Considered in Grand Committee
My Lords, these regulations were laid before the House on 24 March this year. It is now over a year since the emergence of Covid-19, and the Government have consistently taken the swift action needed to save lives, limit the spread of the disease, protect the NHS and mitigate damage to the economy. The Government’s successful rollout of the vaccine programme and the implementation of their 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 35 million people have had their first vaccination and more than 18 million have had their second dose—including me, yesterday. The British public have also risen to the challenge of suppressing the spread of the virus by sticking to the rules: staying at home; getting tested when appropriate; isolating when required; and following the “hands, face, space” and “letting fresh air in” guidance.
However, we are not out of the woods just yet, and the emergence of new strains of the virus mean that now is not the time to become complacent. The continuation of social distancing measures, introduced to limit the spread of the virus and help save lives, is crucial while we wait for everyone to be vaccinated, but this of course continues to have an effect on business. The Government recognise that, while most businesses have been able to reopen and many have received significant financial support, social distancing measures remain and some businesses continue to face uncertainty and financial difficulties, as they are still unable to open or are not yet able to trade at full capacity.
It is therefore crucial that the Government continue to support businesses by giving them every chance to survive, fully reopen and get through this period of uncertainty. This statutory instrument will do that by extending the temporary measures first introduced by the Corporate Insolvency and Governance Act 2020—which were due to expire variously at the end of March or April—by a further three-month period until the end of June 2021. The temporary measures being extended until 30 June 2021 are: first, the suspension on serving statutory demands and the restrictions on filing petitions to wind-up companies; secondly, the small supplier exemption from termination clause provisions; and, thirdly, the suspension of the wrongful trading provisions. In addition, modifications to the moratorium provisions and the temporary moratorium rules are extended until 30 September 2021.
The temporary suspension on serving statutory demands and restrictions on winding-up petitions continue to help many viable companies during these difficult trading conditions by removing the threat of aggressive creditor action at a time when many businesses remain closed or are unable to operate at full capacity, particularly in the retail, hospitality and events sectors. Extending these measures further will give businesses the confidence and support they need while they are doing their best to reopen safely and return to as normal trading as they can in these unprecedented times.
Noble Lords will know that the Government have already extended the temporary suspension on the ability of commercial landlords to forfeit business tenancies. This will give further protection to tenants who have only recently been able to restart trading after the restrictions introduced because of the most recent lockdown.
Although these measures are intended to help companies that may be subject to aggressive creditor enforcement, the Government have been clear that they are not to be seen as a payment holiday. Where companies can pay their debts, they should of course do so. It is important to note that these measures aim to encourage forbearance and do not extinguish any existing creditor rights or interests. In addition to the protection that these measures give, they are also intended to give those companies with unavoidable accrued arrears caused by the pandemic time to take advice from restructuring professionals and to negotiate and reach agreements with their creditors wherever possible.
I know that many businesses and their business representatives will welcome the continued support that these regulations will give them during this extremely uncertain time. However, I also recognise that these measures will mean a further period of uncertainty for creditors where some of their rights to enforce the recovery of their debts are temporarily restricted. Although we believe that the extension of the statutory demand and winding-up provisions will be particularly welcomed by commercial tenants, it applies to all business sectors of the economy.
Noble Lords will be aware that wrongful trading proceedings are an action that may be taken by an insolvency office-holder against directors, which can lead to a director being held personally liable for losses to a company’s creditors where they allowed the company to continue to trade beyond the point at which it became inevitable that the company would enter formal insolvency proceedings. A successful action may lead to losses being recovered for the benefit of creditors but, more importantly, wrongful trading has a vital role in preventing reckless insolvent trading. The threat of personal liability is a strong deterrent against directors causing companies to continue to trade at the risk of creditors.
The suspension of liability for wrongful trading until 30 June 2021 will allow directors to take steps to save companies that would otherwise be viable but for the impact of the pandemic without the threat that they may be personally penalised for losses incurred during a period of great economic uncertainty if things did not improve and the company later had to enter insolvency proceedings. I should stress that suspending wrongful trading does not give a free pass to directors or allow them to act irresponsibly. Other vital protections for creditors when a company is facing insolvency remain in place, such as the directors’ duties set out in the Companies Act, fraudulent trading or misfeasance actions under the Insolvency Act, and disqualification from acting as a company director.
