OECD Report of International Regulatory Co-operation in the UK

Paul Scully Excerpts

Wednesday 2nd September 2020 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

My right hon. Friend the Parliamentary Under Secretary of State (Minister for Climate Change and Corporate Responsibility) Lord Callanan has today made the following statement:

I am today publishing the Government response to a review by the Organisation of Economic Co-Operation and Development (OECD) into the UK’s international regulatory co-operation practices. This includes launching a call for evidence targeted at UK regulators, standard bodies and industry groups to understand their priorities for greater regulatory co-operation, and how the Government can help support and leverage their engagement in support of the UK’s wider national interest.

International regulatory co-operation (IRC) is about understanding the implications of regulation beyond national borders. It provides an important opportunity for countries to adapt their regulations to the rapidly evolving needs of a globalised world and to influence the regulation of others. In practical terms, this involves shaping and complying with international agreements, utilising international evidence and collaborating with international partners when designing and enforcing regulations.

For the UK, consideration of IRC is increasingly important given we are at a critical juncture for the country and our regulatory policy. We are seeking to build on our global ambitions now that the UK has left the European Union and is taking back regulatory competencies. In tandem, we are developing our own independent trade policy for the first time in almost fifty years. The emergence of new technologies, which are global in their scale and implications, also means that regulation is more international than ever. Effective regulation in these technologies underpinned by international co-operation enables consistent enforcement across borders and opens up trade opportunities by the reduction in non-tariff barriers.

In light of this, in 2018 the Government invited the OECD—as the leading authority on regulatory policy—to conduct a review into the UK’s IRC practices. The resulting OECD report finds that there is no overarching, cross-Government strategic vision and systematic practices in place in relation to IRC. And while there are some examples of effective regulatory co-operation initiatives being undertaken by our world-renowned regulators, overall, this is sporadic and sector specific.

The report makes 25 recommendations to address this across three broad categories which are: building a holistic IRC vision, a strategy and political leadership for IRC in the UK; embedding IRC more systemically in regulatory management tools; and increasing awareness and understanding about IRC across departments and regulators.

The document I am publishing today “International Regulatory Cooperation for a Global Britain”, sets out our response to these recommendations. It welcomes the OECD’s report and sets out the programme of work my Department will be undertaking to drive a systematic focus on IRC across Government and regulators by:

developing a whole-of-Government international regulatory co-operation strategy, which sets out the policies, tools and respective roles of different departments and regulators in facilitating this;

embedding international regulatory co-operation considerations within the better regulation framework and other government guidance;

developing specific tools and guidance to policy makers and regulators on how to conduct international regulatory co-operation; and

establishing networks to convene international policy professionals from across government and regulators share experience and best practice on international regulatory co-operation.

The call for evidence we are launching as part of this response aims to understand where regulators, standards bodies and industry groups already engaged in IRC, their priorities for where they would like to see greater IRC and how the Government can aid them identify and pursue opportunities.

The UK has a proud tradition of better regulation in ensuring that regulation is proportionate, targeted, transparent, accountable and consistent. Adopting a more international approach continues this by helping to reduce regulatory burdens on our exporting businesses and ensuring more effective regulatory outcomes for society. IRC will play a critical role in delivering on the Government vision of a global Britain that is a responsible international actor playing a constructive role in tackling issues of collective global responsibility, and a champion of free trade that seeks to counter the growing proliferation of non-tariff barriers.

The results of the call for evidence will be used to inform the development of the Government international regulatory co-operation strategy to be published at a future date, on which I will update the House.

[HCWS429]

Beneficial Owners of Overseas Entities

Paul Scully Excerpts

Tuesday 21st July 2020 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

My right hon. friend the Under-Secretary of State, Minister for Climate Change and Corporate Responsibility (Lord Duncan), has today made the following statement:

The United Kingdom has a reputation as a good place to do business. Our high corporate standards and market transparency give people trust and confidence in our markets. We recognise that knowing whom you are really doing business with improves confidence in commerce and investment and we continue to work on improvements to the strong systems that we already have in place.

However, the same factors that make the UK an attractive location to set up and operate a business also make it attractive to exploitation. One such area of exploitation is the UK’s property market, which continues to be an attractive vehicle for criminal investment, in particular for high-end money laundering. The risks relating to the laundering of dirty money through property are most acute where property is owned anonymously through corporate structures or trusts. The Government are therefore working to crack down on this illicit activity by creating a register of the beneficial owners of overseas entities which own or buy property in the UK.

The Government committed in primary legislation, through section 50 of the Sanctions and Anti-Money Laundering Act 2018, to report to Parliament annually on the progress that has been made towards putting in place such a register. The register is included as one of the key measures of the UK’s “Economic Crime Plan 2019-22”¹, and the December 2019 Queen’s Speech included a commitment to progress the required legislation.

The draft Registration of Overseas Entities Bill underwent pre-legislative scrutiny by a Joint Committee in spring 2019. The Government’s response to the Committee’s report was published on 18 July 2019². In this response, the Government accepted many of the Committee’s recommendations, such as ensuring Companies House is given adequate resources to deal with additional filings under this register; introducing a reporting facility for inaccurate information on the register; and continuing to advance work on reforming the powers of Companies House to verify information. For example, overseas entities seeking to register with Companies House will be required to have their details verified, thereby ensuring that the new register will be sufficiently robust. The Government have been exploring how best to implement these recommendations and others proposed in the Committee’s report, such as civil sanctions, and what options are available.

This register will be novel, and careful consideration is needed before any measures are adopted, as it is imperative that the register is as robust as it reasonably can be, with reliable data and sufficient deterrent effects to make it clear that the UK property market is not a safe haven for dirty money. Engagement with members of civil society, business and the property market throughout all nations of the United Kingdom has been ongoing to ensure the proposed measures work equitably across the country.

The UK continues to lead the global fight against illicit finance and this register will strengthen our already impressive controls. The Financial Action Task Force completed a landmark review of the UK’s regime for tackling money laundering in December 2018, concluding that we have some of the strongest controls in the world.

¹ https://www.gov.uk/government/publications/economic-crime- plan-2019-to-2022

² https://www.gov.uk/government/publications/draft- registration-of-overseas-entities-billgovernment-response-to-joint-committee-report

[HCWS413]

Draft Alternative Dispute Resolution for Consumer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc.) (EU Exit) Regulations 2020

Paul Scully Excerpts

Monday 20th July 2020 General Committees

[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 Alternative Dispute Resolution for Customer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc.) (EU Exit) Regulations 2020.

It is an absolute pleasure to serve under your first of many chairmanships, Dr Huq.

The draft regulations were laid before the House on 29 June, and form part of the programme of work to update our legislative framework in readiness for the end of the transition period. We want a relationship with the European Union that is based on friendly co-operation between sovereign equals and centred on free trade. We will have a relationship with our European friends inspired by our shared history and values, and it is important to ensure that retained EU legislation continues to work effectively in the UK immediately after the transition period.

We have a strong framework of consumer rights in this country, which gives most consumers the confidence to settle any disputes directly with businesses—and they do; around six in 10 disputes are resolved directly with the business. However, we know that when resolution is not achievable directly, many consumers would prefer a way other than court action to settle their differences with businesses.

Alternative dispute resolution, known as ADR, helps consumers to resolve complaints with traders by providing a confidential and objective method for tackling disputes without going to court. More than 2.5 million disputes have been resolved through ADR in the past six years. Research by the Department for Business, Energy and Industrial Strategy found that 80% of consumers who used ADR thought that their problem would not have been resolved without it. The draft regulations we are considering today have no impact on the provision or quality of ADR, nor do they alter substantive consumer rights and protections available to UK residents more generally.

This statutory instrument will ensure that ADR continues to work as intended after the end of the transition period, in a context in which the EU’s ADR directive no longer applies to the UK. It amends four pieces of legislation that implement the EU ADR directive. Those four pieces of legislation extend the time limit for bringing court proceedings when a consumer is engaged in non-binding ADR. Those extensions of the time limit allow the ADR procedure to conclude and, if it has not been successful, give the parties an eight-week grace period to commence court proceedings thereafter. That ensures that the parties are not prevented from initiating judicial proceedings where the court time limit expires during or just after the ADR procedure.

The extensions will continue to apply, but, as a result of the draft regulations we are debating today, they will apply only where the consumer is resident in the UK and the ADR provider is approved under the UK’s ADR regulations. Provided those conditions are met, time limits will continue to be extended for consumers resident in the UK whether the trader is based in the UK or the EU, as is the case now.

The changes reflect those that have already been made to section 140AA of the Equality Act 2010, which also implements the ADR directive, via a separate instrument, the Equality (Amendment and Revocation) (EU Exit) Regulations 2019, which has already been approved by this House. The draft regulations before this Committee are designed to ensure that a consistent approach is taken across the statute book to all rules on extensions of time limits deriving from the ADR directive.

Most disputes involving UK consumers will not be affected by the draft regulations, which do not otherwise affect the ability of any consumer, whether resident in the UK or EU, to apply to the UK courts or to use ADR. Furthermore, the transitional provisions ensure that, where consumers have begun ADR proceedings before these draft regulations come into force, any extensions entailed will be unaffected.

As part of that process, officials from the Department have undertaken the appropriate assessment of the impacts of this instrument. That shows that there is likely to be a negligible impact on business, because the amendments do not bring about a wider policy change or impose any new liabilities or obligations on any relevant businesses, organisations or persons.

In conclusion, this instrument is a sensible and necessary use of the powers of the European Union (Withdrawal) Act 2018, which will ensure that the law in this area continues to function effectively after the transition period. I commend the draft regulations to the Committee.

--- Later in debate ---

[Paul Scully]

I thank the Committee for its consideration of the draft regulations, and I thank the hon. Member for Newcastle upon Tyne Central—I did promise to celebrate Newcastle, in the spirit of collaboration—for her valuable contribution to the debate. To be clear, nothing in the regulations changes which sectors are covered by ADR or the obligations on businesses to engage with consumers. They are limited in their scope to short-term extensions of the time limits for court proceedings where necessary, to give the parties the opportunity to resolve their differences through non-binding ADR.

The hon. Lady asked about the few cases that the regulations affect. That is when cases are getting up to the time limitation—typically six years—so that involves the lengthiest cases, if something has not been resolved by that point. Although it is estimated that 2.5 million cases have been resolved by ADR over the past six years, there are very few at the end period. Most disputes will not be affected by the regulations, and the transitional provisions have ensured that any extensions that have already taken place will also be unaffected by this SI. It avoids inconsistency in the statute books.

Essentially, the hon. Lady asked a few questions about what would happen with EU citizens, UK businesses working abroad and EU companies. UK law still applies to services targeted at UK consumers and UK businesses, so they would have the UK statute book to help protect them within that remit. Without the introduction of the SI, UK legislation would continue to provide EU consumers with flexibility in relation to the extension of court time limits, but it is not clear at this stage whether UK consumers would retain that benefit in member states.

Yes, we want to ensure that we can work through reasonable co-operation with the EU—as sovereign equals, as I said—because we have no intention of lowering standards. The political declaration sets out the parties’ ambitions to work together to safeguard high standards of consumer protection, but our high standards are not dependent on EU membership. The UK has often led or gone beyond the minimum requirements set out by EU consumer law. For example, in 2015, the UK brought digital content within the scope of consumer rights for the first time. We are seeking an agreement with the EU that is like those the EU has struck with other friendly countries, such as Canada. Effective co-operation on consumer protection will be an important part of the UK’s future relationship, and it is in the interests of all parties in that regard. We are examining ways to continue and enhance global co-operation on consumer protection, and the Competition and Markets Authority will continue to take an active role in international forums.

The hon. Lady asked about enforcing consumer rights. I have talked about the fact that UK consumer rights are stronger than those in many other EU countries, and compliance with the law is considered high. Some 84% of consumers think traders respect their rights—the joint-highest rate in the EU—and 79% of traders think their competitors comply with consumer law, which is the highest rate in the EU. We have excellent consumer advice organisations, such as Citizens Advice and Resolver, which can guide consumers in pursuing a complaint and provide data that reveal patterns of behaviour that might require a public enforcement response. That suggests that, for the majority of consumers, the current framework works well most of the time. I must say it is important that we continue to strengthen our consumer rights, and we do not take that lightly at all.

I come back to the fact that current domestic consumer protections relating to ADR will remain the same. The European Union (Withdrawal) Act maintains provisions on ADR that derive from the EU directive. The draft regulations ensure that the consumer rights framework continues to function effectively once the EU ADR directive ceases to apply to the UK. I hope the Committee will approve the SI.

Question put and agreed to.

Companies House Targets

Paul Scully Excerpts

Thursday 9th July 2020 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

My right hon. Friend the Parliamentary Under Secretary of State (Minister for Climate Change and Corporate Responsibility) Lord Callanan has today made the following statement:

I have set Companies House the following targets for the year 2020-21:

Public Targets

Digital services will be available for a minimum of 99.9% of the time.

97% of companies on the register will have an up to date confirmation statement.

We will manage expenditure set out within budgetary limits.

We will be in the top quartile of public service organisations for customer satisfaction.

We will maintain the proportion of external applications from underrepresented groups.

We will withdraw the paper channel for reminders by the end of March 2021.

[HCWS350]

Draft Enterprise Act 2002 (EU Foreign Direct Investment) (Modifications) Regulations 2020

Paul Scully Excerpts

Wednesday 8th July 2020 General Committees

[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 Enterprise Act 2002 (EU Foreign Direct Investment) (Modifications) Regulations 2020.

It is a pleasure to open the debate under your chairmanship, Mrs Miller. The draft instrument was laid before the House on 8 June. I will try to clearly explain the rationale behind it, but first let me turn quickly to foreign direct investment more broadly.

The UK has a proud and hard-won reputation as one of the most open economies in the world. We remain the top destination in Europe, and the third in the world, for foreign direct investment, with 58,000 new jobs created in the UK in 2018-19 through that inward investment.

