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HMRC: Winding-up Petitions

Volume 716: debated on Wednesday 13 January 2010

Question

Asked By

To ask Her Majesty’s Government what proportion of total winding up petitions are being lodged by Her Majesty’s Revenue and Customs and other Government departments.

My Lords, the proportion of winding-up petitions filed by Her Majesty’s Revenue and Customs in England and Wales between April and September 2009 is about 30 per cent. The proportion of petitions filed by other government departments over the same period amounted to less than 2 per cent.

My Lords, I am grateful to the Minister for that response. It is in fact at variance with the research findings of the accountants Hacker Young that were published earlier this week, which found that, in the last six months, HMRC accounted for 43 per cent—nearly half—of all petitions for insolvencies. This is at a time of recession, when insolvencies are increasing at a rate that is a great tragedy. Can the Minister assure the House that HMRC, and indeed any other government departments, are treating small businesses fairly in these difficult times, given the pressure that they are putting on banks and other lenders to treat their customers fairly?

I thank the noble Baroness for her supplementary question. I can assure her that departments are treating businesses fairly. HMRC’s Business Payments Support Service has supported over 160,000 businesses collectively employing more than 1.2 million people, spread over £4 billion-worth of tax. Of this, more than £3 billion has already been repaid. HMRC will continue to offer this service as part of its time-to-pay arrangements. On company failures, I would say this. We currently have registered at Companies House double the number of companies registered in the early 1990s, when we had a failure rate of 2.6 per cent. Among the companies currently registered, we have a failure rate of only 0.9 per cent. So I think that the record of HMRC and the Government in assisting companies during a very difficult period of recession is exceedingly good.

Lord Hunt of Wirral: Is the Minister aware that this is a very serious situation? I think that we are all very concerned about some of the figures he has given. At a time of record levels of youth unemployment, will he extend the answer to cover winding-up petitions presented by companies in which the Government have a majority shareholding, such as banks?

I will have to come back to the noble Lord on that particular issue. We have the break-downs for the different government departments but not for that particular area. However, I stand by my previous statement. In the wider measures that the Government are taking to support businesses—whether in the reduction of VAT, the car scrappage scheme or the encouragement of enterprises—we are doing everything we can to ensure the maximum success of companies and to reduce the number of failures. As I said in my previous statement, compared to previous recessions, we are doing much better than expected in the level of failures.

My Lords, clearly it is good that businesses do not go into liquidation. However, is not one of the problems at the moment pre-packs? Organisations which have often been less careful in their management shed their debts, often get their capital equipment back for free and then undercut small and medium-sized businesses that have traded fairly and looked after their resources well.

My Lords, our view of pre-packs is that they have a role to play. In some cases they have managed to preserve value in a business, thereby retaining jobs and economic activity which otherwise would have been lost. There is no perfect solution, but we believe that in certain circumstances they have benefited the business concerned and thus enabled people to retain their jobs.

My Lords, I declare a past interest as a former senior partner in Hacker Young in the Manchester branch. Will my noble friend have a word with HMRC about the interest charge it makes on small companies which delay payment of VAT or any other form of taxation? The rate it is charging seems to be even higher than that at which a company could borrow it from the bank.

I think that my noble friend is aware of the Government’s attitude to prompt payments. I will do my best to take his point into account and recognise its validity.

Does the Minister accept that one of the reasons why there is such a high level of company failures is that the banks are refusing to roll over facilities on terms that even vaguely reflect the previous facilities and are charging a lot more? Will the Government keep pressure on the banks to make sure that, particularly in the manufacturing sector, when companies with a good order book need a facility, they can renegotiate it with a level of fees and rate of interest that are not significantly worse than those under which they previously operated?

I can reassure the noble Lord that we will do everything we can. We have been working in this area. We have introduced a range of measures to help businesses survive the recession and come through it in a stronger shape, including action to ensure that businesses get the finance they need and securing legal commitments from RBS and Lloyds to lend an additional £27 billion to business between March 2009 and 2010.