Finally, the new company moratorium introduced by the Act gives financially distressed companies protection from creditor enforcement while they seek a rescue. In normal economic conditions, the moratorium is intended to work with certain entry criteria that must be met before a company can enter into one. These criteria protect the integrity of the moratorium, which should be used only for those companies with a realistic prospect of rescue. Noble Lords will recall that it was recognised during the debates on the Corporate Insolvency and Governance Act that it would help fundamentally viable companies impacted by the pandemic to make use of the moratorium if these criteria were temporarily relaxed.
These regulations will extend some of those temporary relaxations to 30 September 2021. They include: allowing a company subject to a winding-up petition to access a moratorium simply by filing the relevant documents at court, rather than having to make an application to the court; and, secondly, disapplying the rule that prevents a company entering a moratorium if it has been subject to a company voluntary arrangement, been in administration or been in a previous moratorium within the last 12 months. These regulations will also extend the temporary administrative rules for the moratorium contained in Schedule 4 to the Corporate Insolvency and Governance Act, which enable it to operate.
The important package of temporary measures, first introduced by the Corporate Insolvency and Governance Act last year and by subsequent extensions, continues to be widely welcomed by businesses. We are told by business that these measures, alongside the availability of new permanent tools, have been essential in supporting continued trading, seeking a rescue or restructuring, and allowing many companies to trade without the threat of creditor action being taken against them.
In conclusion, the Government recognise that these measures represent a significant incursion into the normal operation of insolvency legislation, in particular to the rights of creditors, and as such it is right that they are not extended for longer than is absolutely necessary. These temporary measures will, therefore, continue to be kept under constant review. I beg to move.
My Lords, I thank my noble friend for setting out so clearly the effect of these extension regulations. I support these extensions, as I have done previously—this is not the first time we have been here, of course—but I have some questions for my noble friend.
The Corporate Insolvency and Governance Act 2020 introduced the new stand-alone moratorium procedure for companies. This had been proposed earlier and was, of course, very much a pre-pandemic proposal. Most of the other legislative changes in that Act were driven by the pandemic, and quite rightly so. Given that the moratorium procedure is central to some of the context of these regulations, I wonder whether my noble friend can update the Committee on the number of moratoriums that have been applied for, although I appreciate that that statistic might be difficult, the number granted, which should be more straightforward, and the number that are live today.
Few would argue—and I do not do so—that those businesses impacted by the Covid pandemic and which find themselves in financial difficulties, unable to pay their debts because of the pandemic, should be granted a breathing space, which is what these regulations seek to do. I support that. What I do not understand, and it is not apparent from listening to my noble friend, is why the length of the breathing space varies according to different areas of activity under the regulations.
Protection of companies from creditor action on statutory demands and winding-up petitions lasts only to 30 June 2021—I note in passing that that is not far away, and I suspect we will be back here again, probably after the event, to extend this period, which I do not necessarily disagree with. On the other hand, protection for the operation of the company moratorium goes on to 30 September 2021. Protection for directors and shadow directors from the wrongful trading provisions lasts only to 30 June 2021. There is no explanation in the regulations for the different end dates, other than the somewhat cavalier statement in the Explanatory Memorandum that
“the extension for each measure has been determined having regard to the nature of the measure in question.”
This seems somewhat circular to me. What is it inherent in the nature of the statutory demand versus the moratorium that requires a different end date, particularly, as I say, given that I would be surprised if we are not asked to extend these dates again? I believe I raised this issue on our last outing.
As I have said, I support these provisions, but we need to recognise—to be fair, the Minister made this point too—that, notwithstanding the small business carve-out exemption, these measures are an interference with the normal rules of insolvency, and indeed the normal rules of trading. However, a year into these restrictions—my noble friend referred to them as temporary, and I think we are going to have to revisit that word before too long in this context—there has been no consultation on them. The Explanatory Memorandum does however state that the
“Government has engaged informally with a range of stakeholders”.
The Minister in passing made reference to a welcome, I think, from business. The Explanatory Memorandum also refers to engagement with
“business representative organisations and investor groups on these matters.”
Can my noble friend tell the Committee what groups these were, what the nature of the engagement was and what the groups said? That would be important for us in these proceedings.