Although most FDI does not raise concerns, it is vital that any transactions that could operate against the public interest should be scrutinised. Under the Enterprise Act 2002, the Secretary of State has powers to intervene in mergers that present public interest concerns. The Government will shortly bring forward the National Security and Investment Bill to further strengthen the UK’s ability to scrutinise investment into the UK. There will be the usual opportunities to debate the Bill once it is introduced.

The European Union also recognises the security risks that can, on occasion, be posed by foreign direct investment, and has responded by bringing forward a regulation that establishes a framework for the screening of foreign direct investment into the European Union. The draft instrument will make effective that regulation, which will come into force on 11 October. As Committee members will know, under the withdrawal agreement the UK is obliged to implement EU law during the transition period. Most of the regulation’s provisions will automatically have direct effect in the UK. I will briefly set out its purpose.

The regulation will create a mechanism that will allow the UK, member states and the European Commission to share information about investments with each other. Specifically, the EU regulation does three things. First, it requires member states and—for the duration of the transition period—the UK to provide notification of any FDI that is undergoing scrutiny. That will have no impact on us, because in the UK notifications of screening under the Enterprise Act are already published on gov.uk.

Secondly, the regulation allows the UK, member states and the European Commission to issue opinions and comments on investments that are being screened elsewhere in the EU, and to request information where their own security or public order might be affected. To be clear, while any opinions expressed might be considered, they will not affect the UK Government’s right to intervene in or make decisions on merger cases that we consider may raise national security concerns: our sovereign capability is not affected.

Thirdly, the regulation requires member states and the UK to share basic information about FDI that has not already been screened where it may affect another member state’s security or public order. The UK could similarly request information or issue opinions on investments occurring in EU member states if we felt that our security or public order might be affected. Member states and the UK are not required to share information on specific security or public order concerns.

The EU regulation will automatically become part of UK law on 11 October 2020. However, some measures in the regulation require changes to UK law to ensure that it can operate effectively in the UK. The draft instrument makes those changes. It will allow the Competition and Markets Authority, the CMA, to use its existing powers, set out in the Enterprise Act, for the purposes of regulation.

However, two changes to the Enterprise Act are being made. The first extends the CMA’s existing information-gathering powers and associated penalty regime. The CMA already gathers information for businesses, when the Secretary of State intervenes in a merger, by issuing a public interest intervention notice, or PIIN. However, the EU regulation allows information to be requested about FDI that is not undergoing screening—when a PIIN has not been issued. It is these cases for which the additional information-gathering powers are needed.

The CMA will be able to gather this information only when a member state or the European Commission has requested it on the basis that FDI into the UK might affect their own security or public order. The types of information that can be requested include the ownership structure of the foreign investor, the value of the investment and the date when the investment is planned to be or has been completed. Businesses already hold that information, so it will not be burdensome to provide. If, however, a business fails to comply with a request, penalties could be issued. The instrument extends the scope of the existing civil and criminal penalty regime available to the CMA, as set out in the Enterprise Act.

The second change that the instrument makes will allow the Secretary of State and the CMA to disclose information to the European Commission or member states where the Secretary of State wishes to provide comments on FDI in a member state. The Enterprise Act already allows the Secretary of State or CMA to provide information to the Commission or member states where that is required because of a Community obligation, but that would not be the case when we actively choose to provide comments on FDI in a member state, which is why the second change is needed.

[Mr Mark Harper (Forest of Dean) (Con)]

May I ask the Minister a question about that second point? I have been listening very carefully to what he said. The explanatory notes make it clear that these regulations will be revoked at the end of this year, when the transition period comes to an end. In the Bill that we will introduce, are we proposing to allow Ministers to continue sharing information with the European Union where they choose to do so in the cases that he set out, or will that come to an end when these regulations are revoked?

[Paul Scully]

I thank my right hon. Friend for his intervention. The regulations will be repealed as part of the wider European Union (Withdrawal Agreement) Act 2020. They do not interact with the Bill that we are introducing, but add further powers that can be used.

The UK and the EU have both stated that we intend to support ambitious, close and lasting co-operation on external threats. That co-operation should respect both sides’ strategic and security interests and respective legal orders. We are open to participation in security-facing EU programmes and instruments on a case-by-case basis.

[Mr Kevan Jones (North Durham) (Lab)]

The right hon. Member for Forest of Dean makes an interesting point. Is there not going to be a gap between the lapsing of this legislation and the new Bill to which the Minister refers? This week, we announced sanctions against a number of individuals—independently of any other country, including the EU. Does that not leave us at a disadvantage if we are not able to get information, perhaps about people we think are a threat but the EU does not?

[Paul Scully]

I thank the right hon. Gentleman for his intervention. Both the UK and the EU have expressed our intention to co-operate as best we can. How that is structured will be part of the negotiations. Although this measure does not directly interact with the new Bill, we intend to introduce the Bill very soon.

[Mr Jones]

This is like a lot of things to do with the withdrawal agreement Act—it is wishful thinking, and there will be a gap that will put the UK at a disadvantage. Great fanfare was made this week about the fact that we can now sanction individuals who use investment as a way of hiding money. It was said that that is a great step forward for our freedoms from the EU. If we do not have a seamless connection, this measure will leave us at a huge disadvantage, because there will be no onus on the EU to share any information with us.

[Paul Scully]

As I say, although we are obviously obliged to abide by EU law during the transition period, we do not believe it would be appropriate to remain part of the reciprocal information-sharing channel after the transition period has come to an end. As I say, when the National Security and Investment Bill is introduced, we will be able to debate that fully.

[Mr Harper]

May I clarify something? I think the right hon. Member for North Durham is asking a slightly different question about reciprocal obligations. My question was more straightforward. These regulations give the CMA a power that it does not currently have to share information that we wish to share.

All I was asking was this: in the future, when we are no longer obligated to share information with the EU, will Ministers have the legal power to share that information if they chose to? They will under these regulations, but once those are revoked will Ministers have the power, under the Bill that the Minister has talked about, to share information with the EU if they choose to do so? That is all I was asking. I did not go quite as far as the right hon. Gentleman was suggesting.

[Paul Scully]

I thank my right hon. Friend for that clarification. We already share a lot of this information on gov.uk, and it is not particularly burdensome on businesses to release the information we are looking for. Much of this work is in effect tidying up, because we have gone that little bit further in the Enterprise Act.

[Mr Jones]

I say in response to the right hon. Member for Forest of Dean that there will be no obligation on Ministers to share information. There might be good will, and it might be in our interest to share the information, but there will be no legal obligation as there is now.

[Paul Scully]

As I said, we already go far enough with the Enterprise Act. The information is released and on gov.uk. This is very much a tidying-up exercise to ensure that the legislation works.

[Mark Garnier (Wyre Forest) (Con)]

My apologies for pressing the point, but having been the Minister for Investment at the Department for International Trade, I know there are quite significant implications in the question from my right hon. Friend the Member for Forest of Dean and all of this.

Ministers from the Department for International Trade will be actively seeking foreign direct investment into UK businesses and, at the same time, the Competition and Markets Authority could start pushing back against those active Government interventions to bring people into the country, for various reasons. If Ministers could disclose some of the information at the start, that would pre-empt the problem otherwise of Departments working against each other, which would be to the benefit of the country. Should DIT officials try to start bringing in people who may be a bit dodgy, we could work out that they were dodgy before we started all the hard work. That is why that question is so important.

[The Chair]

Order. Before I ask the Minister to respond, may I gently bring hon. Members back to the fact that we are considering the instrument before us, not any future instruments?

[Paul Scully]

Thank you for that clarification, Mrs Miller, and I thank my hon. Friend for his intervention. We can debate this issue when the National Security and Investment Bill comes to Parliament.

The second change that the regulations make will allow the Secretary of State to disclose information to the European Commission or member states when the Secretary of State wishes to provide comments on FDI in a member state. As I said earlier, the Enterprise Act already allows the Secretary of State or the CMA to provide information to the Commission or member states where required because of the Community obligation.

The interventions were about further information that is not necessarily required, but I believe that in the upcoming National Security and Investment Bill we will have plenty of chances to debate the area and ensure that, with the Enterprise Act, it is solid. Although we do not believe that we should be part of a reciprocal information-sharing procedure at the end of the transition phase, we are already going that little bit further anyway. However, it will be revoked, along with the EU regulation.

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

I want to address a key issue for me: the need to have something in place to ensure certainty. That addresses the point made by the right hon. Member for North Durham. These measures envisage a seamless arrangement until such time as Parliament has implemented new measures. What I think I read in the explanatory memorandum is that the Enterprise Act ensures that the system of which we are currently a part with the European Union to manage the process is operational in UK law through the Competition and Markets Authority.

[Paul Scully]

I thank my hon. Friend. The UK and the EU will have separate jurisdictions to scrutinise mergers. The EU might look at a merger if it is relevant, but that would not stop the CMA from conducting its own investigation.

[Mr Jones]

The hon. Member for Ruislip, Northwood and Pinner tried to help the Minister out, but I do not think he did: the regulations, which I have no problem with, lapse when the transition period ends. Obviously, the new Bill will try to cover some of these areas. If we believe the Prime Minister, this is all going to be done and dusted by January next year, so that Bill will have to come in before January 2021 if we are to have the seamless transition the Minister has referred to.

[Paul Scully]

That is a topic we will come to when we introduce the Bill. Hopefully, with the co-operation of Her Majesty’s Opposition, we can get that through swiftly and at the appropriate time to allow for that seamless approach.

To conclude, this instrument is not going to make fundamental changes to the UK’s investment screening regime. The UK is going to retain the levers in the Enterprise Act that allow the Secretary of State to intervene in a merger. The instrument will also not affect plans for the forthcoming National Security and Investment Bill, nor will it interact with the two instruments laid before the House on 22 June, which amend the Enterprise Act 2002. However, it is necessary to agree this instrument to ensure that the UK complies with EU law, as is our duty under the withdrawal agreement.

--- Later in debate ---

[Paul Scully]

I thank the Committee for its consideration and for the points that have been raised during the debate, which I will try to address. The hon. Member for Manchester Central talked about the CMA and small businesses. Clearly, it is important that we give due consideration to the pressures on small businesses, especially at this particular time. The CMA understands that this is a challenging time for small businesses and encourages them to approach it as soon as possible if they foresee difficulties in meeting the deadline, so that the information request or stipulated response dates can be varied where appropriate. It is important that the CMA works with small businesses in that regard.

The right hon. Member for North Durham raised a few points. On the question of co-operation with the EU, as I have stated, the EU and the UK have said that they both want to co-operate where appropriate. On information sharing, we must not forget that the EU does not equal the rest of the world. It is an important partner for trade, for security and for any number of issues on which we must continue to co-operate, but as we do so, we need to retain our sovereignty at the end of the transition phase, having left the EU in January. The Opposition effectively did not want to bring Parliament back as a result of covid; we wanted to come back so that we could progress the legislation at pace, and we have done a lot since then. The right hon. Gentleman asked whether the legislation places us at a disadvantage. The Enterprise Act already has information-gathering powers when there has been a public interest intervention notice, so we will have the power to share information, as we do now, after the implementation phase.

As I have said, the UK and the EU have stated their intention to support ambitious, close and lasting co-operation. My right hon. Friend the Member for Forest of Dean asked whether Ministers will be able to share information about mergers after December. Yes; that is planned in the National Security and Investment Bill, so we will be able to share information about mergers after that point.

[Mr Jones]

What happens during the gap between these regulations falling and the Bill coming in?

[Paul Scully]

The right hon. Gentleman is talking about a future Bill. If he is happy to work with us, we can make sure that the Bill progresses at pace. We have been introducing a lot of new legislation at pace to respond to covid, and we can do the same with the Bill. We have all learned from the pandemic how to work more closely together when it is in the national interest, instead of playing politics with some of this stuff, and we have moved at pace. The right hon. Gentleman suggests that there will be a gap, but that is not necessarily within the scope of the debate or our intention.

[Mr Jones]

That is a bit rich. I do not control the legislative programme of the House or the Government. The Minister has only to look at the programme for the last few weeks: Opposition days, general debates and the debates on estimates that we have had for the last two days. The idea that there is not enough time—and blaming the Opposition for it—is frankly a bit rich. It is down to the Government to bring the legislation forward.

[Mr Jones]

He raised it!

[Paul Scully]

To be fair, I was responding. The UK’s investment screening process will continue to operate as it does now, with a few additional steps to ensure that we comply with the regulations. Our sovereign capabilities to intervene in a merger will not be affected. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Enterprise Act 2002 (EU Foreign Direct Investment) (Modifications) Regulations 2020.

Corporate Insolvency and Governance Bill

Paul Scully Excerpts

Consideration of Lords amendments & Ping Pong & Ping Pong: House of Commons
Thursday 25th June 2020 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I beg to move, That this House agrees with Lords amendment 1.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this we may take Lords amendments 2 to 116.

[Paul Scully]

The Corporate Insolvency and Governance Bill has been a demonstration of what can be achieved in the best interests of businesses, jobs and the country’s economic future when there is collaborative work across both sides of the House. I am grateful to hon. and right hon. Members for the constructive way in which the Opposition have engaged with the Bill, both in this House and the other place.

Over the past three months, this country has faced the unprecedented hardship of needing to adhere to stringent social distancing measures due to the covid-19 pandemic, where Government had no choice but to order businesses to close their doors to safeguard the nation’s health. We recognise the huge sacrifices that has entailed, and my right hon. Friend the Chancellor has provided unprecedented economic support to businesses and workers across the country to help them make it through this challenging time.

Some UK businesses have been hit hard, with many unable to trade or facing a significant short-term reduction in demand for goods and services. As a result, many otherwise viable companies face the threat of insolvency.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

With regard to Lords amendment 75, which extends the temporary provisions to 30 September, the Minister is absolutely right that a lot of businesses can survive this crisis, but they need these measures in place. They also need the packages of support from the Treasury alongside the legislative changes. The clock is ticking for many, particularly in the theatre and entertainment industry, the steel industry and others affected in my constituency. Does he agree that we need to see financial packages too?

