I beg to move, That the Bill be now read a Second time.
On 23 March, the Government requested many businesses to close their doors to safeguard the nation’s health. We absolutely recognise the huge sacrifices that this entailed. My right hon. Friend the Chancellor, who has been at the Dispatch Box on a number of occasions, has outlined the unprecedented economic support for businesses and workers across the country.
Like the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband), I have regular conversations with businesses, business representative organisations and trade unions, and I know that the scale of what the Government have done has been appreciated across the board. We have supported millions of businesses and individuals through a range of support schemes. These have included grants to small businesses—over £10 billion out of the door now —loans, through the coronavirus business interruption loan scheme and coronavirus large business interruption loan scheme, and bounce-back loans, with more than £14 billion now paid out, as well as business rate holidays, tax deferrals, the job retention scheme and, of course, the self-employed scheme. By any international comparison, the effort that has been put into supporting businesses and individuals to safeguard lives and livelihoods is incredibly favourable.
Alongside those fiscal measures to support businesses and individuals and protect livelihoods, in this Bill we want to provide further support: non-fiscal measures to ensure that we can help businesses at a time of difficulty.
Is the Minister satisfied that the measures being proposed today could expire within 27 days? Is that sufficient time to address the problems that might be coming down the track?
As ever, the hon. Gentleman raises an incredibly important point. I will talk further about this, but that is precisely why we have ensured an opportunity to extend the temporary measures in the Bill, but by regulation, so statutory instruments will have to be laid before the House. However, I am sure that the sentiments he expresses are felt across the House. If we need to, I am sure that we will collectively look to extend some of the temporary measures to continue to help businesses.
The Bill will allow business owners time and space to explore rescue options. It will allow directors of companies that are technically insolvent, but simply because of a temporary drop in demand caused by the covid-19 crisis, to proceed with the business without the threat of personal liability. That has been incredibly warmly welcomed by businesses and business representative organisations.
Does my right hon. Friend agree that this Bill will give businesses in Redcar and Cleveland and across the country the much needed breathing space to get through this crisis?
My hon. Friend is already making a huge impact in supporting businesses in his constituency, and he is absolutely right. The whole point of these measures, both permanent and temporary, is precisely as he says: to give businesses the breathing space to allow them to see whether they can recover and ultimately bounce back. That is what we all want to see.
Unfortunately, some businesses fail. In my constituency, MG Rover collapsed 15 years ago, ripping a huge hole in the community in Northfield and Longbridge. Fifteen years on, over 6,000 people are owed money from the liquidation of MG Rover. Will my right hon. Friend look into ways in which we can speed up the process—15 years is too long and causes a lot of problems and anxiety for people—so that they can get closure and the money that they are owed.
Again, the manner in which the debate has begun demonstrates the consensus on supporting businesses, not just in our individual constituencies but across the country. I can give my hon. Friend a commitment that I am happy to meet him to discuss the case and see what more can be done. He is absolutely right—where we are able to, we must seek to speed up and provide that support to individuals who need it.
The Bill will provide extra flexibilities to hold AGMs online during the covid-19 pandemic and will also provide more time to file accounts and other filings with Companies House.
May I ask the Secretary of State whether companies have to apply for those extensions on filing, or will there be an automated aspect whereby Companies House will approach the companies affected?
Once the filing requirements are enacted, as my hon. Friend says, companies can make filings up to the extension dates. As was mentioned earlier, if there is a need to extend temporary provisions, we will look to see if that is required. While we recognise that these and other support measures will not, sadly, be able to save every business and every job, the Bill delivers commitments that will give businesses in difficulty due to the pandemic a fighting chance of eventually bouncing back.
There are indeed some important measures in the Bill, and we will undoubtedly scrutinise them in more detail in due course. I thank the Secretary of State for the work of the officials in his Department to support a number of businesses in my constituency, and I thank the Welsh Government for the support that they have provided through the economic resilience fund.
We have not had enough support from the banks, some of which have not only struggled to make themselves available to businesses seeking support through the loan schemes that the Government have set up but seem to be trying to push off their books businesses that could make it through the crisis. What does the Secretary of State have to say to the banks?
When we first launched CBILS there were a lot of concerns about how quickly the process was moving. I have been talking to banks individually and to senior managers in the banks, and I think that we are beginning to see movement. CBILS has had over 40,000 loans out of the door, and over 450,000 bounce-back loans have been made. If there are specific banks about which the hon. Gentleman has concerns—he, like all colleagues, is concerned about retaining employment in his constituency—I would be happy to take up those issues with him individually.
Because of the success of bounce-back loans—it is a much easier process to get a bounce-back loan than a CBILS loan—lots of businesses that need more than £50,000 have gone for a bounce-back loan as an interim step, but are restricted from taking a CBILS loan, as they can only have one or the other. Would my right hon. Friend consider allowing businesses to apply for a CBILS loan for a larger amount, subject to necessary lending criteria, then paying off the bounce-back loan so that they can get access to the finance that they need?
My hon. Friend makes an incredibly important point. I am sure that the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), will correct me if I am wrong, but my understanding is that it is possible to transfer loans between the bounce-back scheme and CBILS. I am happy to discuss that with my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who is absolutely right—people cannot have one of each, so to speak, but I think that it is possible to make a transfer.
The measures set out in the Bill have been welcomed across the board by business representatives’ organisations such as the Federation of Small Businesses, the Institute of Directors, the CBI, the British Chambers of Commerce, R3—the insolvency and restructuring professionals trade association—and the Trades Union Congress. Some of the measures will take retrospective effect to provide as much relief to businesses as possible. To ensure that is the case, we have announced the dates from which the measures will begin.
Let me turn to corporate restructurings, and the package of permanent corporate restructuring measures, which have previously been consulted on. As colleagues know, they were consulted on in 2016, and then formed part of a wider consultation on corporate governance and insolvency published in 2018, so they have been consulted on in some detail. They will have immediate effect in helping companies get through the covid-19 emergency.
A number of time-limited provisions are there to cater for the immediate economic impact of the covid-19 pandemic. They have been added to the package and will be in place for a month after Royal Assent.
Playing a fundamental part in the Bill, we have a number of measures that have been consulted on for a long period; people have thought about them and, as my right hon. Friend said, there has been a large degree of consensus around them. Then we have some other measures that have been brought forward in response to the immediate crisis; the Department has worked incredibly quickly to come up with them. Is the Department satisfied that it has got the balance right between the two? Is there anything that we should look out for in the next few months about the permanence of some of those measures?
My hon. Friend is of course right. By the way, I am delighted that he is back in the House, after a short absence. He brings a huge amount of experience in this area, as a result of his work in the private sector. The permanent measures have already been consulted upon, and they enjoy broad support. The temporary measures are of course temporary, and if we were to look to extend any of them, we would have to do so by way of regulation—we would have to come to the House with statutory instruments, and there would be an opportunity, if colleagues in the House felt it was not right to extend them, for them to voice their concerns. So I do think we have managed to get the balance right in this case. We want to ensure that the measures are put in place as quickly as possible, so that we are able to provide support to businesses in difficulty right now. In all the discussions that we have had with the right hon. Member for Doncaster North and his colleagues, we have always had a really constructive approach; I hope that is exactly what we will have today as well.
I speak as a co-chair of the all-party group on fair business banking, has dealt with a lot of problems in how banks treat SMEs, facilitated by insolvency practitioners. To eliminate those conflicts of interest, the Secretary of State’s Department has committed to bringing forward measures to provide that the conduct of insolvency practitioners is overseen by a single regulator, rather than by recognised professional bodies. Can he commit to bringing forward those measures in the not-too-distant future, so that we can try to eliminate those conflicts of interest?
