I beg to move,
That the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 (S.I., 2021, No. 375), dated 22 March 2021, a copy of which was laid before this House on 24 March, be approved.
It is a pleasure to serve under your chairmanship, Madam Deputy Speaker, as we discuss this important extension on the Floor of the House. It is now more than a year since the emergence of covid-19, and the Government have consistently taken the swift action needed to save lives and mitigate damage to the economy. The Government’s successful roll-out of the vaccine programme and the implementation of the Government’s four-step road map out of lockdown are both reasons for cautious optimism that we will soon enjoy a return to normality. To date, in excess of 33 million people have had a vaccination, and the British public have risen to the challenge of suppressing the spread of the virus by sticking to the rules, getting tested when necessary and following the guidance on hands, face, space and letting fresh air in.
We are not out of the woods yet, however, and the emergence of new strains of the virus means that this is not the time to become complacent. Social distancing measures introduced to limit the spread of the virus and help to save lives continue to have an effect on business, and the Government recognise that. Although most businesses have been able to reopen, many continue to face uncertainty and financial difficulties. Therefore, an extension is needed to the duration of the temporary insolvency measures currently in place for the protection they provide.
These regulations extend until 30 June the suspension of serving statutory demands and the restriction of filing petitions to wind up companies; the small supplier exemption and termination clause provisions; and the suspension of wrongful trading liability. In addition, the modifications to the moratorium provisions and the temporary moratorium rules are extended until 30 September 2021.
I hope the House will agree that these regulations are necessary, but I assure Members that we will keep them under constant review. I commend these regulations to the House.
Well, here we are again. The Minister and his officials, who have heard me make the same speech numerous times, are in for a little treat today, because I am going to detour slightly from my usual remarks, which have centred a bit around “I told you so” on extending these provisions. Today I also want to touch on some of the wider insolvency framework issues that I think are pertinent now.
I welcome the Government’s extending the safety net for businesses in distress because of the pandemic. As I said when we supported the emergency legislation last year, we welcome any measures that support businesses that close to keep us safe. We argued then that the protections in the 2020 Act should be extended over a longer period of time. I think this is now the third time—possibly the fourth time—that we have come together to extend them, on each occasion, unfortunately, causing real uncertainty and worry for businesses in the run-up to each previous expiry date.
As the economy reopens and restrictions ease, it is right that these measures are kept under review. Through the crisis, we have called on Ministers to ensure that economic support matches the public health measures in place. While we have seen welcome support for workers through the furlough, there have still been gaps in Government support that they have repeatedly failed to address. There is a cash crisis facing firms with high ongoing overheads but still no income coming in and those excluded from all Government support, and little or no help for those sectors still closed and likely to be closed or uncertain for some time, such as travel, large events and weddings, and the visitor economy.
As I have said before, we are very concerned about the levels of debt facing businesses, whether that is through the loans they have taken, the VAT they have deferred or the rent holiday they have had, but soon have to start repaying. These measures are welcome in staving off creditors, but they just kick the can down the road, and do little to change the fundamentals facing so many firms of large covid debt and low or no takings while the fight against covid continues. The bombshell that businesses face remains real, and that is why Labour has argued for a student loan-style scheme, in which covid debt can be repaid as businesses grow, so that we do not see waves of insolvencies. There is nothing in the provisions today to deal with those fundamentals.
Turning to the Corporate Insolvency and Governance Act provisions in general, it is clear that some of the issues we have warned about are coming home to roost, particularly when we look at the impact of Greensill Capital’s administration on the Gupta Family Group and Liberty Steel. The Government have consistently ducked the need for wider reform of our insolvency laws, particularly in providing greater protection and support for key industries and their workers. We argued for and sought to amend the legislation to this effect, and it is not too late for the Government to act.
It is clear from reports that the gulls are circling, and regardless of whatever judgment people make about GFG, the Liberty Steel plants are a critical asset to our economic and national security, and employ thousands of highly skilled workers directly and through the supply chain. The company must be given time to refinance, but if that is not successful, then the Government must keep every option open and have a plan for all eventualities to save the UK steelmaking capacity and its supply chain. However, our insolvency laws mean that there is no safe place to refinance or protect this company’s assets until it might be too late, all the while leaving the company searching for refinancing while trying to retain the confidence of suppliers and customers, who risk the most should it fail.
