Subsidy Control Bill
Seema Malhotra ExcerptsWednesday 22nd September 2021
(3 years, 2 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Let me start by saying that it is good to see the Secretary of State still in his place after last week’s reshuffle. I also wish to congratulate the new Ministers in his team on their appointments. However, I am sure I am not the only Member of this House who has noticed that there are now no female BEIS Ministers. While businesses across the country recognise the importance of balanced leadership at the top of their organisations, it is remarkable that BEIS seems to be moving in the opposite direction, and overlooking the important contribution that women Ministers make to ministerial teams and indeed to our economic debate.
To turn to the Bill, let me start by thanking the Secretary of State for his opening remarks, in which he laid out the subsidy control principles and talked about the need for autonomy, transparency and accountability in the new regime. Labour recognises the need for subsidy control legislation which establishes the framework for the UK’s post-Brexit regime. As of 1 January this year, EU state aid rules largely no longer apply in the UK. The EU-UK trade and co-operation agreement requires that the EU and the UK maintain their own independent systems of subsidy control. The UK also has to continue to comply with the World Trade Organisation’s subsidies and countervailing measures agreement. The Bill is therefore necessary for us to comply with our international obligations. More than that, however, it is necessary to protect the UK’s internal market and to ensure that public funds are being made available to businesses with the appropriate safeguards in place. That is why we will not be opposing the Bill tonight, but we are seeking to address significant gaps of concern during the passage of the Bill.
Jonathan Edwards
As my right hon. Friend the Member for Dwyfor Meirionnydd (Liz Saville Roberts) alluded to and as the hon. Lady will be aware, the Labour Government in Wales are taking the British Government to court on this issue. Will she explain why the Labour party here in Westminster is not showing solidarity with its colleagues back in Cardiff?
Seema Malhotra
I thank the hon. Member for his comments. I will be making a considerable contribution on the issues associated with devolution and our grave concerns about this Bill, which we would want to see corrected. They need to be addressed because we want legislative consent to be given and the concerns being raised by devolved Administrations to be addressed.
Much in this proposed regime reflects EU state aid rules, including the definition of a subsidy, the prohibition of unlimited state guarantees and the condition that subsidies should be justified on public interest grounds. Where the Bill significantly differs from the EU’s rules is in its departure from a pre-notification system, where subsidies had to be approved before they were granted. The Bill offers the potential of a quicker system where subsidies are not required to be approved in advance of being implemented, but are subject to a review and appeal system. We want this regime to be robust and to stand the test of time, but the new system will work only if it provides transparency, oversight and scrutiny, and there are key areas of the Bill where those are missing.
First, there are huge gaps in the Bill and crucial aspects are yet to be defined. The Bill may establish a regulatory framework of subsidy control, but it fails to provide any clear indication as to how and where the Government plan to see those subsidies being spent and at what scale. Labour is in favour of a subsidy system that backs British businesses and our economy, but it must operate in the context of a strong UK-wide industrial strategy, which for all intents and purposes is not nearly where it needs to be. Furthermore, there is no clear plan for how the new subsidy control regime will be used to support national priorities such as net zero. Much more needs to be joined up and coherent in the new regime.
Secondly, the Bill in its current form does not provide a fair role for devolved Administrations—we have heard that in hon. Members’ interventions—in developing and implementing the new regime. We believe that changes must be made.
Thirdly, we are concerned that the Bill does not strike the right balance between efficiency and oversight, particularly regarding the role of the Competition and Markets Authority. Transparency is also severely lacking in the case of some subsidies, putting the country at risk of allowing damaging subsidies on the scale of hundreds of thousands of pounds, and allowing the use of public money to continue unknown and therefore unchallenged.
Although the Bill may propose a quicker subsidy regime, we want to understand further how the Government plan for those subsidies to be used, what will be brought forward from the contributions to the Government’s consultation and the response to it, and how that will manifest in the guidance to come.
We have heard the concerns about support for assisted areas or key British sectors and foundation industries, such as steel. As the Minister for Finance and Local Government in the Senedd asked in her letter to the Government:
“If areas that have suffered historical economic disadvantage will no longer have the right to greater flexibility of subsidy over other regions… what alternative approach does the Government propose to ensure that disadvantaged areas can compete on a level playing field?”
Is the equivalent to an assisted areas policy implied under the seven principles, for example, equity rationale or specific policy objectives? In that case, will the Government make that clear in the guidance? Public authorities that will transition to the new regime in our devolved Administrations need that clarity.
Parliament is right to be concerned that the Conservatives are more interested in levelling-up rhetoric than in actually levelling up. In March last year, the regional deprivation fund highlighted that clearly, which led to considerable debate in the House. The Government appeared to direct money not to areas that needed it most, but to areas that seemed to serve their interests. If the Government are truly committed to their levelling-up agenda and their plan for growth, they need to show it. The Secretary of State should publish their plans and detailed guidance on how the subsidy control regime will direct public funds to the communities and businesses that need it most, in the interests of genuinely levelling up in deprived areas and our wider economy.
We also know that the UK has historically spent far less on subsidies than its international counterparts. For example, in 2019 the UK spent just 0.38% of GDP on state aid, far lower than Germany, which spent more than three times that or Hungary and Denmark. Indeed, we were seventh lowest in the EU.
The Secretary of State does not have the strongest record on industrial strategy, given that he scrapped his predecessor’s plan and wound up the Industrial Strategy Council in March.
Dame Andrea Leadsom
Why does the hon. Lady equate the fact that the UK has an excellent track record of allowing businesses to stand on their own two feet rather than being bailed out with state aid with not having an industrial strategy? Surely we are backing capitalism as the way for everybody to become richer and be in work.
Seema Malhotra
I will just leave the right hon. Lady with the Institute for Government’s feedback on the Government’s plan for growth, which was that it seemed more like a shopping a list than a prospectus. If those who independently look at what the Government are producing in terms of a plan and our industrial strategy make such comments, the Government would be wise to heed some of that feedback, in the interests of our country. I would like to be having a different debate. I would prefer to have a debate that was much more about content than on whether there is a clear plan.
Let me come back to my speech. We recognise the debate about whether the Government have a strong record on industrial strategy. Last week, the Confederation of British Industry urged the Government to
“build an economy of the future through catalytic public investments”
and to re-find its “role as market maker”. On research and development, innovation, regional growth and hydrogen—on which, perhaps, a strategy has since come forward—the CBI said that further action was needed for the UK
“to remain internationally competitive against peer nations where business investment levels–and public spending…far outstrips our own.”
Sufficiency of strategy is important here; it is not just about the publication of a document. There has been feedback on that, too.
We want to see well-designed, proportionate subsidies as part of the wider industrial strategy that we need to grow the businesses and industries of the future and to invest in our transition to net zero. Labour has also said that we must buy, make and sell more in Britain, as called for by our shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves). That is part of how we can ensure resilience in our economy—the need for which has been highlighted only too starkly by the gas-price challenge and the CO2 challenge of the past week.
The Bill lacks in not only vision but key details and scrutiny. The Institute for Government has expressed concerns about the ability of this House and the other place properly to scrutinise the new subsidy control regime, given the important issues that are being left to secondary legislation or guidance. The Institute for Government claims that the gaps left in the Bill by the Government
“could deny Parliament a proper chance to scrutinise how the new system will work”.
The Government’s own impact assessment says:
“There are considerable unknowns—because key features of the regime will be defined later in secondary legislation or statutory guidance. The analysis of the regime’s impact is also based on historical data when UK public authorities had to comply with the EU State aid regime.”
The impact assessment also says:
“We should expect the behaviour of public authorities”—
perhaps the Secretary of State was alluding to this when he talked about culture change— “and the resulting distribution of subsidies to change under the new regime—although it is not possible to forecast how this will change.”
We are yet to hear how the Government plan to define categories such as subsidies “of interest” and “of particular interest”—categories that will determine which subsidies are voluntarily or mandatorily referred to the Competition and Markets Authority. Such definitions are to be determined not now, but through secondary legislation, in respect of which Parliament is given less opportunity to scrutinise the Government’s decisions. To aid scrutiny, which I believe the Secretary of State will want to be to the standards we would want in this House for a regime that will stand the test of time, he should set out the timeline for consultation on and the publication of secondary legislation that covers critical aspects of the new system.
Simon Baynes (Clwyd South) (Con)
Will the hon. Lady say why no Labour Back Benchers are present in the Chamber? If this issue means so much to the Labour party, why is it not properly represented in the debate?
Seema Malhotra
I have been involved in extensive discussion with my colleagues, and they will want to make significant contributions in Committee to address the gaps in the Bill. We continue to work on that.
As I was saying, the Secretary of State should set out the timeline for consultation on and the publication of secondary legislation that covers critical aspects of the new system. I know the House will want to see that in good time.
Public bodies have faced significant difficulties since the start of this year precisely because of the lack of guidance on how to interpret the subsidy control principles agreed in the trade and co-operation agreement, so clarity on how public authorities should demonstrate that their subsidies comply with those principles will be an important part of the subsidy regime. I am sure the Secretary of State will agree that we will want to see some decisions being made in the interests of how we recover and how we are to grow our economy for the future.
On the important issue of devolution, most importantly of all we are concerned that the Bill has not taken the four-nations approach that is essential for an effective UK-wide subsidy control regime. For example, the balance of the power to challenge between the Secretary of State and the devolved Administrations is asymmetric. I am sure that the Secretary of State has heard those representations made to him directly. Twelve months ago, the shadow Secretary of State stood at this Dispatch Box and warned the Prime Minister of the risks of undermining with policy decisions the devolution settlement that has been part of our constitution for two decades and is vital to our Union. However, on the evidence of the legislation before us, it appears that a shift in mindset and thinking has not been a part of how the Government have brought forward this legislation, and we hope that they are going to listen to the concerns that we and other Members are raising.
Stephen Flynn (Aberdeen South) (SNP)
Let me make a point that almost follows on from the intervention of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). If Labour Members are so concerned about the devolution settlement, why do they not vote against the Bill?