Lastly, I turn to the position regarding wrongful trading. I note what my noble friend said about the suspension of liability for wrongful trading for directors and shadow directors, and I wonder why this part of directors’ liability has been seized upon. My noble friend noted, I think with approval, that other liabilities in relation to directors’ duties, disqualification and so on are unchanged. Why, then, have the Government singled out wrongful trading as a particular area to suspend during this period? It is not clear to me. There may be some reason, and I would be grateful if my noble friend could enlighten us on that.
Subject to these caveats and concerns, I support these regulations.
My Lords, clearly we are at a critical time for UK businesses. It is widely recognised that businesses face enormous liquidity issues when an economy comes out of a downturn as much as when the downturn starts. I draw noble Lords’ attention to my interests as set out in the register, which include investments in all sorts of companies—I think they are all solvent, but one never knows.
As of now, as my noble friend eloquently explained, the effects of the downturn have been cushioned by the somewhat heroic efforts of the Chancellor, and the teams at the Treasury and BEIS, in providing a cushion for so many businesses in different ways, from loans to grants, rates relief and furlough, and, as my noble friend explained just now, measures that were set out in the Corporate Insolvency and Governance Act, which we debated in this House a short while ago. It was a great achievement and showed the Government being fleet of foot at their best.
There is no question that we are coming through the difficult times to some sort of normality, and even possibly a mini boom, so the question is whether we need all the measures in the Act to be extended. I plan to ask my noble friend broadly the same question as my noble friend Lord Bourne of Aberystwyth asked: why are the measures not coterminous? Perhaps he can explain what has happened in the interregnum for those measures which expired on 31 March.
I have been studying some commentary and research from the turnaround specialist group R3. When the previous extension was under consideration it said:
“The Chancellor’s decision to temporarily extend his COVID insolvency measures, coupled with the other aspects of the support package announced today, will be welcome news to many businesses across the country … The insolvency and restructuring profession will also welcome the extension of the temporary relaxation of entry requirements for the new moratorium procedure. This measure could enable more businesses to access this important tool over the coming months, and help to facilitate the rescue of otherwise-viable businesses.”
“However, while the Chancellor’s announcement will make a real difference in the coming months, these measures can’t be prolonged indefinitely, and the Government will face a number of questions when this extension ends.”
It is important to avoid a cliff edge, but the longer temporary measures are in place, the harder the recovery will be. On early intervention, a smart and staged plan is needed for businesses to be in turnaround, ideally, rather than insolvency.
The main issue that businesses will face will be working capital and skills shortages. On the former, the reintroduction of Crown preference has reduced the amount of headroom in inventory finance to the point where there may not be any facility on which to draw. As a key creditor in most corporate insolvencies, along with landlords and banks, the Government have a direct role to play in supporting viable restructuring and business rescue proposals. HMRC, in particular, has not always taken a constructive approach to these proposals although, I understand from briefings, it is being as lenient as it possibly can be to companies that have been sensible taxpayers. However, every step should be taken to encourage HMRC to be as helpful as possible. This is now very important because, as I have noted, HMRC has Crown preference, which is a huge change from the former arrangements. Perhaps the Minister will advise us of whether the Government have any plans to review this preference.
As part of the excellent build back better policy, there is an inevitable need to reallocate resources, improve productivity and, therefore, grow sustainable jobs for businesses that can truly thrive in post-pandemic global Britain—as in post-Brexit Britain, my noble friend will note. There will be a painful but necessary process to get Britain back to fighting fit. There will be casualties; we have to accept that. The enormous challenge we have is to devise ways for fundamentally sound businesses to get through the next year or so, but not to prolong the agony for those that will just use up more and more resource before, sadly, they reach their inevitable end. I understand that the current rate of insolvencies is, roughly, one-third below the normal level, so there is a build-up of companies and businesses facing insolvency.
I will use this debate to make some related points to this SI. First, what will the Government’s approach be to the mounting level of corporate debt in the economy? What further flexibility will HMRC provide to Covid-hit businesses that need extra time to pay their debts? The Government need to make the most of the time they have bought for businesses, industry and the economy, not least by the Act, to consider how they will answer these questions. In particular, are there any further plans for some sort of equity fund, which was being discussed about a year ago, possibly through the British Business Bank or the Business Growth Fund, which celebrated its 10th anniversary last week? This needs to be reconsidered, as so many businesses just need a modest injection of equity—say £2 million or £3 million. I say “modest” in the nature of the world because £2 million or £3 million is below the amount that traditional private equity arranges and is not necessarily within the scope of EIS or SEIS. Of course, this is an opportunity for us to look again at the EIS rules, now that we are out of the EU. This is the famous equity gap that was first raised by Harold Wilson, when he was Prime Minister.