In the US, they have chapter 11 to shepherd important industries facing distress. There, the authorities are able to wrap their arms around strategically important companies to allow them time to resolve difficulties, refinance or restructure. The chapter 11 process, should we have that here, would have created a better context for the refinancing of Liberty Steel, without the spotlight and falling confidence. We argued for its inclusion in the Corporate Insolvency and Governance Act 2020. Ministers could have brought forward changes on that today, but unfortunately they seem content to let the company fail first. We know that this has a high cost for the suppliers as well.
Even without changes to the insolvency laws, if there is a political will, there could be a way. Ministers should not be bystanders. They should intervene early, before liquidation if necessary, and that would mean that workers would not lose their accrued services benefit as well as protecting the supply chain. When the Minister gets to his feet, I hope that he will reflect on the wider point about how we can protect nationally important businesses in future and assure us that his Government will do whatever it takes to save Liberty Steel from insolvency.
First, I commend the Government on the UK Corporate Insolvency and Governance Act 2020 and for putting in place, at such speed, both temporary and permanent measures at such a deeply troubling time for businesses. My hon. Friend the Minister will be pleased, as I am, and possibly a bit surprised, as I am, to see that statistics from the Insolvency Service show that the number of registered company insolvencies in March 2021 was 20% lower than in the same month in 2020 and 37% lower than in March 2019. I certainly know of many businesses in my constituency that have survived the pandemic thanks only to the extraordinary measures put in place by the Department for Business, Energy and Industrial Strategy and the Treasury to help them get through.
In the call for evidence that is outstanding on the performance of CIGA, it will be interesting to see whether feedback from businesses suggests that they needed the temporary measures or the financial support, or both, and to what extent. Certainly, the evidence points to the fact that schemes such as bounce back loans, the coronavirus business interruption loan scheme and furloughing have done a critical job in protecting lives and livelihoods. There may be the need in the future for further flexibility and, I point out to the Minister, interest on coronavirus business interruption loans and potentially more support for weddings and events organisations may well be needed in future to protect them.
I briefly wanted to mention the bigger picture. The Minister will be only too aware that insolvency legislation is not like the proverbial London bus—we do not have none coming along for years and then lots all at once—so I worry that while there have been some good, permanent changes to the insolvency rules brought in with CIGA, there are nevertheless some areas, particularly of corporate governance, where, during my time in BEIS, I was keen to see real reform. I hope that the audit reform work that is under way and the forthcoming employment rights Bill might offer vehicles for wider corporate governance changes. In particular, I would be keen to have an update from the Minister on what is still being done at BEIS to consider some specific issues, such as the roles and responsibilities of directors, the speed of insolvency evaluations post-fact and consideration of the responsibilities of board directors. We have seen some major corporate failures in recent years, including companies such as BHS, Carillion and Thomas Cook, and very legitimate questions have been asked about the performance of the directors of those businesses, whose failures have had such a disastrous impact on lives and livelihoods.
There is also the very real question of whether companies should do more through new statutory responsibilities to protect employees’ pensions, to ensure diversity of the workforce and, of course, importantly, to address their carbon footprint. I hope that the Minister will be able to reassure me that these issues remain very live in his Department, and I would be keen to know, specifically, if he can point me to forthcoming opportunities to press these matters further.
In conclusion, I encourage all those who have an interest in the broader issue of corporate governance to take part in the current call for evidence on insolvency rules. It is a great opportunity for business owners and industry professionals to give their feedback on these two important areas. I hope that the imperative of putting in place excellent temporary measures to help businesses survive during the pandemic does not get in the way of consideration of the bigger picture of good corporate governance.
It is a pleasure to follow the right hon. Member for South Northamptonshire (Andrea Leadsom). To pick up her comments, it is incredibly important that we look at the future of corporate governance and audit. We must make sure that the report is looked at carefully so that decisions are made to ensure not just that investors can scrutinise those organisations but that consumers can do so and work out whether or not they want to be involved in them on the basis of their annual report and audit. People would get a better idea of the risk they would be under if those processes were more open and transparent. I therefore agree wholeheartedly with the comments made by the right hon. Lady.
