Commercial Rent (Coronavirus) Bill

Seema Malhotra Excerpts

Consideration of Lords amendments
Wednesday 23rd March 2022 Commons Chamber

I am grateful for the support that the Bill has received. Tomorrow, if the Bill receives Royal Assent, the measures that have affected the commercial property sector for more than two years will come to an end. I will be pleased to see the measures in the Bill play their part in encouraging a return to normal market operation. To that end, I urge the House to agree with the Lords amendments.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I thank the Minister for the chance to raise issues with him earlier. I also thank colleagues in this House and the other place, as well as staff and all those who gave evidence to the Public Bill Committee.

As the Opposition have laid out here and in the other place, Labour has consistently recognised the need for a fair arbitration process to deal with the significant commercial rent arrears that have accrued during the pandemic. Our amendments were intended to strengthen and clarify the legislation, so that the new regime can be effective, accessible and affordable, and can fairly balance the interests of landlords and tenants.

Throughout the Bill’s passage, we have been clear that no otherwise viable business should face an overwhelming burden as a result of rent arrears that threaten its future. Likewise, commercial landlords must have access to clear mechanisms for recouping appropriate levels of arrears. The guiding principles in the process must ultimately be fairness for landlords and tenants alike, and the long-term interests of British businesses and jobs. I pay tribute to the landlords and tenants who have not waited for the Bill to make it to the statute book, but have used the time to work together in good faith in order to come to an agreement.

We should be clear that commercial rent arrears are just one of the challenges that many businesses face. With today’s announcement that inflation is at a 30-year high, many firms up and down our country face a cost-of-doing-business crisis. Labour recognises how difficult the past two years have been for businesses up and down the country. Sectors of our economy such as aviation, live events, travel and tourism have been hit particularly hard.

The Lords amendments, which are all Government amendments, help to clarify the Bill. In our view, they also give appropriate powers to the Welsh Government; we know that discussions were undertaken. The amendments improve the Bill and we support them all, but there are still a number of areas on which I would welcome clarity and assurances from the Minister on how the Government will move forward.

First, we continue to be concerned that the Bill contains no limits on the costs of arbitration. We cannot let high arbitration fees, or concerns that fees will be prohibitive, deter landlords and tenants from using the processes established under the Bill to achieve a fair solution. That would be a failure of policy and of planning.

We have previously called for a cap on fees, but the Government did not accept that proposal. I note that the Minister in the other place said a cap could be imposed if there was evidence that it was needed, but I should be grateful if this Minister would specify his intentions in that regard. Will he update the House on when guidance on the costs of the arbitration process will be published? Will he also confirm that Lords amendment 18—which relates to schedule 1—effectively limits the liability of the arbitral bodies in the discharging of their duties under the Bill, which is what I understood from his comments?

Ensuring the quality of arbitration is important, and we have consistently called for the Government to explain how they will ensure that there are sufficient numbers of arbitrators to handle the volumes of cases under the scheme. What discussions has the Minister had with the arbitral bodies on their capacity, and on maintaining a sufficient number of arbitrators with the necessary skills and experience, and what quality assurance does he expect will be in place? It is important to have reassurances on these issues, especially in view of the limitation of liability that we have put into the Bill.

Finally on this issue, let me say that the arbitration process will not carry confidence unless the decisions are demonstrably fair and there is consistency of assessment. The Minister will know that business organisations had particular concerns about how the “viability of the business” would be established. Viability is referred to in some of the draft guidance published in February, but what review has the Minister undertaken of that guidance with stakeholders, and when will he finalise the guidance that will accompany the Act?

Let me turn briefly to the detail of the Lords amendments. The Bill, which applies largely to England and Wales, confers a number of powers on the Secretary of State in respect of Wales. Lords amendments 1, 3 and 10 are designed to ensure that different provisions can be made in relation to Welsh and English business tenancies. Lords amendment 3 clarifies that the power to extend the time limit for arbitration can be exercised separately for English and Welsh businesses, which is an improvement, while Lords amendment 10 allows the Secretary of State to reapply the Act to both England and Wales, or to just one of the nations.

Similarly, Lords amendments 4, 6 to 8 and 17 give Wales increased powers to extend the moratorium period, which is the period in which tenants have protection against enforcement action by the landlord in relation to covid rent arrears. This must, of course, be a process that works for both England and Wales, but also, looking at the Bill overall, for Scotland and Northern Ireland, in so far as there are limited provisions that apply to those nations.

Lords amendment 8 inserts a new clause requiring the Welsh Government to consent to any extension of the moratorium period for Welsh business tenancies under clause 23. It states that this moratorium period must be the same length as the arbitration period. Lords amendments 6 and 7 allow for the new clause specified in Lords amendment 8 by proposing that the current moratorium period should be six months long, rather than being tied to the arbitration period. This change allows for different moratorium periods to apply in England and Wales. We support those changes because we recognise that the Welsh Government should have a say in the extension of the moratorium period in Wales.

Lords amendments 12 to 14 were tabled in response to the report by the Delegated Powers and Regulatory Reform Committee. Lords amendment 12 removes the Government’s power to specify certain parts of the legislation that would not apply if the Bill itself were reapplied. Previously, the Minister would have had the power to pick and choose which parts of the Bill were reintroduced or reapplied, but Lords amendment 13 ensures that the Government can make modifications to a reapplication of the Bill only if they are “necessary”. That is important for the role of Parliament and the Welsh Senedd.

Lords amendment 15 allows the Minister to reapply the Bill in Wales only with the consent of the Welsh Government. Lords amendment 14 allows different provisions to be made in England and Wales during reapplication. Labour supports these amendments, and it is important that the Government have listened to the concerns of the Delegated Powers and Regulatory Reform Committee, which is a respected voice on these matters.

We are also pleased to see Lords amendments 5 and 19, which ensure that neither the tenant nor guarantors nor previous tenants are liable for any protected rent debt that an arbitrator has cancelled. Similarly, Lords amendment 20 ensures that neither the tenant nor guarantors nor previous tenants can be subject to winding-up petitions or bankruptcy orders for protected rent during the moratorium period. On Second Reading, I raised Labour’s concerns about ensuring that not only tenants but anyone liable for their rent are protected during the moratorium period, so I am pleased that these amendments support that protection.

Lords amendment 2 ensures that the provisions in clause 4, specifying closure requirements, apply to the closure of businesses and premises. On Third Reading, I raised concerns that businesses that no longer occupied the premises—because, for example, the pandemic had made a particular location unprofitable—would not be able to access the arbitration process. We are pleased to see this amendment, which ensures that the Bill explicitly allows such businesses to benefit from the provisions in this legislation.

In conclusion, the Lords amendments make some important changes to the Bill. They rightly increase the powers of the Welsh Government over this legislation, provide appropriate constitutional limits to the Government’s powers on reapplying the Bill, and ensure that tenants, guarantors and previous tenants are all protected during the moratorium period. However, Minister should provide further assurances in connection with these amendments—for example, on the cost of the arbitration process, and on ensuring that arbitrators apply the measures consistently across cases. Nevertheless, Labour supports all the Lords amendments. We support the Bill’s passage to Royal Assent and look forward to its implementation as soon as possible.

[Paul Scully]

I thank the hon. Lady for her contribution today, and for the way in which she has engaged with me and the Bill team. I also thank other Members across the House for their contributions. The Bill’s passage through both Houses has been a positive and collaborative process, and that is testament to its importance in supporting businesses in recovering from the ongoing impacts of the pandemic. The amendments made in the other place were made for good reason and will serve only to improve the Bill. Let me spend a couple of minutes trying to answer the questions that she has rightly and understandably raised.

The hon. Lady talked about the cost of arbitration. We want to ensure, as best we can, that arbitration fees are predictable and affordable. We have discussed this at length at various stages of the Bill, with good reason. The Bill aims to support both tenants and landlords in resolving rent debt, and it is therefore important that the scheme remains affordable and accessible. Approved arbitration bodies will have the function of setting arbitration fees, and they have the expertise to set them at a level that will ensure that the scheme is affordable while also incentivising arbitrators to deliver the scheme in good time. In the interests of transparency and accessibility, the bodies must publish the details of the arbitration fees on their websites, so that the applicant will know in advance how much it will cost to go to arbitration.

We will monitor the affordability of the scheme by engaging regularly with arbitration bodies, as well as with tenants and landlords. We will be able to judge how things are going by those early cases going through the process. The Secretary of State has the power to cap fees, should they become unaffordable. That power can be used where necessary, but it cannot used prematurely, because we do not want to reduce the number of arbitrators available to act, thereby risking the delivery of the scheme.

The hon. Lady talked about guidance on costs and the viability of businesses. I assured the House that we would bring forward guidance for arbitrators, and we are looking to expedite that, so that it happens within a couple of weeks of the Bill receiving Royal Assent. I am pleased to say that we have published the draft guidance, which is on the Government website, in order to gather feedback from the arbitrators. That addresses viability clearly by setting out a non-exhaustive list of evidence that an arbitrator could have regard to in assessing viability. The final version of the guidance will be published shortly after Royal Assent. Viability is deliberately not defined, because of the vast array of different business models, both within and between sectors.

Penrose Review: UK Competition and Consumer Policy

Seema Malhotra Excerpts

Tuesday 8th March 2022 Westminster Hall

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Efford. I thank the hon. Member for Weston-super-Mare (John Penrose) for initiating this debate, and for his work on this issue. His very important “Power to the People” report was published around a year ago. In his opening remarks, he clearly laid out the sentiments and recommendations of the report, as well as, importantly, the context of declining competitiveness, the productivity challenge we face and the importance of making sure that we can act against the non-compliance of companies that do not play their part, so that we can ensure a fair regime for all businesses and for consumers. He rightly raised points about the vested interests that distort our markets.

Competition law seeks to curb practices that undermine or restrict competition to the detriment of consumers. Those practices can include a firm’s abuse of its dominant market position, anti-competitive practices, and mergers or takeovers that, if allowed, would result in a substantial lessening of competition. There has been a rapid increase in takeovers and mergers, particularly during the pandemic lockdowns, so that is an area that needs further work. I will come back to that.

Labour welcomed the Penrose report, and also highlighted where it needed to go further. UK markets are becoming more concentrated, and that hits consumers and workers, and stops small businesses in their tracks and prevents them from progressing. are stopping small businesses in their tracks. We want a re-evaluation of the role of the Competition and Markets Authority to ensure that it has the tools to tackle the growing concentration of market power.

We may disagree on rolling back economic regulation, but the issue is not necessarily the principle; it is more about asking whether we have the regulations we need for effective regulation of markets for consumers. That may not be about quantity; I think it is about quality. That is where the debate needs to start. I am not interested in regulation for regulation’s sake. For me, regulation is about purpose; it is about making sure that it will be effective and deliver the outcomes that we believe are necessary. We need more robust competition policy; we need to crack down on tax avoidance, and challenge mergers and acquisitions that mean taking on unsustainable debt, or that are not in Britain’s long-term strategic interests.

I thank all hon. Members who have contributed; they have made important and distinct contributions highlighted different areas of the subject. We in this House have long known about the work that my hon. Friend the Member for Makerfield (Yvonne Fovargue) does on consumer protection. She raised important issues around fake reviews—reviews are part of how consumers are informed—and around how action can be taken when consumers are misinformed. She also raised the important point that consumers and businesses have a common interest in making sure that markets work effectively and fairly. She highlighted the importance of ensuring that reform is based on how consumers behave today, how the market works and how consumers receive their goods and services. Many of those issues are interconnected. She rightly alluded to the important work of Which? in this area, and I thank it for its contribution.