My hon. Friend the Under-Secretary of State will elaborate on some of the points that my hon. Friend raised. I would simply say that in July 2019, the Government issued a call for evidence on the insolvency regulatory framework, to determine whether any changes needed to be made. That included questions on whether there should be a single regulator. We expect to publish the Government response to the call for evidence later this year. Perhaps my hon. Friend the Under-Secretary will elaborate later.
Returning to the Bill, the package of measures has three elements. The first is a moratorium. That will give a company that is threatened with insolvency temporary respite from its creditors and a chance to arrange refinancing or a rescue. The moratorium will be for an initial period of 20 days, which can then be extended. There will be a time-limited easing of the eligibility criteria for a company to enter into a moratorium, to make it more accessible during the covid-19 response period.
The temporary measures that my right hon. Friend has included in the Bill will provide great respite for many businesses, particularly in the hospitality sector, where businesses have been unable to trade throughout this outbreak but rents have remained very high; the measures will protect them from aggressive landlords. Those pressures will continue well past the end of June, so will he consider extending the protection for tenants from winding-up petitions?
Of course, that is part of the measures that we will bring in. I recognise why my hon. Friend wants to ensure that tenants have protection, and that is why we will introduce the temporary measures around this issue, but of course we also need to think about landlords. I will address that point as I go through my speech.
Returning to the moratorium, the time-limited easing of the eligibility criteria for a company to enter a moratorium, to make that more accessible during the covid-19 response period, will be in place for a month after Royal Assent. Of course, that can be extended if it is deemed necessary.
The second part of the new permanent restructuring measures will allow companies in financial difficulty to propose a rescue plan to restructure complex debt arrangements, and to bind creditors to it, as long as certain thresholds are met. That means that viable companies struggling with debt obligations will be able to restructure under the new procedure.
There are, however, significant safeguards and protections for creditors, which is right and proper. The plan must be sanctioned by the court and, indeed, any dissenting creditor class bound to a plan must not be made worse off than it would have been in the next most likely outcome. I know that a number of colleagues, both in the House and outside, have raised this issue. That is why we have ensured that this measure is in place.
The third part of the restructuring package will prohibit termination clauses. That will prevent suppliers from terminating contracts or raising prices just because a company has entered an insolvency procedure or a moratorium. Of course, we recognise that requiring companies to supply under those circumstances may cause them financial difficulties, so we have built in a number of protections for suppliers too.
If continuing supply would cause a supplier hardship, it can apply to the court for permission to terminate the contract. In addition, if goods or services supplied after the insolvency begins are not paid for, the supplier can terminate the contract. Further, the Government will temporarily exempt small suppliers from this requirement altogether during the covid-19 crisis, recognising the particular challenges that those firms face.
Small businesses often find themselves dictated to by larger organisations, and the last thing we want is for small businesses to be put at a disadvantage by being compelled to supply when they are not capable or it is not in their interest to do so. Will the Secretary State reassure us that small businesses in particular will be protected by these provisions?
My hon. Friend raises a really important point about protecting small suppliers. They will of course have this exemption. According to the definition in the Companies Act 2006, a small supplier is one that meets two of the following three criteria: having up to 50 employees, a turnover of up to £10.2 million, and gross assets of up to £5.1 million. I think that will cover a very large number of businesses in our country.
May I thank you, Madam Deputy Speaker, for permitting so many interventions? As we are rushing through the Bill relatively quickly, it is important that Members on both sides of the House have the opportunity to raise points directly with the Secretary of State, so thank you for permitting some latitude for interventions.
The small business commissioner appeared before the Business, Energy and Industrial Strategy Committee a few weeks ago, and I posed some questions about whether he had the powers he needed. As my right hon. Friend looks at this period, with the particular pressure caused by covid-19, is he assured that the small business commissioner’s powers are as will be needed, or does he envisage wanting to look again at this in the future?
My hon. Friend raises an incredibly important point. I championed this issue—support for small businesses—when I was on the Back Benches. As he will know, the Government’s payment terms are favourable in setting a very time-limited period within which payments must be made to Government suppliers, and of course the Government also require that if a large organisation is being paid by the Government under a contract, they need to pass on that speed of payment to smaller subcontractors. He will also know that in the manifesto on which he and I stood we committed to looking further at the role of the small business commissioner and how it might be strengthened. We will bring forward a consultation on that in due course.
I move now to the temporary measures in the Bill. The first set provides for a suspension of the serving of statutory demands and a restriction on winding-up petitions. These measures will be retrospective from 1 March and 27 April respectively and will last until one month after Royal Assent, although they can be extended if that is deemed necessary. The Coronavirus Act 2020 temporarily suspended the right of commercial landlords to forfeit the tenancies of retail businesses in order to protect tenants unable to trade because of covid-19. While this temporary suspension has been in place, the majority of landlords and tenants have been working well together to reach agreements on debt obligations, but a small number of landlords have been using aggressive debt recovery tactics to put pressure on tenants, including through the use of statutory demands and threats of winding up. For this reason, the measures in the Bill to limit the use of statutory demands and winding-up petitions have been welcomed by many, especially in the hospitality sector.
The Government have repeatedly spoken about this clause in the context of landlords, but can the Secretary of State confirm that it actually applies to all creditors?
It is intended to apply to all suppliers—I am sure I will be corrected if I am wrong on that. As my hon. Friend has also been keen to point out, although this measure is not restricted to commercial landlords, some landlords will have particular concerns, and I can reassure him that the Government will monitor the impact of the measure and are asking lenders and investors to consider how debt obligations can be met in a way that does not put unnecessary pressure on landlords.
In respect of commercial loans, currently the banks, when showing forbearance, are providing capital repayment holidays but only on the capital element of the repayment. In respect of residential mortgages and loans, they are giving complete repayment holidays. The monthly capital repayment is a small element of the overall payment. The banks could be much more helpful to landlords by giving a complete holiday across the whole repayment for a period of time while showing forbearance to their tenants.
Colleagues in the banking sector will I am sure be watching this debate and listening in, and they will have heard what my hon. Friend has said. I would be happy to have a discussion with him after this debate if there are particular points that he wants to raise or if he wants to talk about particular organisations.
The second temporary measure is the suspension of the wrongful trading provisions. This will be retrospective to 1 March and will be in place until one month after Royal Assent, and again it can be extended if that is deemed necessary. Hon. Members will know that wrongful trading is an important deterrent against company directors continuing to trade when the company is insolvent and when doing so increases the losses to creditors. Directors can be made personally liable as a result. However, during this difficult period, many otherwise viable companies may become technically insolvent, particularly if they have been severely affected by a drop in demand caused by covid-19. This measure gives company directors the confidence to use their best efforts to continue trading without the threat of personal liability, should the company ultimately go into insolvency. Since the measure was announced in March, we have received much support for it from stakeholders. The Institute of Directors has welcomed it, saying that it
“will help to avert entirely preventable corporate collapses.”
The Bill also contains the necessary time-limited powers to extend these temporary provisions, should that prove necessary.
The Bill will also allow the Government to make other temporary amendments to insolvency law or the new restructuring plan to deal with the effects of covid-19, where needed. The power to amend corporate insolvency or governance legislation will allow the insolvency and business rescue regime to react quickly to the challenges we face as a result of the impact of covid-19, and that power will expire on 30 April 2021. However, due to the potential unforeseen circumstances relating to covid-19, the expiry date of this power can be extended if it is deemed necessary. If an extension is sought, the House will of course have an opportunity to scrutinise it.