[Paul Scully]

I agree with the hon. Gentleman that it is important that we remain flexible. We continue to work with businesses from all sectors to ensure that we can get to a point where we can work through the gears to get a full economic recovery over time. That will mean support from the Government in all manner of ways, which we are considering.

[Sir Edward Leigh (Gainsborough) (Con)]

We have no idea what will happen—there could be a second lockdown or other things; we do not know. Will the Minister comment on the necessity or value of including in the Bill a review procedure, which, if something changes, would allow the Government to be fleet of foot in aiding businesses? That particularly applies to those who lose their premises because of the difficult economic situation and who may find it very difficult to find new ones.

[Paul Scully]

I am grateful to my right hon. Friend for that intervention. He will note that the Government have extended the moratorium on the forfeiture of leases due to covid-19 debts to 30 September, with which the amendments in the Bill have become aligned. In my conversations with retail and hospitality in particular, but not solely with them, I have been exercised by property and the balance between landlord and tenant. We must keep an eye on that.

[Jim Shannon (Strangford) (DUP)]

I recognise that what the Minister is bringing forward is important. We thank the Government and him for what they are doing. In relation to circumstances in the regional devolved Administrations—the Northern Ireland Assembly, the Scottish Parliament and the Welsh Assembly—there may be peculiarities in those systems that mean businesses are particularly under threat or having problems specific to those regions. Does the Minister feel that within the Bill we can get help through the devolved Administrations, and in Northern Ireland through the Assembly, to those businesses and, in particular, tourism?

[Paul Scully]

I agree with the hon. Gentleman that it is so important that we work with all parts of the nation and all the devolved Administrations, which we do regularly. My colleague my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) has regular conversations from our Department, and other Departments liaise closely with the devolved Administrations to ensure that local economies are protected, as well as looking at the overall national picture.

The measures that the Bill introduces will give our businesses the vital support they need to keep afloat, preserving jobs, maintaining productive capacity and enabling the foundations to be laid for the country’s economic recovery. Saving lives and livelihoods is at the heart of what we are seeking to achieve. Measures such as the new moratorium and restructuring plan, together with a prohibition on contractual termination clauses, will help more businesses in future to survive rather than become insolvent. Many of the permanent measures have been improved through scrutiny in the other place, and I will set out some details of the amendments that the Government have brought forward to ensure that the measures work as intended.

I turn first to the financial services super priority amendments.  The Government want to prevent firms gaming the system through a moratorium. Our amendments seek to disincentivise financial services creditors from seeking to accelerate their pre-moratorium debt solely to benefit from super priority should the company fail, or to obtain protection from compromise if a restructuring proposal was put to them. The amendments exclude pre-moratorium financial services debts from having super priority status in a subsequent administration or liquidation where the financial services debt has been accelerated for payment during the moratorium. That ensures that the correct incentives are in place for the moratorium to work effectively and not be brought to an end prematurely.

On amendments relating to pensions, the aim of the measures in the Bill is to rescue a company, which is ultimately the best outcome for its pension scheme. Nevertheless, the Government have been alive to the concern that the new procedures could result in a pension scheme being disadvantaged as an unsecured creditor of the company. As a result, we agreed that there is a need to build in specific protections. Amendments made in the other place ensure that the pensions regulator and the Pension Protection Fund get appropriate information in the case of both a moratorium and a restructuring plan and that the PPF can challenge through the courts, the directors and the monitor of a company in a moratorium. There is also a regulation-making power, which will allow the PPF to be given creditor rights in both procedures in certain circumstances. I hope that hon. and right hon. Members will agree that these are important and fair amendments to the Bill.

We have also made amendments to the temporary measures in the Bill. These temporary measures allow businesses to focus on what is important for their survival through this extraordinary period, rather than having to respond to aggressive creditor actions, or struggle with statutory filing or meeting requirements during the disruption. The amendments to the temporary insolvency provisions in the Bill extend the life of those provisions beyond what was proposed when the Bill first came to the House. They will now expire, as I have said, on 30 September.

It is already clear that businesses will need these measures in place for longer than we first anticipated, and we brought forward amendments in the other place to take account of that. The provisions retain the capacity to be extended further through a regulation-making power should it be required, and the affirmative procedure will apply to such regulations.

Amendments have been made in the Bill in relation to pre-pack sales in administrations. Pre-packs are a valuable tool for saving businesses and jobs. However, concerns have been raised about the lack of scrutiny of them. The amendments reinstate a power that had elapsed earlier this year for the Government to regulate pre-pack sales in administrations to connected parties. The Government will look carefully at pre-packs and I can inform the House that a commitment was made by my ministerial colleague, Lord Callanan, to review current practices in the summer before making any decision on regulatory changes.

Finally, a number of technical amendments have been made to the Bill where it was judged necessary. These include changes that will restrict the period for which certain powers have been given in the Bill that will be available to Ministers, changes to clarify the intended effect of the legislation, and changes which place a condition on the use of some powers. We have ensured that there is appropriate parliamentary scrutiny of any regulation made under the Bill, as well as appropriate safeguards on these powers. Where they relate to powers for a Scottish or Welsh Minister or a Northern Ireland Department, the corresponding change has been made to ensure equal scrutiny for all the Parliaments of the UK.

This Bill has been improved by the scrutiny of the House of Lords Delegated Powers and Regulatory Reform Committee, as well as by the incredible work of the Government’s own parliamentary counsel and their legal advisers. I hope that the House will agree that making good, accurate, appropriately balanced and clear legislation is very much in the interests of all, not least of businesses that rely on this legal clarity. I am confident that we have now achieved that in this package, which we have, nevertheless, brought forward as quickly as possible to respond to the covid emergency. Taken together, these amendments improve this important and much-needed Bill. The debates and discussions in this House, as well as in the other place, have shown quite what this Parliament can achieve, even if socially distanced, when we share that common aim to save and support businesses in this emergency context. I therefore call on Members to support all the Lords amendments.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I want to start by echoing the constructive tone of the Minister and thanking everyone, both in this place and the other place, who has been involved in the scrutiny of the Bill. I also want to thank the Minister specifically for how he and his colleagues have engaged with us on this Bill and listened to the concerns we have had as it has progressed. We on the Labour Benches welcome the amendments that the Government have brought forward, which improve and strengthen the Bill in some important regards. As we have said previously, this is just one of the measures that we hope will safeguard businesses and livelihoods through this crisis. Our objective as the Opposition is to be constructive and to ensure that businesses get the support they need now and in the longer term, and that the number of insolvencies over coming weeks and months is as few as possible. We back this Bill, but we are clear that it is a last resort for many businesses and that there is much, much more for the Government to do now—now—to support businesses, safeguard our economy and protect jobs and livelihoods, so that the measures passed today only have to be used in a limited number of companies.

--- Later in debate ---

[Paul Scully]

First, I thank for their contributions all right hon. and hon. Members who have spoken in this and previous debates on the Bill. Overall, it is reassuring to me, and I am sure to the country, to see that the House can come together to provide constructive and challenging scrutiny of important legislation while moving quickly towards agreement in the national interest. The amendments made to the Bill since we last saw it have strengthened its ability to deliver on its ultimate aim of supporting business and reducing the threat of insolvency faced by many during this challenging time.

I thank the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) for her kind words about the engagement on the Bill. She highlighted the need to address sector-specific issues, including those faced by aerospace, the automotive sector and the steel industry. The measures in the Bill apply to companies across all sectors of the economy, including airlines and the automotive industry, provided they meet the relevant eligibility criteria, for example to enter into the moratorium. Ministers and officials are in regular contact with representatives of the steel industry and will continue to work closely with it to determine how steel companies can access the support required at this extremely challenging time.

We know that all sectors must get as much support as possible. As my hon. Friend the Member for North East Bedfordshire (Richard Fuller) said, we must also come back to a sense of business as normal, so that we can start to move through the gears to get the economic recovery that we all want to see, knowing that it will not happen overnight—there is no light-switch moment—but that we must all come together to make that happen.

The hon. Member for Newcastle upon Tyne Central made the point that the financial market is changing rapidly, which is why there remains a regulation-making power in the Bill to adapt as markets do. She also raised the role of employees. My ministerial colleague, Lord Callanan, committed in the other place to the Government’s plan to conduct a review of the permanent measures in the Bill within three years, with a focus on the impact on employees. We will not hesitate to make changes if that review suggests that there is a need to.

My hon. Friend the Member for North East Bedfordshire asked about pensions. He is correct that the interaction between certain measures in the Bill and the pensions legislation gives rise to a number of complex issues. Setting out the detail in regulations will help us to ensure that the balance between trustees’ rights as creditors and the Pension Protection Fund’s interests can be achieved and quickly amended as case law relating to part 26A develops. The pensions framework is, to a great extent, set out in regulations, which allows the law to develop and respond to changes in the market. It is right and proper that the Pension Protection Fund and the Pensions Regulator are able to play a role in the new procedures when it is appropriate for them to do, and that is what the Government amendments allow for.

The Pension Schemes Bill will be in the other place at the end of this month. That Bill builds on the Government’s commitment to tighten the rules on abuse of pension schemes by improving the Pensions Regulator’s power. My hon. Friend asked about the regulations that allow an extension of the temporary changes. Of course, where required, the Government will not hesitate to extend the measures, but we will not extend them indefinitely. We will consider the individual merits of each measure before any further blanket extensions. As he said, it is important that business gets back to usual, but it is also important that shareholders get their say fully at an annual general meeting, as well as at share- holder days. Although we allow directors the leniency to concentrate on their own business rather than their responsibilities to Companies House, there comes a time when we must get back to business as usual, so that Companies House can record companies’ measures.

[Richard Fuller]

I do not want to delay my hon. Friend’s speech, but the point I was trying to make is that clarity about a change of rules is very important for directors, and that also applies to a change in regulations. If there is an extension, it needs the same debate and airing that we have had at this stage, and when these regulations end, that also needs to be communicated as clearly as possible.

[Paul Scully]

I am grateful to my hon. Friend for his intervention. The Department and the Government have been engaging with businesses to try to give that clarity. It has not always been possible, as we move in real time. Those of us who run businesses are used to making decisions in real time. What we are doing at the moment is about as close to real time as it gets for a Government. Normally, consultations can take months, and policy changes can take years. We have been working from day to day sometimes.

I congratulate the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) on his new grandson, Cameron—what a brilliant name. I do not know whether it was inspired by a former Prime Minister; maybe not. I hope that his joyous, optimistic and collaborative comments were not coloured by that fantastic news and that that relationship will carry on.

The hon. Gentleman raised the issue of HMRC’s status in the Finance Bill. This is something that came up clearly through the procedure. It is a matter for my colleagues in Her Majesty’s Treasury, but I can say that the role of HMRC is to ensure that tax paid by employees and customers rightly pays for public good. With regard to corporation taxes, HMRC’s status remains the same. I appreciate his input and I am grateful for the way that he has engaged with me and the team. I agree that it is very important that we protect as many jobs as possible. I will continue to work with my colleagues to ensure that we are doing as much as we possibly can to protect the jobs of the young, and the less young.

[Drew Hendry]

I am grateful to the Minister for his kind comments. I would say in passing that there has to be at least one good Cameron mentioned in this House.

I have asked about a range of things, in addition to the HMRC issue, that are not within the Minister’s direct power. One of them was supporting minor changes to borrowing powers to allow the Scottish Government to take decisions themselves to support economies locally. That is important, as he said. Will he take that forward with his colleagues in order to make sure that we can have those measures taken in Scotland?

[Paul Scully]

I am grateful to the hon. Gentleman. Clearly, these are all things that we will continue to look at.

The hon. Gentleman talked about the hospitality sector. Let me reassure him that the Government recognise that this sector is particularly hard hit by closure. I have regular conversations with representatives of the hospitality sector, including, most recently, only yesterday. They were very pleased and optimistic about the fact that we have now been able to change the rules within England and start giving them the certainty that they need to reopen. I look forward to successful reopening in England and, in time, in Scotland as well. It is so important that we work with the hospitality sector. The three winters issue that he described has been raised with me and I do appreciate it.

This shows the interlinking of the economy. I also hold the position of Minister for London. The hon. Member for Richmond Park (Sarah Olney) talked about culture. With regard to the hotel sector in London, people do not tend to go to a hotel just to sleep in another bed—they come, they sleep and they go because of the theatres, the restaurants and the culture around the area. It is therefore important that we get each of these sectors up and running. That is why we have these frequent discussions and work as collaboratively as we can. That also gives us the understanding we need in order to inform our support. A range of hospitality bodies and companies were consulted on the safer workplaces guidance, for example.

The hon. Member for Richmond Park talked of striking a balance, which is what we have tried to do in this Bill. I am grateful to her colleagues for making the point so clearly that measures are needed for longer. I hope she will agree that the Government have taken on board those concerns. She also spoke about the theatre sector. I know the Orange Tree. I tend to know the Orange Tree pub next door a little bit better than I do the theatre, but I know the great work that it does in the community. I will take her concerns back to colleagues.

Let me take this opportunity to thank the House of Commons Public Bill Office and the House Clerks for ensuring that this vital piece of legislation could be expedited through the House and consequently come into force as a matter of urgency. The support they have provided has been invaluable. I thank the officials who have brought this legislation into existence: my Bill team of Andy Ormerod-Clarke, Muneera Lula, Jess Bradbury, James Roddy and Alice Roycroft. All those in the teams in BEIS and the Insolvency Service—there are too many mention—have worked tirelessly, across weekends and in the evenings, to make sure that we could bring this to bear as quickly as possible. I want to mention the lawyers who have worked day and night, some of them with very young children, to draft this legislation: in particular, Jo Ashida, Denise Fawcett, Samihah El-Gindy, David Anderson, and our lead parliamentary counsel, Diggory Bailey.