The hon. Member for Truro and Falmouth (Cherilyn Mackrory) shared a rich picture of her constituency, the opportunities and sectoral issues in her local economy and the challenges in taking forward some of those opportunities. The hon. Member for Folkestone and Hythe (Damian Collins) highlighted clearly the dominance of power of the social media companies, which is an important backdrop to the digital markets reform that we have discussed. The hon. Member for North Ayrshire and Arran (Patricia Gibson) talked about the importance of value for money and consumer protection. Some of the issues that she raised, like those raised by my hon. Friend the Member for Makerfield, were very powerful.

Focusing on consumer interest has never been more important given the cost of living crisis that consumers face. Inflation is out of control, with energy, food and petrol prices rocketing. It is not just about global factors; we know that poor Government economic management has left us uniquely exposed. We have a buy now, pay later loan scheme for energy bills, rather than dealing with the problems in our energy market. We are very worried about raising taxes on working people and businesses at the worst possible time. In parallel to our debate, an Opposition day debate is taking place to call on the Government, again, to stop the national insurance rise in April.

There has been a long journey of reform. Hon. Members will be aware than when Labour was in power, we argued strongly that UK regulation of anti-competitive practices was weak. That led to one of our first pieces of legislation, the Competition Act 1998. That recent journey is worth noting, because, as my hon. Friend the Member for Makerfield said, it has been four years since the Secretary of State for Business, Energy and Industrial Strategy asked the CMA for proposals to better protect consumers in the digital economy and improve public trust in markets.

The then CMA chairman, Lord Tyrie, outlined his proposals to the Secretary of State in a letter in 2019. The Penrose review followed in February 2021. Last summer, the Government published two consultation documents—the first on reforming competition and consumer policy and the second on a pro-competition regime for digital markets. Both sets of proposals would require legislation to take forward some of the challenges raised, but the Government have yet to publish their response to either of those consultations.

I recognise that both the Penrose review and the Government’s consultation represent some progress in addressing the rules governing the UK’s companies and markets, not least as they recognise that reform is necessary. They are also vehicles for reforming the UK anti-trust regime post covid and post Brexit. The Penrose review is very important in that respect. The existing system, however, is no longer serving consumers appropriately, and is not fit for purpose in a digital age. It could lead to new monopolies created at any time in new markets.

[John Penrose]

It sounds as though the hon. Lady is joining other Members in saying that we need a new competition and consumer Act to fix some of those things. Could she confirm that that is the Labour party’s position? I think that is what she is saying, but I do not want to put words in her mouth.

--- Later in debate ---

[Seema Malhotra]

I will come on to that, but I think we need legislation. We hope that will be announced in the next Queen’s Speech, but I will come back to that.

There seems to be broad consensus for providing the regulators, including the CMA and the Competition Appeal Tribunal, with more powers to protect consumers and hold companies accountable if they are not found to be playing by the rules. That is a positive step. However, so far—I say this gently—the Penrose review and the Government’s consultation are a missed opportunity for a more fundamental review and reform of the UK marketplace. Even the CMA, which is now responsible for all anti-competitive practices that affect UK markets and consumers, has said that comments in the Government’s consultation on reforming competition and consumer policy amounted to

“incremental, rather than radical, change to the competition regime.”

Let me mention resources, which are needed to make any regime effective, an issue that was raised yesterday in the debate on economic crime. Powers and resources for investigation and enforcement are absolutely critical. They are the other side of the coin to policy, and are about how we make sure that any regime is implemented effectively.

I want to focus on four areas to which I hope the Minister will respond. In large part, they reflect the comments already made, with one or two extra points.

First, on digital competition and regulation, digital is changing our economy. It is changing how the economy works, the products we have, how we receive services, how consumers purchase those services and how businesses trade with each other. There is a huge concentration of power in the big digital firms, with consequences for monopolisation, consumer rights and prices, as well as access to markets for new firms, as has been mentioned already. We know that tackling these issues needs international co-operation.

The Government have embarked on the creation of a digital markets unit in the CMA, which was set up on a non-statutory basis last April. I hope we will hear when that will be moved to a statutory footing and be given the teeth it needs.

Will Bills on competition and consumer law reform and on digital markets be in the Queen’s Speech? Perhaps the Minister can share with us in this Chamber—we will take it no further; it will stay within these four walls—whether that legislation will come forward.

Secondly, on powers for the CMA and the speeding up of investigations, the Penrose review made a recommendation for a taskforce on how we can make sure that CMA investigations are more effective. It is important to get justice for consumers, as the hon. Member for Weston-super-Mare said. What more are the Government planning to do in that area? There are other instances of unfairness and questionable policy. One example really struck me before Christmas. Royal Mail highlighted 23 areas that would see a reduction in service pre-Christmas, but that came on the back of £400 million in dividends being announced the month before. It does not seem right that there is no accountability for that sort of decision making.

There is some positive news. In its response to the Penrose review, the CMA announced that it is creating a dedicated microeconomic unit, which the hon. Member for Weston-super-Mare called for, and which I understand will be based in Darlington at the Treasury campus.

Thirdly, on the public interest test, Labour has proposed the introduction of a broad public interest test for mergers and acquisitions. That would give the Government powers to review transactions, impose conditions and block transactions where they could have negative, long-term implications for the UK’s industrial strategy, economy and jobs. The Government have powers under the Enterprise Act 2002 to intervene in mergers and acquisitions where they raise issues of national security, stability of the UK financial system, media plurality or maintaining in the UK the ability to combat and mitigate the effects of public health emergencies.

We are calling for the Enterprise Act 2016 to be expanded to include a public interest test where an acquisition may have long-term implications for the UK’s industrial strategy. In our view, that goes further than the Penrose review in strengthening the interests of consumers, and we believe that we need a debate on how the CMA should move past narrow competition and consumer interests to public interest. On takeovers and mergers, that could apply to consumer interest but also to the impact on supply chains, employees and the public interest more generally, which has implications for consumer interests. As is consistent with the approach that the Minister will know we took on the Subsidy Control Bill, we need the CMA to have more diverse voices in its leadership, including reforms to the authority to make it more representative of the nations and regions of the UK.

I will just comment briefly on hollowed-out local enforcement. Our consumer protection regime has been weakened by 10 years of degradation of local authority trading standards teams. That is a serious issue. The number of LATS officers has been cut by more than 50% since 2010, while 45% of local authority trading standards teams say they do not have the resources to deal with consumer issues in their area. I note that the Penrose review has called for action on that and I would be grateful for the Minister’s confirmation that some of the recommendations in the review will form part of his package of reforms later this year.

In conclusion, Labour welcomes competition and consumer choice in the UK as a sign of a healthy, functioning market economy. We are committed to making the UK the best place in the world to start and grow a business, and we believe that that is important as part of a pro-business, pro-society, pro-worker agenda to be built for Britain. We are ready and waiting for Parliament to have the opportunity to act and to build on the Penrose review. We believe that the Government have been a little too slow, so I hope that the Minister will give us confidence that things will be speeded up. I look forward to working with him and with colleagues from across the House on this important agenda as it moves forward.

Economic Crime (Transparency and Enforcement) Bill

Seema Malhotra Excerpts

Committee stage
Monday 7th March 2022 Commons Chamber

[Paul Scully]

We will be moving on it so that it does apply in Northern Ireland. It is really important that we get this running so that there is no hiding place in any part of the UK for dirty money. It is important that we all work together on this, and I am really pleased about the positive nature of that work.

In that spirit of working together to strengthen and accelerate this package, I urge all parties to accept our Government amendments. I commend them to the Committee.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

On my own behalf and on behalf of my hon. Friend the Member for Halifax (Holly Lynch), it is a pleasure to speak in support of the amendments tabled in our names and the name of the Leader of the Opposition. I echo the sentiments that the Minister expressed about the horror of what is happening in Ukraine and about the importance of today’s debate. We stand in solidarity with the people of Ukraine.

We need the Bill to succeed and to achieve its goals. The Government have dragged their feet on stopping dirty money flowing through our economy. These measures were first promised six years ago, and even now the Bill will be implemented too slowly and with serious loopholes. I thank the Minister for our conversation last week and for tabling amendments that recognise Labour’s concerns about the Bill, but key problems remain.

Time is tight, so I will keep my remarks brief on our amendments and our concerns about the Bill. Part 1, “Registration of overseas entities”, establishes a public register of beneficial owners of foreign entities that own or buy land in the UK. Far too many corrupt individuals are currently hiding their identity behind a foreign company. Under the Bill, a foreign entity need only annually update its entry on the register. We are concerned that that gives the opportunity to register an entity in a non-controversial individual’s name, change the beneficial owner the following day and have 12 months before having to declare the change, by which time property can be sold and money laundered without a record.

The integrity and quality of the data on the register will matter. From the start, the register needs a framework of rules that commands confidence and ensures the completeness and accuracy of information, so our amendments 5 and 6 to clause 7 would require that entries on the register be updated within 14 days of any trigger event, namely the change or removal of a beneficial owner. UK companies have clear obligations to notify Companies House in the days after an ownership change, so why do overseas entities have a year to do the same? Have the Government considered that issue? What measures will they take to address it?

Our amendments 7 and 8 to clause 8 relate to the £500 fine that the Bill would impose on entities that fail to update the register. The idea that such a fine would deter those who fail to comply is frankly ridiculous, so we support Government amendments 45 and 46, which directly replace ours and will raise the fine to at least £2,500 a day.

Our amendments 10 to 12 focus on verification. The Government have accepted Labour’s argument that a verification process needs to be established before the register is operational, so they have tabled amendment 49, which we support. It was unacceptable that the register would have become operational without verification regulations. Will the Minister therefore confirm when the secondary legislation that is needed to design that verification process will be published?

Labour has a wider concern that the Government have not yet addressed. The Bill does not stipulate that verification must take place between an application being made and the registrar entering the overseas entity on the register and allocating an overseas entity ID. We are clear that the regulations that the Government introduce must specify that the registrar must take action to verify the registrable beneficial owners before an entity is put on the register; it is not good enough to rely on the compliance of the entity itself. I would be grateful if the Minister confirmed that point.

Our amendments 15 to 17 would shorten the transitional period. We urgently need to close in on Putin’s cronies who have illicit money in our economy. This is about not just oligarchs, but money launderers and tax evaders. We need to know where the money is and who owns what in Britain. Transparency is vital and the register is essential.

The Government have seen some sense and have reduced the transitional period from 18 months to six months, but we are not being unreasonable in saying that it should be 28 days. As my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) said, this legislation was promised by David Cameron in 2016 and began its passage in 2018, so when we say 28 days, we really mean 28 days plus the preceding six years. Six months still provides ample time for criminals to sell properties and find other assets in which to invest—a concern that has rightly been raised by hon. Members, including in today’s manuscript amendments. Labour’s amendments 15, 16 and 17 to schedules 3 and 4 would reduce the transitional period to 28 days, which in our view would provide enough time for overseas entities to get documents in order, while recognising the need to act urgently.

But that is not enough. It is unacceptable to say that the Bill applies not to all properties owned by overseas entities, but only to those bought after 1999 in England and Wales and after 2014—just eight years ago—in Scotland. It does not matter whether corrupt oligarchs bought property four weeks or four decades ago; the point is that UK property should not be used as a vehicle for money laundering. Under Labour’s amendments 9, 13 and 14, all foreign-bought properties would fall within the Bill’s scope, regardless of when they were purchased. We recognise that registering properties bought before 1999 in England and Wales or 2014 in Scotland may take more time, for reasons that the Minister has discussed, so our new clause 6 would allow an 18-month transitional period for such properties, but it is important that we make sure that they are included in the scope of the Bill.