The next group of temporary measures deals with meetings and company filings. These measures enable companies and other bodies, including mutual societies and charitable incorporated organisations, to hold AGMs and other meetings in a safe way, while respecting social distancing rules.
On the point about AGMs, it is obviously good that the legislation makes provision for AGMs to be held digitally, but is it necessary for the legislation to restrict the participation of shareholders quite as much as it does? Surely, if a digital method enables shareholders to question directors, that should be encouraged if it can be facilitated.
There are, of course, other methods for shareholders to question directors of a company. There will be shareholders’ days, for example. The reality is that businesses will be reacting and doing their best to try to get information to their shareholders. I am sure that the hon. Lady’s point will be noted, but the intention of this Bill—and, I think, of the business community—is not in any way to use these measures to restrict shareholders’ access to information. This is actually about making sure that we can get past the pandemic and be in a position to bounce back.
The flexibility in terms of these meetings and filings will apply from 26 March—retrospectively, obviously—until 30 September. The measures also enable AGMs to be postponed until 30 September this year, where necessary.
I am encouraged that the measures for AGMs and other meetings are temporary. Does my right hon. Friend share my belief that in-person AGMs provide the best opportunities for shareholders to hold their directors to account?
My hon. Friend makes an important point. We would all like to get back to those face-to-face discussions, just as we are doing in the House today. These are temporary measures, and I hope that when we get through to the other side there will again be that opportunity for shareholders to meet and ask questions face to face, because that is right and appropriate.
Can my right hon. Friend confirm that the Government are not mandating how companies and organisations are to hold an AGM, but rather giving them flexibility at this incredibly difficult time as to how best to engage with shareholders?
My hon. Friend makes an incredibly important point. This is not about mandating; this is about giving choice. I expect that many companies will take up the temporary support that is being made available through these measures.
Expanding on the announcement I made on 25 March that companies would have an extended period for filing accounts, the Bill will also give businesses more time to meet a range of filing requirements. The extensions to the various filing requirements will be set out in regulations to be laid once the Bill receives Royal Assent. We will be giving businesses the maximum period allowable under the powers in the Bill for filing their accounts, confirmation statements and event-driven updates. We will also extend the period within which charges should be registered with Companies House to 31 days, which I believe strikes the right balance between providing businesses with breathing space and ensuring that lenders are protected.
In conclusion, the package of measures that the Bill introduces will give businesses the best opportunity to survive the effects of the covid-19 crisis and lay the foundations for a bounce-back in the UK economy. This Government are committed to supporting businesses. We are listening, and we are putting in place meaningful and common-sense measures to provide that support. Let me end by again paying tribute to the millions of business owners up and down our country who are doing their bit to keep Britain moving. In bringing these measures forward, we demonstrate again that we stand with them. I commend the Bill to the House.
I begin by thanking the Business Secretary and the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully), for the constructive conversations that we have had about the Bill, including with the shadow Business Minister, my hon. Friend the Member for Manchester Central (Lucy Powell). We are very much approaching this in a constructive way, and we welcome the discussions.
I want to focus on the provisions in the Bill and the wider policy context around insolvencies, which will determine what happens to millions of businesses in our country. As the Secretary of State implied, we face potentially the most dramatic recession in 300 years. What is more, we know that it is a recession necessitated by the essential public health measures that have been taken to contain coronavirus. Just as we are mutually dependent on each other when it comes to controlling the pandemic, I believe there is agreement across the House that that sense of mutual dependence should extend to the businesses of our country, because it is the right thing to do and because it is in all our interests. Every viable business we save will make the recession less deep and the recovery easier. Every business lost is disastrous not only for that business and its workers, but for our economy and all of us.
We know the great distress that many businesses are facing, and I join the Secretary of State in paying tribute to businesses up and down this country that are keeping going in these circumstances, with one fifth temporarily pausing or ceasing trading during lockdown and another quarter saying that their turnover was down by at least 50%. That is the context in which we should test our approach as a country. I acknowledge that this challenge is bound to test the imagination, speed and responsiveness of any Government, and that is why we want to work constructively with them.
In that context, we welcome the measures in the Bill to help reduce insolvencies and will support their passage. As I will explain, we do not think the Bill does enough to address the dangers for what we might call the less powerful interests—particularly employees—when it comes to insolvency and the new restructuring provision, and I will explain what I mean by that.
Let me say something about the headline provisions, many of which we agree with. As regards the permanent measures, we support the moratorium to give breathing space to firms. We welcome the measures to prevent suppliers from sending businesses into liquidation, suspending so-called ipso facto provisions, and I will say something in a minute about our views on the new restructuring plan provision.
I thank the right hon. Gentleman for giving way and for welcoming this Bill, which I do as well. Does he accept that what is so important about the Bill is that it includes and incorporates Northern Ireland absolutely? Northern Ireland is not cut adrift and the Bill does not have some special arrangement that the Assembly will manage; Northern Ireland is part and parcel of it. The measures have given collective support to businesses across all the United Kingdom and especially in Northern Ireland. Without British money, we would have been ruined. That is the bottom line.
I certainly agree with the hon. Gentleman that it is very important that the approach is UK-wide, and I welcome that.
Let me say something about the temporary measures in the Bill. We think it makes sense to remove the threat around winding-up orders, for example, to deal with the issue around landlords. We welcome the measures that the Secretary of State put in place, but there is another way around, as it were, which is a landlord issuing a statutory demand followed by a winding-up order. We think that the suspension of personal liability for wrongful trading while insolvent makes sense as a measure, but for a strictly time-limited period. It is important, as I think is clear, that other duties continue to apply to directors.
In addition, easing the requirements on company filing deadlines and AGMs makes sense. Indeed, given proceedings yesterday in this House, the facility in the Bill for virtual proceedings at AGMs carries a certain irony. If only the Business Secretary had told the Leader of the House, perhaps we would have been spared a lot of trouble and a lot of queuing yesterday.
As the hon. Members for Dudley South (Mike Wood) and for North Antrim (Ian Paisley) have both said, there is clearly a case for a longer period than to 30 June. This is no disrespect to the people writing the Bill, but I think we can agree across the House that the temporary measures will need to be in place for longer. We would be happy to see an amendment that puts the end of September in the Bill, and one of our amendments would do that. I accept the Secretary of State’s point that the change can be made by statutory instrument.
Having given the Bill a broad welcome, I want to raise some issues.
I agree with all that my right hon. Friend has said. Does he agree that some extension will be needed for some of the sectors that may be hit for longer, such as the creative industries? Many in my own patch will be affected for longer because they will be closed down for longer, and they need special assistance.
My hon. Friend is a brilliant champion of those industries and other industries in his constituency, and I agree with him. I will come on to the particular sectoral challenges that the Secretary of State and the Government are facing.
Let me mention the areas where we would like to see improvements made to the Bill. First and most importantly, the Government’s case on the restructuring plan provision is that it could have benefits in enabling companies to restructure and not go into liquidation and in stopping large creditors from forcing companies to do so. I accept the case. I think I am right in saying that the cross-class cram-down provisions—it is not a very beautiful phrase—apply across the EU under EU law and apply in the United States as well. What is important about the provisions is that they mean that even if a class or classes of creditors object to a rescue plan, it can still go ahead providing they are better off than in the other most likely scenario, which is often going to be liquidation. That is why protecting those without power—creditors and others—is so important.
What cannot be allowed to happen—I know the Secretary of State agrees with this—is for the RP provision, which has wide scope and is not just for companies that are insolvent, but for those who fear they might become so, to be used to ride roughshod over the rights of employees, including their pensions. Given the nature of the crisis we are in, it is essential that there are proper safeguards.