I pay tribute to the policy leads, some of whom have worked in this area for many years, and who have worked with outside experts to make sure that we had the measures right: Steve Chown, Simon Whiting, Laura Bardsley, Rob Mak and many, many more. Colleagues from HMT, the Department for Digital, Culture, Media and Sport, the Ministry of Housing, Communities and Local Government and the DWP have also been invaluable. I pay tribute to all the organisations and representatives of businesses, consumers, workers, shareholders, investors and insolvency experts who have engaged with us in developing these proposals.

I conclude by mentioning those for whom this Bill is intended: the millions of business owners up and down our country who are keeping Britain moving. I say to them: please keep it up. Let us keep moving and let us bounce back our economy as and when the limitations and the restrictions are lifted.

Lords amendment 1 agreed to.

Lords amendments 2 to 116 agreed to.

[Mr Deputy Speaker (Mr Nigel Evans)]

I am sure we all wish baby Cameron Hendry the very best of health and luck for the future.

I suspend the House for three minutes.

Horizon: Sub-Postmaster Convictions

Paul Scully Excerpts

Wednesday 10th June 2020 Commons Chamber

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy what steps the Government are taking to support sub-postmasters wrongly convicted in the Post Office Horizon scandal.

I wish you a very happy birthday, Mr Speaker, and many happy returns.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

Happy Birthday, Mr Speaker. I have listened to a number of postmasters’ stories personally, and I saw the recent “Panorama” programme. It is impossible to ignore the negative impact that the Horizon dispute and court case have had on affected postmasters’ lives, livelihoods, financial situations, reputations and, for some, as we know, their physical and mental health.

Convicted claimants’ seeking to overturn their convictions are going through a further process with the Criminal Cases Review Commission, which has the power to refer cases to the Court of Appeal to consider whether any of the convictions are unsafe. As the hon. Lady will appreciate, it is important that the Government do not seek to influence this process or comment on any individual cases. I can confirm, though, that the Post Office is co-operating with the CCRC to the fullest extent and the Government are monitoring this. Forty-seven of the 61 CCRC cases have now been referred to the Court of Appeal, and it is for the courts to decide whether the convictions are unsafe.

Let me acknowledge the strength of feeling on this matter on both sides of the House, which was evident in the debates I participated in earlier this year and in the correspondence I have had from many Members. That is why the Government are committed to establishing an independent review to consider whether the Post Office has learned the necessary lessons from the Horizon dispute and court case, and to provide an independent and external assessment of its work to rebuild its relationship with its postmasters. Full details of the terms of reference for that independent review are set out in a written ministerial statement that I laid in the House this morning. We are keen to see that review launched as soon as possible, and we are in the process of identifying a chair to lead the work of the review.

[Chi Onwurah]

The Post Office Horizon scandal may well be the largest miscarriage of justice in our history. Nine hundred prosecutions, each one its own story of dreams crushed, careers ruined, families destroyed, reputations smashed and lives lost—innocent people bankrupted and imprisoned. Does the Minister agree that Monday’s “Panorama” adds to the sense of a cover-up on a grand scale in the Post Office, a trusted national institution? And all because of the failings in the Post Office Horizon system.

For over a decade, the Justice for Subpostmasters Alliance campaigned to get at the truth, but the Post Office denied all wrongdoing, imposing huge lawyers’ fees on the claimants. Mr Justice Fraser’s High Court ruling in December paved the way finally for justice for some, but the mediated settlement means the truth remains hidden. Does the Minister agree that there can be no justice without truth?

So many questions remain unanswered. When did the Post Office know that the Horizon system could cause money to disappear, and what responsibility did the developer, Fujitsu, have? What did Ministers, to whom the Post Office is accountable, do, and what did they know? Who was responsible for innocent people going to jail? Have they been held accountable? Will all the victims be properly compensated?

Three months ago, the Prime Minister committed to a public inquiry, but we now hear that that is to consider whether the Post Office has learned the necessary lessons. We need an inquiry not simply to learn lessons but to get to the truth. Only a judge-led inquiry can do that, with the Post Office compelled to co-operate. Will the Minister now agree to the judge-led inquiry we need? It is the very least the victims deserve.

We need answers, not more delay. We will not rest until we get that and justice for all those wronged in this scandal.

[Paul Scully]

I welcome the hon. Lady to her place, and I appreciate her comments. A public inquiry, according to Jason Beer QC, one of the leading experts on this, talks about what happened, why it happened and who is to blame, and what can be done to prevent it from happening again. This independent review, chaired by someone independent of both the Government and the Post Office, will indeed look to do that—to understand and acknowledge what went wrong in relation to the Horizon system by drawing on the evidence of those people who, as we have discussed, have been wronged in this situation, using both Mr Justice Fraser’s judgment and words and his own evidence that he will call upon.

The Government want to be fully assured—I want to be fully assured—that the right lessons are learned for the future and concrete changes have taken place at Post Office Ltd to ensure that this is not repeated. We want to be sure that, through this review, there is a public summary of the failings that occurred at Post Office Ltd, drawing on the judgments and, as I say, listening to those who have been most affected. That is the purpose of the independent review we are in the process of setting up.

[Scott Mann (North Cornwall) (Con)]

It is absolutely right that we acknowledge the injustices that were done at the time. I have spent a bit of time in post offices in my time, and I remember having conversations with sub-postmasters and sub-postmistresses in which they acknowledged to me that they could not get their books to balance at the end of particular days. They were really worried about it at the time. It is worth remembering that the post office network is made up of sub-postmasters, and they need our support at this moment in time. What can the Department do to ensure that our sub-postmasters and sub-postmistresses who are working around the country have the ability to continue while the Horizon scandal is taking place?

[Paul Scully]

I am grateful to my hon. Friend for that question. The Government provided nearly £2 billion for the period 2010-18 and are investing a further £370 million from 2018-21 to invest in the transformation of the business. A negotiated agreement was secured with all 28 UK banks in 2019 and took effect in 2020. That has resulted in a significant increase in the overall fees received by the Post Office from the banks, and that will rise further if transaction volumes continue to grow. We have also encouraged the Post Office to strengthen its relationship with postmasters and postmaster training to foster a stronger commercial partnership. We recently put in place personalised support for postmasters. If we are going to get the future relationship with postmasters right, we have to tackle the injustices that have happened in the past, but we also have to rebuild, with the new management in the Post Office, trust and training and respect for the sub-postmasters of the future.

[Mr Speaker]

We now come to the Scottish National party spokesperson, Patricia Gibson, who has one minute.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

We can all agree with the Minister that the reputations, mental health and lives of the victims of this scandal have been ruined. Alan Bates, the former sub-postmaster who led the legal case against the Post Office, has been clear that the Post Office has not changed. It is six months since judges found major issues, including an excessive culture of secrecy and confidentiality generally in the Post Office, but specifically relating to Horizon, so can the Minister explain why we still are not getting a public inquiry into the scandal? The Prime Minister told the House on 26 February that such an inquiry would be established, but the proposals set out by the Minister today fall short of that. We welcome the Business, Energy and Industrial Strategy Committee inquiry into this issue, but we really need a full independent public inquiry.

Does the Minister understand the anger and disappointment at the length of time it is taking to get the truth about one of the largest miscarriages of justice in the UK’s history, amidst very serious allegations of perjury levelled against employees of Fujitsu, the company behind the system, and will he apologise to the hundreds of postmasters whose lives have been ruined—who have lost their homes, their livelihoods and their reputations as a result of inaction by this Government?

[Paul Scully]

I am grateful to the hon. Lady for those questions. The review that we are putting in train covers the areas that a public inquiry would achieve. We want to find out exactly what is going on. We do not want to duplicate the effort, and we already have a number of words from Justice Fraser that point to exactly where the chairman of the independent review needs to look.

This situation has been going on for some 20-odd years. It is disgraceful that it has taken this time for Alan Bates and his fellow group-litigants to actually get to a settlement and that so many people have had to suffer as a result. What I am keen to do now—my tenure in this role has been brief—is push on and make sure that they can get the answers that they need.

[Mary Robinson (Cheadle) (Con)]

It is clear that the Post Office concealed evidence that would have cleared sub-postmasters who were convicted and have had their lives ruined. A major part of the evidence came from a Fujitsu whistleblower, who revealed that Post Office accounts could be changed remotely from Fujitsu offices. Sub-postmasters now have the opportunity to sue the Post Office for malicious prosecution, but while those who were subject to criminal proceedings are able to make claims, people who brought civil claims that have been settled cannot. This was clearly not the intention of the courts, so how can such a disparity in outcome be justified?

[Paul Scully]

In terms of the whistleblower, Justice Fraser recommended a number of individuals to the criminal prosecution service, and that will follow its train accordingly. In terms of the group litigation, the settlement was agreed with the Post Office and that included legal and all other costs. In those circumstances, the Government cannot accept any further requests for payments, but for postmasters who have been convicted and had their convictions overturned there is a process in place for them to receive compensation, if appropriate.

[Darren Jones (Bristol North West) (Lab)]

The Minister will know that the Business, Energy and Industrial Strategy Committee, which I chair, is undertaking an inquiry on the Post Office Horizon scandal, and it is a matter of regret that we were unable to take oral evidence from Mr Read, the current chief executive officer of the Post Office, Ms Vennells, the former CEO, and Fujitsu as planned on 24 March, because of the lockdown. The sub-postmasters who have suffered such a depth of injustice, such a wide range of harm, will no doubt welcome the news today of the Minister’s inquiry, but will he confirm to the House that that inquiry will have sufficient power to compel the disclosure of documentary evidence and to compel witnesses to come before it to give evidence in public?

[Paul Scully]

I am sorry that, for the same reason, I was unable to attend that session, but I hope in future to engage fully with the Select Committee. The key point is that the Post Office has said that it will disclose everything, and I will ensure that it does, to the best of my ability. I saw the same “Panorama” programme as the hon. Gentleman did, in which there was a big discussion and a long piece about non-disclosure. That cannot happen again. We have to draw a line and make sure that we get answers. The chairman of the independent review will push for that and so will I, to ensure that the Post Office complies appropriately.

[John Redwood (Wokingham) (Con)]

Most MPs want the Post Office to apologise to all those it has wronged and pay generous compensation to them in the circumstances. Will the Minister add the Government’s voice to that and make it a demand of the Post Office?

[Paul Scully]

The Post Office has acknowledged mistakes in the settlement and the case that we have had. I am glad that both parties to the group litigation were able to reach a settlement. Other sub-postmasters who suffered a shortfall will be able to take advantage of the historical shortfall scheme that the Post Office has launched. They will be able to come forward and have their case investigated, and hopefully those wrongs will be righted.

[Mr Kevan Jones (North Durham) (Lab)]

I, the hon. Member for North West Leicestershire (Andrew Bridgen) and Lord Arbuthnot have been campaigning on this for over seven years. People have been imprisoned; they have been ruined, both financially and mentally. As I have said on the record previously, they have been treated in a way a totalitarian state would treat people. The fact is that only a judge-led inquiry will get to the bottom of what is needed. Over the past seven years, I have cross-examined many of the Minister’s predecessors; today, I urge him to insist on that, because without it we will not get to the truth.

The Post Office is not the only one to blame; the Government are to blame as well, because Government Ministers have shareholder representation on the Post Office board and they have sat back and done absolutely nothing. Last year, they allowed the Post Office to spend nearly £100 million of public money on trying to bankrupt the Justice For Subpostmasters Alliance. That disgrace also needs to be exposed.

[Paul Scully]

I acknowledge the right hon. Gentleman’s long campaign on behalf of the Horizon postmasters, which is to be welcomed. I have been shocked and surprised by the revelations I saw when I took over and continue to see. The terms of reference of the review are the same as those for a public inquiry. It is to work out: who is to blame, can it happen again, how can we prevent it from happening again, what wrongs were done, and how can we right them? The chairman will be independent of both the Post Office and Government.

On the Government’s role as a shareholder, clearly the Post Office has operational independence, but numerous attempts have been made over the years to resolve the dispute, including an independent investigation in 2013 and a mediation scheme in 2015, which was supported by Post Office Ltd and Ministers. All those attempts failed to resolve the issues, leaving the court as the only way to provide the independent review that all sides needed.

[Shaun Bailey (West Bromwich West) (Con)]

I am sure we all agree that sub-postmasters are at the heart of our communities, none more than the communities I represent in Wednesbury, Oldbury and Tipton. It is right that the Post Office is able to compete in challenging times, but may I ask my hon. Friend to reassure sub-postmasters in my constituency that the Government will continue to review the Post Office’s relationship with sub-postmasters and make sure that they are given the protection and respect they are entitled to and deserve?

[Paul Scully]

One of the first things I said to the chief executive was to acknowledge the fact that we need to build the relationship with postmasters and give them the support they need in the future, and we need to make sure that we right the wrongs of the past. The chief executive has assured me, and his background supports this, that he is used to working with sub-postmasters as stakeholders, and I think that is what they need to be.

[Stephanie Peacock (Barnsley East) (Lab)]

Postmasters across the country have been fired, gone bankrupt and, in some cases, gone to prison. Given the scale of this injustice, with over 550 postmasters’ families left in financial ruin, does the Minister agree that the current compensation, which fails to cover their legal costs, is neither fair nor just?

--- Later in debate ---

[Paul Scully]

I agree that so many people have suffered. Indeed, some people have taken their lives, as well as losing their livelihoods; that is not to be forgotten. I was pleased that a settlement was reached by both sides of this agreement and, as I say, sub-postmasters caught within shortfalls in the past who were not part of that agreement are able to claim under the historical shortfall scheme.

[Jerome Mayhew (Broadland) (Con)]

One of the great frustrations to date has been the refusal of the former senior management of the Post Office to answer detailed questions on this issue and to be held to account. That is the least that is owed to those who have been wrongly convicted, including my constituent Siobhan Sayer. Will my hon. Friend confirm that individual culpability of senior management figures within the Post Office will be part of this review?