Seema Malhotra
The hon. Member will have heard my earlier remarks; although we have considerable concerns, we believe that the Bill is vital to us meeting our international obligations and we want it to pass. However, there are significant gaps and issues that must be addressed in Committee. I hope that he will work with Labour on those matters, so that the regime that comes out of this process is one that reflects the four-nations approach that I just articulated.
Stephen Flynn
I appreciate the hon. Member’s remarks and I admire her confidence in being able to get the Government to address Labour’s concerns, but let me just be clear: is it the Labour party’s position that this Bill—irrespective of the damage it does to devolution—should pass?
Seema Malhotra
Perhaps the hon. Member will allow me to continue with my remarks, because he has not quite represented our position. It is important that we continue the debate and detailed scrutiny of the Bill. The remarks that I am about to make may provide him with some reassurance on this issue.
Sammy Wilson
Does the hon. Member accept that a regime of control is important for all the devolved areas of the United Kingdom: first, because it is a safeguard against richer regions being able to subsidise more heavily than poorer regions; and secondly, because it is a safeguard against central Government issuing subsidies that could affect the devolved regions? We need a strong regulatory regime.
Seema Malhotra
The right hon. Member makes an important point. I will make some points in that regard later in my remarks.
As I was saying, on the evidence of the legislation it appears that the Government have not reflected in the Bill a true four-nations approach in order that we have a UK-wide subsidy regime that commands the confidence and support of all parts of the UK. We do not contest that subsidy control is a reserved matter, but we recognise and support the requirement on public authorities to consider the impact of a subsidy on competition or investment within the UK. It is important for the Secretary of State to make it clear to the House why there is such a limited role for the devolved Administrations in the development of this new regime. They are not even required to be consulted beforehand on advice given by the Secretary of State on the implementation of subsidies.
Under the legislation, the Competition and Markets Authority’s new subsidy advice unit will play an important role in protecting the UK’s internal market, yet the Bill provides no formal role for the devolved Administrations in appointing members to the new unit. Remarkably, the Bill is even less generous than the United Kingdom Internal Market Act 2020, which at least requires the Secretary of State to seek the consent of the devolved Administrations before making an appointment to the Office for the Internal Market. Can the Government not see how this flies in the face of a four-nations approach?
It is imperative that the devolved Administrations be involved in the development of secondary legislation and in the amendments to the Bill. Even more worryingly, the powers given to the Secretary of State and First Ministers are significantly asymmetric. Although the Secretary of State is explicitly able to challenge Scottish, Welsh and Northern Irish subsidies that may damage English interests, no complementary power is given to First Ministers. Unlike the Secretary of State, the devolved Administrations seem unlikely to be able to challenge English subsidies that may be perceived to be causing harm to Scottish, Welsh and Northern Irish interests. Will the Secretary of State clarify whether this is correct, or is it his intention that First Ministers would be considered as interested parties for the purposes—
Seema Malhotra
I have given way to the right hon. Lady already and I hope she will not mind if I continue my remarks.
Will the Secretary of State clarify whether it is the Government’s intention that First Ministers, or public interest groups, be considered interested parties for the purposes of being able to bring forward a challenge to a subsidy decision—if so, why will the Government not put that in the Bill?—or will a challenge have to be made via the Secretary of State?
This is not where the devolution challenges end. Perhaps the Secretary of State could clarify his remarks on Northern Ireland, because, as I understand it, under article 10 of the Northern Ireland protocol, EU state aid rules must apply to subsidies that affect trade between Northern Ireland and the EU. This affects not only subsidies granted in Northern Ireland but subsidies granted throughout the UK. There is a risk—unless the Secretary of State wants to correct me—that article 10, taken alongside the new subsidy regime, could cause legal or practical difficulties, particularly if the UK and EU disagree on what affects EU-Northern Ireland trade.
Kwasi Kwarteng
I thought that I could not have been clearer on this precise point in my opening speech. I repeat: it is clearly no longer necessary for Northern Ireland to be subject to the EU state aid regime, and that is precisely why we proposed a change to the Northern Ireland protocol in order to bring all subsidies within scope of the domestic regime.
Seema Malhotra
I thank the Secretary of State. Indeed, I did hear those comments in his opening remarks. I was seeking to clarify the issue because I do not think it is clear across the House, and it is important that it is tested and made clear in the course of the passage of the Bill.
Crucially, what is the Government’s intention if the Bill does not receive legislative consent from Scotland, Wales and Northern Ireland, as has been requested?
Deidre Brock (Edinburgh North and Leith) (SNP)
Is the hon. Lady suggesting a four-nation approach whereby any one of the nations has a veto over decisions taken by those four nations that they feel are not in their interest?
Seema Malhotra
I am not clear why the hon. Lady refers to a veto. I think we are talking about the symmetry of powers in terms of being able to bring forward a challenge. I hope that makes the point clear.
Seema Malhotra
If it is okay, I want to move on because I am conscious of time, but the hon. Lady may want to make her point in her own remarks.
Finally, on the issues of oversight and enforcement, while well-designed subsidies can support Government objectives and foster growth and opportunity, there are risks too. Subsidies can distort markets, undermine competition and unfairly discriminate between businesses. Effective oversight and enforcement are critical to the success of our subsidy control regime, yet they are lacking in certain areas of the new regime. The Bill does not provide enough certainty as to the definition of “interested parties” that are able to challenge a subsidy. Does that definition extend to local authorities and devolved Administrations?
There are also concerns about the limited powers of the CMA’s new subsidy advice unit under the Bill. We are pleased that a trusted independent regulator is being given key responsibilities. However, as the Bill stands, the CMA lacks any power to instigate an investigation on its own initiative or to take enforcement action. This requires careful consideration, particularly when transparency issues around the Bill are taken into account.
Seema Malhotra
I am sorry but I will move on. I have taken an intervention from the hon. Member, so perhaps he can make his own contribution.
The Government have stipulated that subsidies under £315,000 over three years will not have to be reported on the subsidy database. However, there is an issue, also raised by the hon. Member for Thirsk and Malton (Kevin Hollinrake), about the threshold and reporting. In the consultation on the Bill, the Government asked whether there should be a minimum threshold of £50,000 below which no subsidies would need to be reported, and 64% of those who responded agreed on that threshold of £50,000. On that general point, what are the Government’s plans for reporting, oversight and accountability arrangements for subsidies below that threshold? I am sure they will want to ensure transparency in how public money is being spent and to whom it is going.
On the decision made for a six-month time limit to upload subsidies to the subsidy database, there was a discussion in the consultation on whether that period should be shorter, or three months. What was the reason for deciding on six months? That seems rather a long time for a decision to be uploaded and therefore in the public domain. If interested parties and the Secretary of State are not made aware of smaller subsidies or those that are uploaded—they have a month to bring a challenge—there will be no opportunity to prevent them going forward, even if they are harmful. The CMA may be able to produce reports on such subsidies, but it will not be able to enforce any of its recommendations. Does that not expose a significant transparency gap in the Bill? The Government could choose to have further reporting requirements. I urge them to review the CMA’s role alongside the necessary transparency requirements for subsidies.
Labour recognises the need to develop a post-Brexit subsidy control regime in line with the UK’s international commitments. There are benefits from a more flexible and speedy subsidy regime, but we have serious concerns about gaps in the Bill that we will look to address during its passage. Those include unanswered questions on the operation of the new regime, its enforcement and oversight, and the role of the devolved Administrations. We want to see legislation that establishes an effective UK-wide subsidy regime that commands confidence across the country. The Bill gives the Government and other public authorities greater powers to provide subsidies. It is an important Bill, but the gaps in it must be addressed.
Kirsty Blackman (Aberdeen North) (SNP)
It is great to hear the thoughtful contributions from that Tory Bench, although not from the Treasury Bench, I hasten to add. The hon. Member for Amber Valley (Nigel Mills) and I have spoken in many debates together, and I always appreciate his forensic assessments of the details in the Bills before us. I hope that he will be on the Committee, and I hope that I will be too.
First off, I want to ask a couple of questions about what the Secretary of State said, because I am immensely confused by a couple of the things that he said. First, he said that the devolved Administrations were broadly happy with the Bill. If they are broadly happy, why have the Welsh Government said that they object to five of the six parts of the Bill? One out of six does not equate to “broadly happy”. In fact, I get the impression that they really do not like it and are not happy about it.
We have not seen what the Scottish Government are saying about the legislative consent motion, but I cannot imagine that they will be terribly happy with the power grab that is occurring as a result of the Bill. So I am quite confused by what the Secretary of State said. Does he mean that the devolved Administrations are broadly happy with having a state aid regime? Does he mean that they are broadly happy with the detail of the Subsidy Control Bill? I do not know. I do not understand what he is saying, because it does not seem to be coherent with what the Welsh Government have said in public about this.
The other thing that I am really confused about is what the Secretary of State said about the EU state aid provisions no longer applying to Northern Ireland. I thought he said something about article 21 of the Northern Ireland protocol, but maybe he meant article 16. I am not sure what he meant. In terms of the planned changes to state aid application in Northern Ireland, he seemed to be saying that the new subsidy control regime would apply there and that the UK Government were seeking some sort of change to an article in order to ensure that that happened. I am not aware of any publicity around the UK Government asking the EU for a change, but if that has happened, why have we not heard about it?
Could we please have a bit more information on this? We have the trade and co-operation agreement and we have the Northern Ireland protocol, but how do the UK Government expect these measures to apply in Northern Ireland without us breaking either the agreement or the protocol? That does not make sense. If the Secretary of State was making that important an announcement, you would think he would do it in a ministerial statement rather than as an aside during the Second Reading of this Bill. I would be really keen to hear a bit more information about what this actually means.
Seema Malhotra
The hon. Lady is absolutely right about the confusion that has been raised. Does she agree that it is important that the Government clarify what they are suggesting has changed in relation to article 10 of the Northern Ireland protocol and whether it has been dropped on the basis of this Bill? Should they not also tell us whether their proposal has been negotiated with the EU, and what the status of those discussions and any agreement might be?