To give an example, the Secretary of State will have heard earlier the deep concerns across the House about the actions of British Airways, including sacking its employees and apparently offering worse terms and conditions. The RP provision cannot become a charter for more of that sort of action, and it is our mutual responsibility to make sure it does not become so. I know the Secretary of State shares that view.
I am extraordinarily grateful to the right hon. Gentleman for raising this point, because he will be aware that when a company is in a crisis situation and has so many wolves at the door, it has to make rapid decisions to salvage the assets and the business and continue, hopefully, to trade profitably. He is putting his finger precisely on the issue of what the rights of employees in that circumstance are and what protection there is for their pension benefits in the long term—that is a fundamental part of this issue. I am interested in his new clause on employee representation, which refers specifically to trade union representation; would he be prepared to broaden that out to include some broader sense of employee representation?
I welcome what the hon. Gentleman says, and the answer is yes, because lots of businesses do not have trade unions, and the question is what rights employees will have in those circumstances. The US experience is quite informative: I mentioned the US hazard provision, and at American Airlines and General Motors we saw employees lose out very significantly. The hon. Gentleman’s point about pension provision is absolutely part of this. I very much hope—this is the spirit in which we are approaching the Bill—that the Government will seek to improve the protections that are in place. Our new clause 5, to which the hon. Gentleman referred, seeks to ensure mandatory discussions with the trade unions once a company enters a restructuring process. That will ensure that employees are provided with all the information made available to the court and fully consulted on any restructuring plan, and the court could then take that into account. There may be better and more comprehensive ways to build in such protection, but it is essential that we do so. Perhaps the Minister can come back on that in his winding-up speech and, indeed, in Committee.
Secondly, we are concerned about similar issues when it comes to insolvency. Unsecured creditors are left to bear most of the risk of insolvency, so they are often at the back of the queue when it comes to being protected. The protection of unsecured creditors, or the greater protection of them, could be provided through strengthening the ring-fencing of the proceeds of sale of assets when a company becomes insolvent, increasing the proportion of the proceeds reserved for them to 30%, and removing the financial limit, which is what we propose in one of our amendments. We also believe that pension schemes—this goes to the point that the hon. Member for North East Bedfordshire (Richard Fuller) made—should be made a priority creditor in the event of insolvency so that they get to have a role as a class, because currently I do not believe that they necessarily will.
I welcome the right hon. Gentleman to his position and wish him well. I have a bit of concern about what I refer to as predatory companies, which look for companies that are probably heading towards insolvency and see them as an opportunity to gain something. I wonder whether it is possible to ensure in the Bill that such predatory companies that would prey on those in trouble, of which there are many, are prevented from taking over an asset that is probably solvent in the long term but is not in the short term.
I agree with the hon. Gentleman’s intervention. I once used the word predatory in relation to companies and it was rather controversial, but I think the consensus may have changed. [Interruption.] Government Members are saying it has not; it was worth a try. The hon. Gentleman makes a really important substantive point on which I think Members from all parties can agree, and it goes to the width and breadth of this provision: we have to make sure that companies cannot use it as a way to take their employees for a ride. I know from my conversations with the Secretary of State and the Minister that the intention to make sure that that does not happen is shared throughout the House, but we have to give expression to it in the Bill, and I hope the Government will indeed do so.
Let me turn to some things that are not in the Bill—
The right hon. Gentleman touched on his amendment that would ring-fence 30% of assets for unsecured creditors; is he not concerned that if we did that, people who are willing to extend finance to businesses on a secured basis may be less willing to lend?
I believe I am right in saying that the hon. Gentleman knows a lot about this, and I congratulate him for his work on the all-party group dealing with the whole range of these issues, but I am talking about the situation after secured creditors and others have been dealt with. There is currently a provision for 20%, but up to a limit of £800,000. Our amendment seeks to make that 30%, and to raise the proportion, but remove the limit. We must ensure that we do all we can for employees and small businesses—my hon. Friend the Member for Manchester Central will correct me if I have got those figures wrong, but I think I am broadly right.
Two sets of issues are not in the Bill, although we would have liked them to have been included, as I believe they are missed opportunities. First, in 2018 the Government consulted on a set of corporate governance safeguards in the wake of the scandal at Carillion, and indeed at Thomas Cook, which came after that. I understand that the Bill relates to the immediacy of the coronavirus crisis, but it would have been better if the Government had acted on those vital corporate governance issues in the Bill, and we would have supported them in doing so. Given that this crisis makes corporate distress more likely, it is strange that the Government have not chosen to introduce such measures. The risk is that we will get more Carillions and Thomas Cooks, with all the consequences of that for employees.
In 2018 the Government were committed to greater accountability of directors in group companies, legislation to enhance powers for insolvency practitioners, and further raising standards by ensuring an explanation about the affordability of dividend payments. Labour supports all those measures—indeed, we have tabled amendments to insert them into the Bill—and we do not think they cut across the need to protect businesses through the coronavirus crisis. Will the Government explain what plans there are for those improvements to corporate governance? I understand that the Bill must go through at speed, but it would have been better if it contained those measures.
Secondly, like the hon. Member for North East Bedfordshire, I wish to mention late payments to small businesses, and the important role of the Small Business Commissioner. If larger companies do not make good on their payments to small businesses, that could be the thing that pushes them over the edge. We believe that the Bill could be used to strengthen the powers of the Small Business Commissioner to help businesses that are struggling with cashflow and liquidity, and such a measure would have improved the Bill.
As I have said, we want to facilitate the passage of the Bill as it is important to protect businesses up and down the country, and we hope it can be improved in the ways I have set out. Having dealt with its specific provisions, however, let me deal with the wider context. The measures in the Bill can play a part in preventing insolvencies, but as the House knows, the number of businesses that go out of business depends on the external environment and on what the Government do in response to that. I welcome the action taken by the Government so far. There are lots of measures that we support, but we also believe there are gaps and other areas where the Government need to act.
I wish briefly to outline four sets of issues that go directly to the question of insolvency. First, I fear that the support system introduced by the Government is still not working sufficiently for our SMEs, and it risks worsening the insolvency problem. We called for the 100% underwriting of loans six weeks ago for smaller firms, and we welcomed the bounce back loan. Clearly, however—the hon. Member for Thirsk and Malton (Kevin Hollinrake) made this point—those loans do not do enough for SMEs that need more than £50,000 of liquidity.
The bounce back loan was intended to improve the working of the CBIL scheme, but I am afraid that has not happened. I have the figures for what happened to the CBIL scheme in the past few weeks—I am sure the Secretary of State is as in touch with them as I am—and the number of facilities approved each week is going down, and the gap between the total numbers of applications and approvals is widening. Somebody contacted me the other day who will not be counted in those figures. He waited two months to be told by his high street bank that he was not eligible and that there was no point in him applying for a loan under the CBIL scheme. He will not be counted in those statistics, and hon. Members across the House will have heard of similar experiences.
I know that the Secretary of State is dealing with a range of issues to do with companies in distress. As I understand it, the idea was to get rid of the forward credit check for the CBIL scheme, but that does not seem to be doing the business and we need to understand why. I personally would be open to having 100% underwriting slightly higher up the scale, but we need a solution.