[Paul Scully]

I totally empathise with the suffering of my hon. Friend’s constituent, Siobhan Sayer. The chairman, who is independent of the Post Office, and the Government need to look at exactly what went wrong, which will by necessity mean looking at who took what decisions when. It will be complicated, because this happened over a period of 20 years, but none the less, they must get to the bottom of it.

[Marion Fellows (Motherwell and Wishaw) (SNP) [V]]

Happy birthday, Mr Speaker.

Post Office Ltd has been allowed to destabilise the post office network by its underhand and legally dubious actions. This Government must take up their responsibilities as a special shareholder in Post Office Ltd and commission a judge-led inquiry—I make no apology for repeating that. Nothing less will do. Will this Government help to compensate those postmasters who have been so wrongly convicted and help shore up the finances of Post Office Ltd?

[Paul Scully]

In terms of the finances, the Government continue to work with the Post Office on its needs and to ensure that, although it is an independent company, it can work within its service obligations. In terms of the review, we recognise the hugely negative impact that the Horizon dispute had on postmasters. The financial settlement was a major step towards resolving some of those grievances, but there is more to be done. That is why we have launched the independent review, to ensure that the lessons are learned and that they can never be repeated.

[Dr Julian Lewis (New Forest East) (Con)]

This is one of the worst disasters in public life since the contaminated blood scandal. Does the Minister agree that, if it is proven that Post Office executives were aware of the software faults but allowed innocent people to rot in jail, they were guilty of criminal negligence and possibly criminal conspiracy and therefore ought to be brought to justice? Will the proposed inquiry allow that to be done?

[Paul Scully]

I am grateful to my right hon. Friend for his question. The Horizon IT system was put in place in 1999, with the first issues being raised in the early 2000s, so this was over a long period. Mr Justice Fraser considered what happened over that period and set out his findings in considerable detail and, as I said, he has referred some individuals to the Crown Prosecution Service. Post Office is now working to implement all the vital changes to which it has committed under the leadership of its new CEO, to reset the relationship with its postmasters.

[Karl Turner (Kingston upon Hull East) (Lab)]

Many hundreds of postmasters were forced to pay back many thousands of pounds to the Post Office—moneys that were never in fact owed or, indeed, missing. That in itself should trigger a criminal investigation. How much of that money went to pay the previous chief executive’s £5 million salary, and why can the Minister not accept that only a judge will get to the bottom of this miscarriage of justice?

[Paul Scully]

I acknowledge the hon. Gentleman’s part not only in campaigning on the plight of the sub-postmasters since coming to this place, but in his previous work representing some of them in the court case. As I said, the important thing about the review is: does it find out what went wrong and who made what decisions when, does it listen to the evidence of those who were wronged and get those voices out there, complementing what Justice Fraser said, and does it make sure it can never happen again? Those are the terms of the inquiry and review. The independent chair will get to the bottom of that while being independent of Government and the Post Office.

[Martin Vickers (Cleethorpes) (Con)]

I cannot understand why the Government want to prolong the agony on this with the halfway house of an independent review. I add my calls for a judge-led review that progresses speedily. Does the Minister share my amazement at the behaviour of the Post Office, which had employed these postmasters and postmistresses for years and realised they were decent, hard-working people? They did not suddenly all become criminals. Did no one ask the questions? Can we please get on with this and get the full judge-led inquiry now?

[Paul Scully]

It is for that very reason that we have announced an independent review. Of all the judge-led inquiries in the last 30 years, the shortest lasted 45 days —that was one Minister dealing with two people, whereas this is an incredibly complicated case—and the longest lasted 13 years. In the last 30 years, inquiries have cost £600 million. We need something reasonable in its timing and extensive in its remit so that we can get to the bottom of this as quickly as possible.

[Mohammad Yasin (Bedford) (Lab) [V]]

The covid crisis has revealed what should have been obvious: that key workers, including postmasters, are essential workers and should have been treated with respect, not suspicion. Why did the Minister’s Department fail to protect workers from a corporate governance failure of this magnitude, and how will it prevent such a failure from happening again?

[Paul Scully]

The Government have challenged it over the years, especially in recent years—the Horizon situation has come about over 20 years, but as I have said, recently there have been independent reviews in 2013 and investigations in 2015. It is because we have been unable to get a result that we have had to resort to the courts. We need to get to the bottom of this so that we can right the wrongs done to the postmasters of the past and ensure the respect of future postmasters, who must feel secure in their positive relationship with the Post Office.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I fear the cover-up could continue. The Post Office has decided to bring in Herbert Smith Freehills to oversee historic cases. This is the practice that contributed to the cover-up of a fraud at Lloyds HBOS over seven years and oversaw the establishment and operation of the Lloyds bank customer review, which was described by the Financial Conduct Authority’s review of that scheme as discriminatory, flawed and an unacceptable denial of responsibility, and that review is now having to be done again. Does the Minister think the Post Office should reconsider that decision?

[Paul Scully]

My hon. Friend and I spoke about this earlier. As he says, the Post Office decides its own legal advisers. As far as I understand it, the Post Office changed its advisers to Herbert Smith Freehills in the latter stages of the litigation, which resulted in the settlement, good progress in resolving outstanding claimant issues and a successful launch of the historical shortfall scheme.

[Alyn Smith (Stirling) (SNP) [V]]

Happy birthday from me also, Mr Speaker.

We have seen some movement today from the Government, and I do welcome that as far as it goes, but like the Equitable Life scandal, this is an ongoing deep injustice, as is the plight of people currently suffering under the loan charge. There is a consensus across the House that this just does not go far enough. Could I urge the Minister to build on the progress he has announced today and accept the will of the House that we need a judge-led inquiry to properly ventilate all the issues?

[Paul Scully]

As I have said, the terms of reference of this review are deep enough to get to the bottom of exactly what has happened. The fact that the chairman, who will be appointed, is independent of Government, independent of Post Office Ltd, and will have the freedom to be able to go and find evidence to complement the evidence that has already been published by Mr Justice Fraser in his judgment means that there will be plenty to draw on in order to come to conclusions and recommendations.

[John Howell (Henley) (Con)]

Does the Minister not accept that this is as big a scandal as that of the Guildford Four? Although the settlement was reached by mediation, which I approve of, much of that settlement was taken away in cash for lawyers. Can we not do something to ensure that the settlement justifies the indignities that many of these people have had to suffer?

[Paul Scully]

With regard to the scale of the issue, I agree with my hon. Friend that this has gone on for so long and has involved so many people who have suffered as a result, some with their lives, as we have heard. The point is that the mediated settlement was between the Post Office and the sub-postmasters who took out that group litigation. I am pleased that it came to a conclusion, but, as a result of that, the Government cannot enter into a new discussion with the Post Office on that basis.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is noble of the Minister to offer himself up as a human shield for the Post Office in this way, but I hope that, when he returns to the Department today, he will tell his officials, who, I fear, have perhaps not briefed him as well as they might have done, and Post Office senior management that this review will just not cut it. He says that this is a complex case spanning a long period of time, and he is absolutely right about that. That is why it requires a judge-led inquiry. That is what will happen eventually, so why not just cut to the quick and do it now?

[Paul Scully]

I keep hearing that. I keep hearing the words “judge-led inquiry” and then I keep hearing that we need to move this on as quickly as possible. The point is that the terms of reference within this review are the same as a judge-led inquiry.

[Patricia Gibson]

Why not just have one?

[Paul Scully]

Because I do not want an inquiry that will last 13 years, with sub-postmasters coming back time and again with no justice. I have been pushing on this from the moment that I found out the details about it as postal affairs Minister. That is why I will drive this through to make sure that the answers are heard and that the independent chairman, who is independent of Government and independent of the Post Office, gets to the bottom of the case and gets some answers.

[Richard Graham (Gloucester) (Con)]

In 2015, Post Office Ltd closed its own review of Horizon IT by saying that there were “no system-wide problems with our computer systems”. Nothing could have been further from the truth. We have all been let down, and many sub-postmasters have been badly treated. I urge the Minister to start the independent review as soon as possible to discover precisely who knew what and when in Fujitsu, Post Office Ltd, and the National Federation of SubPostmasters. Does he agree that nothing should be ruled out, including criminal prosecution, if justified?

[Paul Scully]

I totally agree with my hon. Friend. Indeed, as the criminal proceedings continue, those wrongly convicted continue as well, and that will sit along with Justice Fraser’s findings. I do want to move this on as quickly as possible—not to rush anything, but to make sure that those postmasters can get answers and bring the injustice to an end.

[Andrew Gwynne (Denton and Reddish) (Lab) [V]]

I add my support for a proper judge-led inquiry, too. Della Robinson was sub-postmaster at Dukinfield post office. She lost her business, the building the post office was in, her rental property, her job, and almost her home. It is just wrong. Can the Minister confirm that the Government are re-evaluating any public positions held by current or former senior employees at the Post Office who were intimately involved in decisions that victimised sub-postmasters?

--- Later in debate ---

[Paul Scully]

I am aware that a former chief executive of the Post Office took up a role as a non-executive director at the Cabinet Office until she stood down. I am also aware that the Care Quality Commission has written to Imperial following a fit-and-proper-persons referral. The CQC is considering this. Lord Callanan wrote to the Department of Health and Social Care on 18 May to draw the Department’s attention to the strength of feeling about the position in the NHS of the former chief executive of the Post Office.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

Post offices are at the heart of our communities, yet the sub-postmasters and sub-postmistresses have been so badly let down. I share the clear anger felt across the House on this issue, but to keep the network open and viable it must be attractive to take on a Post Office franchise. To do that there is the critical question of rebuilding trust. As the Minister holds the Post Office to account, will he hold it to account on how it is rebuilding trust with all sub-postmasters and sub-postmistresses right across the network?

[Paul Scully]

I absolutely agree with my hon. Friend. That is why some of my first conversations with Nick Read, the current chief executive of the Post Office, have been to ensure that he can do exactly that. We need to draw a line and right the wrongs of the past to give respect and trust, as well as support, for future postmasters to make sure they are valued stakeholders.

[Kim Johnson (Liverpool, Riverside) (Lab)]

Many innocent sub-postmasters and sub-postmistresses have been bankrupted, imprisoned and wrongly accused of theft due to the Post Office’s heavy-handed approach, when accountancy issues with Horizon reported financial irregularities. Sadly, one of my constituents tragically took his own life after being falsely accused of financial impropriety, leaving his family destitute and without their business. It is too late for an apology or compensation for that family. What new procedures have the Post Office introduced to protect sub-postmasters and sub-postmistresses as a consequence of this scandal? What protections has the Post Office put in place to ensure accountancy software is fit for purpose? What action will be taken against those in positions of leadership in the Post Office during the scandal? And does the Minister agree that actions speak much louder than words?

[Paul Scully]

I sympathise with the hon. Lady’s constituent who sadly took his life. That is one of many tragic stories. The fact is that we have now got the Post Office to accept its wrong position and the fact that the Horizon software could make mistakes—things were being changed there. That is why it is important to get that acknowledgment. It is also important that we continue to build trust with sub-postmasters and sub-postmistresses in their relationship with the Post Office. That is why every time I speak to the chief executive, I make sure that that is at the top of our agenda.

[Mr Steve Baker (Wycombe) (Con)]

If the Government accept that software can never be thought infallible, will the Minister take steps to ensure that the law and policy making reflects the truth that all software has bugs?

--- Later in debate ---

[Paul Scully]

We will, of course, review that and keep it in our mind.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

Happy birthday, Mr Speaker.

The Post Office Horizon scandal begs the question: why did the Post Office not believe its own sub-postmasters and sub-postmistresses, many of whom had given decades of loyal service, even after evidence was presented to them that the Horizon system was most likely faulty? Can the Secretary of State give a cast-iron guarantee, as other hon. and right hon. Members have requested, to all sub-postmasters and sub-postmistresses and their families whose lives have been ruined, that there will be a judge-led inquiry, not merely a review, so we can ascertain how this happened, who is responsible and what steps can be taken to ensure that this never happens again?

[Paul Scully]

I thank the hon. Gentleman for that promotion to Secretary of State. He raises some really important points. The point is that, whether we call it a review or an inquiry, the terms of reference are exactly as he describes. We want to make sure we can get to the bottom of this to find out who made what decisions and how they were made, and ensure they can never happen again. That is exactly why I have pushed to make this happen as soon as possible.

[Simon Fell (Barrow and Furness) (Con)]

Isabella Wall was a sub-postmistress in Barrow. She ran a thriving shop and let flats above the property. As a result of the scandal, she lost everything. She was the very first person to come and see me at a surgery as a newly elected MP and I carry with me the anger she brought to that meeting. Does my hon. Friend accept that while the Post Office has accepted it got things wrong, there is a long, long way to go for people like Ms Wall before they are properly compensated for the financial and emotional losses they faced? Will he confirm that the Government will give weight to fair compensation being paid to wronged sub-postmasters and sub-postmistresses?

[Paul Scully]

Isabella Wall is one of far too many constituents of ours who have suffered in this. The hon. Member for Slough (Mr Dhesi) was right when he said that the Post Office should have had more faith and trust in its sub-postmasters. Of course we will make sure we can get to the bottom of this to get some justice for Isabella Wall. On the group litigation, I am glad that they have reached a settlement. As for sub-postmasters who have not yet been part of a case but may have suffered a shortfall, I encourage them to come forward to take advantage of the historical shortfall scheme the Post Office has launched.

[Neil Gray (Airdrie and Shotts) (SNP) [V]]

Many happy returns, Mr Speaker.

There is no doubt that many grave injustices have been served upon sub-postmasters and sub-postmistresses, some of whom have gone to jail and lost everything. I know that my constituents will want two things. The first is to see justice done and the full facts brought out in a public inquiry, which is why a judge-led public inquiry is so important. They will also want to see their local post office network protected, ensuring it is shielded from the potential ramifications arising from the actions of management. So what plan does the Minister have to ensure both?