I turn to a subject that my noble friend and I have discussed at length, the moratorium. In answer to the question from my noble friend Lord Bourne, I think that there have been only four moratoria between June and December. There is an argument that initial take-up was low because of other reliefs, such as statutory demands, winding-up petitions, furlough payments, et cetera, which are protecting companies that might otherwise need the procedure. The extension is to the relaxation of the eligibility criteria for a moratorium to make it more accessible. I understand that the moratorium is intended to be a permanently available procedure and that permanent rules will be introduced in due course. Can the Minister comment on that and on whether the changes to the moratorium that we debated are under review?
By taking a more active and engaged stance as a creditor and legislator, I am sure that the Government could help to save more potentially viable businesses, thereby safeguarding thousands of jobs, securing future tax income and giving companies a chance to deal with the liabilities resulting from this pandemic. However, there must soon be a time when we allow businesses to find out if they are viable without further support, and thereby protect creditors from prolonging and deepening the problem.
My Lords, the regulations before us extend the life of temporary measures to 30 June this year, but the Government have failed to provide any road map to show how businesses can negotiable the cliff edge that is inevitable whenever the regulations end. The past 15 months should have been used to develop such a strategy, but none is in sight at the moment.
Covid-related loans have been welcomed by many businesses and have enabled them to manage and survive the crisis. Such support has been welcomed by big and small businesses, including easyJet, British Airways and many others. Of course, some loans will never be repaid. However, this loan-centric policy is also storing up more problems for the future. In time, the loans and interest thereupon will need to be repaid. The repayments will deplete business cash flows and dampen business recovery, employment and investment in productive assets.
A better policy option would have been to take an equity stake in businesses wherever possible. This would mean that business cash flows would not be depressed and would instead be available for investment in productive assets. In time, the Government could sell their equity stake to recoup their investment if they so wished. Of course, the equity stake would need to be written off if the business in question did not survive. However, that risk is no different from a situation where the business has been supported by government loans. Even now, there is nothing to prevent the Government converting their loans to an equity stake wherever possible. I hope that the Minister will agree with this proposal and the Government can therefore avoid the problems that will surely arise and affect many businesses.
In previous debates, I have asked the Government to help unsecured creditors. Under insolvency law as it stands now, unsecured creditors recover little of the debts owed to them. This in turn affects their survival, jobs, investment and local prosperity. There is no economic or moral reason for enabling secured creditors —mostly banks and other financial institutions—to walk away with most of the proceeds from the sale of a bankrupt business’s assets. This leaves little for unsecured creditors and hits micro-businesses and SMEs particularly hard. Their prospects of survival are strangled by inequitable insolvency laws.
The current insolvency laws do not provide equitable risk-sharing and the biggest burden is borne by those least able to carry it, namely micro-businesses and SMEs. Such entities are not diversified and therefore cannot absorb the risk arising from the collapse of a major customer. In contrast, banks hold diversified portfolios and are in a position to absorb risks arising from the default of loans. Insolvency law needs to be changed. At least 40% of the proceeds from the sale of bankrupt businesses’ assets must be ring-fenced for distribution to unsecured creditors to give them a chance of survival. If the Minister does not agree, I hope he will explain why SMEs are being penalised by the current insolvency laws.
There is no legislation in place to prevent insolvency practitioners enriching themselves by prolonging insolvencies and charging exorbitant fees. In some cases, partners are charging more than £1,500 an hour for their services; I have seen the invoices. Government statistics show that around 14,328 insolvencies were not finalised, even after 15 years. This is a licence to loot and no regulator has done anything to check it. It is no good saying that a creditors’ committee can act because many insolvencies do not require the prior approval of creditors. In any case, small businesses are too busy looking for replacement business and do not have the time to attend such meetings. Even if they did, the votes cast by banks and private equity would override their concerns. The cost of administration and the liquidation fees are directly borne by unsecured creditors. In other words, higher fees for insolvency practitioners reduce the amounts that can be recovered by unsecured creditors. I hope the Minister can explain why secured creditors do not bear the cost of insolvency —the insolvency practitioners’ fees, in other words.