Secondly, beyond SMEs, I am deeply concerned about particular sectors, with manufacturing top of the list. We have seen thousands of redundancies at Rolls-Royce, real problems in the aerospace sector, issues in the car industry and massive issues facing steel. In France, steel received support within a fortnight of lockdown, whereas here our companies are still waiting. We read stories in the Financial Times about public equity stakes being considered—the so-called “Project Birch. It sounds like an interesting idea, but I say to the Secretary of State that this is taking too long, both for larger companies and for the SMEs in the supply chain.
My right hon. Friend is right to mention steel and aerospace in particular, as they are crucial providers of jobs in south Wales, and we have the situations with BA and with the steel industry. Does he agree that we need to get support to them as soon as possible?
My hon. Friend has been powerfully advocating for the steel industry, along with other hon. Members in all parts of the House, and there is real urgency in this respect.
Let me just say something about the CLBIL—Coronavirus Large Business Interruption Loan—scheme, which is for larger loans. We are talking about more than £45 million. I fear that this is Treasury orthodoxy, so I will not expect the Secretary of State to comment. We all know Treasury orthodoxy—I do, as I used to work there. The good news is that the Chancellor raised the limit to £200 million for the amount that companies can get, but the bad news for companies is that the CLBIL loan has to become their most senior loan—it has to be top of their list. The problem is that that means companies then have to renegotiate their other most senior loan, so they are caught in a Catch-22 situation. I suspect the Secretary of State agrees with me, but he cannot say; perhaps the Chancellor is watching. I say to the Secretary of State that companies such as McLaren have said, “We have tried to get this loan but we cannot get it because of this Catch-22 situation.” This is urgent and I urge him to get it sorted. We have had only £1 billion paid out under this scheme; 191 firms have got loans, but that is out of 579 that have applied. This is about manufacturing largely; it is about lots of large manufacturers across our country who are really in distress. There is more to be done in advancing some of the money that is already in the budget for low carbon. That is true in relation to aerospace, where I believe there is a fund—I am hoping that can be advanced— and to steel.
Let me refer to some other sectors, as one of my hon. Friends did earlier. With the public health measures that are necessary, it is obvious that sectors such as hospitality, tourism and the arts will face much greater pressures for longer; they are going to take longer to reopen and recover. To give the House a sense of the scale, I should point out that the British Beer and Pub Association has warned that up to 40% of Britain’s pubs cannot survive beyond September with the current level of financial support; that one third of jobs in tourism-related areas are estimated to be at risk; and that the Society of London Theatre and UK Theatre estimate that 70% of the 290,000 jobs in that sector are at risk. Those are dire warnings we are being given.
That brings me on briefly to the furlough scheme. It has been a really good innovation, but I do not understand why the Chancellor is pursuing a one-size-fits-all policy on that scheme, because the public health measures mean that some sectors will take longer to reopen and recover. Whether through the furlough scheme or a second wave of support, these sectors are going to need extra help. I know the Secretary of State is working on this, but I underline its importance: we are talking about thousands of pubs across our country, hundreds of theatres and arts venues, and jobs in tourism. These things are the lifeblood of our constituencies.
Thirdly, I want to raise with the Secretary of State the issue of the “month 13 problem” of insolvency. This is a bit further off, but it is still an issue. Even if the Government fix their loan schemes and provide the sectoral support required, the more debt there is weighing down companies, the greater the danger of insolvency down the line—this debt overhang is also bad for our economy when it comes to recovery. [Interruption.] I hear the hon. Member for North East Bedfordshire muttering about borrowing from a sedentary position, but I am talking about private debt. The Federation of Small Businesses has been suggesting for some time that loans need to become income contingent. It has suggested a student loan-type approach. In other words, when businesses get to a certain level of financial health, they can start repaying the loans. There may be other ways forward, such as converting the loans into equity, but we are going to need solutions for these firms.
Would the right hon. Gentleman support the ideas that I have been doing some work on—as have lots of people—outside this place in relation to recapitalising the British corporate sector, not just in terms of debt to equity, but in finding ways to get much more equity into our businesses so that they are not weighed down by debt? That approach could be how we recover from this situation.
I agree with the hon. Gentleman. We need innovative thinking in this area. We are going to have to do things—I think that the Chancellor has said this—that we would not have done in normal times, but we cannot send businesses back out into an economy that is recovering, with this massive debt overhang. [Interruption.] I will not give way again because I need to get on with it so that other Members can speak; I can see the beady eye of Madam Deputy Speaker.
Fourthly, crucial to helping businesses through this crisis is an economic stimulus that matches the moment. In particular, I hope that plans for a green recovery, which the Government have been talking about, will be at the centre of what they do. This is the way to get our economy moving, help to save businesses and meet our climate goals.
The Bill is a step forward. We continue to have worries about the protection of workers in the event of restructuring and insolvency, and hope it can be addressed as the Bill passes through both Houses. I wish that the reforms to corporate governance had been included.
I will end by mentioning the wider economic context. We are only at the end of the beginning of the economic crisis that we are facing, and there is a need for urgency, boldness and action in the coming weeks and months. The Chancellor has said that he will do whatever it takes. In my view, that means support for specific sectors, reform of the loans scheme, imaginative solutions to the debt problems facing the small and medium-sized enterprise sector, a commitment to building back better and a green recovery. It is in the interests of everyone across the country for the Government to act; if they do, they will have our support.
It is a great pleasure to follow the shadow Secretary of State. During this crisis, many of us have experienced groundhog day, and we have certainly just experienced it now; looking at the right hon. Gentleman at the Dispatch Box took me back to a period before 2015.
I warmly welcome the Bill. As the shadow Secretary of State said, the Secretary of State is right to set this legislation in the context of an extraordinarily impressive set of business measures—regardless of any tinkering around the edges that is needed—that the Government have put in place to tackle the covid crisis. We are right to recognise that in normal circumstances the Bill probably would have been split into two phases. Some of the changes that it contains are permanent, and have been debated and consulted on certainly since 2016, but maybe earlier. Other changes are rightly temporary, as they are urgent measures to address the challenges faced by many in the corporate sector who would not necessarily normally be experiencing such problems with insolvency. The flexibility is therefore clearly right.
As I have said, the Bill sets out a number of permanent and temporary concepts and provisions. I will spend a little bit of time reflecting on one or two of the permanent ones, before finishing with a particular temporary issue that affects my constituency. The Bill outlines the concept of moratorium, and it is quite clear what that is. It gives the challenged business a 20-day opportunity to consider a rescue plan. That can be extended for a further 20 days if the directors ask for it, and can, as I understand it, be extended for a whole year should the creditor or the court consent. The purpose of that is clearly obvious, and all that makes a huge amount of sense. During that period the directors retain control of the company and no legal action can be taken against it without a court decision.
However, the process is overseen by a monitor, a point on which I want to raise a few issues that I hope my Front-Bench colleagues will consider or at least address later. First, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) has already raised with the Secretary of State the potential conflict of interest to do with whether the monitor is sanctioned by an independent regulatory body or is just a normal insolvency practitioner that could be taking work from one group of companies with one hand and, with the other, working against that in looking at insolvency. I hope my right hon. Friends on the Front Bench will carefully consider the point about regulation and bring something back quickly.
The second point concerns the criteria that the monitor has to use for the moratorium, the time it could take to assess whether the definition is met, and whether the criteria are too tightly drawn or could be met more quickly if they were more easily drawn. I recognise the need for the monitor to make a suitable statement about the moratorium. The current threshold is whether
“in the…monitor’s view, it is likely that a moratorium…would result in the rescue of the company”.