[Paul Scully]

On the inquiry, I have set out the fact that the terms of reference are wide and deep enough. The judge has already reviewed this situation; Justice Fraser has already come up with many, many pages of a response about what happened when and what went wrong. We need to make sure we can build on that evidence, we listen carefully to those who have been wronged and we make sure it can never happen again.

[Bob Blackman (Harrow East) (Con) [V]]

Happy birthday, Mr Speaker.

We are all aware that victims of this scandal have lost their livelihoods, savings and reputations, and that some have lost their liberty, as a result of a faulty computer system. I know that my hon. Friend understands the financial and emotional suffering that the Horizon litigation has brought on the victims, but does he agree that the only right and just situation will be to restore those victims to exactly the financial position they would have been in had this faulty system not occurred? I am talking about full compensation and an apology, and, equally, about the real criminals being brought to justice.

[Paul Scully]

I thank my hon. Friend for that question. The point he raises shows why it took a court to get to the bottom of this, to break the deadlock that had been happening over so many years, which should have been settled so much earlier. That is why in December 2019 both parties in the group litigation agreed a settlement, following several days of mediation—it was a financial settlement totalling £57.75 million. Convicted claimants can still go through a further process; processes are in place for them to receive compensation, if appropriate.

[Dave Doogan (Angus) (SNP) [V]]

The Post Office was not slow in dragging hard-working, honest sub-postmasters and sub-postmistresses before the courts based on spurious data from a flawed IT system, one that it knew to be flawed, thereby depriving good people at the centre of their communities of their reputations, businesses and personal assets, in some instances their liberty and, tragically, for some their lives. Does the Minister accept that a judge-led public inquiry, not a review, is required now, without delay, and that anything less is a further assault on the welfare of Horizon victims?

[Paul Scully]

The findings outlined during the Horizon case provided extensive insight into what went wrong with the Post Office—this includes the independent judicial review of the facts that all sides have been looking for. However, the serious impacts of this case mean more needs to be done. We want to be assured that the right lessons are learned, and that is the purpose of the independent review that we are in the process of setting up.

[Joy Morrissey (Beaconsfield) (Con)]

Will the Minister join me in paying tribute to the postmasters in Beaconsfield and Bucks and across the country who have tirelessly carried on throughout covid-19? Will he also join me in paying tribute to Mr Patel, who passed away from covid-19 and served the people of Hedgerley loyally? He was lovingly known as CD to many of the customers. Will the Minister please not only demand an apology but demand justice for the countless men and women who served and have suffered at the hands of the Post Office, and who see no justice? I hope that he will have the courage to deliver that for them.

[Paul Scully]

Justice is exactly what I want and what I want to be seen to be done. I would go further to extend my sympathy to the family of Mr Patel as well, because we must not forget, in all of this, at this particular moment in time, postmasters up and down the country are doing an incredible job for the most vulnerable people in society.

[Kate Osborne (Jarrow) (Lab)]

Happy birthday, Mr Speaker.

At Prime Minister’s questions on 24 February, the Prime Minister agreed with my request to commit to hold an independent inquiry into this horrific scandal. I followed that question up with a letter to the Prime Minister. Three months later, only this week, I received a response from the Minister. I welcome the Government’s commitment to a review of mishandlings, but this cannot just be a review of past mistakes. With a background of many years in the postal industry, I know many whose lives have been destroyed by this scandal, including sub- postmasters and sub-postmistresses in my constituency of Jarrow. So I ask the Minister again, and make absolutely no apology for doing so: will he commit to having a judge-led review as quickly as possible that will take action against those responsible for the scandal, and ensure that each individual case is assessed and proper compensation is paid to all those affected?

[Paul Scully]

I thank the hon. Lady for the work that she has done on this matter. Given her background, I can understand her motivation. As I have said, it is important to know that the terms of reference of this independent review are wide enough and deep enough to get to the bottom of what happened. An independent judge has already looked at this and built up a body of evidence and other views, which will be then be looked at as a complement to the review. Do not forget that public inquiries cannot determine criminal or civil guilt in themselves; that is reserved for a court.

[Mr Gagan Mohindra (South West Hertfordshire) (Con)]

Happy birthday, Mr Speaker.

Many colleagues in the House have alluded to the importance of sub-postmasters during this global pandemic. What reassurance can my hon. Friend give that Post Office Ltd has understood that there needs to be fundamental cultural and organisational change to ensure that sub-postmasters come forward and that therefore the critical network of post offices remains in our communities for years to come?

[Paul Scully]

I think that that lesson has definitely been learned by the new chief executive. Certainly, the Government have worked, as shareholders, on a new framework for the Post Office to make sure that we can build a solid, confident relationship with future sub-postmasters. Nick Read’s background working with independent convenience stores suggests that he is used to working with people as stakeholders rather than as simple employees or instruments of a large company.

[Clive Efford (Eltham) (Lab)]

Happy birthday, Mr Speaker.

The Minister has said several times that the victims of this situation need to be heard and their cases listened to, so can he name any one of them who is in agreement with his position and is not calling for an independent judge-led inquiry?

[Paul Scully]

The sub-postmasters who have been wronged by this want some justice and they want it quickly. What I do not want to happen is a public inquiry that may take many, many years and cost them a lot of money to get more legal representation in. When people have the chance to study the terms of reference, they will realise that the chair will be independent of Government and independent of the Post Office, and that he or she will listen to them to make sure that their stories are told—not just listen to them but make sure that those stories are actually there to feed into making sure that this can never happen again. Then, I hope, they will see that justice can be done.

[Caroline Nokes (Romsey and Southampton North) (Con)]

I thank my hon. Friend for his response to my hon. Friend the Member for Cleethorpes (Martin Vickers), but one of the stumbling blocks to a judge-led inquiry is cost. Does he agree that it is absolutely imperative that the honest, decent sub-postmasters and sub-postmistresses across the whole country, and indeed specifically in Romsey and Southampton North, should not have a price put on lifting the stain on their characters?

[Paul Scully]

Sub-postmasters who have been wronged, including in Romsey, need to ensure that their voices can be heard quickly, with no cost. They need to be sure that this can never happen again, and get the acknowledgement that there have been severe mistakes that have caused misery for so many.

[Martyn Day (Linlithgow and East Falkirk) (SNP) [V]]

This scandal represents a massive failure of accountability and oversight, not just by Post Office Ltd, but by the Government. Will the Minister apologise to those whose lives have been ruined? What assurances can he provide that the losses arising from the Horizon case will not affect postmasters’ pay and unfairly penalise even more postmasters and sub-postmasters?

[Paul Scully]

There have been numerous attempts over the years to try to resolve the dispute. The fact is that the Post Office has independent operational control. However, facts have come to light through the litigation, revealing that the advice that the Government and the shareholders received over that period was flawed. That is why the Government will be monitoring closely the progress of the Post Office in delivering the programme of commitments following the settlement, including through the review. We have also reviewed the mechanisms that we have in place to maintain oversight of the Post Office, by increasing the frequency of shareholder meetings, establishing a Post Office policy team within the Department for Business, Energy and Industrial Strategy, and publishing a framework document to govern the relationship between BEIS, UK Government Investments and the Post Office.

[Amy Callaghan (East Dunbartonshire) (SNP) [V]]

A very happy birthday to you, Mr Speaker.

This Government have had six months to enact an inquiry—six months to seek justice for the damage, disruption and loss of livelihood caused by this scandal, not just to see whether the Post Office has learnt lessons. The Minister has said that he pushed for the independent review, but what about listening to the sub-postmasters who have been left destitute by this scandal and providing them with the judge-led inquiry they so desperately want? Will the Minister stop stalling with reviews and commit today to a judge-led inquiry?

[Paul Scully]

We can talk about semantics, but what we actually need are the terms of reference that get people what they want. Whether we call it a review or an inquiry, the fact is that it will understand and acknowledge what went wrong in relation to Horizon by drawing on the evidence. It will assess whether the Post Office has learnt its lessons, whether the commitments made by the Post Office in the mediation settlement have been properly delivered, and whether the processes and information provided by post offices to postmasters are sufficient. It will also examine the governance and whistleblowing controls now in place at Post Office Ltd. That is what we need to ensure that we get answers in as timely a fashion as possible. I am sorry that it has taken six months. These things are complicated; I would love to have announced the review that following day. However, I am glad that we now have terms of reference that are deep and wide enough to get the answers that we need and for which sub-postmasters have desperately been waiting.

[Mr Andrew Mitchell (Sutton Coldfield) (Con)]

My hon. Friend the Minister is quite right to emphasise the need for speed, but people have taken their own lives, and have been wrongly convicted and imprisoned. It does not get much more serious than that. This House is here to defend the liberties of our constituents. Will he bear in mind that the Prime Minister confirmed on 26 February that there would indeed be an inquiry, and, following this urgent question, will he discuss with his colleagues in the Government whether the will of the House may be different on this point from the will of the Government?

[Paul Scully]

We have looked at the different options. I do not want something that is long, drawn out and costly for sub-postmasters, and which does not necessarily get any answers for years and years to come, if ever. Someone used to say to me, “Less haste, more speed.” Yes, we need to ensure that we can do this in a timely fashion, but that does not mean that we need to rush through the detail as the review is going ahead. We need to listen to the views of the sub-postmasters who have been wronged and put that alongside the findings of Justice Fraser to ensure that such things will never happen again.

[Rachael Maskell (York Central) (Lab/Co-op)]

Happy birthday, Mr Speaker.

The Government speak as if there is nothing that they could have done as a special shareholder. Well, of course they could have done something. This situation has left communities in York, such as Clifton, bereft of a post office. The fact is that the Government sat on their hands and did not use their powers, and sub-postmasters and sub-postmistresses were thrown into jail and made bankrupt, and some took their lives. Do the Government not want a full, judge-led inquiry with the powers necessary to investigate and dig deep because a review does not hold those powers and will not expose their failings in this matter?

[Paul Scully]

The Post Office has said that it will comply fully with this review. I will push fully for that compliance, and I am sure that the independent chair will want to get right to the bottom of things, however long that takes. We need to get on with the review and get it started now.

On the Government’s actions over the past few years, this issue happened over 20 years, and with hindsight facts have come to light in the litigation that some of the advice received was flawed. However, we have pushed for many years to make sure that we can get a settlement, and I am glad that we are at the point at which we can start to get some answers.

[Miss Sarah Dines (Derbyshire Dales) (Con)]

As a barrister of more than 30 years’ experience, I have witnessed at first hand the sheer devastation that a wrong conviction, or even a false accusation, can bring to a family. This is the United Kingdom. This is an injustice. Will the Minister reassure me that following the review there will be real sanctions, because this injustice has effectively destroyed a much-loved public institution?

[Paul Scully]

I thank my hon. Friend for that question. She is right about its being a much-loved institution. What we must not lose is the amazing work of post offices and sub-postmasters up and down the country. We must make sure that their reputations are not tarnished by what happened over a 20-year period. We need answers as quickly as possible, so that I, the Government and all of us can see the recommendations that the chairman will bring forward from that review.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

Many happy returns, Mr Speaker.

For the Patels, moving from being managers of Acton Crown post office for more than three decades to their own sub-postmaster role in the country was meant to be a dream come true, but it turned into a nightmare when they lost not only substantial sums of money but their mental and physical health and their reputations. Mr Patel ended up with a criminal electronic tag—the humiliation of it. They want to know why in Acton, for more than 20 years, they were seen as upstanding pillars of the community—they handled multi-million pound sums and had a safe key—but suddenly in Oxfordshire they were falsely branded as criminals. Why did it take the Criminal Cases Review Commission to say that there had been a miscarriage of justice? Where was the oversight? Finally, can the Minister make good on the promise that Paula Vennells gave me in 2018 that Acton Crown post office will reopen? It closed on her watch, and she has since done a runner.

[Paul Scully]

We have had the most stable network of post offices for a number of years now, on which—obviously, covid-19 notwithstanding—we need to make sure we can build. I also want answers to why the three Patels—her constituents, who were fine, upstanding members of the community—were seen in that way because of the actions of the Post Office. That is why we need to get this review done and why we need to get the independent chairman’s recommendations out, so that we can see justice done.

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

Many happy returns of the day, Mr Speaker.

The scale of this scandal demands no less than a judge-led inquiry that has appropriate power. Why can the Minister not accept that that is the only way to examine fully and get answers on how this sorry saga went on for so long and caused so much misery and heartache to my constituents and thousands more across the country?

[Paul Scully]

We have 1,000 pages of Justice Fraser’s findings to build on. Reviews are going through to over- turn and look at a number of convictions. We have this review to build on all of that. I hope and believe that all that body of work will find the answers that sub-postmasters are after about when decisions were taken, who took those decisions, how they went wrong and how they were allowed to go wrong. The fact is that we must get some answers so that it can never happen again.

[Tracey Crouch (Chatham and Aylesford) (Con)]

I think the Minister is doing an excellent job, and I have been in his position, where I have announced a review but was not allowed to call it a review. I appreciate that he might think the difference between a review and an inquiry is just semantics, but for many people those semantics really matter. I share colleagues’ views about the need for an independent inquiry. I would also like to know what the Minister will do about financial compensation. He has said that there are limits on what the Government can do, but it is really important that he looks at this again and sees what steps can be taken to ensure that those affected are fully and fairly compensated.

[Paul Scully]

In terms of compensation, the mediation that took place allowed a settlement to be reached by the members of that group litigation. Other sub-postmasters who have been found to be wrongly convicted will be able to go through other procedures to get compensation, and any postmasters who were not part of that litigation but suffered a shortfall as a result of the Post Office will be able to apply to the historical scheme. I believe that this review will be able to get to the answers and build on the body of evidence that Justice Fraser has built up through the findings of his court case. There will be a lot of answers and recommendations there to secure the future trust and relationship between postmasters and the Post Office.

[Douglas Chapman (Dunfermline and West Fife) (SNP) [V]]

Happy birthday, Mr Speaker.