Kirsty Blackman
Absolutely. If we as a country can suddenly renege on our international obligations and agreements, why cannot Scotland hold an independence referendum next week? The UK has agreed to these agreements and it would be great, when the Minister speaks at the end of the debate, if he could explain exactly what is going on. This is serious enough for a Minister to be making a separate statement to the House, because it is such an important matter for the people of the UK and particularly for the people of Northern Ireland.
My hon. Friend the Member for Aberdeen South (Stephen Flynn) spoke eloquently about the levelling-up agenda, and I agree that the red wall Tories elected in the north of England should be jumping up and down about this—we are jumping up and down about it, as the right hon. Member for South Northamptonshire (Dame Andrea Leadsom) suggested—because it explicitly excludes us from doing anything that may disadvantage any other area of the UK. In schedule 1, principle F says:
“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom.”
And principle G says:
“Subsidies’ beneficial effects…should outweigh any negative effects, including in particular negative effects on competition or investment within the United Kingdom; international trade or investment.”
That reference to international trade or investment confuses me.
The principles try to level the playing field across the UK, so there can be a subsidy in Manchester only if a person in the south of England would not move their company as a result.
Oral Answers to Questions
Seema Malhotra Excerpts(3 years, 2 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
For months, the Government have ignored warnings about supply chain issues from the Food and Drink Federation, UKHospitality and other businesses. August saw Nando’s temporarily close 50 stores. McDonald’s ran out of milkshakes and now the HGV shortage has been compounded by a CO2 crisis that the Government should have foreseen. With Iceland warning of food shortages in days, jobs at risk as businesses deal with this utter chaos, and looming costs for consumers who are now paying the price, will the Minister now tell the Chancellor that universal credit must not be cut? Is Professor Haszeldine not right to say today that, with only two to three days’ of methane stored rather than months’ of supply that other countries have, we should have been far better prepared?
Paul Scully
The hon. Lady started talking about supply chains and ended up talking about welfare, but let me tackle the supply chains issue. We are working closely with sector leaders to understand how we can encourage more people to work in these areas. Through our plan for jobs, we are also giving people the skills and qualifications that they need to quickly take up roles in key sectors. That is why we are inviting employers from a range of sectors, including farming and hospitality, into local jobcentres, as one of the most effective ways to promote vacancies is for employers to come out and market their opportunities directly to our work coaches and jobseekers
Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (First sitting)
Seema Malhotra Excerpts(3 years, 4 months ago)
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Jeff Smith (Manchester, Withington) (Lab)
Q Hi, and thanks for coming to give evidence. I am just trying to get a picture of the scale of the problem. To what extent do you think this is a problem? Are the measures in this legislation adequate to deal with the scale of the problem that you think is out there?
Stephen Pegge: To put it in context, the Insolvency Service estimates that there is currently evidence of misconduct or misuse of dissolution process in only 1% of cases. Given that there are something like 500,000 dissolutions a year, that might amount to only about 5,000 cases. There is some evidence that it is a rising problem and, given that the average company that is dissolved might have a loan of say £200,000, even 5,000 cases could amount to a risk to creditors of up to £1 billion. It is significant in scale because of the large number of companies, even if it is not currently a high level of risk in proportionate terms. I would emphasise that the vast majority of businesses are honest and straightforward and are not abusing this scheme.
The other factor that members of the Committee may be interested in is that quite clearly over the last year, during the covid crisis, there have been a significant number of companies that have taken finance. Given that the Government, through the British Business Bank, have provided guarantees, there would be an impact on the taxpayer if those loans were not repaid and a claim for repayment were made. Again, that is relevant to consideration.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q Thank you for your evidence today, Mr Pegge. I understand that you helped to establish the covid-19 lending schemes. The Government have suggested that some companies have been dissolved to avoid paying back Government loans given as coronavirus support. Have you seen any evidence of that? If these measures go through, do you believe, from your experience and what you have seen, that the Insolvency Service is adequately resourced to deal with the expansion of powers it would have through the Bill?
Stephen Pegge: Yes, we have seen instances of this practice being used to try and avoid liability under bounce back loans. Back in May 2020, UK Finance with the British Business Bank established the bounce bank loan fraud collaboration group. It involves attendees from the Cabinet Office; CIFAS, the UK fraud prevention service; the Treasury; BEIS; and the National Investigation Service—NATIS. The aim is for intelligence to be shared, good practice to be developed and a threat log to be maintained and fed into the National Crime Agency and the National Economic Crime Centre. In fact, this was one of the practices which had been identified through that and has led to some efforts more recently to try to intervene and intercept these cases of dissolved companies involving Companies House and BEIS.
In the meantime, it is always possible that these cases may well have got through and there is some evidence—again, reported by the Insolvency Service—that there could be around 2,000 such cases which are dissolved and where currently the powers to investigate do not exist, so it is a real problem. If it were to become a more popular route for fraud, while there are mechanisms to deal with it and creditors can object when they get notice through alerts when these situations are gazetted, unscrupulous individuals can still get through and it is important that it is closed as a loophole.
As regards the resources of the Insolvency Service, we have all been conscious that, while the number of insolvencies has been low during a period of suspension and the generous support that has been provided to businesses through public agencies and the finance industry, we would expect that to rise significantly in this next period. There is already some evidence that it will do so. It is important that the Insolvency Service is resourced sufficiently to be able to deal with this. The evidence at the moment is that they have been involved in disqualification of directors in something like 1,000 or so cases across the last year, so it is quite possible that there might be a rise in the amount of work that they will need to do. We would certainly support any investigation into what additional resources might be necessary.
Peter Grant
Q Good morning, Mr Pegge. You have described the loophole of company directors being able to dissolve the company in order to avoid their liabilities. Another way that directors can act is to set up two or three companies, transfer all the assets out of a company, dissolve the company with the debts and retain the companies with the assets. Is that a loophole that will still exist, even if the Bill goes through? If that loophole continues, is there a danger that that then becomes the route of choice for dodgy directors to avoid their liabilities?
Stephen Pegge: I think the practice you are describing is sometimes called phoenixing—setting up a company in the same location with the same assets purporting to be the same business with the same directors. It has certainly been a matter of concern for some time. Putting in place these measures should help to discourage and mitigate the risks of phoenixing: I do not think it entirely removes it. As you say, it is possible, even without these additional powers of investigation, for that to take place, but certainly where there is evidence of abuse, the fact that the Insolvency Service will have powers under the discretion delegated by the Secretary of State to investigate the directors, take action against them in terms of disqualification more generally, and seek compensation from them personally for losses suffered will discourage the practice of phoenixing, which I know is a concern. As I say, I do not think that it entirely removes it, but it certainly will discourage it, and to some extent remove some of the possibilities of it taking place.
The Chair
Q We will now hear oral evidence from David Kerr, a fellow at the Chartered Institute of Credit Management. We have until 11 for this session. Could the witness please introduce himself for the record and make a few remarks about the Bill? Thank you.
David Kerr: Good morning, and thank you for the invitation to join the proceedings today. My name is David Kerr. I am a fellow of the Chartered Institute of Credit Management, the largest such body for credit managers. It was formed approximately 80 years ago and provides professional support, training and representation for credit managers and the creditor community.
The CICM contributed to the 2018 consultation and broadly supported the proposed measure in relation to director disqualification. Creditors have often raised concerns about directors leaving behind unpaid debts; whereas in a formal insolvency process, there will be some inquiry by an insolvency practitioner, when a company is dissolved ordinarily there is not. As we have heard, at present, the Insolvency Service will rarely look at those cases because it would potentially involve the cost of restoring a company to the register. The Bill therefore plugs an important gap, as others have commented.
It is probably important to make the point that this was first considered as a suitable measure and had support back in 2018, and while the urgency to bring it in now is understood, this measure is not solely for the purposes of chasing after directors and recouping funds in relation to covid debts but potentially has wider implications as well. There has been reference to the fact that 2,000 or 2,500 companies with unpaid bounce back loans may have been dissolved over the last year or so. I do not think there is any suggestion that every one of those will be investigated, but presumably the Insolvency Service will apply the same public interest criteria as it has hitherto in relation to insolvent companies. That would certainly give it the power to investigate those companies where directors have left behind debts, whether they are bank or Government debts or any other. That should act as a deterrent, one would hope, to directors using this route to avoid liabilities, and will perhaps also restore some confidence in the creditor community, provided that the action taken is publicised and therefore serves its purpose, both in the compensation orders that might be made and the deterrent factor. Broadly, the CICM supports the Bill. With that, I will be happy to take any questions that Committee members may have.
Seema Malhotra
Q Thank you for giving evidence today, Mr Kerr. You talked about restoring confidence to the creditor community. Would you say that there has been a loss of confidence in the creditor community? In relation to the 2,000 or 2,500 dissolved companies that you mentioned as having received covid-related loans, would you say that a high proportion of those may require investigation? Based on your experience of the creditor community, do you think that there was the means to repay those loans that those companies then tried to avoid?
David Kerr: In relation to confidence, I would not go as far as to say that there is a lack of confidence in the system, but in order to enhance confidence this is a suitable measure. It removes one source of frustration among creditors, which is where they can see directors who are not taking steps to put their companies through a formal insolvency process and instead are seeking to avoid debts by using the dissolution route.
In terms of numbers, I have not made any inquiry into the 2,000 to 2,500 companies that have been mentioned, but there has to be a sense of realism about the extent to which any Government agency can inquire into their circumstances. A percentage of them, based on creditor inquiries, complaints or other information that may come into the hands of the Insolvency Service, would trigger some investigation.
In relation to insolvent companies, although perhaps insolvency practitioners and creditors may be frustrated from time to time about the number of cases that result in disqualification proceedings, again there needs to be a sense of realism around the extent to which that can be done. That will happen in cases where, despite all the information, there is also a public interest test that is passed to pursue those actions.