However, the monitor has a relatively short period in which to make that assessment. In normal circumstances there would be a huge amount of due diligence done on trading, future trading, inspection of management accounts, general financial arrangements and debt arrangements. Not only does that normally take longer than 20 days; it is potentially a costly process to undertake. Particularly given the spirit of what we are trying to do in the Bill, will Ministers consider whether it might be more effective to look at the definition of the criteria and approve a slightly lower threshold for what constitutes a company that could be rescued? That might be as simple as saying that “it is likely” that the moratorium could result in the rescue of the company, as opposed to saying that “it must”. That would be of considerable help in rescuing companies.
I agree with my hon. Friend and support his point. I think the provision to which he is referring is proposed new section A6(1)(e) in the Insolvency Act 1986, which contains the wording:
“in the…monitor’s view, it is likely that a moratorium for the company would result in the rescue of the company as a going concern.”
Simply changing “would” to “could” would resolve the issues.
My hon. Friend drafts the amendment for me. I absolutely agree, and I hope those on the Front Bench will too. That would seriously help with what we are trying to do at this stage.
The permanent measures are designed to allow as many companies as possible to be rescued and to continue trading, but these companies will be creditors of others. In that regard, we must also look at the Bill’s potentially perverse impacts. I have a constituency case, Ms Ravindran, a constituent who runs a design business. It is a small company that is owed £36,000 by an individual, and at least 10 other creditors are owed up to £200,000 in total by that particular individual and company. She is rightly concerned that the Bill will give undue protection to one rather than the other. The issue is that it will be clear to those intending to use the provisions of the Bill to protect themselves, and to enable themselves to trade through and be rescued or restructured, that they should not be undertaking activities. I would like the Minister’s reassurance that the companies seeking to be rescued will not be able to take early advantage of things such as directors loans to take money out of a business that is then likely to apply for a moratorium and thereby impact others who are debtors of that company.
There is also a potential problem that I hope the Minister will be able to reassure me about later. Under the current drafting, ongoing trading costs and scheduled debt repayments that occur during the moratorium do get paid. Those that do not get paid become a super-priority, but nothing prior to that gets paid. The concern is that the potential suppliers to a company in the moratorium period may try to game that period. They may well see a company in difficulty and decide that it is easier to put the payments due to them in the moratorium period, so that they get super priority, not in the normal supply. I suggest to the Minister that the way around that is to have a look again at whether there could be some tweaking of the definition and to consider that the Bill be amended so that only the interest and charges incurred during the moratorium, rather than the scheduled debt repayment, becomes the super priority. That would take away the incentive to game the system.
There is clearly an understanding about why changes are proposed in the Bill to the termination of supply contracts. We all know that currently a supplier could use contractual terms to cease supply. Therefore, ensuring that a company that has entered into a moratorium or a restructuring procedure, as defined by the Bill, is not forced to rely on the usual contractual terms is clearly right, but there are some other circumstances. Again, have we thought clearly enough about the protection to the supplier? My right hon. Friend the Secretary of State rightly talked about some of the protections that are there, but it is clear that the non-payment of those debts to the supplier could put that supplier into insolvency as well, because it may not be able to get the protection from the court fast enough.
I think that the definition of what constitutes hardship to the small or medium-sized supplier or the company in the rescue package might clearly present some—I was going to use the phrase “wriggle room”—legal possibilities that should not be contemplated. Beyond the definition of hardship, should there not at least be a legal obligation in the restructuring plan that requires a supplier’s status to be given legal protection? I think that is quite important, and it inevitably means some reconsideration of the named cross-class clampdown proposals as well.
A lot has been said about the supplier and making sure that it continues to supply, and, hopefully, the company getting those supplies is then rescued. Again, however, in some circumstances not every company entering the restructuring procedures will actually be rescued. It simply will not happen. What happens then? As I understand it, the supplier is given the super priority status, but—and this leads into another point I want to make in a moment—will Her Majesty’s Revenue and Customs, or indeed other financial providers, want to be given super super priority status over and above that of the supplier? The provisions to ensure the continuity of supply are welcome, but I ask my hon. Friend on the Front Bench to reflect on whether he can reassure us about the protections to the suppliers.
That leads directly to my next point, which is that the Bill reintroduces the concept of making HMRC a preferential creditor. I am very concerned that all the good work that my right hon. Friend the Secretary of State is doing in this Bill could be unwound by doing that. It could have a really negative impact on business rescuing and lending across the UK.
Do not take my word for it: R3, the industry insolvency practitioner, directly makes that point. It goes against a policy, which has encouraged lending to small businesses, that has been in place for some 18 years.
That is a very important point. I think the legislation is covered under clause 95 of the Finance Bill, which makes HMRC a preferred creditor once again. The real concern is not just that lenders will be less willing to lend on that basis—that is a concern because you go above lenders with a floating charge—but that HMRC may be less willing to show forbearance to businesses that are seeking protection and time to get through these problems.
I thank my hon. Friend. The House will be pleased to know that it will not need to listen to the next couple of minutes of my speech on the basis that he has just made exactly the point I wanted to make about the floating charge in particular. They are the normal financiers to those sorts of businesses. If they find themselves displaced in the ranking of credit priority, they are less likely to lend and that will have an impact. It was introduced in 2002 and has seen an extraordinary expansion of lending via those floating charge providers. It would seem odd that we are, in one place, trying to do one thing in one piece of Government legislation, and potentially undermining the impact of this very welcome Bill in another. I hope the Minister will, with his formidable powers of persuasion, speak to the Treasury about this matter.
I have a long list.
The shadow Secretary of State says that he has long list. I am sure we all have, but I have only one point today, which is this particular issue. I ask the Minister to have a conversation with the Treasury about whether that measure, which it may or may not want to do, needs to be brought in now, because I think it will impact this Bill.
Finally, I want to talk about one of the temporary changes that directly affects my constituency. I welcome the flexibility that is being allowed to charities and bodies to move their annual general meetings or to hold them digitally. That is extremely sensible, but it does not cover all bodies. It does not cover charities set up under an Act of Parliament, or charities that are not CIOs—charitable incorporated organisations.
The wonderful Wimbledon and Putney Commons is such a body. It was set up in 1871 by an Act of this place and it has, in its constitution, a requirement that it meets in person, that all levy payers are instructed of the date of the annual meeting and that it must happen by the end of June. The measures in the Bill would undoubtedly help the conservators who run the common. The trouble is that it does not apply to them. May I therefore make a particular plea to the Minister to say in his winding-up speech either that the Bill will include all charities rather than just those set up under CIOs, or that all bodies set up by an Act of Parliament are included, such as the Wimbledon and Putney conservators—Wimbledon and Putney Commons. [Interruption.] I said conservators. For those who want a history lesson, I made that slip in my maiden speech, but I am not making it now. If that is not possible, I ask that there be a definitive statement that the Charity Commission specifically allows some temporary flexibility to those bodies. With that entreaty on behalf of Wimbledon Common, I thank you Mr Deputy Speaker.
I thank the Secretary of State for his customary and welcome thorough exposition of the Bill. I pass on my thanks, too, to the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully) for his engagement. We have been working constructively to try to ensure that we are, as the Secretary of State said, supporting businesses with the measures we are taking. It is very important to remember that people and businesses should be the laser focus of the work we are doing throughout this crisis.
It is important to consider the Bill and support it through today in a constructive manner. That is what the SNP intends to do. The Bill, although in itself a welcome step in the current crisis, should not be seen in isolation. Some very good points were made by the right hon. Member for Doncaster North (Edward Miliband) and the hon. Member for Wimbledon (Stephen Hammond). Some interventions were also very telling.