On the Corporate Insolvency and Governance Act 2020, there is an extension for some of its provisions to the end of June this year, and an extension to September for other provisions. I am concerned that there have been so many extensions—30 June is very soon—that the Government will end up having to come back with another extension. Even if the pathway that has been laid out by the Prime Minister comes to fruition, and even if we end up with pretty much everything going back to normal in some ways by the end of June—I doubt that we will, by the way—it will not be a five-minute job for businesses to recover. They will not be back on their feet immediately; they will not suddenly make up the money that they have spent, or pay back the loans that they have had to take out during this period. They will not even be able to take back all their employees full time if social distancing continues, for example. I am concerned that there is not enough time, and if the Government intend to make a further extension, it would be useful for those organisations to be aware that that extension is likely. I would prefer such an extension to have been made already, but an extension to September for all the measures would have been slightly more helpful.
We have spoken about the impact on companies, but insolvency also has an impact on the supply chain. In particular, self-employed individuals have been missed out of the furlough scheme, and if some of those organisations go under, they are more likely than others to be hit as a result of their being part of that supply chain and their role in supporting those businesses. We are looking at the big picture, which is great, but I am concerned that there is not enough focus on the knock-on impact, particularly on those groups that have been missed out and have been hit particularly hard by the pandemic.
I am a representative for Aberdeen, and we have had a triple whammy of Brexit, covid and the reduction in oil prices in recent times. That affects not just the big companies making megabucks profits in the oil industry, but the smaller companies that are producing tech for renewables as well as tech for oil and gas extraction. We do not want to lose that intellectual property—that tech—in renewables, and we must ensure that support continues to be available, so that if big organisations fail, despite what the Government have put in, smaller companies can keep going if they have the potential to become profitable in future.
It would be useful if the Minister reassured me that the Government are not just looking at the big picture but paying attention to the smaller organisations that may not be covered by the measure, particularly in the light of the concerns that we have expressed on numerous occasions about self-employed individuals being missed out from the furlough schemes. We are concerned that they may be missed out when we look at the future of this as well.
As the Minister said, we are not out of the woods yet. There is a very long way to go, and it is right that we protect businesses that would be viable were it not for the pandemic and the resulting loss of revenue. These regulations play their part, but as the long-term impact of these challenges begin to make themselves known, it is clear that these measures are only part of the answer.
There are significant question marks over how the Government plan to support businesses in the long term. For example, in the absence of an impact assessment, it is unclear which businesses are benefiting from the exemption on the rules about wrongful trading. What contribution does the Minister believe the regulations have made in enabling businesses to recover? After the imminent end of the lockdown restrictions, businesses will continue to need support to recover, and it would be helpful to understand whether these regulations have worked up to now and what the likely impact of their removal will be.
Three million is the estimated number of individuals in business who have been wholly or partly excluded from financial support by this Government over the past year. That includes around 2 million owner-managers, also known as the ForgottenLtd, as well as the self-employed, freelancers, women who became pregnant and people who changed jobs at the wrong time. Let us remember that half of the excluded groups have not even been able to claim universal credit.
Similarly, we need to know the impact on businesses repaying the emergency coronavirus loans—CBILS, coronavirus large business interruption loans and bounce back loans. As we head closer to the end of the lockdown cliff edge, those businesses that took out loans and have been unable to trade will need to know what the implications are for them, their staff and, indeed, the economy as a whole. Let us not forget the 7.5 million employees of the ForgottenLtd, who will need to know what will happen to them, their jobs and the companies they work for when the loans have to be repaid.
Before the Minister says that the ForgottenLtd owner-managers took out loans and therefore had support, he should note that those loans were for their business costs, including for rates and for energy or electricity for equipment. Many owner-managers have been unable to pay themselves through furlough as they are paid dividends. Unless businesses have time to rebuild their profitability, they will simply be unable to restart because of the deferred business rates, corporate and personal taxes and covid loans.
There is a real problem of massive potential unemployment and business closure unless the end of the regulations is not just the start of financial problems induced by forced repayment—repayment that is simply not possible without sufficient income having first been re-established. According to the Government’s own Business Banking Resolution Service, nearly half of small businesses that have taken out emergency coronavirus loans do not intend to repay them, not because they do not want to but because they will not be able to do so. Are company owners right to be concerned that the end of the regulations will mean that business are forced to close because of an inability to pay mounting debts and the associated legal problems of trading insolvently?