I urge the Government to provide an insolvency road map so that more businesses can survive the coming crisis, which will not end soon but will roll on for quite a few years yet. We need a strategy in place now.
My Lords, I support this measure. It is right that the Government should take action to protect corporates from insolvency in the current pandemic emergency situation. The Explanatory Memorandum makes it clear that the measures are designed to help UK companies and “other similar entities”, so I hope I will be forgiven for pointing out that the measures have no effect and give no relief for those running businesses as self-employed persons from the equivalent of corporate insolvency in their case, which is of course personal bankruptcy. This also applies to the directors of small companies who have been required to give personal guarantees to their creditors and landlords.
I take as an example for the benefit of the Committee a bespoke tailor of my acquaintance. Effectively, his business and the skills he has learned so hard over the years have been criminalised during the past year; it is impossible in practice to do an inside leg measurement without breaching Covid regulations. His past earnings—now very much in the past—exceed the limit for help under the self-employed income scheme that the Chancellor has made available. Of course, trading as he does from shop premises, he is protected from eviction and has had business rate relief, but he is not immune to personal bankruptcy proceedings brought by his landlord. Bankruptcy, even more than corporate insolvency, threatens one’s home, one’s family and one’s reputation in a terrible way. It is a terrible threat to live under. My example is only emblematic, of course; it applies to the self-employed as a class, especially those trading from business premises and, as I said, to directors of companies.
Short of legislation, because legislation is not the essential answer to everything, there are things that the Government could do. For example, they could prevent such claims coming before the courts for a period to come—certainly while the pandemic lasts and for a period beyond—in the same way as they have prevented actions for eviction being brought before the courts. They could even use the force of moral suasion—the bully pulpit, if you like—against unscrupulous and unforgiving landlords. There may be other things that they can do to get landlords and tenants working better and more effectively together. I hope that my noble friend will be able to offer some words of support to those in this very difficult position.
The noble Viscount, Lord Trenchard, has withdrawn so I call the next speaker, the noble Lord, Lord Bhatia.
My Lords, as the Explanatory Memorandum states, this SI
“has been prepared by the Department for Business, Energy and Industrial Strategy”.
It goes on:
“This instrument makes provision to further extend the duration of some of the temporary measures introduced by the Corporate Insolvency and Governance Act 2020 … beyond their current expiration dates, namely: restrictions on the use of statutory demands and winding up petitions from their current expiry date on 31 March 2021 to 30 June 2021; the modifications to moratorium provisions and temporary moratorium rules from their current expiry date of 30 March 2021 to 30 September 2021; and the small supplier exemption from termination clause provisions from its current expiry date of 30 March 2021 to 30 June 2021. This instrument also extends provisions suspending liability for wrongful trading in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 … made under the CIG Act, from the current expiry date of 30 April 2021 to 30 June 2021.”
The EM also states:
“The instrument is made using the powers given by section 20 and section 41 of the CIG Act to make regulations which amend or modify corporate insolvency or governance legislation, and to extend temporary provision in the CIG Act respectively and is subject to the made affirmative procedure … the Secretary of State must have considered the effect of the regulations on those likely to be affected by them. The Secretary of State must also be satisfied that the need for regulations is urgent, the regulations are proportionate, and that the same result cannot be achieved either without legislation or by using a different power. The Secretary of State must also keep the need for the regulations under review and revoke or amend them if appropriate. This power is being used to amend secondary legislation … The territorial extent of this instrument is England, Wales and Scotland.”
My Lords, like other noble Lords who have spoken in this debate, I have a strong sense of déjà vu. We are back debating the extension of measures in the Corporate Insolvency and Governance Act 2020. As we have heard, these measures include extending the
“restrictions on the use of statutory demands and winding up petitions”
from March to June. The modifications to moratorium provisions and temporary moratorium rules are extended from March to September; the small supplier exemption from termination clause provisions are extended from March to June; and the provisions suspending liability for wrongful trading are extended from April to June.