As I have said, this Bill should not be seen in isolation. I want to touch on the impact of the Finance Bill, current business conditions and, of course, business and public confidence in the steps that need to be taken. This Bill helps with some provisions and should allow firms to apply their best endeavours to continue to trade during this pandemic emergency. As I have said, we support the Bill and the amendments to make that as easy as possible for people. None the less, as I have alluded to, the problems for the Bill lie in three other areas. Another piece of legislation—the Finance Bill—actually undermines, not just risks, these provisions and sets the conditions that could push companies to the brink. Then there are the plans to grant HMRC preferential status in the insolvency procedures, and the measures to make directors personally liable for companies’ tax liabilities. Together, these represent a significant challenge to businesses across the nations of the UK in trying to access working capital finance. While noting that it is difficult to accurately model the policy’s impact on business lending, UK Finance estimates that the policy could hit lending by well over £1 billion per annum, and possibly—because the modelling is difficult—much more than that.
As well as having a detrimental impact on business and economic growth, restricted lending will make it harder to rescue businesses, increasing the knock-on effect of insolvency on other businesses and people. Business investment returns to creditors and confidence in the UK corporate framework all stand to be damaged as a result. Although the tax abuse using the company insolvencies measure can be mitigated through accurate legislative drafting and detailed guidance from HMRC, the policy to grant HMRC preferential creditor status should be withdrawn entirely, as its introduction may prove a hammer blow to businesses at exactly the time that the Government profess to be seeking to level up and support them as they adapt to the impact of covid-19.
The second area of difficulty involves the economic inequities left by the gaps for businesses and Government support schemes during the covid-19 crisis. If the changes for this Bill can be pushed through sensibly in record time, there is no reason why the same urgency cannot be applied to filling the gaps that people and businesses are experiencing. We have heard today that there are substantial problems that not only exist now, with people struggling and unable to access support, but that are looming larger because of the decisions that have been made— over quarantine, for example. As I said during the statement earlier, this is not about whether quarantine is a good or bad device; it is about the fact that it will impact disproportionately on businesses involved in tourism and hospitality. That has to be addressed as we go forward.
The issues are very clear. Firms are already finding it difficult to access cash, not least because of the UK Government’s flawed coronavirus business interruption loan scheme. I say this with the understanding that the schemes had the best of intentions—to support businesses —but, as we have already heard, they are just not working for everyone. I will not repeat the details because we have heard about that in the Chamber today. There are also big holes in the job retention scheme and the support programme for the self-employed. All of those things are critical to supporting businesses, and all of those things undermine what we are trying to do with this Bill by working collectively to ensure that these measures are taken forward as effectively as possible.
I agree entirely that the Treasury should extend its 100% bounce-back scheme. That guarantee should cover the entire CBIL scheme. The fact that only a tiny fraction of businesses have received support underlines the need for the UK Government to introduce grants, not just loans. The UK Government should review and relax the lending criteria and speed up the process so that businesses can get vital access to cash.
I think it is a bit harsh to say that the schemes are not working at all. About £30 billion has been lent under both those schemes—about £9 billion under the CBILS and £21 billion under bounce-back loans. The CBILS issue seems to be that, although the forward-looking viability test has been removed, banks are still assessing whether businesses can afford to make the loan repayments over that period. If we remove the requirement for banks to do that, a lot more money would go out the door under the CBILS.
I agree and I am willing to concede that some people have indeed been helped. I said that the scheme was introduced with the best of intentions, but the fact is that there are far too many people running businesses who have tried to access this scheme but could not do so. We have heard examples, and I could give dozens more from people who have contacted me. I guarantee that just about everybody—if not everybody—in the Chamber has had similar contact from people who have been unable to access the scheme. The fact is that it is not working as it was intended to. It is not getting through to the people who really need it, notwithstanding those who have been able to access it.
My party, the Scottish National party, also backs calls by the Institute of Directors for the Government to use the scheme to provide firms with overdrafts during this crisis. For firms still unable to access finance, it is high time—indeed, it is overdue—for direct grants and/or equity investments to be offered instead.
The final problem is public and business confidence. We are at stage four in the covid crisis at the moment. There has been a relaxation of measures for people to get out and about and do things and for businesses to start up, but that confidence evaporates if we have to go back to the restrictions and businesses are not able to do that. That will pile on the pressure for the businesses that we are trying to assist today.
I was struck by what was said by the hon. Member for Wimbledon—I hope I get this right—about one of the problems being the protection of one thing at the expense of another. That is a really good comment, because overall confidence and compliance for people and businesses will face further threat. All measures that are introduced by a Government who are, unfortunately, defined by double standards are likely to run into difficulties. This UK Government, these measures and those on public health are all being undermined by the failure to deal with the Dominic Cummings saga. No matter how much the Prime Minister bloviates, this matter has not gone away. My inbox and, I am sure, those of many others, were still full this weekend of messages from people looking for that to be addressed. I know that it is not a party thing, because I have seen the tweets and messages from people representing constituencies and parties around the House—they have all had the same messages. This matter—the principle of different rules applying—has not gone away or failed to register. We might take the comment of the hon. Member for Wimbledon and say that the protection of one at the expense of all others applies here. Observance of the rules is critical to the success—[Interruption.]
The hon. Gentleman has taken a bit of latitude with what I said. I was pointing out that this was beneficial, but that we needed to consider the interests of the other and therefore their protection. He is corrupting, or misusing, my words, shall I say.
Order. I think we might be straying a bit further afield from what we are supposed to be debating this afternoon.
Thank you, Mr Deputy Speaker, but I did say that this was about the ability of businesses to continue to trade and this has a material impact on the Bill, because along with the Finance Bill, which it was entirely relevant to mention today, and the support for business, this can undermine the work that we are doing on this Bill. I will rein myself in now, but I think that that is a valid point. I hope—as you know, I greatly respect you, Mr Deputy Speaker—that you will understand and accept that point.
I have a lot more to say about that. This issue has not gone away, nor has it been dealt with—but it should be if the public are to have any confidence going forward.
Finally, returning to the Bill, getting this through today to protect people and allow them to trade out of difficulties is vital. We should accept that changes need to be made. I have set out a few, and we have seen the amendments. We should work collectively to make sure that the Bill is as good as possible to protect businesses.
I declare any interest I may have arising from my entry in the Register of Members’ Financial Interests. The Bill initiates the most significant changes in insolvency rules for at least the past 20 years, and it has two broad directions. The first introduces new requirements for moratoriums and company reconstructions, which have been consulted on in outline over the past two years. They were expected and are generally welcomed by practitioners and by business. However, when one looks at practitioners’ commentary, nearly all of them note that the devil is in the detail and they look forward to debates on the Bill. Of course, that is not going to happen to any extent, given that 170 pages of the Bill are allocated to two complicated proposals that were published a day before recess only two weeks ago. To allocate one day for all stages of the Bill is inadequate.
The foundation of our insolvency system is the Companies Act 1985 and the Insolvency Act 1986, both significant measures forged by a Conservative Government that have stood the test of time through the rebuilding of our economy after deindustrialisation, the dotcom crash and then the banking crash. Yes, we face another crisis, but rushing these changes through will not, in my view, produce the best law. For instance, if we take the moratorium, the key change is to introduce the concept of a monitor to review companies’ affairs. What will that involve? How will the role work, and will the monitor be able to charge for staff placed on site and so on? The purpose of the Bill is to present oven-ready processes that can be used to help businesses in the crisis, but I am not sure how that will work if practitioners, civil servants and possibly courts have to spend a long time working out what the law means.