I turn to reform of Companies House. Changes to Companies House’s regulation are long overdue. It beggars belief that despite how long the issue has been on the agenda, all we have had from the Government in the past week is a White Paper. I know that the Minister knows this is urgent. The legal framework in which Companies House operates needs an overhaul. It has been called for by business, by law enforcement agencies and by civil society. Companies House is a key tool in our fight against economic crime. That is why Labour has tabled new clause 7, which would require that the Secretary of State lay draft legislation on Companies House reform within 28 days of this Act coming into force. I acknowledge the arguments being made by the hon. Member for Glasgow Central (Alison Thewliss) in new clause 4 on some of the areas associated with Companies House reform and verification.

Let me turn briefly to parts 2 and 3 of the Bill, which relate to unexplained wealth orders and the Sanctions and Anti-Money Laundering Act 2018. Since their introduction in January 2018, UWOs have failed to live up to expectations. The Government expected them to be used 20 times a year, but the National Crime Agency has so far obtained only nine, with none in the past two years. We welcome measures to make these orders more effective. Clause 40 grants enforcement agencies the ability to apply for more time to consider the information related to UWOs. The Government have accepted the principle of Labour’s new clause 8, which would require an annual update to be made to the House on the use of UWOs, in their new clause 31. However, these changes on their own will not lead to more effective use of UWOs.

The Prime Minister announced the creation of a combating kleptocracy cell in the NCA, which is welcome. However, money laundering prosecutions have dropped by 38% in the past five years and the NCA’s budget has dropped by 4.2% in real terms since 2016. As the Treasury Committee made clear in January, on financial crime there is a “mismatch” between the scale of the problem and the Government’s response. We all recall as well the Business Secretary’s suggestion that fraud is not a crime affecting most people—he could not be more wrong. Economic crime affects us all, and the Government must match the reforms with adequate resources. So our new clause 30 calls on the Government to create a funding plan that sees enforcement and investigative agencies benefit from the assets seized. The Government have so far failed to adequately resource this vital work, but this new clause would allow for a rebalancing of the risk appetite, which the Government are seeking to address with their cost capping proposal in clauses 46 and 47.

The Government have also accepted, with their amendments 59 to 62 and new clauses 32 and 40, Labour’s argument that the designation process under the 2018 Act was not fit for purpose. It cannot be right that the UK is slower at targeting oligarchs who prop up Putin than the EU, where unanimity is required across 27 member states. It is also worth noting that in all four of the NCA’s high-profile dirty money cases brought in the past two years, all of those under investigation had entered the UK with a golden visa. We have not tolerated dirty money but courted it. We must amend the Act to remove the barriers that stop the UK keeping pace with allies on Russian sanctions. We are pleased that the Government have agreed with us on that, and we expect to see the raft of promised designations soon.

Finally, important amendments have also been tabled by my hon. Friends the Members for Rhondda (Chris Bryant) and for Walthamstow (Stella Creasy), my right hon. Friend the Member for Barking (Dame Margaret Hodge) and the right hon. Member for Haltemprice and Howden (Mr Davis). I thank colleagues, including my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne), for their commitment and work on tackling economic crime. We support amendments 26, 27, 37 and 38, new clauses 2 and 9, and new clause 29, among others. They would tighten up the register requirements and enforcement; address the issue of a lack of resources; and strengthen the effectiveness and powers of the registrar.

This Bill is long overdue and we support its passage. We acknowledge that the Government have taken on board a number of our amendments in the past few days, but we know that a lot more needs to be done. I cannot stress enough how important it is that the UK acts now and acts effectively to start to put right our embarrassing reputation as an international soft touch on fraud and money laundering. Putin and those who prop him up should have nowhere to hide, least of all in the UK. I hope that Members from across the House will support us in the proposals we have put forward to improve the Bill.

Corporate Transparency and Economic Crime

Seema Malhotra Excerpts

Monday 28th February 2022 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I thank the Secretary of State for early sight of his statement and for our call with the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully), this afternoon. The Labour party and the House are united in our support for Ukraine and we take very seriously our role in ensuring that Russia’s unprovoked and unjustifiable aggression fails.

Russia’s invasion of Ukraine has shaken the world, with huge concern across Parliament and the country about the invasion and the unfolding humanitarian crisis. It is clear, however, that it has taken the Russian invasion of Ukraine to shake the Conservative party into finally taking the action that is required. These steps are imperative, not just for financial transparency but for our national security, and the Government’s action on that to date falls far short of the leadership required. That is why we must urgently take the necessary steps to drag illicit finance out of the shadows and make it clear that the UK will no longer be a home to dirty money.

We therefore support the Government in introducing the emergency legislation in the light of the atrocities that we are seeing in Ukraine. The need for it is clear for all to see, but the Secretary of State will recognise that these steps have been needed for a long time. He will know that Labour and, indeed, some Government Members have been calling for years for the measures that the Government have announced. We were first promised this legislation in 2016, and this draft legislation has in fact been ready since 2018. Although we support the Government’s actions today, the Secretary of State needs to take responsibility for the time and progress lost through Government inaction. I hope we will see that lessons are learned for this Bill and future legislation, because time is of the essence.

The UK would have been in a much stronger position to act with speed and our national security would have been better protected if the register had already been up and running. That is why the Government must move quickly, because the dangers of a lack of transparency, particularly in the current climate, are all too plain to see. If the intention, as stated, is to impede Russian money, the register will need to be operational in the coming weeks to have any effect. I assure the Government of Labour’s full support in moving through the Bill’s stages quickly, and hope in turn that they will act quickly to make the register and other measures a reality.

I wish to press the Secretary of State on some key areas in which the Government must go further to make the measures as effective as they could be, and I do that in the spirit of cross-party support. I welcome his announcement that the economic crime transparency and enforcement Bill, or some aspects of it, will finally be introduced tomorrow and welcome the White Paper reforms to Companies House, but frankly, we have to ask whether a White Paper is all he is bringing forward on Companies House—[Interruption.] We have been promised more before, and the Prime Minister announced that more immediate steps would be taken. Will the Secretary of State confirm when other aspects of the economic crime Bill, such as the reform of Scottish limited partnerships and the power to seize crypto-assets, will come before the House?

Will the Secretary of State confirm that the register of overseas entities will be publicly available and that there will be criminal penalties for non-compliance? Will those criminal penalties apply to those who fail to update the register annually, as well as to those who provide false information? Will he confirm when the register will be up and running? Can he give an update on the Crown dependencies and overseas territories, and will he commit to enacting similar reforms and to the Government taking action if they do not take action?

The freedom of our press will be vital throughout this invasion. Will the Secretary of State confirm whether the Government intend to use Monday’s legislation to tackle strategic lawsuits against public participation, so that journalists are not silenced and can freely report on the financial activity of Russian oligarchs? Finally, will he update the House on the discussions that he is having with the devolved Administrations on these important measures? I look forward to his response.

[Kwasi Kwarteng]

I am grateful to the hon. Lady for her points. Clearly, on the time that this has taken, she will remember that in the 2017 to 2019 Parliament, a huge amount of our time was taken up by members of the Labour party and the Opposition parties frustrating Brexit. They absorbed a huge amount of parliamentary time and I am afraid that that was one of the reasons we could not expedite this sort of legislation.

There will be criminal liability for failure to update the register annually and for giving misleading or inaccurate information. We are working with the Crown dependencies to update their transparency; by next year, they will have to have much greater transparency requirements. The hon. Lady will be pleased to know that my Government colleagues and I speak to our counterparts in the devolved Administrations on a very regular basis.

Post Office: Horizon Compensation Arrangements

Seema Malhotra Excerpts

Thursday 24th February 2022 Commons Chamber

[Paul Scully]

I thank my hon. Friend for his work in the campaign for both his constituent and for many other sub-postmasters across the country, and I thank the right hon. Member for North Durham (Mr Jones), whom my h F mentioned, and James Arbuthnot—Lord Arbuthnot—to whom I spoke earlier this week. I have spoken to Nick Read, the chief executive of the Post Office, and officials about this because, as I was quoted as saying in The Times last week, this, of all my wide range of responsibilities, is the one area that keeps me awake at night and absolutely drives me to get resolution.

My hon. Friend asked about the 555 and our commitment. As I have said, the 555 have been pioneers in this area, and I will absolutely work at speed. I do not want this to go on a moment longer than necessary, which is why we have tried to do everything we can to short-circuit any bureaucratic processes to be able to get on and compensate everybody fairly. The 555 postmasters who secured the group litigation order exposed this whole scandal by taking the Post Office to the High Court, and they performed a massive public service by doing so. I have written to the Select Committee with details of the costs and the preparations we have made with the Treasury.

When talking about this legally complex issue, we must remember the timeline of this and the timescale with which we are working. Horizon was installed in 1999, and the prosecutions started in 2000. In 2004, Alan Bates set up the Justice for Subpostmasters Alliance, and in 2009 press reports really started to look into the concerns about those prosecutions. Over this 20-year period, many different Ministers have been involved and there have even been Post Office reorganisations, but now—after this 20-year scandal, frankly—we want to make sure, at pace, that everybody, including the 555, get justice, answers and fair compensation.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I, too, thank the hon. Member for North West Leicestershire (Andrew Bridgen) for securing this important urgent question, and I really pay tribute to my right hon. Friend the Member for North Durham (Mr Jones) for all his work on this issue.

The Horizon scandal is perhaps the most devastating miscarriage of justice in British history, damaging the lives of over 700 wrongly convicted sub-postmasters and their families, and the lives of so many who have been affected but have not been convicted. I join the Minister in paying tribute to those postmasters who have been relentless in their quest for justice. As the judge-led inquiry into this scandal has just begun, we have now been hearing extremely moving and devastating testimonies. I recommend that every Member spends time listening to the accounts just to understand how widespread this injustice has been.

Last week’s very important Select Committee report shows that, 12 years on, we are still painfully far from all the sub-postmasters receiving the compensation they deserve. Sadly, 33 of them have died before receiving any recompense. My thoughts and those of the whole House will be with their loved ones.

Given the cripplingly slow pace of justice, I want to press the Government on a few issues. First, without the extraordinary efforts of the 555 litigants, much of what we know would not have come to light. The Minister expressed his sympathy, but as Labour has pushed for time and again, will he now confirm that this group will be able to claim the compensation that is due, as he has hinted, and if so, when? Secondly, a year on from the historical shortfall scheme closing—I understand that over 2,500 have applied—only 30% of claims have been processed. Can the Minister outline what steps he is taking to hold the Post Office to account in urgently getting through this backlog, and can he clarify the definition of “eligible” that he stated? Finally, could he provide the House with an update on how long it will be before we get closure on compensation for all those affected?

The Minister is right that we will need to learn the lessons, understand the causes and ensure that this never happens again. The devastating reality of this scandal will be felt by so many families for years. The Government have taken some of the right steps, and we do appreciate that, but justice is not happening quickly enough and it is not going far enough.

[Paul Scully]

I thank the hon. Lady, and I sympathise and empathise with everything she said. I know that for everybody affected, whether the 555 or those who were not prosecuted but lost money, nothing will be quick enough, and there is nothing we can do to restore up to 20 years of hurt and distress. On the 555, yes we want to ensure that those people who broke open the case and were the pioneers get full compensation. I am not yet able to outline a resolution for them, but I am working at pace within my Department, and with our legal representatives, Post Office legal representatives, and those of the Justice For Subpostmasters Alliance. I hope to have news for the hon. Lady as soon as possible.