We welcome the Government extending the safety net for businesses in distress because of this pandemic. Just as we supported the emergency legislation last year, we welcome any measures to support the businesses that closed to keep us safe. As the Minister knows, we argued then that the protections in the Act should be extended over a longer period. Now, as we extend them again, I stress that this causes 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 but we must remember how many people are still being affected by insolvency. According to the most recent government statistics, there were 29,140 total individual insolvencies in the first quarter of this year—2021—with one in 424 adults having become insolvent in the last 12 months.
Throughout this 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 support that the Government have repeatedly failed to address. In particular, we are concerned about the levels of debt facing businesses, whether through the loans they have taken, the VAT they have had deferred or the rent holidays they have had but will soon have to start repaying. These measures are welcome in staving off creditors but they just kick the can down the road. They 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.
After the Queen’s Speech, it is also clear that the Government continue to dodge the need for wider reform of our insolvency laws, particularly in providing greater protection and support for key industries and their workers. Currently, there is no safe place to refinance or protect such a 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.
Even if these changes do not come forward, Ministers should not be bystanders. They should intervene early—before liquidation if necessary. This would mean that workers would not lose their accrued service benefits, and would protect the supply chain. We support today’s measures but call for wider reform tomorrow.
First, I thank all noble Lords who have contributed to what I thought was a very interesting and informative debate. The points raised have highlighted the importance of the measures being extended by these regulations and the necessity of extending them so that many businesses can continue to benefit from them. Over the past year, businesses have faced an exceptionally challenging time, with many unable to trade or having had their ability to trade at full capacity restricted due to social distancing measures.
My noble friend Lord Bourne asked how many moratoria there have been to date. The answer is four. This relatively low number is a direct result of the decisive government action to support the economy through the worst of Covid-19’s economic impact, which has helped many businesses and saved jobs. These measures have meant that there has been somewhat suppressed demand to date for the moratorium. It should be noted that there have also been far fewer corporate insolvencies in this period; for example, government statistics show that corporate company insolvencies in March 2021 were 86% down on the same month last year—as I say that, there is a clap of thunder; I hope that is not a sign of impending doom.
As the economy begins to emerge from the pandemic, it is of course sad to report that we expect the moratorium to be used more frequently. It will be subject to review to ensure that it works as intended no more than three years from Royal Assent of the Act.
On the different end dates my noble friend asked about, the Government recognise that these measures have a significant impact on the normal working of insolvency legislation and the rights of creditors; it is therefore right that they are not extended for longer than needed. The temporary provisions for moratoria in Schedule 4 are extended to 30 September because the consent of the Scottish Government may be required to implement replacement permanent rules for Scotland, as some aspects of corporate insolvency are devolved. Users have told us that when rules in both England and Wales and Scotland change, they prefer the rules to come into force in both jurisdictions at the same time. An extension of six months will therefore aid this process.
My noble friend also asked whom we consulted. We have engaged with major trade representatives including the Institute of Directors, R3, major restructuring firms and insolvency practitioners. There are too many to list now but I can write to my noble friend if he wishes to have a list.
My noble friend Lord Bourne also asked why we have singled out wrongful trading for these measures. Representatives have made it clear that wrongful trading is a strong deterrent to continued trading, and many responsible directors will cause companies to cease trading rather than risk the threat of future personal liability, with the impact that this could have on the lives of directors and their families and all it entails. As with all these measures, we will keep the need for them under constant review and act swiftly if evidence demonstrates a need to extend them further or turn them off.
My noble friend Lord Leigh asked about the Government’s approach to mounting levels of corporate debt in the economy. While many firms have been hit hard by the pandemic, government support has ensured that the corporate sector has remained resilient, with the increase in indebtedness matched by an increase in net deposits over and above the level of lending. Firms look likely to have used lending to increase cash buffers, both to cover deferred liabilities such as VAT and rent and to prepare for any further shocks. Firms in certain sectors such as hospitality, which has been hit hardest by the pandemic, have received additional government support in grants of up to £9,000 per premises. Support continues to be available to firms as restrictions are eased and economic activity rebounds.
Further temporary insolvency legislation and business support provided by the Government since the crisis began have resulted in fewer insolvencies than would normally be expected. Her Majesty’s Treasury is monitoring the impact that insolvencies will have on lenders’ balance sheets, which to date have remained largely resilient—backed of course by government action —and on their ability and willingness to lend to support economic recovery.