Seema Malhotra
Q If a case passes the public interest test, do you think there should be the resources to deal with that? There is concern that the Insolvency Service may not have the resources, and therefore the ability to follow up on the expansion of powers in the Bill in the public interest. Has your experience been that the Insolvency Service has been able to resource any investigations that might be needed? What tools should the Government use to pursue directors of dissolved companies that they identify as culpable? Do you have a view on that?
David Kerr: In terms of resources and the ability to pursue all the cases that the Insolvency Service might wish to pursue, I guess that is probably a question for the Department. Not all the cases that are investigated will pass the public interest threshold. To the extent that there are cases that pass the test but cannot be pursued for resource reasons, I am sure the Insolvency Service would welcome any additional resources that can be made available to it. From the point of view of creditors, if actions are pursued in relation to covid-related debts and not others, perhaps the measure works against them a bit.
That comes to the second part of your question. There are two elements to this. First, there is the potential disqualification of individuals who are proven to have acted inappropriately. Secondly, and on the back of that to some extent, there is the possibility of compensation orders against those individuals, with a view to putting money back into the hands of creditors. Again, I am sure CICM creditors would wish that to be as effective for its members as for any Government debt.
Jeff Smith
Q Mr Kerr, you said that the CICM is broadly supportive. Do you have any particular concerns about the Bill? Is there anything that you think is missing from it, or could it be improved?
David Kerr: I think the point has been made about resource. I have heard comments from others on Second Reading and elsewhere about that. It would be unfortunate if the emphasis were entirely on dealing with bounce back loan fraud and if that took resources away from other directors’ conduct investigation cases. That point is not, I suppose, directly relevant to the provisions in the Bill; it is more a question of how it is implemented and taken forward. There have also been some comments about the retrospective element; the previous witness touched on that. I think these cases have to be taken within three years of the relevant date—the date of insolvency or the date of dissolution. I do not think the Department would be able to go back before 2018 in any event, and that was the date on which the consultation was conducted, so I suppose one could argue that directors have had notice of the intended provisions for the relevant period.
Those were probably the only points where there might be concerns to a limited extent, but generally I think the provision is a sensible one that gives the service powers that it does not have currently and which can only be helpful, I would have thought, to trust and confidence in the insolvency regime.
Jeff Smith
Q That is very helpful. On the three-year cut-off, are you concerned that that is likely to have implications on other investigations that the Insolvency Service carries out if it is not funded properly?
David Kerr: I was referring partly to the point that had been made by the Committee to the previous witness about whether there would be any issues around natural justice if the retrospective provisions pre-dated the consultation. I do not think that, in practice, that would happen. Going forward, the compensation laws that might be sought can be obtained after the disqualification order or undertaking, so there may be more than three years available to the service from the date of dissolution. There has to be a cut-off. I do not think there is any suggestion that the provisions of the disqualification have to be changed in that respect, merely that they would be applied to these circumstances. They have proved to be satisfactory since 1986 in relation to director disqualification in the insolvency proceedings, so I have no reason to believe that, going forward, those time limits will not be effective in relation to dissolved companies.
Seema Malhotra
Q Are any sanctions that are currently available to use against directors who may have dissolved companies to avoid liabilities not being used as much as they could be?
David Kerr: None that I can think of immediately.
Peter Grant
Q Good morning, Mr Kerr. May I come back to the retrospective nature of parts of the legislation? The three-year period will be permitted because that is what the current timescale is. Given the notorious complexity of a lot of financial misconduct cases and the fact that they are long drawn-out processes, is there an argument for that three-year period to be extended in cases where there is an indication that there is not only misconduct, but potentially criminal fraud? I am thinking about cases in which the potential fraud runs into the tens of millions of pounds. Is there an argument that in those cases, there should be no hiding place for criminals of that scale, simply because of the length of time they have managed to get away with it?
David Kerr: That is a fair point. I suppose the statute of limitations could be considered a relevant backstop, but I will come back to my previous point that we have a three-year limit in relation to investigations into directors’ conduct in insolvent situations, and that has been with us for 35 years. I have not heard any suggestion from the Insolvency Service that that has proved to be inadequate. This is effectively an extension of the same power into dissolved company circumstances. I have not seen or heard any evidence to suggest that it is an inadequate period.
Paul Scully
Q Finally, in terms of your role in credit management, what do you think this will do for the confidence of lenders and supply chains, in particular SMEs in those supply chains?
David Kerr: Generally, if the system is seen to be working well and those who abuse it are brought to account, then it helps enhance the confidence of those engaged in providing credit, whether it is through loans, trade credit or anything else. In that sense, it is a welcome provision that, if resourced and used as intended, should have the desired effect.
Seema Malhotra
Q To follow up on a couple of points, there have been critics of the proposals in this small piece of legislation. From your experience and that of your members, how long can it take for companies that have been dissolved to be restored to the register? In 2019, over half a million UK companies were dissolved but only 33 restored. In terms of the time it takes in practice, what could that look like?
David Kerr: I think the cost issue is the bigger disincentive for creditors that previously might have wanted to take steps to try and get somebody appointed to investigate. The service itself has made the point that there are legal costs and other costs associated with that process, and it would not be practical for creditors to mount that kind of action alone or, in many case, at all, given the amounts of their own debts.
The bigger disincentive is probably the cost and this avoids that. You are right in the sense that if there is a lengthy time process and if it takes several months, that eats into the three-year time limit that we have talked about, so that could be a problem. I think here, with this measure, we avoid that because the Department can have the ability to make appropriate inquiries and take action, without the need to go through that process.
Seema Malhotra
Q How much could it cost? What sort of range of costs could creditors see?
David Kerr: I do not have those figures in front of me but I have seen the fees involved. They amount to a few hundred pounds, but that does not include the cost of a solicitor to spend the time doing the necessary work. I would imagine that it would be a few hundred running into a thousand or more pounds to get a company restored, but I could not give you any exact figures.
Seema Malhotra
Q May I probe you a little further on the three year issue? You are right that within legislation there is provision for courts to make disqualification orders within three years after a company has been dissolved. This legislation extends that in line with that current time limit. In light of the fact that we have very unusual circumstances at the moment, with potentially thousands of companies that could require investigation, do you think that with that increased workload for the Insolvency Service, the question about available resources and the court backlogs, there could be a particular issue with directors effectively being culpable but the Government running out of time for courts to issue disqualification orders against them?
David Kerr: We might have touched on this slightly previously. First, there is no suggestion, as far as I am aware, that the whole of the 2,500 companies that have been mentioned would be the subject of an investigation. We are talking about dissolutions in the last 15 months or thereabouts. The time limit is relevant, obviously, because the service has to work to that, but the previous witness made the point, which we should bear in mind, that the majority of the cases that it takes do not necessarily involve court proceedings. In a lot of cases, having presented the evidence to the directors and with the threat of court proceedings available to the service if necessary, many are resolved by the director giving an undertaking, which has the same effect as an order, so a lot of them will not involve court proceedings and that helps the service to achieve what it is seeking to do within that timeframe. Many of the cases in these instances of dissolved companies, I imagine, would result similarly in a relatively high proportion of those being concluded by undertaking.
Simon Baynes (Clwyd South) (Con)
Q Thank you, Mr Kerr, for your evidence. I have two questions. These measures clearly have widespread support. Can you give us a feel for the scale of the problem with dissolved companies? We have discussed quite a lot of different figures this morning, but do you feel this is a very significant problem, or a manageable problem, just to get some more idea anecdotally on that?
Secondly, clause 2 allows “easier investigation”. Can you give us some idea of the way in which the Bill improves that process of investigation?
David Kerr: I will deal with the second point first. We know that this provision means that we do not have to go through the process of restoring a company and instead the Department can commence an investigation in circumstances where it deems it appropriate without any barriers to doing that. In that sense it makes the process easier to commence the work it needs to do.
Many companies are dissolved every year, but I do not think there is any suggestion that all those, or even the majority, involve any misconduct by directors and those who have opposed or supported them. I do not think there is any suggestion among those who proposed or supported the measure that that process should be removed as an option for companies in appropriate circumstances. The question is really how many of those represent some form of misconduct or where misconduct might be hidden, or where there is some abuse. I have not seen any statistics on that and do not know if anybody would know for certain. Again, it comes back to the point that the service would have the power to investigate in circumstances where something was brought to its attention, suggesting a need for investigation. In that sense, it is a welcome provision.
Jeff Smith
Q Thank you, that is helpful. Just as a follow-up, are you concerned that there might be a focus on making use of these new powers at the expense of current work on other insolvent companies?
Dr Tribe: Not necessarily. Going back to my prioritisation point, the Insolvency Service obviously has finite resources that it needs to deploy in the best way possible—I suppose that is a problem for many public bodies— if other types of abuse manifest over time. The most obvious and recent problem is the bounce back loan phoenixism problem, but in due course other things might come about that require us to tinker with our corporate and insolvency law so that we have an effective system that maintains trust and confidence in it. What the Insolvency Service wants to do in terms of prioritising threats to the system will depend on its internal guidance.
Seema Malhotra
Q Dr Tribe, I want to ask first whether you have a view about the existing sanctions that are available to use against directors who may be abusing the dissolution process—perhaps powers that are currently available but are not used as extensively as they might be. That is one of the challenges that critics of this legislation may make.
Secondly, are there any other more general problems with the dissolution of companies that are important to discuss at this time while changes are being made? Should changes be made to the eligibility criteria on dissolutions? What steps need to be taken prior to dissolution?
Dr Tribe: I will take the first question first. I think you are drawing attention to the compensation order regime, and you did so on Second Reading, too. There is some interesting research by Dr Williams at Cambridge in 2014, who looked—he sort of future-gazed—at how successful the compensation system might be. In that research, he highlighted that some of the directors in small closely held companies, which he argues the regime mainly targets, might end up being adjudicated bankrupt—they might go through the bankruptcy process, I should say—in due course. That would mean, of course, that any pursuit of those individuals would run into another layer of difficulty in trying to get to the value that might be there for the insolvent estate of the company or dissolved company that we are dealing with. His work future-gazed in that way at some of these issues.