The Government declined to support the excluded groups, but it was not because of a lack of money. Billions of pounds were available for friends of the Health and Social Care Secretary, for the International Trade Secretary’s adviser and for £7,000-a-day consultants to a centralised contact tracing system that still does not work, and having the Chancellor or the Prime Minister’s phone number meant paydays for moguls in the realm of millions of pounds. Will money now be available so that businesses can start the process of recovery, their staff can keep their jobs after furlough ends, and debt repayments can be delayed until they can be afforded? Will the Government adopt Labour’s suggestion of allowing businesses to wait to repay loans until they are making enough money to do so, in a way similar to that adopted for the repayment of student loans?
More than 1 million small businesses do not expect to recover from this pandemic, which is why we need to know where the regulations fit into the strategy for economic recovery. Millions of microbusinesses and owners of small and medium-sized business are trying to figure out how they are going to put food on the table and pay their workers. More needs to be done to give businesses stability and security than just extending the existing provisions again and again. That means looking at proper business support and enabling smaller firms, microbusinesses, sole traders and self-employed workers—all of them—direct access to Government contracts. That is how the US Small Business Administration operates. Why not do the same in the United Kingdom?
Does the Minister share my concern that, through David Cameron’s access to the Chancellor, Lex Greensill made so much progress in proposing invoice factoring in the public sector? The public sector is supposed to follow the prompt payment code. Why were Ministers and officials even considering invoice factoring? Will the Government use the recovery from the crisis as a reason to revisit the prompt payment code’s effectiveness, and particularly to ensure that smaller firms and microbusinesses are paid in 30 days? Direct procurement and payment in 30 days for small and microbusinesses are just two ways in which firms can be supported, alongside a delay in debt repayment. I hope the Minister will respond to those suggestions. I also hope he will empower the Small Business Commissioner with the proper resources to insist on prompt payment, including in the public sector.
The Minister could do worse than look at the United States, where they know the value of small businesses to the economy. The US Federal Reserve bank found that 30% of small businesses in the US—that is 9 million of them—did not expect to survive 2021 without assistance, which is why the US Small Business Administration has been tasked with supporting small businesses to build back better, alongside President Biden’s American Rescue Plan Act. In the UK, more than 1 million small businesses face similar concerns. Would it not be great if the UK had a small business administration to look after microbusinesses, the self-employed and SMEs? As the Minister should know, it is vital to distinguish between those fundamentally different types of business. The US Small Business Administration shows clear intent to support smaller businesses as part of a concerted and thought-out plan for the long term, not just a quick fix.
The excluded groups, the ForgottenLtd owner-managers, microbusinesses, sole traders and partnership businesses can all be viable again, but they need a plan that goes beyond the end of measures such as the Corporate Insolvency and Governance Act 2020. The failure to plan will lead to disaster for millions of people and just add to the significant problems that we have already seen as we come out of the crisis and into recovery.
I thank Members for their valuable contributions to this debate—and, indeed, to the other, general debate I seem to have been hearing about coronavirus support beyond the regulations. Members have highlighted the importance of the measures that the regulations extend and the necessity of extending them so that businesses can continue to benefit from them.
I welcome the return to working with the hon. Member for Manchester Central (Lucy Powell). We are in a grander setting than usual, but the conversation remains. I understand her concern about the fact that we have come back to extend these regulations, but it is important to remember that they contain some important powers on things such as wrongful trading and the moratorium, and that we are holding a lot of things in stasis. It is right that we get the balance right between giving businesses the certainty that she rightly asks for and using Government interventions in these matters sparingly and continuing to scrutinise them in this place. I would rather that we come back and do our work regularly than overstep in respect of these powers and intervene too much in the economy. It is important to keep an eye on these things.
The hon. Lady raised the issue of those businesses that have been excluded, or that have been coming back with requests for more support, including the travel sector, the wedding sector and the visitor economy as well. They are all hugely important businesses and sectors that are vital for our recovery. We are working on all those areas. We have the global travel taskforce. My colleagues in the Department for Transport are working on international travel. I am working with colleagues on weddings. The Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), is working on events and domestic tourism. All of these areas will be hugely important not just for the economy as a whole, but to get our towns and cities back open again. As Minister for London, that is something that I feel and see on a day-to-day basis.