Following this case being taken to the High Court, I have read that some Fujitsu employees are being investigated for perjury, which is a big deal. What discussions has the Minister had with the Attorney General and the Ministry of Justice on this issue, and when will he announce a judge-led inquiry into this whole sorry debacle?

[Paul Scully]

My understanding is that Justice Fraser has referred a number of people to the Crown Prosecution Service.

[Derek Thomas (St Ives) (Con)]

I hope that all the time taken to wish you a happy birthday has not delayed any celebration you might have planned for later, Mr Speaker.

I want to raise a case that is one of many. Susan Knight was a postmistress of 32 years who was dragged before magistrates courts three times and Truro Crown court twice and made to pay over £20,000. This lady’s life was made a misery, with her reputation trashed and 32 years of service for the Post Office counting for nothing. It is too late for her to rebuild her business. She is basically left with nothing. Can the Minister assure me, my constituents and Susan Knight that she will be adequately compensated in good time without a huge effort to achieve that result?

[Paul Scully]

My hon. Friend refers to Susan Knight. He has also told me about another constituent of his who was the landlady of a local pub and lost that pub. It was another terrible story, alongside those we have heard from Members on both sides of the House about their constituents. In terms of compensation, members of the group litigation have reached a settlement, and I am pleased that a settlement was reached after many years and that the deadlock was broken. As I said, anybody else who has not claimed can join the historical shortfall scheme, and if people have been wrongly convicted, there will be procedures in place for them to claim compensation.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Happy birthday, Mr Speaker.

While the Post Office was wilfully hiding its own failings, it operated a system where sub-postmasters were automatically guilty. The Post Office then ran its own prosecutions, so in effect, it was judge, jury and executioner. This proves that we need a judge-led public inquiry, with all the powers associated with that, to get full disclosure and a call for evidence. In the meantime, can the Minister tell me what steps the Government have taken to ensure that this abuse of power can never be replicated and that sub-postmasters now have fair and transparent contracts?

[Paul Scully]

Justice Fraser is that independent judge who has looked into exactly what the hon. Gentleman described, which is why we want to build on those findings in what happens next. The Post Office has realised and finally acknowledged that it has done wrong. The fact is that the Government, within our new relationship and new framework as the sole shareholder in the Post Office, need to ensure that we can analyse the work that is done to earn trust and rebuild the relationship with future sub-postmasters.

[Chris Loder (West Dorset) (Con)]

The biggest disgrace about all this is that innocent people have been incarcerated and imprisoned. Can the Minister confirm whether there are any sub-postmasters or sub-postmistresses currently in prison? If that is the case, will he commit to expediting immediately a full investigation into those specific cases for their release, if that is appropriate?

[Paul Scully]

What we are not going to do with the review is get in the way of the Criminal Cases Review Commission. It is really important that it does actually go through that process as quickly as possible for any number of reasons, not least to lift the conviction of people wrongly convicted. My hon. Friend is absolutely right to decry the fact that people have been put in prison wrongly. Their reputation has suffered, their lives have suffered and, indeed, in certain cases their lives have ended. That is why I want to make sure that we can get on, set up this review and find those answers to move forward.

[Wera Hobhouse (Bath) (LD)]

If the review that the Minister proposes is just as deep and wide-ranging in going into the complexities as a judge-led inquiry, the question is why it should be less time consuming and more cost-effective than a judge-led inquiry. I understand that the Government always say no before they say yes, so for the last time today, will he commit to a judge-led inquiry?

[Paul Scully]

I can give the hon. Member one easy answer as to why it takes so long, and that is lawyers. If we have a public inquiry, we tend to get a lot of expense, with both sides lawyering up, to use the vernacular. That is why £600 million has been spent in the last 30 years on public inquiries. We can either spend a lot of time in working on such a case, or we can get through a review, build on the work of the independent judge who has already looked at this case and has already built up the foundations, and make sure that we add to that by listening to the voices of those people who have gone through absolute hell.

[Karl MᶜCartney (Lincoln) (Con)]

Hearty birthday felicitations, Mr Speaker.

Throughout the financial and emotional suffering the Horizon process has caused postmasters and their families across the country, I have been kept informed of developments by the Bailgate post office sub-postmaster, Simon Clarke, in my constituency of Lincoln. Can my hon. Friend tell me and the House how many senior managers responsible for the position that the Post Office has taken have resigned or been sanctioned or had any bonus payments revoked?

[Paul Scully]

I thank my hon. Friend. One of the problems with this case is that it has happened over 20 years, which means that a lot of people have moved on or moved around, and it has been difficult to follow those who have gone through the system in all this time. [Interruption.] I hear the right hon. Member for North Durham (Mr Jones) say from a sedentary position that we gave the former chief executive a CBE. We have followed that up: she went through the independent honours commission, which works on that in a separate process, but we have actually made sure that we have written to the Care Quality Commission to ask if she is a fit and proper person in terms of the position she now holds.

[Lucy Allan (Telford) (Con)]

Thank you, Mr Speaker, for including me on the call list.

I sympathise with my hon. Friend, and I know that he will have heard what has been said today and will be listening very carefully. A succession of his predecessors have come to that Dispatch Box over years to read out statements from officials who we know have closely connected relationships with Post Office management and who knew that an injustice had occurred. What will he do to tackle the network of intertwined vested interests on his doorstep—and I include the Cabinet Office and ex-Fujitsu employees—that led to this shameful and tragic scandal and cover-up?

[Paul Scully]

It may be that many Government Ministers have come here, but it is this Government Minister who has actually pushed to make sure that we can have a review and that we can have it independently chaired—separate from the Post Office, separate from Government —to come up with those answers. That is what postmasters want. We have made sure in Government that we have come up with a new framework for an increased frequency of shareholder meetings to ensure that we can hold the Post Office to account for its actions, but also ensure that the taxpayer gets the most out of the Post Office, communities get the most out of the Post Office and, importantly, postmasters can feel confident they can build up a trustful relationship as valued stakeholders within the post office network.

[Mr Speaker]

In order to allow the safe exit of hon. Members participating in this item of business and the safe arrival of those participating in the next, I am now suspending the House for three minutes.

Post Office Horizon IT System: Independent Review

Paul Scully Excerpts

Wednesday 10th June 2020 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I am today announcing the scope of the independent review into the Post Office Horizon IT system and trials which the Prime Minister committed to on 26 February 2020. This followed Post Office Ltd reaching a settlement, in December 2019, of £57.75 million to conclude a long-running case brought against it by a group of postmasters over issues related to Post Office’s Horizon IT system.

        The longstanding dispute and subsequent trials relating to the Post Office Horizon IT system have had a hugely negative impact on affected postmasters and their families. These events have deeply affected postmasters’ lives: their livelihoods, their financial situation, their reputations and, for some, also their physical and mental health. In his judgments in the “common issues” and “Horizon issues” trials, Mr Justice Fraser identified significant failings within Post Office Ltd over nearly two decades, particularly in relation to the treatment of postmasters and in its management culture.

        Under its new CEO, Nick Read, Post Office Ltd has admitted it got things wrong in relation to the Horizon case and has apologised. It has also started to take steps to reset the relationship with postmasters. These are important moves in the right direction. However, given the very serious impacts this case has had on many individual postmasters, more needs to be done.

        Government want to be fully assured that through the review there is a public summary of the failings that occurred at Post Office Ltd, drawing on the judgments from the Horizon case and by listening to those that have been most affected; that lessons have genuinely been learned; and that concrete changes have taken place at Post Office Ltd to ensure that this situation will never be repeated. For these reasons Government have decided to establish an independent review.

        The independent review shall:

Understand and acknowledge what went wrong in relation to Horizon, leading to the Group Litigation Order, by drawing on evidence from the Horizon judgments and affected postmasters’ experiences and identify what key lessons must be learned for the future;

Assess whether the Post Office Ltd has learned the lessons from the criticisms made by Mr Justice Fraser in the “Common Issues” and “Horizon Issues" trials and those identified by affected postmasters and has delivered or made good progress on the organisational and cultural changes necessary to ensure a similar case does not happen in the future;

Assess whether the commitments made by Post Office Ltd within the mediation settlement—including the historical shortfall scheme—have been properly delivered;

Assess whether the processes and information provided by Post Office Ltd to postmasters are sufficient to i) enable both parties to meet their contractual obligations; and ii) enable postmasters to run their businesses. This includes assessing whether Post Office Ltd’s related processes such as recording and resolving postmaster queries, dispute handling, suspension and termination are fit for purpose. In addition, determine whether the quality of the service offer for postmasters and their relationship with Post Office Ltd has materially improved since the conclusions by Mr Justice Fraser; and examine the governance and whistleblowing controls now in place at Post Office Ltd and whether they are sufficient to ensure that the failings that led to the Horizon case issues do not happen again.

        The review will be led by an independent chair who will be announced in due course alongside final timings and terms of reference for the review.

        The review shall set out Post Office Ltd’s actions in response to the findings of Mr Justice Fraser. While avoiding a re-examination of the findings made by Mr Justice Fraser through the lengthy court proceedings, it must use these and the experiences of affected postmasters as the basis for its work. The review should not encroach on the work of the Criminal Cases Review Commission and the Court of Appeal. The review should make any recommendations it sees fit, including actions that may, in its view, be appropriate as a result of its findings. The final report will be laid in the Libraries of both Houses upon completion of the review.

[HCWS280]

Workplace Support for Victims of Domestic Abuse

Paul Scully Excerpts

Tuesday 9th June 2020 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I am tabling this statement for the benefit of hon. and right hon. Members to bring to their attention the details of a review into support in the workplace for victims of domestic abuse.

The Government are committed to supporting victims of domestic abuse and are currently taking their Domestic Abuse Bill through Parliament. The Bill and wider package of non-legislative measures underpinning it focus on raising awareness and increasing understanding of domestic abuse, further improving the effectiveness of the justice system in protecting victims of domestic abuse and their children, bringing perpetrators to justice and strengthening the support available for victims by statutory agencies.

Domestic abuse affects every aspect of a victim’s life, so it should come as no surprise that domestic abuse also affects a victim’s work. It strips people of their independence, can reduce their productivity, and ultimately denies them the opportunity to flourish and develop in their chosen career.

There is already a lot of support which employers can, and do, provide to domestic abuse victims. A number of organisations have developed best practice guidance and model policies to help employers to improve the support available to employees affected by domestic abuse, such as the Equality and Human Rights Commission, Business in the Community and the Employers’ Initiative on Domestic Abuse.

The review is an opportunity to draw together the various existing strands of activity and consider whether there is more that can be done to support victims of domestic abuse in the workplace. It will start with a call for evidence and will investigate:

What practical circumstances arise in relation to domestic abuse and work?

What support can be offered in the workplace for victims of domestic abuse?

What is possible within the existing statutory framework?

What does current best practice look like, in the UK and elsewhere?

What is the potential to do more?

The review will report by the end of the year.

[HCWS277]

Corporate Insolvency and Governance Bill

Paul Scully Excerpts

Committee stage & 3rd reading & 3rd reading: House of Commons & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[Lucy Powell]

The hon. Member makes a good point. Businesses that are struggling to keep their heads above water need certainty, and they need to know that the lifeline measures in the Bill will not be pulled from under their feet before they even reach needing them.

The point of the suspension of the wrongful trading provisions is that lots of businesses are effectively trading technically insolvent already through no fault of their own. Just as we have seen Ministers rightly extend the furlough scheme, support for the self-employed and other measures, they should get ahead of this now. Rather than having to spend time on a statutory instrument in only two or three weeks’ time, Ministers could and should take the opportunity to get this done today by agreeing to our amendment.

Amendment 2 would extend the moratorium for small businesses from 20 days to 30 days for businesses facing insolvency. The Federation of Small Businesses has called on Government to extend the moratorium period for small businesses because it does not believe that the 20-day period in the Bill is sufficient. We support that call and ask Ministers to agree to that change.

New clause 2 has not been selected, and we will have a proper look at this in the other place, but we think that the powers of the Small Business Commissioner should be strengthened, as we discussed on Second Reading.

We have long argued for some of the permanent measures in the Bill, particularly in the wake of the Carillion collapse. However, we have some concerns about what has been left out, as I said on Second Reading. There could be unintended consequences in the restructuring proposals that are being put in place that could disadvantage small businesses, employees or other unsecured creditors, such as pension funds. The Minister and I have discussed the issue in private, and it was also raised by a number of Government Members earlier. Given the crisis and the numbers of businesses already struggling, we appreciate the haste in bringing forward the changes, but we are concerned that Members and outside bodies have not had a lot of time to scrutinise the Bill and its implications, so we think the Government could consider having a period for reflection and review.

We have included as amendments a number of omissions from the 2018 consultation. The collapse of Carillion and the consequences for workers, supply-chain businesses and the public were a national scandal and an abject failure of British corporate governance policies. There have been huge repercussions for taxpayers, with unfulfilled contracts, unfinished buildings and thousands of apprentices laid off—the taxpayer had to foot the bill for those failures of corporate governance. There is, rightfully, public anger at the failure to hold people to account for such things. As ever, it seems that in such instances the profits are taken by the private sector, but the public sector foots the bill when the risks have been taken by directors over whom they have no control. Given the economic crisis that we face and the likely recession, it is clear that in the next few months and years we will see more big corporate collapses and failures, so it really is remiss of the Government not to strengthen the corporate governance measures, as they said they would do in 2018. I wish to make it clear, especially because Members raised this earlier, that the measures in our amendment are lifted entirely from the Government’s own recommendations.

Alongside key omissions from the Bill, we have heard from academics, trade unions and other organisations about some of the sweeping powers in the legislation and the fact that there could be considerable scope for the misuse of some measures to disadvantage particular groups. The next set of amendments would seek to safeguard funds for unsecured creditors, protect pension schemes, and protect employees by giving trade unions a voice in any restructuring plans. I urge the Minister to have conversations with the trade unions and to look to add our provision—or a provision like it, as Members from both sides were calling for earlier—to the Bill as it progresses to the other place.