Again, the historic shortfall scheme is not moving as fast as anybody would like. The Post Office has paid the de minimis cases and the most straightforward, smaller amounts. For the rest, it is working through the early cases, which will then benchmark the value of compensation for others. That will then allow the Post Office to start rattling through these cases a lot quicker. The Post Office says that it wants this to be 95% finished by the end of the year. I want to say 100% by the end of the year, and that is the kind of timescale I am working on.

Oral Answers to Questions

Seema Malhotra Excerpts

Tuesday 22nd February 2022 Commons Chamber

[Kwasi Kwarteng]

My hon. Friend will appreciate the excellent statement made by my right hon. Friend the Chancellor of the Exchequer a couple of weeks ago. There was a range of measures totalling £9.1 billion, which included the council tax rebate for bands A to D and a £200 reduction in energy bills, totalling £350 to reduce bills. As I alluded to earlier, there was also an extension of the warm home discount.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

The Secretary of State omitted to mention that inflation is now at its highest level for 30 years. Energy costs are spiralling and the private sector has yet to recover to pre-pandemic levels. Does he acknowledge that the Chancellor’s very large rise in national insurance, coming in April, will make a bad situation for British businesses even worse?

[Kwasi Kwarteng]

I am delighted to hear Members from the Opposition parties so bullish about our economy, given that we are the fastest growing economy in the G7! The hon. Member for Sefton Central (Bill Esterson) mentioned Germany; I was very struck by the Bundesbank saying that Germany was facing recession, but we do not hear about that. We are creating more jobs, we have announced record investment and the Government’s plan is working in terms of bouncing back better from the pandemic.

[Seema Malhotra]

The Secretary of State did not answer the question, because he knows that this is a high-tax Government because they have created a low-growth economy. May I also raise his recent claim that fraud is not something that affects people day to day? Fraud is estimated to cost the British economy as much as £52 billion a year, so will he accept that he has got this wrong? Will he apologise to the 4.6 million people who are victims of fraud each year, and tell the House today what steps he will take to do better?

[Kwasi Kwarteng]

I will tell the hon. Lady exactly what steps I will take to do better. I will constantly and always fight against Labour’s socialism, its windfall tax, its inability to plan ahead and its total lack of remorse for the fact that it destroyed manufacturing jobs in the time it was in government.

Commercial Rent (Coronavirus) Bill

Seema Malhotra Excerpts

Wednesday 12th January 2022 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Government amendments 1 and 2.

Amendment 9, in clause 2, page 2, line 40, at end insert—

“(6) Notwithstanding subsection (5), the provisions of this Act shall extend to a business tenancy irrespective of whether the property comprised in the tenancy is occupied by the tenant.”

This amendment broadens the definition of business tenancy to cover arrangements in which the property is not occupied by the tenant.

Amendment 13, in clause 7, page 5, line 19, at end insert—

“(2B) The Secretary of State must ensure that bodies approved under subsection (1) have sufficient numbers of arbitrators (whether alone or as a member of a panel of arbitrators) required to conduct arbitrations under this Part.”

This amendment would require the Secretary of State to ensure that the approved arbitration bodies collectively have sufficient capacity to hear all arbitrations under this Part.

Amendment 10, in clause 9, page 7, line 7, leave out from “beginning” to the end of line 8 and insert “25 March 2022”.

This amendment revises the period for a reference to arbitration to be made in order that it is consistent with the Code of Conduct.

Government amendment 3.

Amendment 14, in clause 11, page 8, line 21, leave out “supporting evidence” and insert

“any evidence relevant to the proposal.”

This amendment would require a formal proposal put forward under this section to be made on an open-book basis.

Amendment 15, in clause 17, page 11, line 13, after “practicable” insert

“and no later than 14 days”.

This amendment would require awards in arbitrations which do not have an oral hearing to be made within 14 days.

Amendment 16, in clause 19, page 12, line 6, replace “may” with “must”.

This amendment would require the Secretary of State to make regulations specifying limits on arbitration fees.

Amendment 11, page 12, line 13, before “When” insert “Subject to 6A,”.

This amendment is consequential to Amendment 12.

Government amendments 4 to 6

Amendment 12, page 12, line 19, at end insert—

“(6A) When the arbitrator makes an award under section 13 or 14, the arbitrator may also make an award requiring that a party at fault pays costs which it has caused the other party to incur.

(6B) For the purposes of 6A, a party is at fault where the arbitrator considers that the conduct of the party before or during the proceedings is unreasonable or improper.”

This amendment would empower the arbitrator to make an adverse costs award where the arbitrator considers that a party has acted unreasonably or improperly.

Government amendments 7, 8 and 18 to 21.

Amendment 17, in schedule 2, page 19, line 6, leave out sub-sub-paragraph (a).

This amendment would extend the debt claims over which a party could apply to the court for the proceedings to be stayed to claims made before 10 November 2021.

[Seema Malhotra]

It is a pleasure to speak to new clause 1 and amendments 9 to 17, which stand in my name and in the name of my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury).

A process for resolving commercial rent arrears is very much needed, as dealing with the financial pressures brought on by covid is vital for landlords and tenants alike. Against that backdrop, Labour broadly welcomes the Bill, but we believe that the Government can and should do more on business support. That context is important because covid is not over. Business costs continue to rise, and they are also driven by rising fuel costs and inflation. Economic forecasts for the next three to five years project low growth, high inflation and high taxes. Managing financial pressures and supporting viable businesses to do so—that is the helping hand that we need in place as businesses navigate the uncertain road ahead and as some sectors recover faster than others.

To access the opportunities that we seek to ensure that the Bill provides, we need to be sure of the consistency, affordability and accessibility of arbitration and to ensure that the system operates effectively and fairly. On that basis, we have tabled new clause 1 and our other amendments in a positive spirit, to continue the dialogue that we had at the earlier stages of the Bill, because we support it and want it to work as effectively as possible.

On consistency, the Minister will appreciate that there will be retail and hospitality businesses with numerous landlords, and landlords with numerous tenants; businesses may therefore be party to more than one case under the new system. Predictability and consistency will be vital if those businesses are to have faith in the system, so our new clause 1 would require the Secretary of State to conduct a review of awards to assess whether clauses 15 and 16 have been interpreted consistently. The review would need to be conducted

“no later than three months following the day on which this Act is passed”,

and where the Secretary of State identifies material inconsistencies, he would need to publish or amend guidance to arbitrators as necessary. We believe that such a review would be welcomed by landlords, tenants and arbitrators and would ensure that the system is well understood.

On the accessibility and affordability of the new scheme, the definition of “business tenancy” in clause 2 has important consequences. Only tenancies in which the tenant is in occupation of the property fall within the Bill’s scope and can therefore access the arbitration scheme that it establishes. Let me give the House two examples of circumstances that could fall outside the Bill because of that definition.

First, Sir Paul Morgan, a specialist in property arbitration, has set out the case of a tenant who leaves a property unoccupied because of covid restrictions and does not now intend to reoccupy it when the restrictions end. As Sir Paul explains, the tenant may have a viable business but may not wish to reoccupy the particular premises for which the rent was due. Under the Bill as it stands, there would not be a business tenancy in such a case and the tenant would not be able to claim the benefit of the Bill in relation to that property, where the company was a tenant of that property during the period that is protected.

Secondly, there might be a situation where there is a head lease and a sub-lease on the property, for example where there is a franchising arrangement and the franchisee is the sub-tenant. In such a situation, the head lessee does not occupy the property and therefore could not benefit from the reliefs under the Bill, whereas the sub-tenant could.

Labour’s amendment 9 would fill those gaps, broadening the definition of “business tenancy” to cover arrangements in which the property is not occupied by the tenant. Unless the Minister can confirm that in the examples I have given it is intended that the leases would fall outside the new regime, I very much hope that the Government will recognise the gap and support our proposed changes.

We have tabled amendment 10, in relation to the period for reference to arbitration, in the same spirit of constructiveness. Clause 9 establishes a six-month period for a tenant or landlord to make a reference to arbitration, for which the clock starts on the day on which the Act is passed. We recognise and support the need to act quickly, but want to ensure that the full six months is available to tenants and landlords. The code of conduct suggests that the arbitration scheme will be operational on 25 March 2022, but what happens if the legislation passes before that date? Will that mean that parties have less than six months to make a reference? What if the legislation is not passed until a later date? Presumably, the current code of conduct would then need to be amended and existing protections extended. Amendment 10 reflects the suggestion by Bill Chandler of Hill Dickinson LLP that the date for referrals to open be fixed as 25 March 2022 irrespective of whether the legislation is passed. I would be grateful for the Minister’s feedback on that and on the importance of these questions in relation to improving accessibility to and the clarity of the new regime.

Let me turn to the question of cost. The scheme will be a success only if it is affordable. In Committee, the Minister acknowledged the importance of affordability and suggested that he was working with relevant bodies that may be appointed to agree cost schedules. Could the Minister update the House on those discussions? Clause 19 gives the Secretary of State the discretion to specify ceilings for arbitration fees in secondary legislation. Given the concerns of stakeholders and the financial pressures they are facing, the Secretary of State should be required to set a limit on arbitration fees, and that is the intention of amendment 16.

On county court judgments, the Minister will know that many commercial tenants were deeply frustrated that the temporary protections introduced to assist businesses struggling to pay their rent did not include protections against county court judgments and High Court judgments. UKHospitality and others have been calling for this protection for months. While it is welcome that the Government have finally listened to industry and to Labour, and improved the provisions that would stay any debt proceedings made after 10 November, choosing this cut-off date has had some perverse consequences.

As we heard in Committee, the result of this arbitrary date means that any landlord who started proceedings before 10 November is now arguably in a better position than those who held off and pursued negotiations with their tenant. Surely this cannot be the Minister’s intention. As the British Retail Consortium explained, the more aggressive the landlord, the better the position they are now in on county court and High Court judgments. That is why we have tabled amendment 17, which would remove this arbitrary cut-off date. As a result, a party could apply to court to stay any debt claim that is made by a landlord and relates to protected rent debt, pending a resolution whether by negotiation or arbitration. We see this as an issue of basic fairness. Labour does not believe that landlords or tenants should be punished for in effect doing the right thing and seeking to negotiate a settlement.

I turn now to Labour’s amendments designed to ensure that the new scheme operates effectively. First, on arbitrators and arbitration bodies, arbitral bodies and their members will be absolutely critical to the success of this arbitration scheme. The Government have taken a market-based approach to the running of the arbitration scheme, which will have a list of approved arbitral bodies, rather than a single provider. In Committee, we heard the concerns of stakeholders who wanted to understand what skills and expertise would be required of arbitrators. While some thought that financial and accounting qualifications were critical, others suggested that legal qualifications would be paramount given the complexity of the cases. I would welcome any update on the Department’s discussions with stakeholders and about the approval of suitable arbitral bodies.

As well as ensuring that arbitrators are suitably qualified, it is vital that there is sufficient capacity. The Government’s impact assessment assumes 8,200 cases going to arbitration in its central scenario. While the appointed arbitral bodies will maintain their own lists of arbitrators, in a system where the Secretary of State may appoint several bodies, it is the Secretary of State who ultimately must ensure that there is sufficient capacity. The intention of amendment 13 is to make that an explicit and ongoing duty on the Secretary of State to ensure that the arbitral bodies appointed have sufficient numbers of arbitrators to hear and report on all cases as quickly as possible. If the impact assessment’s estimate is too conservative, our amendment would require the Secretary of State to appoint additional arbitral bodies to work with those bodies already appointed to increase their list of approved arbitrators.

Stakeholders have also made it clear to me how vital it is that there is consistency across the new system in how different arbitrators interpret the legislation and any guidance under it. For example, an arbitrator must dismiss a reference to arbitration where it determines that the tenant’s business is not viable. As such, how arbitrators interpret viability is of central importance.