It is true to say that, on the compensation regime, we saw one case in 2019, the Noble Vintners case, where insolvency and companies court Judge Prentis made a 15-year disqualification order. That is right at the top of what we call the Sevenoaks scale, after the case in which Lord Justice Dillon set out the various types of malpractice and where they fall on the scale, from two years up to 15. In the Noble Vintners case, it was the most unfit behaviour on the facts of that case that you could have —up at the 15-year period. Then, of course, that was followed by a compensation order that recouped for creditors just over half a million pounds—£559,000.
There has been some success with the compensation scheme. It is in its early days, in a certain sense. Although the reforms came in in 2015, there was a delay in implementation. You are right to say that we should pause for thought and mull over how effective that is. That takes us back to the resourcing and funding point, for one thing. Secondly, it takes us to the idea of that prioritisation agenda and how fruitful a claim that you are going to bring might be to get compensation. It is a power that exists and should exist. It goes some way—as you can see from the case of Noble Vintners—to getting value back into the insolvent estate for the creditors. It is a positive thing for creditors, and something that the disqualification regime did not do until that reform in 2015. Of course, it provided a protection mechanism, but in terms of getting value back into the estate, that is a good reform. That is your first question.
Your second question was on dissolution problems. I think you might be driving at the process of dissolution and how the registrar at Companies House deals with dissolution. After the directors have signed their form, made their declaration, paid the £10 and noted that there is going to be a striking off and that is published in the London Gazette, there is a period of two months where all the parties that should be informed—shareholders, creditors, employees and pension managers, for example—might know of this potential dissolution and should then, therefore, perhaps act on it as creditors. Some of the witnesses who have gone before me may have addressed this, particularly those from the credit community. In due course, as part of a wider analysis of what Companies House and its function is, that step in dissolution may be looked at.
As I said earlier, there are approximately half a million dissolutions per year, and many of those are for very good reasons in terms of, as I have said, maintaining the integrity of the register and getting rid of companies that have been through the insolvency processes but then get dissolved as well. The guidance for the Bill and some other sources note that among those half a million dissolutions, there could be about 5,000 that are potentially problematic that we would want the Insolvency Service to be able to investigate. Obviously, 5,000 is a lot more than the current levels of disqualification under the current provisions. Over the past decade or so, there have been about 1,200 a year, so you can see there is quite a significant upshift in the work that the Insolvency Service might have to do.
A Companies House review perhaps in due course mulling on what its function is—is it a regulator, is it a repository of information?—might look to dissolution, but in the short term I think you have this £17 billion to £26 billion problem, and there seems to be a loophole that needs to be closed.
Oral Answers to Questions
Seema Malhotra Excerpts(3 years, 4 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Many businesses on our high streets face financing their reopening in July while dealing with quarterly rents, emergency loan repayments, business rates and VAT deferrals, all while furlough support is being withdrawn. UKHospitality has now warned that the sector faces coming out of lockdown with more than £6 billion of Government debt. Not all sectors are going to bounce back overnight; they need a Government who are on their side at this crucial time. Does the Minister think it is fair for hospitality businesses to pay a £100 million business rates bill from 1 July? Why do the Government not extend the relief period, as the Labour-led Welsh Government have done, and what discussions is he now having on the root-and-branch reform of business rates to allow the reintegration of the high street that was promised in the Conservatives’ 2015 manifesto but has still not been delivered?
Paul Scully
Different businesses and sectors have different views on furlough. UKHospitality is explaining that furlough is starting to become a problem, while other sectors want it extended further. On business rates and other support, the Chancellor deliberately went long in his Budget; he erred on the side of generosity. It was always about data, not dates, so that was always going to be flexible. The fundamental business rates review that we are conducting will report back this autumn.
Financial Assistance to Industry
Seema Malhotra Excerpts(3 years, 4 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Mr Dowd. I thank the Minister for her opening remarks; I think it is very positive that two women are leading this debate. She gave a helpful and comprehensive introduction to the Government’s proposals and intentions, and to the role of the Advanced Propulsion Centre in this important endeavour.
The motion authorises support for the development of an electric vehicle supply chain to be delivered through the automotive transformation fund. This is part of the significant transformation of the automotive sector that we need as it makes its transition to zero-emission vehicles. We understand that this programme will support late-stage capital and R&D investments in the UK in strategically important technologies. The Minister outlined quite a lot of these, but it is important that this should cover a much wider area of technologies than batteries, including cells, battery management systems, electric machines, drives, integrated power, electronics, fuel cells and so on.
The Government’s intent is a step in the right direction, but the Opposition feel that we should be more ambitious and match it with other necessary support. It is correct to be ambitious on the importance of phasing out petrol and diesel vehicles by 2030—indeed, we called on the Government to do that—but high ambition must be matched by support from Government, as well as support for consumers and workers to navigate this transition successfully.
Domestic battery production is absolutely key to securing the future of the industry, which is why Britishvolt’s plans and Nissan’s expansion and announcement ofits gigafactory in Sunderland are very welcome. I pay tribute to local MPs, including my hon. Friends the Members for Washington and Sunderland West (Mrs Hodgson), for Sunderland Central (Julie Elliott) and for Houghton and Sunderland South (Bridget Phillipson), for the work they have done in support of Nissan. We certainly hope for further announcements from other companies.
Perhaps I should declare a small interest: I have been driving an electric vehicle for three years. We must do what we can when investing in electric vehicles to bring the price point down, to make electric vehicles more accessible more quickly for hundreds of thousands or millions more, so that it will start to be the transformation that we need. I pay tribute to the work of Hounslow Council and other councils across the country for putting more charging points on our streets, making shifting to electric vehicles a much more practical and realistic option for many busy families.
However, if we really want to win the race on EV production, the Opposition strongly believe that the Government need to step up far more actively. We are not the only ones. The Faraday Institution says the UK will need not only one or two but up to seven gigafactories by 2040. Professor David Greenwood, professor of advanced propulsion systems and chief executive officer of the Warwick Manufacturing Group’s high-value manufacturing catapult at the University of Warwick, told the Environmental Audit Committee earlier this month that
“if the UK is able to secure the supply chain for its own battery supply, there are tens of billions of pounds worth of value per year to be generated in the UK.”
In its recent report, “Full Throttle: Driving Automotive Competitiveness”, the Society of Motor Manufacturers and Traders asks for the Government to have a target for the production of 60 GWh of battery supply within the UK, which it suggests will support capacity to produce up to 1 million electric vehicles domestically. This kind of thinking and forward capacity building is what we need to make, buy and sell more in and from the UK.
When we look at what Governments in Germany, France, China and the US are doing, we can see that the global race for gigafactories is well and truly on. Germany, Sweden, Poland and Hungary are also developing battery manufacturing capability. The German Government, for example, are providing €1 billion, while France is investing €700 million as part of a Franco-German project to establish European battery cell production. The issue is particularly pressing for us in the UK because of the rules of origin that will be in place by 2027. We have heard surprisingly little, however, about the Government’s vision of how we will become global leaders in the automotive manufacturing and industry of the future. Will the Minister take this opportunity to tell us how we will match up to our ambitions and catch up with other countries?
We welcome the Government’s automotive transform- ation fund, Mr Dowd, but forgive us for being a little impatient and for calling on the Government to be willing to go further and faster. Some £500 million of funding for R&D and capital expenditure was allocated to the ATF over the next four years but the motion references £388 million for the capital funding allocation. Will the Minister clarify when the remaining expenditure will be brought forward? Will that be through another motion?
The £388 million to support battery manufacturing is a start, but I worry that it is not enough. That is why we have said that the Government should commit to helping to finance with further investment the creation of further additional gigafactories and their associated supply chains by 2025. That investment would signal the UK’s commitment to the industry and demonstrate that the Government recognised the urgency of acting now.
Labour has also set out why, alongside that, we must make electric vehicle ownership affordable. We have called for interest-free loans for new and used electric vehicles for those on low to middle incomes, removing the upfront cost barrier and trialling a national scrappage scheme. We would also make it easier for people to drive an electric vehicle wherever they live, accelerating the important roll-out of charging points on streets and targeting areas currently left out, such as Yorkshire, the north-west and many parts of the west midlands. We need an electric vehicle revolution in every part of the country to boost the car manufacturing industry, create jobs and make only zero-emission vehicles the option for all. For that, we need a strong domestic battery supply chain to remain competitive, build our position as a leading electric vehicle producer and sell to the world. We cannot afford to be in the slow lane. If the batteries are not made here, the danger is that the cars will not be either. We need to back our ambition with the policies that will fulfil that ambition.
The Climate Change Committee tells us that for a smooth transition to 2030, 48% of new sales need to be electric by 2023. To reach that level, we come back to the point that electric vehicles must be affordable for lower income families. That is why the Government should not be cutting the plug-in grant. On supply chains, the intended investment from the fund in the development of electric vehicle supply chain in the UK is important. That development requires strategic interventions—something on which the Government do not have the best track record.
We saw the cost of Government inaction at the historic Orb steelworks in Newport East. Orb was the UK’s only producer of high quality non-oriented electric steels—the steel used to build electric motors. But in 2020, it was mothballed and subsequently closed despite determined campaigning. The Government declined to support investment to keep the plant going, but it could have been an integral part of a new UK supply chain for electric vehicles. The Sindex consultancy has estimated that the decision to let the Orb close will cost the UK economy more than £1 billion over the next decade—pretty devastating, by all accounts. As a country, we cannot continue to make such huge strategic mistakes when it comes to our steel and manufacturing sectors.
Will the Minister also clarify the following final points? The 10-point plan, published last November, commits up to £1 billion to support the electrification of UK vehicles and their supply chains, but only £500 million is being announced in this Parliament. The industry is rightly asking when the next £500 million is planned, because there is a lead time for big investments and the ability to plan ahead to invest well. Will any of the support that has been announced be tied to companies’ investment in skills and human capital, so that that growth is more sustainable as we upskill our workforce and create local jobs? What is the social return, in terms of skills and employment, on these grants expected to be? What expectation do the Government have about how SMEs will get access to some of this support through supply chains, including BAME-led and women-led businesses that are often excluded?
