Commons Urgent Question
The following Answer to an Urgent Question was given in the House of Commons on Wednesday 2 December.
“On Monday, Arcadia Group Ltd, which employs approximately 13,000 people, appointed administrators, who are assessing all options available to the group. They will honour orders made over the black Friday weekend. No redundancies have yet been announced and existing sales channels will continue to operate while administrators evaluate options. The Secretary of State has written to the Insolvency Service asking that it expedites consideration of the administrators’ report. Yesterday, Debenhams, which employs approximately 12,000 people, announced the decision of administrators to wind down the company. No redundancies have been announced and existing sales channels will continue to operate while administrators evaluate options. We know that this will be a worrying time for employees and their families, and we stand ready to support them. I pay a particular tribute to the hard-working staff, who have kept these well-recognised businesses going in difficult times for so long.
Although the Government have no role in the strategic direction or management of private retail companies, we are in regular contact with both companies and the administrators in order to understand fully the situation they are facing. The coronavirus crisis has made life difficult for retailers such as Arcadia and Debenhams, particularly those that were already facing challenging trading conditions before the pandemic. We acted quickly at the start of the pandemic to deliver one of the most generous and comprehensive economic packages in the world. It included: the coronavirus job retention scheme, which up to 30 September had provided £7.7 billion-worth of support to companies in the retail and wholesale sector; removing all eligible properties in the retail, hospitality and leisure sectors from business rates for 12 months—that is worth more than £10 billion; cash grants of up to £25,000 for retail, hospitality and leisure businesses with a rateable value of between £15,000 and £51,000; more than £50 billion in business loans, which supported 9.6 million jobs and provided flexibility; and legislation to protect commercial tenants from eviction.
Through the plan for jobs, we have also announced a series of measures to protect, support and create jobs, including our £2 billion kick-start scheme and a doubling of the number of front-line work coaches, which will be important in this situation in particular. The Government have committed to supporting the retail sector, and we are working closely with industry through these unprecedented times, particularly to ensure the safe reopening of non-essential retail today. On Monday, my right honourable friend the Communities Secretary encouraged local authorities to allow shops to open for extended hours, to accommodate more shoppers safely in the lead-up to Christmas.
I will continue to work with the sector to meet future challenges. Indeed, I will co-chair the next meeting of the Retail Sector Council tomorrow to discuss our strategic approach to the sector. I have regular retail calls, including one last week, with representatives from Arcadia among the retailers on that call. We are confident that the sector has the skills, knowledge and drive to bounce back.”
My Lords, I am sure the whole House joins with me in expressing deep sympathy with those who are at risk of losing their jobs just before Christmas, at a difficult time in the high street and, more generally, because of the pandemic. During the passage of the Corporate Insolvency and Governance Bill earlier this year, we put forward amendments to make pension fund holders priority creditors when businesses go bust. Would this not be a very good opportunity for the Government to review their decision not to proceed on this issue? SMEs, such as those that supply Debenhams and Arcadia, do badly when big firms get into trouble. Their debts are rarely given priority in a liquidation and are lost if there is a pre-pack. The Government are consulting on the powers of the Small Business Commissioner. Will they ensure that much-needed new powers for the commissioner in this area are given proper consideration?
My Lords, I remember the noble Lord’s amendments to the Corporate Insolvency and Governance Bill very well, but it was always a question of getting the balance right. Elevating the rights of pensioners would have negatively impacted suppliers and the unpaid wages of existing employees. The trade credit reinsurance scheme is designed to support small businesses coping with the economic impact of Covid-19, and I assure the noble Lord that we will take his views on new powers for the Small Business Commissioner into account.
In an answer yesterday, the Minister Paul Scully noted that
“The independent Pensions Regulator has a range of powers to protect pension schemes”.—[Official Report, Commons, 2/12/20; col. 314-15.]
Under the watch of that regulator, using those powers, Philip Green ran up a deficit of £350 million in the Arcadia pension fund, while paying his family three times that. Does the Minister agree that this is proof that the regulator has too little power over business owners like Mr Green, and what do the Government plan to do about it?
The noble Lord is right to point out that the Pensions Regulator has a range of powers, but the Government do not involve ourselves in the running of businesses. Where there is evidence of bad practice, it is taken up through the relevant authorities. At this stage, it is difficult to estimate the shortfall between the assets and liabilities of the fund. The Pensions Regulator is working closely with the company and scheme to ensure that prior commitments are fulfilled.