On the conduct of parties, it is welcome news from stakeholders that the vast majority of landlords and tenants have already reached agreement on their covid rent arrears. The British Retail Consortium estimated in December that 80% to 90% of its members had reached agreement. For the minority of businesses that are yet to reach agreement, the arbitration scheme provides a lifeline for an independent and binding arbitration. However, we believe that the Bill could be improved to further ensure a fairer arbitration process.

Clause 11 requires a reference to arbitration to include a formal proposal for resolving the dispute. The other party may then put forward their own counter-proposal. Both must be supported by supporting evidence. However, a requirement to submit supporting evidence is not the same as full disclosure on an open book basis. As the Property Litigation Association makes clear, parties are not required to provide any evidence which might be adverse to their proposal. This lack of an obligation to make full disclosure prevents the other party from making an informed counter-proposal and, arguably, ultimately the swift resolution of the dispute. That is why our amendment 14 revises clause 11 and requires a formal proposal to be accompanied by all evidence relevant to the proposal, whether helpful to that party or not.

We are pleased to see the Government table Government amendment 4. Although a 50-50 split is fair in most cases, it is right that the arbitrator has the power to change how the arbitration fees are split, particularly if one party has acted unreasonably. However, we believe that the Bill should go further than that as it is vital that tenants and landlords are incentivised to approach the arbitration process fairly and in the spirit of resolution. That is why we have tabled amendment 12, which would provide the arbitrator with the power to make an adverse cost award, where one party has caused the other to incur costs by acting unreasonably. As Sir Paul Morgan said in his written evidence, that would be nothing new. In the case of many tribunals where the general rule is that each party will bear its own costs, the tribunal is typically given such a power.

On swift resolution, the regime is intended to deliver swift resolutions for disputes, yet the Bill does not do everything possible to secure them. While clause 17 requires the arbitrator to make their award within 14 days in a case in which an oral hearing is held, where no oral hearing is held the arbitrator is required to make their award as soon as reasonably practicable. My understanding from debate in Committee is that the likelihood is that most arbitration hearings will not be oral hearings, but on the basis of paperwork. Can the Minister explain the logic here? Why is there no backstop requiring the arbitrator to make their award within a specific timeframe where there is no oral hearing, which, as I say, we understand is expected to be the majority of cases. Labour’s amendment 15 intends to ensure that awards are made within a specific timeframe irrespective of whether there is an oral hearing.

In conclusion, in the current climate viable firms risk going to the wall. We believe that the Government can and should do more. From business rates to energy costs, the Government have let down British businesses and the impacts are now a part of a cumulative rise of cost pressures on businesses. In the context of commercial rent debt, we welcome the relief this Bill offers to commercial tenants facing the risk of eviction, bankruptcy or debt enforcement, and we welcome the prospect of resolution on covid rent arrears offered to landlords and tenants that have not been able to reach agreement. That is why the Opposition have taken a constructive approach to scrutinising this legislation, and I hope that, in recognising the spirit in which our amendments have been tabled, the Minister will respond favourably on the points we have raised today.

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

Before I respond to the Opposition amendments, I would first like to thank the hon. Members for Feltham and Heston (Seema Malhotra) and for Brentford and Isleworth (Ruth Cadbury) for their continued constructive engagement with the Bill and for their contributions to date.

The Bill is key to ensuring we support viable businesses that will continue to thrive and contribute to our economy in a way that does not risk the insolvency of their commercial landlords. We remain committed to these principles. The arbitration system is designed to be a quick, effective and impartial solution for rent debts that cannot otherwise be resolved, and we currently expect that all applications for arbitration will be made within six months and that cases should be resolved as soon as practicable afterwards.

Requiring a review of the arbitration process within three months of the Bill being enacted could slow down the process by adding additional steps and requirements for arbitrators that have already proved their suitability for the role. It might also delay the resolution of cases while arbitrators await the findings of the review before making awards.

Under the Bill’s existing provisions, the Secretary of State can already request a report from approved arbitration bodies covering the exercise of their functions under the Bill, including details of awards made and the application of the principles set out in the Bill in the arbitrations they oversee.

Additionally, there is a requirement for arbitrators to publish the detail of awards made, including the reasons behind them. This will show how arbitrators have applied the principles of the Bill in coming to their decisions. We will carefully monitor the position, and if there is a need to revise the guidance, such as to clarify or add new information for arbitrators, the Secretary of State is already able to do so.

I believe that requiring a review would not benefit the aims of the Bill or, indeed, the people who would want to use the new arbitration system to resolve rent disputes, and I therefore hope new clause 1 will be withdrawn.

On amendment 9, as hon. Members will be aware, the Bill defines a business tenancy as a tenancy to which part 2 of the Landlord and Tenant Act 1954 applies—that is to say it is a tenancy comprised of property that is or includes premises that are occupied by the tenant for business purposes. I reassure hon. Members that the Government intend such property to be considered occupied even if it has been mandated to close for some time in full or in part. A tenant will still be in occupation if they are operating their business remotely and intend to return, so I do not believe amendment 9 is necessary. I hope it will be withdrawn.

I should say that we also anticipate courts will take a pragmatic view of occupancy, given the underlying rationale behind the Bill to introduce a system of binding arbitration for businesses that have built up rent debt as a result of Government-mandated closures.

On amendment 13, the operation of approved arbitration bodies follows a market-based policy approach, leaving it to arbitration bodies to manage their internal capacity processes. Our engagement with arbitration bodies suggests that this is the right approach. Looking purely at the number of arbitrators disregards the fact that an arbitrator will be able to take on more than one case at a time. Although the application process will contain a question on the number of arbitrators available, we recognise that this will provide an under-representative picture of capacity in the market, so I am not able to accept the amendment.

On amendment 10, I am grateful to the hon. Members for Feltham and Heston and for Brentford and Isleworth for seeking to ensure consistency between the Bill and the code of practice. I reassure them that the Government’s intention under both the Bill and the code is for the Bill, including the arbitration system it establishes, to come into force as soon as possible. We want the arbitration system to start as soon as possible given its importance to supporting resolution of protected rent debt and a return to normal market operation. The aim remains to bring the Bill, including the arbitration system, into force by 25 March 2022. That is reflected in the code of practice, as updated on 9 November 2021. I am happy to consider whether clarification would be useful within the code. The code outlines the processes and principles that we are seeking to introduce through the Bill. It has given, and continues to give, businesses the opportunity to negotiate in line with those principles until the Bill comes into force.

The March timing is linked to the expiry of the moratorium on forfeiture and the restrictions on use of the commercial rent arrears recovery regime. The Government have been clear that they intend such measures to remain in place until the Bill is passed, if that is earlier than their expiry.

I turn to amendment 14. Clause 11 as it stands must be read with section 34 of the Arbitration Act 1996, which states:

“It shall be for the tribunal to decide all procedural and evidential matters”.

That provides arbitrators with the discretion to call for further evidence where that is considered necessary. There is also no express limit in the Bill on the types of evidence that parties can put forward to support their proposals. We are aiming for a quick and efficient process to restore businesses to normality. The aim of requiring supporting evidence is therefore to help focus participants’ minds on the most pertinent evidence that will support their proposals. It will have to be sufficient to show why the proposal is consistent with the principles and should be adopted. That will help arbitrators to resolve cases quickly. A widening of the clause could lead the paper-based arbitration process to become lengthy, inefficient and costly for the parties, who must meet their own legal and other costs.

I turn to amendment 15. As I have previously explained, clause 17 establishes the timeframe for making awards, requiring arbitrators to make an award as soon as is practicable, or within 14 days in the case of an oral hearing. While we expect that most cases will be resolved quickly, the clause also provides arbitrators with the necessary flexibility to take additional time to make decisions on more complicated cases. One or both of the parties may each simply submit one formal proposal that is final, or one or both may decide to submit revised proposals as final proposals. They may also agree to extend the time limit for submitting initial or revised proposals. That means that it is hard for an arbitrator to know exactly when final proposals have been submitted and when the clock on the 14-day time limit would start running.

Arbitrators may need to request further information after receiving proposals. It would therefore be impractical to impose a time limit. Imposing a 14-day time limit for issuing awards following an oral hearing, as the Bill does—although the time limit can be extended—is less problematic because the arbitrator will have seen the final proposals and had time to consider them before the hearing. They also have an opportunity to ask questions about them during the hearing, which would conclude on that set date.

On amendment 16, I agree that fee levels are an important consideration. The Bill adopts a market-based approach. Arbitration bodies are best placed to decide on fee levels given their experience in costing arbitration schemes to make it affordable for all and attractive enough for arbitrators to want to take on cases. The Secretary of State’s powers are intended to be used only when circumstances determine that to be appropriate. Setting a limit on fees at this point could reduce the number of arbitrators able to act, which could undermine the arbitration mechanism in the Bill. There is no evidence that such a limit is needed. However, if it is, the Secretary of State is prepared to exercise the power as appropriate based on the available evidence.

On amendments 11 and 12, I agree that it is important to encourage behaviour in line with the code of practice and the Bill’s general principles. A key aim of the Bill is to restore businesses to normality as quickly as possible. We have carefully designed the process with arbitrators to make it quick and cheap to navigate, and accessible without further support. The amendments, however, could result in prolonged arguments on costs, appeals and enforcement, delaying a return to that normality that we all seek. They could also encourage the use of legal and other support where that is not needed, lengthening the time to resolution and potentially increasing costs for all parties.

The amendments could create a situation in which one party’s viability or solvency could be endangered through having to pay costs other than arbitration fees. Widening the discretion to include other costs could also lead to an uneven playing field, especially for smaller businesses who could end up paying high legal costs for larger companies. Under the Bill, the arbitrator has discretion to deviate from the general rule of evenly splitting the costs of arbitration fees between parties where appropriate, based on the circumstances of the case, such as when one party has not reasonably co-operated.

On amendment 17, the Bill as drafted allows for a stay of debt claims that include ringfenced debt and are issued between 10 November 2021 and the Bill coming into force. The Bill enables ringfenced debt under those claims and under judgments made in respect of such claims to be subject to arbitration. I understand the concern about the date, but it is not an arbitrary date, because 10 November 2021 follows the Bill’s introduction and the Government’s announcement of the policy. The Bill seeks to introduce proportionate measures that address the interests of both landlords and tenants, whereas the amendment would allow for arbitration of protected debt which was subject to earlier proceedings or judgments when the parties could not have known that this was proposed at the time when the proceedings were issued, so reopening those situations.

Let me now deal with the technical amendments tabled by the Government and the substantive amendment that we are tabling at the request of the Northern Ireland Assembly. Amendments 1 and 2 are technical amendments to make it clear that the definition of “service charge” in clause 2 covers both fixed and variable costs, as well as costs incurred by the landlord insuring against loss of rent. That has always been our intention, and the amendments help to make it clear, ensuring that all relevant costs and charges are within the scope of the arbitration process.

Technical Government amendments 3 and 8 make it clear that the provisions of clauses 10 and 24, in so far as they relate to company voluntary arrangements or certain restructurings, apply to limited liability partnerships. That is in addition to their usual application to companies. These are minor clarificatory amendments to improve the technical drafting of the Bill.