This is an important strategic agenda and a vital step in accelerating the shift to zero-emission vehicles that we need to see. The areas I have raised are in the interest of being constructive, because Labour wants to ensure that everyone in the country can benefit from the electric vehicle revolution, instead of baking in unfairness. While it is right that the Government have said that the sale of new petrol and diesel cars will end, they are wrong to impose a massive transition on our manufacturers from Whitehall without integrated and full support. It is also important to think about the vehicles that small businesses rely on, such as light vans and small vans, and how they will also make the transition.
We do not want our automotive sector to lose out in the race to be a world leader in the electric vehicle market. Labour would back our manufacturers and our communities with proud histories in the industry, but we must not let history write that the Government were asleep at the wheel. They need to do more, and we will not stop calling for that.
Draft Conformity Assessment (Mutual Recognition Agreements) and Weights and Measures (Intoxicating Liquor) (Amendment) Regulations 2021
Seema Malhotra Excerpts(3 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I beg to move,
That the Committee has considered the draft Conformity Assessment (Mutual Recognition Agreements) and Weights and Measures (Intoxicating Liquor) (Amendment) Regulations 2021.
It is a pleasure to serve under your chairmanship, Mrs Murray.
Hon. Members will appreciate the importance of supporting international trade while protecting our product safety and legal metrology system, which is among the strongest in the world. The regulations implement important aspects of international trade agreements within the Government’s trade continuity programme, ensuring continuity for UK business. They include certain mutual recognition agreements that the UK has signed with the USA, Australia and New Zealand, along with a free trade agreement with Korea, containing conformity assessment provisions that are relevant to the regulations. The UK-Japan comprehensive economic partnership agreement and the UK-Canada trade continuity agreement also include protocols on mutual recognition of conformity assessments. I will now refer to the mutual recognition elements of all those agreements as MRAs, as proceedings would otherwise get quite tedious.
MRAs promote trade in goods between the UK and partner countries by reducing technical barriers to trade. The UK’s product safety legislation and that of many of our partners often require products to be assessed against minimum essential requirements, sometimes by a conformity assessment body external to the business. MRAs can reduce barriers by allowing a conformity assessment to be undertaken by a body that is based in the UK prior to export to the relevant country. Likewise, they enable procedures carried out by recognised overseas CABs to be recognised against our domestic regulations.
The products that are in scope of these agreements vary between the MRAs. Many cover rules on radio equipment, while the agreements with Australia and New Zealand also address products such as machinery and simple pressure vessels. If a small UK business that manufactures wi-fi equipment is considering exporting to one or more of our MRA partners, they might therefore find that they can get all their advice and approvals from a single UK-based CAB. If that means that they reduce their costs, they can pass the saving on to their customers. The manufacturer can access international markets more easily when assessment is facilitated in this way, thereby increasing their potential for exporting and increasing consumer choice. Such benefits, which the UK has experienced for years, are maintained through the continuity MRAs.
In addition to measures to implement the MRAs, the regulations address one aspect of the UK’s trade agreement with Japan by giving greater flexibility to importers of the traditional Japanese spirit called single-distilled shochu. The regulations amend specified quantity requirements in Great Britain so that bottles of single-distilled shochu can be sold in 900 ml bottles, one of the traditional bottle sizes.
I shall whip through the issues in a bit more detail, first by addressing provisions on goods coming into the UK that are in scope of an MRA. Under the MRAs, the UK committed to recognise the results of conformity assessment procedures carried out by recognised overseas CABs against our domestic regulations. Today’s regulations make it clear that assessments carried out by a recognised body based in one of our partner countries should be treated as equivalent to those carried out by a UK-approved body when relevant products are placed on the market in Great Britain. The benefits are significant: trade with our MRA partners in radio equipment alone amounted to nearly £2 billion in 2019, although not all those products will have required conformity assessment by a third party.
The regulations provide for the Secretary of State to create a register of CABs that the UK recognises under the MRAs, which are defined as MRA bodies. That is communicated via the UK market CAB database, which is publicly available and used by the UK’s market surveillance bodies to verify the status of CABs that have approved products sold in the UK. Having all those CABs that are competent to assess for the domestic market in one place creates a one-stop shop for not only our UK enforcement authorities but businesses, helping them to find and verify the credentials of CABs quickly. The regulations also provide for Canadian accreditation bodies that are recognised by the UK under the UK-Canada trade continuity agreement to be listed on the Government’s website. They do not change the substance of requirements for third-party assessment, nor do they amend any requirements related to a product’s specifications.
I turn to goods in scope of the UK’s MRAs that are assessed by UK CABs. The regulations provide for the Secretary of State to designate CABs as competent to assess whether goods comply with certain regulatory requirements of our trading partners under the MRAs, as set out in schedule 2. To give a quick example, if a UK-based CAB wishes to be recognised by the American authorities as competent to test and assess for the USA’s radio equipment requirements, the body can apply to UKAS, the United Kingdom’s accreditation service, to be accredited as competent to test against those overseas requirements. The Secretary of State may then designate the body under the UK’s MRA with the USA to assess radio equipment for export to the USA. Once a CAB is designated, a UK manufacturer that uses the body’s services to assess its products for the domestic market can use that same body to do its assessment for the USA. The manufacturer does not need to identify a different CAB operating in the USA and commission it for assessment services, so the manufacturer can continue to place products on the USA market efficiently and without extra costs, potentially passing savings on to consumers.
The regulations also provide that the Secretary of State, or a person authorised to act on their behalf, may disclose information to the other party to an MRA when required by an MRA. For example, we may pass on information related to goods originating in the USA that have been suspended by UK enforcement authorities under commitments to co-operate in the MRA with the USA. Disclosure will be made in accordance with data protection legislation.
The regulations make provision for a product known as single-distilled shochu, a spirit that is single distilled, produced by pot still and bottled in Japan, to be placed on the market in Great Britain in the additional bottle size of 900 ml. Before the UK-Japan comprehensive economic partnership agreement, single-distilled shochu bottled in Japan had been permitted in Great Britain in quantities of 720 ml or 1,800 ml, in addition to the usual specified quantities for pre-packed spirits. Allowing the sale of this traditional bottle size was an important request by the Japanese Government in negotiations for the UK-Japan comprehensive economic partnership agreement. Given that the product is already on sale across the UK, albeit in other bottle sizes, the change should not have a significant impact on consumers in Great Britain.
Let me turn to the territorial scope of the regulations. Some provisions make amendments only for Great Britain, while others extend to the whole UK. Regulations 4 and 5, which deal with the recognition of conformity assessment by relevant overseas CABs, extend to Great Britain only. Northern Ireland will continue to recognise the results of conformity assessment procedures done under mutual recognition agreements between the European Union and the relevant third country, in accordance with the terms of the Northern Ireland protocol to the withdrawal agreement.
Regulation 6, which deals with the Secretary of State’s power to designate UK-based bodies under the agreements, will extend to the whole UK. CABs across the UK can therefore be designated under the MRAs. Regulation 7, which relates to information sharing, will also extend to the whole UK to enable the Secretary of State to share relevant information required under the MRAs.
Part 3—regulations 8 and 9—which amends the permitted bottle sizes for single-distilled shochu, extends to Great Britain only. In accordance with the Northern Ireland protocol, single-distilled shochu will continue to be permitted on the Northern Ireland market in 720 ml and 1,800 ml bottle sizes, in addition to the usual specified quantities for pre-packed spirits.
The regulations will provide certainty on the UK’s approach to recognising and designating CABs for certain products under the MRAs, and also make necessary amendments to allow for the 900 ml bottle size of single-distilled shochu to be placed on the market in Great Britain. We have introduced the regulations to give effect to provisions that keep barriers to trade low while preserving our robust safety rules. We do so as a Government who are committed to ensuring that consumers are protected from unsafe products as we look to deliver a product safety regime that is simple, flexible and fit for the opportunities ahead of us. I urge the Committee to approve the regulations.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Mrs Murray.
I am grateful to the Minister for his opening remarks on why we are using this measure to continue to support international trade while keeping in place measures to ensure product safety. I am particularly grateful for his remarks about some of the disclosure processes that have to be followed if there are concerns about products that may be entering the market.
Conformity assessment ensures that what is being supplied or placed on the market in Great Britain complies with regulations and meets the expectations specified or claimed. Conformity assessment includes activities such as testing, inspection and certification. As the Minister has laid out, those organisations that make these checks are called conformity assessment bodies, to which I shall refer from now on as CABs.
Mutual recognition agreements lay down conditions under which one party will accept conformity assessment results from testing, certification or inspection performed by the other party’s CABs or designated public authorities to show compliance with the first party’s requirements and vice versa. MRAs enable exporters to obtain conformity assessment certification from CABs in their home market, which is recognised then in the export market.
National rules on weights and measures can also form technical barriers to trade, as the Minister will know, and that is why the World Trade Organisation technical barriers to trade agreement aims to ensure that technical regulations, standards and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade. At the same time, it recognises WTO members’ rights to implement measures to achieve legitimate policy objectives such as the protection of human health and safety or of the environment. The agreement strongly encourages members to base their measures on the international standards as a means to facilitate trade. Through transparency provisions, it also aims to enable a predictable trading environment. Parties to a trade agreement can agree to eliminate such barriers beyond what is applicable under the WTO rules.
The draft regulations cover UK MRAs with the United States of America, Australia and New Zealand, and the incorporated MRA chapters of UK agreements with Canada, the Republic of Korea, and Japan. As discussed, these agreements have similar or sometimes identical terms to those of the EU MRAs with these countries immediately before exit day. The regulations therefore give effect to the MRAs between the UK and certain third countries which have been agreed to provide continuity for businesses and consumers following the UK’s exit from the EU and the end of the transition period. May I ask the Minister why the regulations are coming now now? Obviously, the powers under the Trade Act 2021 have just commenced, but there is a question whether the instrument should have been passed before the respective MRAs were ratified. Perhaps the Minister will come back on that point.