My Lords, will my noble friend ask her ministry to make clear to the Treasury the damage done to UK business if HMRC does not tax international businesses effectively? About 10 million packages from China arrive in the UK each week. The Treasury proposes not to charge VAT on packages with a declared value of less than £135. That is around £100 billion of business per annum that UK firms are shut out from, because they pay VAT and the Chinese do not, and £20 billion per annum lost to the Treasury. Will my noble friend agree to meet me to discuss ways in which this damage can be avoided—which appear effective and not difficult to implement?
I agree to meet my noble friend to talk about these issues, but he is not quite right about VAT. The Government will collect VAT on parcels below the £135 threshold, but we will also implement a more robust system to do so from the end of the transition period. That will include removing a relief from VAT for the import of goods under £15, which has long been abused by overseas sellers, and improving VAT collection by placing the responsibility to collect VAT on an online marketplace where it facilitates a sale of up to £135.
The Minister will be aware that the vast majority of jobs that will be lost due to the collapse of Arcadia and Debenhams this week are held by women. That is mostly because jobs in retail can often be offered with part-time hours and a deal of flexibility. What plans does the Minister have to initiate programmes to get those women back into jobs—for example, working with employers to identify a greater selection of part-time employment and perhaps dedicated training programmes to enable women to reskill or upskill?
The noble Baroness is quite right to focus on the proportion of women who are employed in retail specifically. We are doing all we can for all affected employees and have doubled the number of front-line work coaches across the network of jobcentres, who will help with preparation of CVs and interview practice. Our plan for jobs also includes a series of measures to protect, support and create jobs. We are also helping those who have lost jobs in the pandemic back into employment through our £238 million JETS programme. I will write to the noble Baroness on the specifics of women employees and the projects we have to support them, having done some research.
My noble friend will be aware of the large rates bills faced by high-street and town-centre retailers. She will also aware that out-of-town shopping centres are not subject to the same amount of rates. Secondly, parking in town centres is discouraged or extremely expensive, whereas in out-of-town centres it is free and encouraged. Under these circumstances, how can our high streets possibly hope to compete against larger organisations, particularly online, which are operating at warehouse-level rates against town-centre rates? Surely this policy needs to be completely scrapped and to start over.
My Lords, it is right that all businesses make a contribution to maintaining the roads, buses and emptying bins—all things on which their customers rely—but the noble Lord asks a good question about the difficulties of following a green agenda and discouraging car use for out-of-town shopping centres. We need the whole system to be fair, which is why we will deliver a fundamental review of the whole business rates system. This will build on the changes we are making, which are worth over £23 billion to businesses over the next five years, and will take nearly half of all businesses in England out of paying any business rates at all. We have committed to small businesses by increasing the retail discount to 50% and, due to Covid-19, we have gone further and increased it to 100%.
My Lords, if Arcadia and Debenhams had worker-elected directors, they would have enriched the corporate governance at both companies. At Arcadia, they would have sought early resolution of the pension scheme deficit, and at Debenhams, they would have expressed concern about the overload of debt market equity owners. Their insights would have resulted in better outcomes for all concerned. Will the Government now follow many other European countries and legislate to create worker-elected directors for all large companies?
I cannot comment on the Government’s intentions or otherwise to create worker-directed representation on company boards, but the audit trail of Arcadia is quite clear. The auditor’s report was clear that there was a material uncertainty about the group’s ability to continue as a going concern. It also failed to publish its 2019 accounts this August. Late filing of accounts attracts an automatic penalty fine and is an alert. As to whether there need to be specific investigations of directors, the administrators have a duty to report within three months of the insolvency on the conduct of the company’s current and former directors.
The Government have done a great deal to support this highly competitive sector, and little more can profitably be done to help these firms. Schumpeter’s creative destruction nearly always builds a better world eventually, as resources and skilled staff shift into new areas of opportunity; I remember that from the sad collapse of Woolworths when I was in retail. What does the Minister think can be done with the stores and sites that are freed up by this sad collapse this week?
I thank my noble friend for her supportive and constructive comments. The Government recently reformed the use classes to create a new commercial business and service use class. This will give businesses greater flexibility to change to a broad range of uses such as leisure and as shops and offices, as well as nurseries and health centres, without the need for planning permission. This means that businesses will be able to adapt to changing circumstances and respond to the needs of their local communities more easily and quickly. More widely, we are looking to transform the planning system as set out in the White Paper, Planning for the Future, which will make it simpler, quicker and more accessible, and more certain.
My Lords, the time allowed for this Question has elapsed. I apologise to the noble Lords, Lord Mackenzie, Lord Liddle and Lord Foulkes, that we did not have time for their questions.