Amendments 4 to 7 are minor and technical, and clarify the operation of arbitration and all hearing fees and expenses. Amendments 4 and 7 make it clear that the general rule is that the party that has paid fees is to be reimbursed half the amount by the other party, but where appropriate, the arbitrator may determine a different proportion, including zero. Amendment 5 makes a small correction to clause 19(6) to make it clear that except for reimbursement of arbitration or oral hearing fees, a party must meet its own legal or other costs. Amendment 6 makes it clear that costs incurred in connection with arbitration are not recoverable under an existing clause in the lease. Allowing cost recovery via the lease concerned would undermine the specific provisions in the Bill on fees, expenses and costs. It would also put the party able to rely on the lease terms at an advantage, as they could be more confident about investing money in their case, in the knowledge that the costs could ultimately be recovered from the other party. In addition, allowing this could potentially put the viability of the other party at risk, even when an arbitral award had been handed down in that other party’s favour.

I turn now to amendments 18 and 19. The Northern Ireland Department of Finance and Department for the Economy have requested the removal of the existing delegated power for them to make regulations for purposes corresponding to the purposes of the Bill, set out in clause 28. This decision was taken for several reasons, which include the availability of existing dispute resolution facilities, plus a lack of compelling evidence that rent debt in Northern Ireland is on a scale to require additional measures. The rationale for the policy in England and Wales remains strong, and this is where our evidence of rent arrears threatening jobs and business insolvency is focused. The removal of clause 28 necessitates an amendment to the Extent provision in clause 30(2), which currently refers to this provision.

Amendments 20 and 21 ensure that clause 24(4) extends to Northern Ireland in relation to company compromises and arrangements, but not company voluntary arrangements. That reflects the territorial extent of the Companies Act 2006 referred to in this provision.

I commend the amendments to the House.

[Seema Malhotra]

On the basis of the Minister’s comments, particularly those relating to ongoing review, and other comments relating to the amendments, I beg to ask leave to withdraw new clause 1.

Clause, by leave, withdrawn.

Clause 2

“Rent” and “business tenancy”

Amendments made: 1, page 2, line 19, leave out sub-paragraph (ii) and insert—

(ii) which is a fixed amount or an amount that varies or may vary according to the relevant costs (or a combination of the two),”.

This amendment clarifies that the expression “service charge” includes any amount payable under the terms of a tenancy for something mentioned in clause 2(2)(c)(i), whether it is a fixed amount or a variable amount (or a combination of a fixed part and a variable part).

Amendment 2, page 2, line 22, leave out from “costs”” to “in” and insert

“includes costs incurred by the landlord in connection with insuring against loss of rent or”.

This amendment clarifies that the costs of insurance against loss of rent are within the expression “service charge”, in addition to insurance costs relating to the demised premises and any common parts.

Clause 10

Requirements for making a reference to arbitration

Amendment made: 3, page 8, line 12, at end insert

“(as well as to companies).”

This is a drafting amendment to make clear that clause 10(6) (which applies provisions of the clause to LLPs) operates in addition to the rest of the clause

Clause 19

Arbitration fees and expenses

Amendments made: 4, page 12, leave out lines 14 to 18 and insert

“(subject to subsection (5A)) also make an award requiring the other party to reimburse the applicant for half the arbitration fees paid under subsection (4).

‘(5A) The general rule in subsection (5) does not apply if the arbitrator considers it more appropriate in the circumstances of the case to award a different proportion (which may be zero).’”

This amendment clarifies that the rule in the current clause 19(5)(a) (that the party paying the arbitration fees is to be reimbursed half of the amount) is the general rule, although the arbitrator is able to determine a different proportion, including zero, where appropriate.

Amendment 5, page 12, line 19, leave out “Otherwise” and insert

“Except as provided by subsection (5) and section 20(6),”.

This corrects a small error in clause 19(6). The word “Otherwise” at the start of clause 19(6) currently refers back to clause 19(5), but it also needs to take account of the provisions of clause 20(6) which makes provision corresponding to clause 19(5) for oral hearing fees.

Amendment 6, page 12, line 19, at end insert —

“(6A) Legal or other costs incurred in connection with arbitration (including arbitration fees) are not recoverable by virtue of any term of the business tenancy concerned.”

The amendment clarifies that arbitration costs are not recoverable under a tenancy term enabling recovery of enforcement costs relating to a breach of covenant under the tenancy. The parties’ rights and obligations in relation to arbitration costs are governed by clauses 19 and 20.

Clause 20

Oral hearings

Amendment made: 7, page 12, leave out lines 36 to 40 and insert

“(subject to subsection (6A)) also make an award requiring the other party to reimburse the applicant for half the hearing fees.

‘(6A) The general rule in subsection (6) does not apply if the arbitrator considers it more appropriate in all the circumstances to award a different proportion (which may be zero).’”

This amendment clarifies that the rule in the current clause 20(6)(a) (that the party paying the oral hearing fees is to be reimbursed half of the amount) is the general rule, although the arbitrator is able to determine a different proportion, including zero, where appropriate.

Clause 24

Temporary restriction on initiating certain insolvency arrangements

Amendment made: 8, page 14, line 37, at end insert

“(as well as to companies).”

This is a drafting amendment to make clear that clause 24(4) (which applies provisions of the clause to LLPs) operates in addition to the rest of the clause.

Clause 28

Power to make corresponding provision in Northern Ireland

Amendment made: 18, page 15, line 33, leave out clause 28.

The responsible Northern Ireland minister has informed Her Majesty’s Government that the powers to be conferred by clause 28 are no longer needed. This amendment would omit the clause, which would otherwise require the approval of a Legislative Consent Motion in the Northern Ireland Assembly.

Clause 30

Extent, Commencement and Short Title

Amendments made: 19, page 16, leave out lines 14 and 15.

The reference in clause 30(2) to clause 28 is no longer correct if clause 28 is left out of the Bill. The rest of clause 30(2) (which provides that Part 4 of the Bill extends to the whole of the UK) is reproduced in Amendment 20, so the whole of clause 30(2) can be omitted.

Amendment 20, page 16, leave out lines 18 and 19 and insert—

“(a) in section 24—

(i) subsections (1), (2)(c) and (3), and

(ii) subsection (4) so far as relating to a compromise or arrangement under section 899 or 901F of the Companies Act 2006,

(b) Part 1 so far as relating to the provisions mentioned in paragraph (a), and

(c) this Part.”

This amendment and Amendment 21 secure that clause 24(4) extends to Northern Ireland in relation to company compromises and arrangements, but not company voluntary arrangements. This is for consistency with the extent of the legislation covering those matters.

Amendment 21, page 16, leave out line 21 and insert—

“(a) in section 24—

(i) subsection (2)(a), and

(ii) subsection (4) so far as relating to a company voluntary arrangement,”.—(Paul Scully.)

See the explanatory statement for Amendment 20.

Third Reading

Queen’s consent signified.

--- Later in debate ---

[Seema Malhotra]

As we move on to Third Reading I would like to thank the Minister for his engagement with us and for meeting us outside the formal Committee and other stages of the Bill. I also thank the Whips on both sides, the civil servants, the Clerks of the House, all those who gave evidence, Parliamentary Private Secretaries and all colleagues who contributed to proceedings on the Bill.

Labour supports the Bill. Where we believe that it could be further improved we have laid out our arguments, and I hope that such debate will be helpful as the Bill is taken forward in the other place. Labour recognises the need for a fair arbitration system to deal with these difficult rent arrears. No otherwise viable business should face an overwhelming burden from rent arrears incurred as a result of a very difficult time during lockdown and through no fault of their own. Neither should those businesses feel that they are on their own without due arbitration, without a burden-sharing process and without a Government and a Parliament on their side. At the same time, we recognise that commercial landlords also need a clear and predictable mechanism through which to seek to recoup levels of rent arrears fairly, recognising the ability to pay as viable businesses navigate the ups and downs of our economic recovery.

Crucially, the guiding mechanism of any arbitration system must ultimately be fairness and must be in the long-term interests of British businesses and jobs. By ensuring that the arbitration process must aim to preserve viable businesses and do so fairly, while also preserving landlords’ solvency, the Bill offers a balanced arbitration process. As such we support it.

The timing of the Bill, however, was somewhat disappointing, because we called for action over rent debt and wider business costs earlier last summer, ahead of the end of restrictions; indeed, I met with UKHospitality, the British Beauty Council, the Federation of Small Businesses, the Night Time Industries Association and many others. The Minister will have had such meetings too, and heard of the huge ongoing burden that businesses were facing over rent payments; yet it seemed to take the Government months after we, and other stakeholders, made that call to produce the Bill and to set out the arbitration process for rent arrears. In that time, the covid pandemic continued to hit businesses hard, in sometimes predictable and sometimes unpredictable ways as new waves were coming through, particularly those on the frontline of our high streets and communities.

Rent debt remains a heavy burden for those businesses and their commercial landlords. Indeed, the Bill’s impact assessment notes that, according to the Treasury analysis, the total amount of deferred rent liabilities may be at around £9 billion by March 2022. It is likely that businesses and landlords could have been helped by the legislation being introduced a little earlier, but we move forward, and as the Bill moves forward the issues around affordability and accessibility should be further tested. The Minister alluded to that in his speech on Third Reading.

Businesses up and down the country have had a very tough Christmas period, despite the period of October to the new year being called the golden quarter for many hospitality and retail businesses, in which they hope enough revenue can be made, particularly in December, to make up for and steer through the fallow months of January and February. That period has been incredibly difficult this time around. UKHospitality found that the average hospitality venue lost over £10,000 in the weeks leading up to Christmas, with Christmas day takings down 60% compared with those in 2019. A December survey—the period between some of the stages of the Bill—by the Night Time Industries Association found that the outstanding business debt from their members was, on average, around over £200,000 per unit.

Businesses need help with their rent debt, but they will not be able to access it if the cost of arbitration in the Bill is too high. It is vital that the Government continue to listen to the views of Members of this House, and Ministers should ensure that arbitration fees are capped. It is also vital that all viable businesses can access the arbitration process, including those that no longer occupy their premises. I heard what the Minister said in relation to how the courts might interpret that in the context of the intentions behind the Bill, but that issue may well be raised further in the other place. The Government must ensure that there are enough arbitrators, as we have raised, to deal with all cases, and that the arbitration system works consistently and fairly.

We recognise that, as the scheme comes in over March and into April, businesses will also be hit by the hike in national insurance contributions, as well as the ongoing labour shortages, supply chain shortages, rising prices and rising inflation. It is why, in the context of business cost challenges, we continue to believe that the hike in national insurance contributions will be the wrong move at the wrong time. It will be right when viable businesses, we hope, start to recover, and when the arbitration process comes in and they are expected to repay any rent arrears. It is critical that any arbitration system that is created is administered within the context of a wider supportive environment for businesses. I hope that the Minister will keep that under review, and perhaps raise the issue with his Treasury colleagues.

Labour supports the Bill, which addresses a commercial issue on which we have called for action. It provides a fair system for helping landlords and tenants to find a solution to rent arrears under a binding arbitration system. Its measures must be kept under review so that the outcomes that it is intended to achieve are supported, and the process does not otherwise become one that loses the confidence of those it is there to support. On that basis, I wish colleagues in the other place every success in their ongoing scrutiny of the Bill as it moves forward.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Glue Traps (Offences) Bill (Money)

Queen’s recommendation signified.

Resolved,

That, for the purposes of any Act resulting from the Glue Traps (Offences) Bill, it is expedient to authorise the payment out of money provided by Parliament of:

any expenditure incurred under or by virtue of the Act by the Secretary of State or another public authority; and

any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Jo Churchill.)

Glue Traps (Offences) Bill (Ways and Means)

Resolved,

That, for the purposes of any Act resulting from the Glue Traps (Offences) Bill, it is expedient to authorise the charging of fees and other charges under the Act.—(Jo Churchill.)