The regulations ensure that specific products assessed by bodies in the countries recognised under the MRAs can be placed on the market, largely in Great Britain—they might also apply to Northern Ireland—and enable the Secretary of State to designate and monitor UK CABs to assess products against the other parties’ requirements.
The Minister mentioned that the instrument also implements annex 2-D to the UK-Japan comprehensive economic partnership agreement by allowing single distilled shochu to be placed on the market in Great Britain in the new quantity of 900 ml, in addition to the existing quantities that are currently permitted.
The MRAs are signed with countries with which the European Union already has existing mutual recognition agreements and requires the UK to accept conformity assessment procedures performed and conformity assessment results issued by those bodies designated by the other country that is a signatory to the MRA.
I recognise that this is an important statutory instrument to provide both businesses and consumers with vital continuity and certainty—something even more important now as we look ahead to 21 June and our hopes for the beginning of the end of restrictions. In order to support businesses and provide that all-important continuity, Labour will be supporting this motion to implement rolled-over MRAs. However, there are several areas on which I would be grateful for some further clarity.
First, in relation to UK policy on conformity assessment and accreditation of the situation under EU law as it is still applied in Northern Ireland—as the Minister made reference to under certain regulations—a regulation sets out the requirements for the accreditation of market surveillance as it applies in EU law through the Northern Ireland protocol, and that continues to be the basis for accreditation policy. If in future there are any changes to UK policy, will that require an assessment of the implications of any trade barriers between Great Britain and Northern Ireland? How is that being considered?
Secondly, regulation 5 in respect of registers of MRA bodies states that the Secretary of State may
“compile and maintain a register of…MRA bodies…their MRA body identification numbers…the activities for which they have been designated; and…any restriction on those activities”.
Can the Minister confirm where he has outlined or whether he will outline the activities for which the MRA bodies have been designated, and what restrictions there will be on those activities?
Thirdly, under regulation 6, the Secretary of State will also be able to designate a conformity assessment body to assess products against other countries’ requirements. What criteria will the Minister use to consider whether that body is capable of fulfilling those functions and to ensure that it meets the requirements of a designated body? Following that, how will the Secretary of State monitor each body and guarantee that they continue to have the necessary designated capability?
We know that in the EU and Australia MRAs, it is the responsibility of other signatory countries to monitor their own designated bodies, with general discussion set at joint committee level and action that may include joint participation in audits. If that is the case for the MRAs being discussed today, do the Government have any plans to conduct any audit? If they do not, does the Minister envisage any risks associated with simply letting other parties regulate those conformity assessment bodies? Could he clarify if any issues will arise in relation to the standard or speed of operations of conformity assessment bodies, and if there is an impact for British businesses seeking to export goods or services? If there are any issues, how will those issues will be handled?
On divergence, the UK MRAs replicate the previous EU MRAs in substance, with the only substantive divergence from the EU in the permission to allow the additional bottle size of single-distilled shochu. That poses a broader question of whether the UK could take a different approach to conformity assessment in the future.
From 1 January 2021, the UK introduced its own product safety mark, which broadly mirrors the EU’s CE mark. According to law firm Bird & Bird, the UKCA—UK conformity assessment—regime follows essentially the same principles as the previous CE marking regime, but with the safety and compliance standards, authorised representative/responsible person and notified body requirements all now being valid for the UK only. Despite being a UK ask, the EU-UK deal did not include an agreement on mutual recognition of conformity assessment, a crucial factor for the sale of a heavily regulated product. That means that most goods produced in the UK but requiring certification for sale in the EU will, I understand, have to go through a second conformity assessment for the EU to be eligible for export. That will result in extra costs to trade with our main trading partner.
A lack of an MRA is unusual for comparable deals as Japan, Canada and Switzerland all have MRAs with the EU, while even countries such as Australia and the US, which do not have a trade deal with the EU, have MRAs. Does the Minister not think it is ironic that, in not having an MRA, the terms of the trade and co-operation agreement seem to be worse than those of the infamous Australia-style deal? Outside the EU, we know that there are new regulatory barriers to trade. The EU Commission’s “Blue Guide” on product standards has a comprehensive overview of the system of mutual recognition and the functions of conformity assessment and accredited bodies. There is a system of notification in the EU by which national authorities notify the Commission and each other that a conformity assessment body has been designated to carry out conformity assessment according to harmonised EU rules. Will the UK continue to share information on CABs with the EU, or will that go through the public database of CABs to which the Minister referred, which the UK will put together?
In the absence of an MRA, local regulatory bodies cannot certify goods for sale in other countries. However, MRAs can help reduce some of the burden by avoiding duplicate product safety testing, for example. Consequently, to help businesses thrive, to do what we can to make trade easier and relieve additional barriers, Labour will support the draft statutory instrument today. I will be grateful to the Minister for his response on the points I have made. If he cannot answer in Committee, perhaps he will write to me afterwards.
Paul Scully
I thank the Committee for its consideration of the draft statutory instrument and the hon. Member for Feltham and Heston for her valuable contribution to the debate.
I set out how the draft SI will maintain our latest product safety framework while preserving measures to reduce barriers to trade with some of our key trading partners. I will quickly whip through some of the questions the hon. Lady asked, such as about the timing of the SI. The Trade Act allows the Secretary of State to make regulations to implement non-tariff provisions of international agreements. That power was required to implement the MRAs that the UK has agreed with its trading partners. We have laid this SI at the earliest possible opportunity following Royal Assent to the Act.
On why we do not have an MRA with the EU, clearly it was proposed but not agreed in the negotiations. The UK proposed to the EU a comprehensive mutual recognition agreement covering all the relevant sectors, which would have allowed conformity assessment bodies in either market to assess goods for the other market. However, the countries in the scope of the draft SI have a combined population of more than 570 million with which UK businesses may continue to trade across the world.
On divergence from the EU and Northern Ireland diverging from GB, in many ways the EU signals are still changing. The UK-Japan CEPA is the first agreement that the UK has secured to go beyond the existing EU deal, with enhancement in areas such as digital data, financial services, food and drink, and the creative industries. Clearly, the single distilled shochu will still be available in the entire UK market, including Northern Ireland, but an additional bottle size will be available in the UK.
The hon. Lady talked about what will happen in future mutual recognition agreements. The approach that we are developing for future such agreements is under discussion, but will involve appropriate consultations with all interested parties. Northern Ireland and all the devolved Administrations will be important in that regard. I hope that I have covered a good deal of the questions. If I have not, I will certainly pick up on any the hon. Lady does not feel satisfied with.
The draft SI gives effect to the provisions of the MRAs and the Japan comprehensive economic partnership agreement, which are important for the reasons that I outlined. By supporting the SI, we will ensure that our manufacturers and consumers benefit from maintaining agreements to minimise duplication of conformity assessment requirements between us and our trading partners. I commend it to the Committee.
Question put and agreed to.
UK Steel Sector: Supply Chains
Seema Malhotra Excerpts(3 years, 5 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Sir Graham. May I begin by thanking my hon. Friend the Member for Aberavon (Stephen Kinnock) for securing this important debate and for his powerful opening speech on the future of this vital foundation industry, which is important to our history and our economy? I congratulate him and colleagues across the House on their work through the all-party parliamentary group for steel and metal related industries.
I also congratulate all hon. Members who have spoken powerfully in the debate, including my hon. Friends the Members for Neath (Christina Rees), for Birkenhead (Mick Whitley), for Newport West (Ruth Jones), for Newport East (Jessica Morden), for Rotherham (Sarah Champion)—particularly on working with Liberty Steel on the sale of the Stocksbridge and Brinsworth plants—and for Alyn and Deeside (Mark Tami), as well as the hon. Member for Strangford (Jim Shannon) and the hon. Member for Motherwell and Wishaw (Marion Fellows), who made a powerful speech.
UK steel is at a turning point. A lack of strategic focus from successive Conservative Governments has inevitably resulted in reduced resilience against external shocks and fierce international competition. Our shared goal must be a sustainable future for UK steel and its supply chains, and we need the Government leadership that that demands. Steelmaking must decarbonise, and the long-term future of the industry is in supporting green jobs at the core of low-carbon economy. Steelmaking is a highly-skilled industry and a national asset, and it has a clear opportunity for continued growth, with procurement policies that could also help to increase the contribution of UK steel to UK manufacturing, products and infrastructure.
Currently, 60% of steels are imported, and there is no assessment of the carbon footprint of those imports. Across the UK, there are around 1,100 businesses in steel and around 75,000 jobs, whether directly supported or in the supply chain. Those jobs are at the centre of our economies. In my speech, I will say a few words about supporting our steel industry today, about the need for a vision and plan for the future, and about ensuring a fair and just transition.
The Labour party and the UK steel industry have been united in rejecting the recent draft recommendations of the Trade Remedies Investigations Directorate to remove almost half the safeguard measures currently protecting UK steel producers from the surges in imports that threaten the sector. We hope that the Trade Remedies Authority will listen to the reasoned explanations as to why all current safeguards must stay in place beyond their June expiry date, not least in the light of the other huge pressures faced by the industry at this difficult time.
UK Steel’s criticisms of those recommendations have highlighted a failure to recognise the interconnectedness of the steel industry. One part of the supply chain cannot be damaged without damaging the industry as a whole. As an example, Celsa Steel UK has 28 product categories, with much interconnection between them, but 10 of those have been affected by the revocation of safeguards, while 18 have not—a situation that is inexplicable to Celsa and others. UK Steel has put together significant evidence to challenge the data used by TRID in producing its recommendations. I would be grateful for the Minister’s assessment of that industry evidence.
The process has exposed a worrying gap in Ministers’ ability to act in the national interest, and has illustrated the flaws that the Labour party warned about during the process to establish the UK’s post-Brexit trade remedies regime. We also warned about the lack of representation of UK producers in unions such as Unite and Community, and the risk that it would exacerbate those failings. Worryingly, the current legislation does not allow the Secretary of State to retain existing safeguards or introduce new ones against the advice of the Trade Remedies Authority, even if to do so would be overwhelmingly in the public interest.