We have concerns about how the restructuring plan will hit employees: many more could be pushed to or around the national minimum wage and lose their rights and their wages, as we are currently seeing with what British Airways is doing. Pension scheme deficits will be left unaddressed and more workers could end up losing out from their pension schemes. If this was not an emergency Bill, we would have had a lot more time to probe Ministers on these issues in a full Committee and to discuss what could be done to strengthen the protections in the Bill.

New clause 1 would insert into section 176A of the Insolvency Act 1986 a requirement that at least 30% of the proceeds from the sale of assets of businesses in administration or liquidation should be ring-fenced for payments to unsecured creditors, who often end up losing out to larger creditors, such as banks. The new clause explores a way for unsecured creditors to be guaranteed some assets so that they do not miss out. The legislation assumes that all creditors are identical and take a hit, but we know that that is not borne out in reality. There is a case for protecting the debts of SMEs and other unsecured creditors up to a specified amount, and that should not be reduced. What assurances can the Minister give that unsecured creditors will not lose out as a result of the Bill—although I know that that is what it is designed to try to achieve—and what mitigation is in place to protect unsecured creditors, who are often in the SME sector?

The intention of new clause 4 is to make pension scheme deficits a priority creditor in the event of insolvency and therefore due to be paid before unsecured creditors. The new clause would require the Government to make pension scheme deficits a priority, meaning that they would be the first in the queue in the event of insolvency and paid before other creditors. That could make employees’ votes count and offer them some protection. It is worth remembering that pension schemes are unsecured creditors in normal circumstances. If the deficit is not addressed by companies, employees face an erosion of their pension rights and their pension value goes down. Our amendment would help them to become a separate class in their own right and not to be subsumed into the amorphous mass of unsecured creditors. Members would be able to vote on any restructuring plan. That way, there would be a clear message to past and present employees. Given the nature of this debate and the number of colleagues from both sides of the House who have raised this issue, I hope that Ministers will look at the matter.

The intention of new clause 5 is to require mandatory discussion with trade union representatives once a company has entered the restructuring process. I understand that US evidence shows that restructuring plans often hit employees hardest, and many of the provisions in the Bill are based on US-European models. Wages can be reduced and employment terms changed. Many employees end up on zero-hours contracts or, as we have seen recently with BA, are sacked and then offered worse terms and conditions when they are re-employed. Pension rights are also reduced, and that could happen in the UK. I am sure that Ministers do not wish that to be an unintended consequence of the legislation, so we hope that the Minister will look at our idea, or a similar idea, and see if it can be introduced in the other place. I hope he can provide reassurance on that, not least because my boss, the shadow Secretary of State, is particularly agitated—and rightly so—about this issue.

I hope that the Minister will consider the amendments in the constructive way in which they are tabled. A number of Government amendments have been tabled, and they seem reasonable. We have not had a lot of time to study them, but I am grateful to the Minister for arranging a briefing with his officials. I look forward to his providing us with a bit more detail and assurance as the Bill proceeds.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

This Bill has been produced with ministerial colleagues, the Bill team, which has worked through weekends, representatives of businesses, consumers, workers, shareholders, investors, insolvency experts and, indeed, after really constructive conversations with Opposition Members from all parts of the House. For all those people, I want to put on the record thanks for the constructive way in which the measure has been introduced.

We have had a good debate and there are a number of issues that we need to explore. I am more than happy to cover as much ground as I can. An amendment on prompt payment was cited on Second Reading, but it was not selected. However, as the Secretary of State has said, we made a manifesto commitment to consult on extending a range of powers to the small business commissioner and to clamp down on late payment. We still plan to consult on doing so to allow the small business commissioner to advocate for and support small businesses. We are keen to capture as many views as possible to ensure that the policy response is the right one. In the light of businesses furloughing staff and of other priorities, we do not believe that consulting now is the right thing to do, but the Government remain committed to the prompt payment code.

Amendment 1 seeks to add a statement from a trade union on behalf of employees to the document that must be filed at court at the commencement of the moratorium. It is important to note that a successful rescue would be of direct benefit to employees, as it would result in jobs being saved. Requiring a statement from the trade union on their behalf alongside statements from the insolvency practitioner and directors would add little to the process. In fact, it might risk publicising the company’s financial problems before the protection from creditor action that a moratorium would bring, making rescue less likely.

Employees benefit from considerable protection in the moratorium, which will not be a bomb shelter for bad employers. As I have set out previously, wages and any redundancy payments relating to a period before as well as during the moratorium should be paid by the company. If it does not pay such amounts the monitor must bring the moratorium to an end. While legal process cannot be begun or continued against the company while it is in a moratorium without the leave of the court, an exception is made for employment tribunal claims and other proceedings between an employer and the worker. For those reasons I have set out, I am unable to accept this amendment and I hope it will not be pressed, but I do value the regular meetings I have with TUC members, a number of whom I will be speaking to tomorrow as part of my regular engagement. I value their input at every stage on employment rights and other issues that fall within my brief.

--- Later in debate ---

[Kevin Hollinrake]

Matters are progressing quickly and it is important to bring forward these measures now, but they do not directly tackle the issues relating to conflict of interest. The Department’s proposal to look for a single regulator could well do that. Will the Minister be prepared to meet me to discuss those measures to see when they might be brought forward in future legislation?

[Paul Scully]

I welcome my hon. Friend’s intervention. He has spoken at length on this and he has been a champion for that change, and I would be happy to meet him to discuss that further.

Amendments 18, 19, 21, 22, 23 and 25 deal with the Cape Town convention, which is an international treaty that seeks to lower the cost of finance for various high-value, mobile assets, including, importantly, aircraft. I know the sector has been particularly impacted by the unique situation posed by the coronavirus pandemic. The insolvency provisions in the Cape Town convention and the aircraft protocol, which we ratified in 2015, are some of the key provisions that give rise to low financing costs in the airline industry. They provide aircraft creditors with greater certainty that they will be able to take steps to enforce their security if an airline debtor defaults on payments or enters into insolvency. The effect of the provisions in the Bill that the Government are amending would have been to enhance the existing protections afforded to Cape Town creditors by extending those protections beyond what the convention and the aircraft protocol require. That was done to create even greater certainty for creditors and further reduce lending costs within the industry. However, in doing so, the new provisions would also have constrained the ability of a financially distressed airline to restructure without creditor consent, either using existing tools under the Companies Act 2006 or the new restructuring plan procedure that is being introduced by the Bill.

Since the publication of the Bill, we have listened closely to the views of many, including interested stakeholders in the airline sector and the restructuring profession. Both have expressed that these provisions could create a significant hurdle to successfully restructuring a struggling airline. The Government are absolutely aware of the very significant impact that this emergency is having on the airline sector. I am also clear that the overriding aim of the Bill is to make it as easy as possible for affected companies to get the breathing space that they need to weather the impact of covid-19, which clearly applies to the airline sector. Given the extraordinary challenge of the circumstances faced by the sector, the Government have decided to remove the relevant provisions from the Bill, which will retain the ability for an airline to use a scheme of arrangement and a restructuring plan to affect Cape Town creditors’ registered interests without the consent of every individual creditor, provided that the other safeguards of those procedures are satisfied. It is complex and we know that we need to work with the airlines on this and give struggling airlines the ability to successfully restructure.

I turn to amendment 15, which deals with the temporary changes to the moratorium that we are introducing in the Bill specifically for England, Wales and Scotland. I will shortly speak to a corresponding amendment for Northern Ireland. Members of this esteemed House will be aware that one of the things that the Bill is for is to create the moratorium, which is vital to give troubled companies the breathing space, but they face significant risks when seeking to restructure, and creditors can derail rescue plans and cause otherwise viable companies to fail unnecessarily. This adversely affects the interests of the company, its creditors and its employees, as well as the wider economy. Recognising the pressing need for companies to be able to access a moratorium in the face of the immediate impact of this emergency, in addition to the permanent measures, we have also introduced temporary measures to ensure that it is as easy as possible for businesses to access a moratorium in the short term. This is done in schedule 4 to the Bill.

While the schedule 4 temporary measures are in place, it is important that these can be applied consistently to each type of entity that can obtain a moratorium. If eligibility for the temporary measures changed depending on what sort of entity was seeking the moratorium, that would patently not be the case. As drafted, there are two entities for which schedule 4 would not otherwise apply: limited liability partnerships and co-operative and community benefit societies. This amendment would add a small fifth section to schedule 4, consisting of two paragraphs to make limited liability partnerships and co-operative and community benefit societies eligible for the temporary moratorium measures. That ensures that these entities can also be brought within the scope of the schedule and make best use of the breathing space that the measures offer. It ensures that both co-operative and community benefit societies and limited liability partnerships in England, Scotland and Wales will benefit from the temporary measures that we have set out in the schedule, as well as from the wider provisions on moratoriums. There is a corresponding amendment for Northern Ireland. These time-limited and temporary changes will make sure that we best address specific issues for companies during the covid-19 emergency and ensure that the relevant entities are all equally eligible for our temporary measures on moratoriums.

Amendment 17 is related and ensures that the temporary modifications that have been made to the moratorium process can be applied to limited liability partnerships and certain types of registered societies in Northern Ireland. It inserts two paragraphs to the temporary measures in Schedule 8, so it largely mirrors what we see in the previous amendment.

Amendments 20 and 24 are minor and technical amendments, intended merely to make a clarificatory point to ensure that it is crystal clear that at the point when a company proposes a restructuring plan coming out of a moratorium, the company should contact all creditors with an explanatory note of a proposed restructuring.

Similarly, amendment 16 deals with an erroneous repeal of the Northern Ireland provisions. The provision being repealed is still needed, so the amendment rectifies that and I therefore commend it to the House. I turn briefly to one amendment raised by the hon. Member for Manchester Central (Lucy Powell). It seeks to make any pension scheme deficits a priority creditor in the event of an insolvency. I have to say that I can understand where her intentions are coming from in this proposed amendment. I am sure that, in recent years, we can all remember one or two high-profile insolvency cases—we have heard of some today—which feature large deficits owing to the pension scheme, and we can appreciate the uncertainty that that brings.

However, as always, when insolvency occurs, there is a balance to be struck when considering the order in which those owed money are paid out of the available assets. There are seldom enough funds to pay all creditors in full in insolvency cases. To ensure fairness, the law requires that available funds be distributed in a certain order. Secured creditors are paid out first for the sale of any property to which their charges attach. Without that, securities, banks and others who funded business activity would be less likely to do so, or would charge more to cover the increased risks they bear. It is essential that the insolvency system helps to give investors, lenders and creditors confidence to take the commercial risks necessary to support economic growth. Unsecured creditors are paid once the secured creditors and preferential debts, which include employees’ remuneration, have been dealt with, and they share the funds that are left. For limited amounts of unpaid pension contributions, which are preferential, any deficit to a pension scheme ranks alongside all other unsecured creditors, which will inevitably include trade suppliers, some of which will be small and micro companies. Therefore, the level of debt owed to a pension company can be very large—we know that. To raise the priority of these creditors and pay them ahead of not only unsecured creditors, but also, as the new clause would seem to suggest, preferential creditors such as employees for unpaid wages and floating charge holders would really upset the balance that has existed for a long time.

New clause 5 seeks a future review of trade union involvement in company restructuring and to commit the Government to specific proposals in spite of what that review might show. It does not seek to amend or improve the debt finance restructuring provisions in the Bill being taken forward as those most needed at this moment in time. The permanent restructuring provisions introduced by the Bill have been the subject of a considerable period of consultation and engagement dating back to 2015. The process included the then Government’s review of the corporate insolvency framework public consultation in 2016 and extensive public engagements since then, with a wide range of stakeholders. There were no strong or widely made calls at that time for trade unions to be given a formal role in the new processes proposed. The design of the new restructuring provisions already includes strong protections for employees. For example, a company in a moratorium will be required to continue paying wages and salaries during the moratorium. If they are not paid, the moratorium will have to come to an end.

In addition, the measures allow employment tribunal proceedings to continue during the moratorium, despite the fact that other types of legal processes are to be prevented during the moratorium. In cases where employees are creditors of the company that they are employed by, and so a party to a new restructuring plan in that capacity, they will benefit from the comprehensive set of general creditor protections built into the new measure.

On corporate governance reform more widely, the Government are implementing a number of reforms already enacted that strengthen the voice and interests of employees in company decision making, be they members of a trade union or not.

The Government also intend to put forward a further consultation on audit and corporate governance reform, taking into account the recommendations of three independent reviews of audit, the views of the Business, Energy and Industrial Strategy Committee and a recent industry development, so we do not believe that a separate review is necessary.

At this point, Madam Deputy Speaker, I am not able to accept any of the amendments, apart from the Government amendments that are in my name. I hope therefore that hon. Members will therefore withdraw their amendments.

[Imran Ahmad Khan (Wakefield) (Con)]

On a point of order, Madam Deputy Speaker. It has come to my notice that certain Members of this House, including well-known Members such as the hon. Member for Brent North (Barry Gardiner), have flagrantly flouted the law and joined the protests outside, boasting that they have broken social distancing measures. I am not going to talk about the legality of this, because that, I presume—I may be mistaken about this—is a matter for the police. What I am discussing here, and what I wish to bring as a point of order, is my concern for the community that makes up this parliamentary estate: the hardworking and dedicated staff, and, indeed, as a subsequent thought, even my fellow Members. I feel that we are going to be placed at risk when there has been such advertised and self-publicised breaking of the law. Vectors of the disease we are fighting, and which the Government are fighting, will be, if he returns to this House, allowed access to spread among the hardworking staff here. Are there measures to prevent such Members, who have flouted the law and are now possibly more likely to be contagious or infected by the disease, re-joining this House until they have undergone a period of self-isolation to ensure that we do not suffer a threat because of their aberrant behaviour?