Oral Answers to Questions

Seema Malhotra Excerpts

Tuesday 11th January 2022 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Tory failures on the economy now show all too clearly that the Tories are no longer the party of business. Business taxes and costs are rising, revenues and profits are falling, and businesses face a cliff edge in March as support is withdrawn. Yet when hospitality businesses were losing, on average, £10,000 a week, the Chancellor was in California, with the Business Secretary nowhere to be seen. Does the Minister agree that hospitality businesses, hit hard by covid and Government chaos, need more than the one-off grants finally announced, and will he now back Labour’s calls for the Government to consider extending the VAT discount for hospitality?

[Paul Scully]

This Government continue to be the Government and the party for businesses, and that includes the hard-pressed hospitality sector, which is such a crucial part of the ecosystem of our high streets, our cities, and our coastal and rural areas. The Secretary of State and I spoke to hospitality sector representatives of all kinds within hours of the announcement of the move to plan B ahead of Christmas, and we will continue to support them as best we can.

Reducing Costs for Businesses

Seema Malhotra Excerpts

Tuesday 11th January 2022 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

One thing that stands out from this debate is that British business is calling for a Government who are on its side. We have just seen the third consecutive quarter with more than 100,000 business deaths reported. From across the House, we have heard stories about struggling businesses, jobs at risk, businesses facing hardship and closure, and sectors of our economy left to fend for themselves as crises are worsened by Government inaction. I thank colleagues for speaking in this debate, including my hon. Friends the Members for Llanelli (Nia Griffith), for Halifax (Holly Lynch), for St Helens South and Whiston (Ms Rimmer), for Bradford West (Naz Shah) and for City of Durham (Mary Kelly Foy), the hon. Members for Thirsk and Malton (Kevin Hollinrake) and for Richmond Park (Sarah Olney), the hon. and learned Member for Edinburgh South West (Joanna Cherry), and many others.

The reality is that business support from this Government has been haphazard or, for some, non-existent. One thing that business needs above all else is stability and the ability to plan ahead with confidence. That has been as absent as the Chancellor was before Christmas, with his trip abroad delaying much needed action for businesses in that period. The Government were also absent during last summer’s HGV crisis, the steel crisis, the supply chain crisis, the CO₂ crisis and the fuel crisis that saw forecourts close across the country, with small businesses reliant on their vehicle for trade unable to visit their customers. This Government had one test—were they making life easier for businesses to get through the covid crisis, or were they making life harder? In many respects, they failed that test.

On top of that, the Conservatives are bringing in a new jobs tax, just as support measures come to an end. That is not a plan. It is evidence of a lack of one. Clearly, the Conservative party has become the high-tax party because it is the low-growth party. All the indications are of future years of low growth, on top of the low growth going into the pandemic.

When it comes to the economy, Labour puts the national interest first. We called for furlough-style employment support in early 2020 and it was right to have such support. We called for and supported help for the self-employed, business loans and urgent support on commercial rent debt. However, so much came so late, with businesses paying the price. Many are still excluded from the support that they need.

Covid is not over, however, and businesses need clarity on how to plan for the future. We believe in a strong private sector where investors and entrepreneurs are rewarded fairly. We believe in an economy where companies are good corporate citizens, sharing wealth, engaging communities, paying their fair share of tax and treating their employees with dignity and respect; in a national economy that is anchored in every part of the UK, every region and nation, with no locations left behind; in prosperity that is shared evenly, bringing security, dignity and respect to families across our country; and, most of all, in an economy that moves smoothly towards a low-carbon economy, with a plan for how businesses move to net zero and, as part of that journey, our businesses doing well as they do good.

To achieve those goals, we need a proper industrial strategy, with a plan for how we buy, make and sell more in Britain, a strategy with leadership and direction that guides serious investment, not an incoherent plan with slogans and soundbites. The more I hear the phrase “levelling up”, the less faith I have that the Conservative party has a clue about what it is doing.

Today’s Labour party is the party of business. We will freeze business rates until the next revaluation. We will increase the threshold for small business rates relief, ahead of more fundamental reform—[Interruption.] Government Members may chuckle, but that is because they know that we are right. We will support businesses now with their energy bills, extend the VAT discount for hospitality, and invest in skills and training to tackle skills shortages to help businesses to build those new capabilities.

Every economic indicator, every commentator and every ounce of common sense tells us that we have the perfect storm of rising costs, rising skills shortages and rising taxation. This is catastrophic for businesses. So Ministers have a choice. What will they do to support businesses, large and small, with the next set of challenges that faces them? Businesses across the country are watching and waiting for a plan. They cannot keep shouldering the burden. Today is the Minister’s opportunity to tell businesses what the Government will do now. It is now the Labour party that is the party of business and the Conservatives that have led to life for British businesses being harder than it is for businesses abroad.

Commercial Rent (Coronavirus) Bill (Fourth sitting)

Seema Malhotra Excerpts

Committee stage
Tuesday 14th December 2021 Public Bill Committees

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

As usual, Mr Hosie, it is a pleasure to serve under your chairmanship.

The clause sets out what awards an arbitrator may make following a reference to arbitration. It provides clarity to arbitrators and parties considering arbitration about the criteria for successful referral.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is pleasure to serve under your chairship, Mr Hosie.

Subsection (3) requires an arbitrator to dismiss a reference if they find that the tenant’s business “is not viable” and

“would not be viable even if the tenant were to be given relief from payment”.

Will the Minister say more about what constitute viable and unviable businesses? Groups representing the hospitality sector, for example, have made it clear that the seasonal nature of their businesses should be reflected in the viability test. As well as being provided with guidance, arbitrators should also have the right level of flexibility.

[Paul Scully]

I am happy to give the hon. Lady that assurance. The reason why we do not have a specific definition of what constitutes viability or affordability is that businesses models vary greatly, including with seasonality, and within and between sectors. Under clause 16, which we will consider later, we include factors that the arbitrator should consider when assessing the viability of the tenant’s business.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Arbitrator’s award on the matter of relief from payment

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The Bill contains principles that are key to ensuring that rent debt is resolved in a proportionate way for tenants and landlords. The clause sets out how arbitrators must consider those principles when making an award under the Bill.

[Seema Malhotra]

I have a couple of questions about the clause. First, will the Minister clarify why the Government have chosen to make the repayment time under subsection (7) 24 months? Has he concluded that that will be sufficient time for businesses to repay what they owe, even if further covid restrictions are put in place? The current circumstances are a cause for concern to businesses that have seen revenues drop while costs continue. Secondly, reflecting the concerns of stakeholders including the Pubs Advisory Service, will the Minister clarify whether subsection (2) implies that the arbitrator will consider only the final proposal when making the award, or will they consider all proposals made by both parties in the round?

[Paul Scully]

In awards that give tenants time to repay the debt, tenants will have no longer than 24 months to do so. That recognises that additional time to repay may help businesses to recover and start to trade as normal, while ensuring that the issue of rent debts does not drag on unnecessarily. As for how it works, the scheme uses a key aspect of pension arbitration, by which each may propose a financial solution to pay protected rent, and the arbitrator will select the proposal that is most consistent with the principles set out in the Bill, assuming that one at least follows those principles. Otherwise, the arbitrator must make whatever award the arbitrator considers appropriate when applying the principles.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Arbitrator’s principles

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Seema Malhotra]

New clause 1 is a probing amendment. It would require the Secretary of State to conduct a review of awards to assess whether sections 15 and 16 of the Act have been interpreted consistently and to publish or amend guidance as necessary. We have heard issues raised about the interpretation of viability of businesses and making sure there is enough experience with arbitrators to ensure a consistent approach to resolving rent debt. In tabling the new clause we are seeking a review. It is helpful to know if the Secretary of State is seeking feedback on how the system is working and whether there are inconsistencies identified, which may require further guidance to be given to arbitrators about the exercise of their functions under the Bill. That is in the interest of strengthening the regime and trust in it among tenants and landlords alike. I would be grateful for the Minister’s comments on what feedback process he is expecting to see otherwise, so that we can make sure there is learning through the system and that it works effectively.

[Paul Scully]

We are committed to the principles in the Bill. That is why we have included them in the legislation. We will require arbitrators to follow them in their work. Arbitration bodies will only appoint arbitrators that are considered suitable to carry out arbitration as set out in the Bill. These bodies also have the power to oversee any arbitration when an arbitrator is appointed.

The arbitration system is designed to be a quick, effective and impartial solution to rent debts that cannot otherwise be resolved. Requiring a review of the arbitration process within three months of the Bill being in force could slow that process down. It may add additional steps and requirements for arbitrators who have already proven their suitability and impartiality for the role. It may postpone the appointment of arbitrators, further delaying cases if arbitration bodies must await the findings of the review before acting.

If new or revised guidance were required following a review, it would take additional time to produce and would not be in place for many cases referred to arbitration. We currently expect that all applications to arbitration would be made within six months and that cases should be resolved as soon as practicable afterward. Under the Bill’s provisions, the Secretary of State can also request a report from approved arbitration bodies covering the exercise of their functions under the Bill, including details on awards made and the application of the principles set out in the Bill on arbitrations they oversee.

There is a requirement for arbitrators to publish details of awards made, including the reasons behind it. That will show how arbitrators have applied the principles in the Bill to come to their decision. If there is any need to revise the guidance, for example to clarify or add new information for arbitrators, the Secretary of State is already able to do so. In summary, the Bill already contains several ways of monitoring the application of its principles. If the need arises, guidance can be updated to ensure that arbitrators have the information required to carry out their work. I do not believe that a required review would benefit the aims of the Bill. Therefore, I hope the hon. Member will withdraw her new clause.

[Seema Malhotra]

On the basis that there are other mechanisms that the Minister will—I use the word will—be using to ensure that there is feedback from the system, we will not push the new clause to a vote today. However, I do think it will be important to keep this under review. I expect that on Report in the new year, when circumstances might be different, we may want to look again at some of these amendments.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Arbitrator: assessment of “viability” and “solvency”

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The clause is important because it relates to the key principles of viability and solvency that underpin the arbitration process. Arbitrators must ensure that an award maintains or restores a business’s viability as long as it is considered that it would be preserving a landlord’s solvency.

[Seema Malhotra]

Subsection (2) lists factors to which an arbitrator may have to have regard when assessing landlord solvency, so far as the information is known. Could the Minister confirm whether further details about this evidence will be released by the Government? Again, I am just asking about consistency in the arbitration process.

Subsection 3 states that the arbitrator must disregard the possibility of either party borrowing money or restructuring their business. We support this measure and think it will contribute to ensuring that the arbitration process is fair. However, if would be helpful to hear some clarification on the regulations outlined in clause 16, and what further guidance will be forthcoming.

[Paul Scully]

I have talked about the fact that in this clause there are a number of factors when assessing the viability of a tenant’s business. I would also point the hon. Lady to the code of practice, which is not only for the use of the arbitrator, but for people who fall outside the scope of the Bill. It contains a non-exhaustive list of evidence that can be considered when determining viability and affordability, including existing and anticipated credit debt balance; business performance since March 2020; the tenant’s assets, some of which may be liquid, others of which may be plants or machinery; the position of the tenant with other tenancies; insolvency of a major customer; unexpected retentions or knowledge of a lack of working capital; or loss of key personnel or staff redundancies. Further factors can be found in annex B of the code of practice.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Timing of arbitrator’s award

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Seema Malhotra]

We recognise that both businesses and landlords will benefit from prompt solutions to rent debt. Can the Minister explain why a different time frame is appropriate for the making of the award depending on whether an oral hearing is held or not? It would also be helpful if he could explain what

“as soon as reasonably practicable”

means in this context. What would be a reasonable period of time for the award to be made?