The hon. Lady talked about Greensill and Liberty. Clearly, there are concerns here that need to be addressed, but, obviously, speculation about Liberty Steel and other businesses can in itself cause uncertainty to investors, employees, and people seeking to work with those companies. We are monitoring the situation. We are engaging with Liberty Steel, and we are engaging with the unions. I know that the owners of Liberty Steel are seeking a market solution, but we will continue to monitor that situation. We are also engaging with the sector, with trade unions and with the devolved Administrations to make sure that we can develop a long-term, sustainable future for the UK steel industry, because it clearly has an incredibly important role in the UK.
I say to my right hon. Friend the Member for South Northamptonshire (Andrea Leadsom), erstwhile Secretary of State for Business, Energy and Industrial Strategy, that we want to make sure that, within our Department, we are building on her excellent work in the areas of audit reform and corporate governance. She rightly pointed out some significant failures, including BHS and Carillion to name just two, and we want to make sure that we can work on that within our audit reform work. We have already published a consultation to enhance the UK’s audit control and regulation, and we will make sure that we have full debates in this place as we bring those proposals forward for scrutiny in Parliament and in terms of legislation.
Let me turn now to the hon. Member for Aberdeen North (Kirsty Blackman). I would like to pass on my thanks to others who noted her comments on depression in a previous debate. It is so, so important to speak out. I really welcome her personalised appeal to people, making sure that they know that it is okay not to be okay. They were wise words, and words that we must all take on board. There has been a mental health aspect to the lockdown. Obviously, business uncertainty plays a part. There are lots of businesses, small and large, that I see and hear from on a day-to-day basis, which are incredibly stressed and incredibly worried. I valued her words.
The hon. Lady talked about companies struggling to get back on their feet. Clearly, that is the case. I do not want to get into a wider debate about coronavirus support, but we realise that, with many of these measures, there is the risk of cliff edges, and we will continue to work through those and to flex to make sure that we can support businesses. She talked about smaller organisations as well, especially around tech and IP. Yes, we must make sure that we are working on those, too.
Over the past year, businesses have faced an exceptionally challenging time, with many unable to trade, or their ability to trade at full capacity restricted owing to social distancing measures. These regulations will provide the much needed support for businesses as we continue with the Government’s four-step road map out of lockdown, allowing them to concentrate their best efforts on reopening or continuing to trade and building on the foundations for economic recovery in the UK. We want to get to that economic recovery.
Finally, let me answer the hon. Member for Sefton Central (Bill Esterson). When he was looking to throw this open to a wider debate, I think he missed the strengthening of our prompt payment code, which was done in consultation with the signatories to the payment code, and indeed the fact that we have got more to sign up to that as well. When he was looking for a wider debate about coronavirus, he also missed the plan for growth, which does exactly what it says on the tin. It looks beyond these measures. It is a plan and, funnily enough, it is a plan for growth, which goes beyond 30 June. Careful consideration has been given to extending these temporary measures, and the Government will continue to monitor the situation closely.
I thank hon. Members for their valuable contributions to the debate. I commend the regulations to the House.
Question put and agreed to.
That the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 (S.I., 2021, No. 375), dated 22 March 2021, a copy of which was laid before this House on 24 March, be approved.
On a point of order, Madam Deputy Speaker. During Prime Minister’s questions today, the Prime Minister claimed that
“last night our friends in the European Union voted to approve our Brexit deal, which he opposed.”
That is totally incorrect. You will remember, Madam Deputy Speaker, that in an extraordinary sitting of this House of Commons on 30 December 2020, the Leader of the Opposition and the whole Labour party voted for the Brexit deal agreed by the Government and the EU. As limited as it was, we backed it and avoided a no-deal scenario. Do you agree, Madam Deputy Speaker, that it is vital that the Prime Minister returns to the House today to swiftly correct the record?
I am grateful to the hon. Lady for her point of order. I hope she will appreciate that it is not really a point of order for me, but I am sure that the Treasury Bench will have heard what she has said and will report it back in the usual way, through the usual channels. The hon. Lady has obviously also placed it on the record by raising the point of order in the way that she has.
We will have a short two-minute suspension for cleaning before the next business.
Business of the House (Today)
That, at this day’s sitting, the Speaker shall put the Question on the motion in the name of Keir Starmer relating to the Immigration (Guidance on Detention of Vulnerable Persons) Regulations (SI, 2021, No. 184) not later than 90 minutes after the commencement of proceedings on the motion for this Order; the business on that motion may be proceeded with at any hour, though opposed; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Scott Mann.)