The fate of large parts of the steel industry and of thousands of jobs currently lies in the hands not of elected representatives, but of an unelected body that cannot be overruled. Even if the TRA reverses the original recommendations this month, we cannot find ourselves in this position again. We are therefore willing to work constructively on a cross-party basis to amend the trade remedies legislation to allow for a wider range of public interest tests to be applied in these decisions. In the interim, we call on the Government to do everything necessary and permissible within the law to extend all the current steel safeguards. The Minister must also make those intentions public at the earliest opportunity to provide the UK steel industry with the certainty that it badly needs.
We urgently need a truly ambitious vision for the sector that puts the UK at the cutting edge of green steel-making technology, and we need a plan to go with it. We need to see better progress on the industrial decarbonisation strategy and the acceleration of the clean steel fund. That £250 million fund was announced in 2019, but the spend from it is not set to start until 2023. I would be grateful for clarity from the Minister about why there is a delay.
The UK seeks to decarbonise by 2050, but blast-furnace investments operate on a 20 to 25-year timescale, so we need a clean steel innovation programme now. As the Materials Processing Institute highlights, delaying until 2024 shows a lack of co-ordination between the Government’s timetable and the reality of the industry’s investment cycles.
Although we accept that it is necessary that UK steel continues using coking coal for the next decade until technology is in place to provide for decarbonised steel, with the right strategy, investment in renewable technologies can create three times as many jobs as those in fossil fuel industries—jobs that are long term, highly skilled and high wage. Hydrogen could also play a huge part. Trials of direct reduced iron technology are already happening in Germany, Sweden and China. The Government should act quickly to prevent the UK from being left behind with this technology too.
As the price of energy hinders progress, we need a clear industrial plan. We have heard how the gap between German and UK electricity prices is placing an extra £54 million a year additional cost on the UK steel sector. As the sector seeks to decarbonise, the price disparity is a major barrier to transitioning. All low-carbon options available are much more energy intensive. The Government have always said that the EU is a barrier to action. Now that we have left, they must take decisive action to address that price disparity.
We also need a plan for capital investment for future productivity. Plants that I have visited have demonstrated that they have a set of clear transformation business plans ready, with detailed assessments of returns on investment and alignments of goals with national priorities. In the short term, the challenge of working capital also remains. Viable businesses with multi-year order books, such as Stocksbridge, need urgent support to be able to purchase the supplies they need and get the products that are demanded by their customers into production now.
Priorities for a fair and responsible transition to low-carbon steel making must include long-term planning, as the Centre for Sustainable Work and Employment Futures, Community union and Prospect have begun to outline. Protecting jobs and steel communities also means that transition must seek to retain our capabilities and high skills, include retraining and avoid hard redundancies.
Our manufacturing renaissance, infrastructure and green economic recovery depend on steel. In 2015, the Business, Innovation and Skills Committee argued that the relative decline of UK steel production was partly down to the fact that other European countries have better valued their domestic steel industry. That has to change. Labour is determined to safeguard the UK’s steel industry, and with industry operating on the basis of lengthy investment cycles, the future of industry is dependent on investment now to support our green transition. We need a strong steel industry fit for the 21st century that can compete on a level playing field, with the capability to make a full range of steels over the long term.
The Government have said that they are committed to supporting and securing a future for UK steel, but recent events do not back that up. It is vital that the Government do more now to bring forward a long-term plan to support our proud British steel sector and the UK manufacturers that are their customers. We must secure this industry in our national interest, to protect jobs, livelihoods and our economy.
Amanda Solloway
I will, of course, pass on the hon. Gentleman’s question.
I will move on to Liberty Steel. The hon. Member for Newport East rightly highlighted its importance to many Members and their constituents, and its recent financial difficulties, which were also raised by the hon. Member for Rotherham. As the Secretary of State reaffirmed to the Business, Energy and Industrial Strategy Committee in an oral evidence session, we continue to monitor the situation closely and engage with the company, trade unions, local MPs and the wider steel industry. Liberty is important.
Seema Malhotra
Does the Minister appreciate that there is a need to work to support plants that are viable—such as Stocksbridge and Brinsworth, which purchase their supplies from Rotherham—and provide the working capital that is needed for orders that are there and products that are there to be made?
Amanda Solloway
I thank the hon. Member for her contribution. Again, I will pass that on, with the passion that she has shown, to the relevant places.
I return to Liberty Steel. We continue to monitor the situation closely and to engage with the company, trade unions, local MPs and the wider steel industry. Liberty is an important supplier of steel and provides highly skilled jobs. The Government believe that Liberty sites can be viable and we remain hopeful that the commercial issues can be resolved to ensure future success.
It is, however, first and foremost the company’s responsibility to manage commercial decisions for the future of the organisation, and we welcome the dedicated efforts being made by Liberty to find solutions. I hope that I have reassured hon. Members, who have displayed sincere empathy for our steel sector today, that the Government are working tirelessly with the industry to secure its future through difficult times.
Focusing specifically on Tata Steel—I know that that is of great interest to the hon. Member for Aberavon, and I have saved discussion of it for my summing up—I can assure Members that the Government will continue to work closely with the company and the unions as they shape the business strategy to support the future of high-quality steelmaking in Port Talbot.
I have set out a wide range of actions that demonstrate that the Government fully understand the vital role that steel plays for communities, for our economy and as a foundation supplier for our manufacturing base. UK industry will continue to need high-quality steel, and British steel is among the best steel in the world. As we level up our country, we are actively considering where there is scope to go further to support our steel industry.
We are committed to sustainable decarbonisation, decarbonising a globally competitive future steel industry in the United Kingdom, and I look forward to working with Members towards achieving that goal.
Oral Answers to Questions
Seema Malhotra Excerpts(3 years, 6 months ago)
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Amanda Solloway
The Government have provided unprecedented support to business sectors throughout the pandemic, including the hospitality and retail sectors. In addition to the job retention scheme and cuts to business rates and VAT, we have provided one-off restart grants of up to £18,000, which are available to businesses in the non-essential retail, hospitality, leisure and personal sectors to support them to reopen as restrictions are relaxed. To date, businesses in Coatbridge, Chryston and Bellshill have benefited from more than 1,500 loans and £59 million, with 70,800 jobs supported through furlough.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
This week marks English Tourism Week, but the UK’s tourist destinations have been hit hard, with a much higher than average increase in people who are now out of work, including in places such as Scarborough and Whitby. Many tourism businesses, such as hotels and cafés, have taken on debt to stay afloat, and one in five hospitality businesses now says that it is at moderate risk of insolvency. Yet the Government’s pay as you grow scheme does nothing to solve the underlying long-term issue of business debt, which means that businesses will have to repay whether or not they are making a profit. Does the Minister agree that, if we want to give businesses the time to build up their trade and resilience, and also protect jobs and not let debt stifle the recovery, we need a genuinely flexible repayment scheme such as the one Labour has called for.
Amanda Solloway
We care passionately about businesses in this Government, and our support package includes the job retention scheme, generous grants and cuts to business rates. Pay as you grow measures will allow 1.5 million bounce back loan borrowers to extend payment terms and to benefit from a further repayment holiday. Our plans to support economic recovery and pursue growth through significant investment in infrastructure skills and innovation will help us to build back better and level up across the United Kingdom.
Oral Answers to Questions
Seema Malhotra Excerpts(3 years, 8 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Tony Lloyd (Rochdale) (Lab)
The Secretary of State for Business, Energy and Industrial Strategy (Kwasi Kwarteng)
I am grateful for the opportunity to say here in the House that the Government do intend to bring forward the employment Bill when parliamentary time allows.
Seema Malhotra [V]
The TUC estimates that 3.6 million people—one worker in nine—were in insecure work ahead of the coronavirus outbreak, leaving them exposed to massive drops in income or unsafe working conditions. It was bad then, and it is worse now. The Government have driven the author of their own Taylor review to say in quite extraordinary terms that the Government have lost their “enthusiasm” for enforcing workers’ rights. With no employment Bill yet on the horizon, is that not the plain truth for all to see? Whose side are the Government on?
Kwasi Kwarteng
I will take no lessons from the hon. Lady about workers’ rights and what this Government have done over many years to protect workers’ rights. The national living wage is higher than it has ever been in this country’s history. We have taken thousands of people out of tax, and I am not going to take any lectures from her.
Oral Answers to Questions
Seema Malhotra Excerpts(4 years, 6 months ago)
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Miss Sarah Dines (Derbyshire Dales) (Con)
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Simon Jupp (East Devon) (Con)
Alok Sharma
I thank my hon. Friend for that question. I can tell her that my Department is working very closely with the financial sector to ensure that businesses across the whole UK, including in Derbyshire Dales, are getting the support they need. As a result of the schemes we have announced, through the British Business Bank, businesses can now access Government-backed loans worth anywhere from £2,000 up to £50 million.
Seema Malhotra [V]
It is estimated that 50% of social enterprises could run out of cash by June without further support, raising concerns that the CBIL scheme is not working for social enterprises. Some of those will be in aviation, which is coming under huge strain. The UK aviation industry could lose around £21 billion-worth of revenue, putting at risk over 600,000 jobs, with 12,000 job cuts likely at British Airways alone, which will hit Feltham and Heston and the surrounding constituencies very hard. When will the Secretary of State bring forward specific support packages for the sectors that are worst hit by covid-19, such as aviation?
Alok Sharma
The hon. Lady’s question was in two parts. The first related to social enterprises. CBILS is open to all social enterprises, so long as they make at least 50% of their income from trading, which we believe covers the majority of social enterprises. She raised a wider question about larger companies. As she knows, we have a range of schemes in place, with the bounce-back loan scheme at one end and the corporate finance facility at the other. Where an individual business is not able to access any of those particular schemes, they can come to us, and we will consider the case that they make.