Stakeholders have suggested to us that under the pubs code, awards and adjudications can take up to a year to be published. Presumably the Minister can confirm that this would certainly not be reasonable. He has talked in general terms about time limits before, but given that there is no stipulated time limit under clause 17(1), what recourse would the parties have where no award is forthcoming in a timely manner?

[Paul Scully]

Although the applicant making a reference to arbitration must submit a formal proposal, there is the option for the respondent to also submit a formal proposal. Both parties also have the option to submit revised proposals. In addition, some cases may be more complex than others, and the arbitrator may need to ask for further information. The Bill therefore provides that the arbitrator must make the award as soon as reasonably practicable, which will allow for any additional work required because of the complexity of the case. I assure the hon. Lady that we are indeed hoping and expecting such cases to be resolved within a matter of months rather than, as she described in relation to the pubs code, anywhere approaching a year.

When there is a long period, there is a clear date on which the hearing concludes and evidence has been given, so that is why the Bill provides that the arbitrator has 14 days from the day on which the hearing concludes to issue such an award. Some cases that go to oral hearings may have added complexities, so the arbitrator may need more than 14 days to consider arguments, facts and evidence that have arisen. There is a discretion there for the arbitrator to extend the time limit if they consider that it would be reasonable, in all circumstances.

--- Later in debate ---

[Paul Scully]

The arbitrators will be required to publish awards and the reasons for making them in the interest of transparency, but they will also be required to exclude confidential information for anything published, unless notified by the person to whom the information relates that they consent to its publication. Landlords and tenants can ask for confidential information to be redacted.

[Seema Malhotra]

We support the clause and the exclusion of confidential or personal information that may cause harm or concern. Labour believes that the arbitration process established under the Bill should be subject to appropriate transparency, with appropriate safeguards for commercially sensitive or other confidential information. The publication of awards should also support a consistent approach being taken across cases heard under the regime.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Arbitration fees and expenses

[Seema Malhotra]

I beg to move amendment 4, in clause 19, page 12, line 6, leave out “may” and insert “must”.

This amendment would require the Secretary of State to make regulations specifying limits on arbitration fees.

[The Chair]

With this it will be convenient to discuss amendment 5, in clause 19, page 12, line 8, after “question” insert

“and having regard to the accessibility and affordability of the arbitration process.”

This amendment would require the Secretary of State to consider the accessibility and affordability of the arbitration process when specifying limits on arbitration fees.

[Seema Malhotra]

I am pleased to move amendment 4, which relates to limits on arbitration fees, and speak to amendment 5, which relates to the accessibility and affordability of the process. We recognise that parties have to meet their legal and other costs, but we believe that arbitration fees and expenses should be proportionate to the arrears that are the subject of the dispute, and that they should not create a significant cost for the parties. I am sure the Minister recognises the harmful effect that a high arbitration cost would have on businesses that are already struggling, and it is only those in very difficult circumstances that are going into the process in the first place.

Clause 19 gives the Secretary of State the discretion to specify ceilings for arbitration fees in secondary legislation. We believe the Secretary of State should make such regulations to provide a cap, which would be the effect of amendment 4. We have also tabled amendment 5, which

“would require the Secretary of State to consider the accessibility and affordability of the arbitration process when specifying limits on arbitration fees.”

That is to ensure that, when setting new limits, the Secretary of State explicitly takes into account how the limits will affect the ability of business tenants and landlords to enter the arbitration process. I hope the Minister recognises the importance of ensuring that arbitration is not too costly for either landlords or tenants, particularly as businesses are again seeing falls in revenues at this stage. There is a cross-party desire to tackle rent debt, but we want the arbitration process to work. For that, businesses must be able to afford to enter the process.

I would be grateful if the Minister could respond to a concern raised by a stakeholder about the fees and costs that the arbitration bodies may apply. I understand that there is a £750 fee associated with a complaint under the rules of certain arbitration bodies. Would such a cost be included within the cap? I thank the Minister in advance for his response.

[Paul Scully]

As the clause stands, the Secretary of State will have the delegated power to make regulations specifying limits on the fees and expenses of arbitrators, but if the power is exercised, approved arbitration bodies will still have the discretion to set fee levels up to the cap limit. We have adopted a market-based approach that enables arbitration bodies to set fee levels for themselves, because they are best placed to decide, given their experience of costing arbitration schemes to make them affordable for parties and attractive enough for arbitrators to take on cases. The Secretary of State’s powers are intended to be used only when circumstances determine that it is appropriate.

We have designed the arbitration scheme to be affordable, and we are working with arbitrators to agree the cost schedules, which may answer the hon. Member’s question. Setting fee levels at this stage would be counterproductive, because we do not know what the market rate is while discussions are ongoing. A market-based approach is the optimum way to ensure that, on one hand, there is enough capacity in the system to deal with the case load and that, on the other hand, fees are affordable. Hon. Members have also asked that an express requirement be inserted that would require the Secretary of State to have regard to the accessibility and affordability of the arbitration process when specifying those limits. As I said, affordability is an important consideration in our discussions. It will be an important factor that will determine accessibility. We will take it into account when deciding if and how to exercise this power.

We have tested the cost of similar arbitration schemes currently on offer in the market, and landlords and tenants have indicated that it is affordable. We do not want to specify cost limits unless there is a need to do so. For those reasons, I do not accept the amendment 4. Amendment 5 is unnecessary. I hope the hon. Member will not press the amendments.

[Seema Malhotra]

I thank the Minister for his remarks, but I do not think that they approach the heart of the debate. I would like to push amendment 4 to a vote, because this is an important issue.

Question put, That the amendment be made.

--- Later in debate ---

[Paul Scully]

Clause 19 concerns the fees and expenses of the arbitrators of approved arbitration bodies. We want to make sure that we have capacity and that it is affordable. If the cost does indeed prove to be a barrier, we can cap the fees to ensure that it remains affordable.

[Seema Malhotra]

Notwithstanding the concerns we have just raised, which we will continue to pursue, we support clause 19.

Question put and agreed to.

Clause 19 accordingly ordered to stand part of the Bill.

Clause 20

Oral hearings

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

Being mindful of European convention on human rights considerations and the right to a fair trial, it is important that landlords and tenants have the option of a hearing. Any hearing would be in public unless the parties agreed otherwise. An oral hearing would add time and costs to the arbitration process, and the parties would be responsible for meeting those costs. This clause is important, as it gives the parties the right to an oral hearing and establishes the process for doing so.

[Seema Malhotra]

Labour generally supports these measures, but it would be helpful to understand whether the Minister expects oral hearings to be the exception rather than the rule. As the Chartered Institute of Arbitrators made clear in evidence about the business arbitration scheme, there was an assumption against oral hearings, with a document-only approach, which keeps costs and time low and, as it would say, allows for a more efficient process. Will guidance set out when oral hearings might be necessary or appropriate? We would like to understand more about the cost of oral hearings. Can the Minister say what he might expect the cost of oral hearings to be? Would he explain what action the Government will take to ensure that all hearings are affordable?

[Paul Scully]

I can reassure the hon. Lady that we would expect oral hearings to be very much the exception, because we want to make sure that we get through the process for landlords and tenants as quickly as possible. Under clause 21, the Secretary of State will provide arbitrators with guidance on the process of the scheme, including in relation to their function and exercise under the Arbitration Act 1996, as modified by the Bill.

There are a number of areas, such as what evidence the parties should provide when attending any oral hearings, where there is a risk of being too prescriptive, as what is relevant may differ between cases. Guidance would therefore be more helpful than strict rules. However, the ability to go for an oral hearing will very much depend on the arbitrator’s skills and experience, and will take into consideration the landlord and the tenant—as I said, they do have a right to a fair trial. The costs would depend on the complexities of the case.

Question put and agreed to.  

Clause 20 accordingly ordered to stand part of the Bill.  

Clause 21 

Guidance

[Seema Malhotra]

I beg to move amendment 6, in clause 21, page 13, line 3, leave out “may” and insert “must”.

This amendment would require the Secretary of State to publish guidance on the exercise of arbitrators’ functions and the making of references to arbitration.

[The Chair]

With this it will be convenient to discuss amendment 7, in clause 21, page 13, line 6, at end insert—

“(1A) Guidance issued under subsection (1)(a) shall provide further information as to how arbitrators should assess ‘viability’ and over what timescale for the purposes of section 16.”

This amendment would require guidance published under this section to include information on the interpretation of “viability”

[Seema Malhotra]

I will speak briefly to these amendments, which relate to viability. As we have outlined several times, we are asking how arbitrators would assess viability, and what skills and experience they would have to do that. We have tabled these probing amendments to seek guidance with information on the interpretation of viability.

There is benefit in having some flexibility, while still commanding the confidence of both sides, so that judgements can be made with the information available, but there is also a question of trust. We need confidence that the definition around viability will be interpreted consistently across arbitrators and arbitration bodies. Amendment 7 would reflect the concerns of stakeholders that guidance must address the meaning of viability and the timeframe over which it would be assessed.

[Paul Scully]

As the clause stands, the Secretary of State already has a delegated power to issue guidance. Hon. Members have asked that amendments be made to place a duty on the Secretary of State to issue that guidance. As I have explained, it is not necessary to require the Secretary of State to issue guidance, and it is neither necessary nor appropriate to be more prescriptive in the clause is.

Clause 16 already sets out a list of evidence that the arbitrator must have regard to when assessing viability. We have also set out a detailed, non-exhaustive list of the types of evidence that tenants, landlords and arbitrators should consider when assessing the viability of a tenant’s business, and the impact of any relief on the protected rent debt on the landlord’s solvency in annex B of the revised code of practice.

We are in ongoing discussions with arbitration bodies and landlord and tenant representatives to gauge what further guidance they need. We want to be informed by those discussions in deciding whether further guidance is needed and, if so, what precisely it should contain. If further guidance on viability is needed, we are prepared to produce it, but that is clearly covered by the clause as it stands.

It is essential that arbitrators maintain flexibility in assessing the viability of a tenant’s business, including the types of evidence required to make those assessments, so that they can be made in the context of each individual business’s circumstances. If guidance is too prescriptive, there is a risk of depriving arbitrators of that necessary flexibility, potentially resulting in unfair arbitration outcomes.

[Seema Malhotra]

I thank the Minister for his remarks. That was a very helpful set of comments, in light of what he has also outlined in relation to the ongoing discussions, which we are pleased to hear of—indeed, we have had discussions as well—as that is important.

Looking particularly at the pubs and hospitality sector, and other businesses with great variation in income, their repayments may need to happen over a more reasonable period of time. It is helpful to know that the Minister is considering where there may be differences between sectors, and recognises a system that takes into account the circumstances of individual businesses, because they can differ in how they are affected by slowdowns and so on.

I thank the Minister for his comments. It is certainly an area that we will keep under review. We will not press our amendment to a vote today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The clause provides the power for the Secretary of State to issue statutory guidance to arbitrators or to tenants and landlords.

[Seema Malhotra]

We support the clause standing part of the Bill.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Modification of Part 1 of the Arbitration Act 1996

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider that schedule 1 be the First schedule to the Bill.

--- Later in debate ---

[Seema Malhotra]

The Minister outlined the clause and how it introduces schedule 1. We support the measures and will vote for the clause and the schedule to stand part of the Bill.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 23

Temporary moratorium on enforcement of protected rent debts

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 8 in schedule 2, page 19, line 3, at end insert—

“whether against the tenant or a person who has guaranteed the obligations of the tenant”.

This amendment would clarify that the definition of “debt claims” includes claims against guarantors.

That schedule 2 be the Second schedule to the Bill.