The noble Lord, Lord Sikka, raised some concerns about insolvency practitioner fees. In our view, it is right that insolvency practitioners are paid a fair rate for the work they do. The remuneration and expenses of insolvency office-holders are subject to the approval of creditors in each case and, of course, subject to the overall control of the court. Regulators have a statutory duty to encourage an independent and competitive insolvency profession that provides high-quality services at a fair and reasonable cost to the profession. Complaints about high levels of fees charged by an insolvency practitioner can be made through the Insolvency Service’s complaints gateway.
I was particularly grateful to my noble friend Lord Moylan for highlighting the many ways in which the Government have consistently supported business throughout the pandemic; he also made a number of very important points. He asked what the Government are doing to protect sole trader tenants and/or directors who have given personal guarantees against being made personally bankrupt by aggressive landlords; that is indeed a good point. As my noble friend will be aware, although the restrictions on insolvency proceedings were targeted at companies, the Government have put in place an unprecedented package of support to help the self-employed with their finances during the coronavirus pandemic; this includes the job retention scheme and the recovery loan scheme as well as a number of business support schemes operated by local authorities.
The Government recognise that many people are struggling financially due to the coronavirus. We have worked with mortgage lenders, credit providers and the Financial Conduct Authority to ensure that people can get and access the support that they need. We are also committed to helping people to access the necessary support to get their finances back on track. An extra £37.8 million has been made available to debt advice providers to support people in financial difficulty. I would always encourage businesses that have not been able to access support, or are not sure of the support available, to contact their nearest business growth hub. The Government have established a network of 38 of these hubs, with one in each local enterprise partnership area in England. Expert advisers can offer businesses of all sizes free, tailored, one-to-one guidance on areas such as business plans, building resilience and potential funding streams.
My noble friend asked why these temporary measures are not being extended for longer. The temporary measures can be extended by statutory instrument only for a maximum period, which was set down in the original primary legislation; for the insolvency measures, that is a maximum of six months. However, recognising that these measures involve a significant intervention into the normal working of the insolvency regime, including affecting the rights of creditors, it is right that these measures are put in place only for as long as is necessary and that we keep them regularly under review. The Government will keep this matter under review in the light of ongoing developments during the pandemic, and we will move swiftly to extend them further if that proves necessary.
Turning to my noble friend’s questions about the measures that expired at the end of March, this was solely due to a relaxation of the requirement to hold annual general meetings physically. The provision was effective for a limited period and it was not possible to extend it beyond 5 April 2021. Where there remain concerns in the business community that holding general and annual general meetings post March 2021 would be problematic given continued uncertainty around coronavirus restrictions, officials are working closely with stakeholders as a matter of urgency to explore non-statutory approaches to address the challenges that might arise upon the expiration of the temporary provisions.
Turning to the question of how we avoid a so-called cliff edge when these measures expire, the Government recognise the risks of such a scenario involving the accumulation of unpaid debts becoming due when restrictions and government fiscal support expire. Work is ongoing to develop possible solutions to enable a viable exit from these measures; that continues to support business during the recovery phase.
Finally, I turn to the question of the Government’s approach to the mounting level of corporate debt in the economy. While many firms have been hit hard by the pandemic, HMG support has ensured that the corporate sector remained resilient, with the increase in indebtedness matched by an increase in net deposits. As I said earlier, firms in certain sectors, such as hospitality, have also received additional support through grants of £9,000 per premises.
Further temporary insolvency legislation and business support, provided by the Government since the Covid-19 crisis began, has resulted in far fewer insolvencies than would normally be expected; I outlined the figures earlier to my noble friend Lord Bourne. We continue to monitor the impact of insolvencies on lenders’ balance sheets; backed by government action, these have been largely resilient to date, as have lenders’ ability and willingness to lend to support economic recovery.
The noble Lord, Lord Lennie, asked about the scope for wider insolvency reform. I can tell him that the Government always keep the insolvency regime under review and, if any change is needed, we will not hesitate to bring forward the necessary legislation. These regulations will provide much-needed continued 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 our economic recovery in the United Kingdom. Careful consideration has been given to extending these temporary measures, and the Government will continue to monitor the situation extremely closely.
Once again, I thank all noble Lords who have contributed to this debate.