would otherwise go to arbitration because they have not been able to have a satisfactory discussion beforehand. These positions allow parties time to reflect on whether they can reach that settlement in a fair and open process.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clause 11
Proposals for resolving the matter of relief from payment
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause requires the party making a reference to arbitration to include with that reference a formal proposal and supporting evidence. The other party may respond with their own proposal, accompanied by supporting evidence, within 14 days of receiving the applicant’s. The process therefore gives each party the opportunity to review the other’s proposals. The parties then have 28 days from their initial formal proposal to submit a revised proposal accompanied by further supporting evidence—or longer if both parties or the arbitrator agree to allow more time, giving each party time to reflect and respond. That is important, because it facilitates the possibility of a settlement occurring early on in the arbitration process once a reference to arbitration is made. It supports our aim of giving businesses certainty as soon as possible. I commend the clause to the Committee.
Ruth Cadbury
I thank the Minister. Again, we do not intend to amend or oppose the clause at this point. We support the proposals for resolving the matter of relief, because, as the Minister has said, it allows tenants and landlords to reach an agreement. We know from stakeholder feedback that this process is welcomed by businesses. It will provide relief, especially because of the block on any court action that it provides. We also welcome it because it allows both parties to make proposals to tackle debt relief. Equally, we want to make sure that there is a level playing field in the arbitration process. We do not want larger companies to be able to muscle through the arbitration process because they have greater levels of resources—both financial and in levels of expertise and so on.
Although we welcome the fact that the process can be extended with agreement, there is an equal chance that, if the process extends and extends even further, it could act as an extra burden on smaller businesses. That is why we hope the Government will look into the accessibility and ease with which small businesses, in particular, can engage in the arbitration process.
Paul Scully
We will continue to work with the arbitration services that have expertise in this area, especially as the measure is based on systems specifically targeted at smaller businesses and smaller disputes.
Question put and agreed to.
Clause 11 accordingly ordered to stand part of the Bill.
Clause 12
Written statements
Question proposed, That the clause stand part of the Bill.
Paul Scully
Statements of truth confirm the veracity of written statements submitted to the arbitrator, and they will be required to verify any written statements provided to the arbitrator—whether by one of the parties or another person—that relate to a matter relevant to the arbitration. An unverified written statement can be disregarded by the arbitrator. It is standard practice in arbitration processes to require a written statement to be verified by a statement of truth. That ensures that parties only make written statements that they believe to be true, ensuring that arbitral awards have a sound basis. I urge the Committee to support the clause.
Ruth Cadbury
This is a welcome clause and one that we support. It is vital that statements given to the arbitrator are truthful. That will be crucial when viability is being assessed. Although we have expressed the importance of viable businesses being supported, we appreciate that this is a two-way street, and that businesses need to provide truthful and full information to the arbitrators, as, of course, do landlords. We support the clause.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Ordered, That the Order of the Committee of Tuesday 7 December be amended, in paragraph 1(b), by leaving out “and 2 pm”.—(Craig Whittaker.)
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)