The remaining provisions of the Bill have not even been consulted on despite their raising many serious issues of principle—above all prioritising the survival of businesses over the interests of creditors and consumers. We need to appreciate that the Government support schemes for businesses and employees, which have been popular and which I absolutely support, are often a blunt instrument. For instance, some businesses have taken state support, then gone on to renegotiate their leases, effectively leveraging their crisis support to undermine the market. The proposal to prevent winding-up petitions could accentuate that. Usually if companies are becoming insolvent, deals will be done and rents will fall, but banning winding-up petitions could undermine the market.
Why concentrate on big landlords? What about small companies sub-letting to cover part of their rent? They, too, will lose protection. As I asked the Minister, why are the Government talking just about rents when that applies to all debt and all sectors? Has the Minister considered that preventing winding-up petitions and the new wrongful trading termination provisions could reduce the willingness of banks and private lenders to issue credit? It could increase lenders’ risk aversion. It could increase demands for cash on delivery, prepayments and deposit increases. It could require more bonds and personal guarantees. That state meddling in the marketplace could have serious negative implications for credit and business, and I am interested to hear the Minister address those issues.
Some of the provisions are retrospective which, again, will undermine confidence in our economy. Why are the provisions being effected only for one month, as the hon. Member for North Antrim (Ian Paisley) and others have mentioned, which is simply unrealistic and points to extensions effected by ministerial order rather than by Commons debate?
Let us be quite clear: the provisions that will temporarily prevent winding-up petitions are being made on the basis of statutory demands not just from now but including those demands made between 1 March and 30 June. This suspension applies to all statutory demands, irrespective of whether the financial difficulties being experienced by the debtor have anything to do with covid, and of course they apply to all creditors. So a blanket ban is being introduced on a retrospective basis, with no reference to covid or the circumstances of the company. If I were to believe, as I do, that these provisions might merit the justification of proper scrutiny, a practitioners’ review and then feedback, I do not think that I would be asking for anything out of the ordinary.
On winding-up petitions being suspended, this is based on cash flow insolvency in circumstances where covid has had a financial effect on the relevant debtor, which has given rise to the proceedings in the first place. In such a situation, the creditor requesting the winding up must show the court that the company’s inability to pay its debts was not caused by the covid crisis. One wonders how, in the current health climate, the creditor will be able to show that this test has been met. Could the Minister enlighten us? Will there be a series of tests to be met, or will this all have to be fleshed out by the judiciary and the courts, which is presumably not the intention? Again, this provision is to be retrospective, so we could have a number of void petitions out there at the moment. Can the Minister advise us how many we are likely to be talking about?
The Bill goes even further, because it says that the court can make orders to restore a company where a petition was brought under the existing law but the requirement was not met. I believe that this would all be at the cost of the petitioner. Could the Minister confirm that? It looks like if creditor A has a petition in against company X, who owes A money, not only will creditor A be forced to withdraw his petition for winding up and be unable to collect his debt, but he might have to pay more money to company X to put X in the same position as if A had not tried to get his money back. We do live in strange times. Moreover, what about creditor A? How many mouths might creditor A have to feed from the money that should have come from X? What if X had been taking every loan and support going, but A had taken nothing from the state? I have met a lot of small businessmen who have not wanted to take anything during this crisis. There will clearly be knock-ons from this, and I am frankly unsure whether the legislation will help or hinder in certain respects.
Could the Minister explain why the winding-up provisions should be needed if the Government have confidence in their own new moratorium proposals, which will allow courts, following assessment, to stop winding ups? Will directors get any benefit from the wrongful trading proposals, knowing that they could be in breach of other directors’ duties and that these proposals are only temporary, so they could well need to justify their decision to trade on at a later date in any event?
The wrongful trading provisions have served us very well, and let us remember that they were brought in to reassure creditors and consumers who were disgusted at companies being used to trade in situations where they were clearly going to the wall. The reform of termination clauses in supply contracts had been suggested some time ago; I appreciate that. The problem is that if we stop people freely negotiating contracts in one direction, businesses will look for other ways of limiting their exposure. Ultimately, we can all understand that if I, as a supplier, am not paid for the previous consignment, I might not want to supply any more until I have been paid, because I might not get paid if the customer were to go insolvent. So we will head to cash on delivery, reduced credit, shorter payment terms and possibly contract terms. This will not help our economy.
Does my hon. Friend agree that part of the problem is the 30-day, 60-day, 90-day culture that has arisen in trading between companies? It is much easier now for companies to get an earlier payment, because so many payments are by electronic transfer, and the notion that the cheque has to be there when the guy delivers the goods no longer applies. If this measure moves trading in that direction, does he agree that that would not necessarily be a bad thing?
Not necessarily. These are the sorts of things that I would like to have heard debated, frankly.
The provisions have a limited time exclusion of, I think, one month for small companies. I am not sure of the worth of that. If a large company entered into a very large contract and failed to be paid yet was still forced to supply, that could be just as devastating as a scenario in which a small company had to do likewise on a smaller order. In my experience, not only are these clauses often negotiated, but there are standard gives and takes to be had. For instance, a hard termination clause for any type of insolvency event may be narrowed down to exclude deals with creditors or waived if the debt is repaid, say after a month, despite an insolvency event having occurred.
Removing the ability for negotiation in the way the Bill does may have a minimal impact at the cost of damaging our reputation as a place for free contracting. I can see that there are safeguards for suppliers to go to court on the grounds of hardship to the supplier, but going to the court in that way will not be a cheap process, and it will run the risk of throwing good money, which the supplier may not have, after the existing debt.
I agree with the proposals to enable AGMs to be held flexibly, but why mess about with the filing deadlines? If companies have filing problems, the current system allows for that to be quietly considered by the Department. Why publicly undermine our corporate governance and national economic credibility, especially on the filing of accounts?
My concern is that the Bill, although well meant, may not properly work for lack of scrutiny, or may provide dubious short-term benefit at the cost of longer-term distrust in our economic system. In market economies, weaker businesses will sometimes fail, particularly in a downturn. I suggest that the Government’s role is to ensure confidence in the marketplace rather than in companies themselves.
One thing that has been missing from the debate so far is the question of corporate governance in the wider sense. I notice—the shadow Minister, the hon. Member for Manchester Central (Lucy Powell), nods—that the Opposition have tabled new clause 3, which addresses that. As it happens, I do not agree with all the things in that new clause. However, I do recognise, and it is important to say, that a lot of companies have been conducting excellent corporate governance. A lot of directors have forgone salaries. A lot of companies have not paid dividends and are doing the right thing. A lot of good work has been going on, and I would like to see more recognition of that; let us recognise the good.
Although corporate governance is mentioned on the front of the Bill, it is about how we will suspend corporate governance. That may be for good reasons, but we should use the opportunity of the Bill, and particularly its Second Reading, to discuss how we are going to move corporate governance forward too. I would like to hear a little about that from the Minister when he winds up the debate.
I welcome the measures in the Bill, which will support struggling businesses during this difficult economic period, but, as other Members have said, this short-term relief needs to be followed quickly by a comprehensive recovery plan for the British economy.
For British businesses, this is a moment of genuine crisis. More than one in five companies across the economy, and an overwhelming majority of those in the worst affected sectors, have already been forced temporarily to cease trading. Survey after survey and the cases we have all encountered in our constituencies shed light on the depth of the anxiety that businesses and their employees are carrying about the coming months. I think there is an understanding across the House, therefore, that failure to act would have meant hundreds of thousands of fundamentally healthy businesses going under altogether, and that that would have been unacceptable.
In that context, the Bill’s time-limited provisions are a matter of necessity. The measures on wrongful trading, statutory demands, winding-up petitions and greater flexibility on governance constitute meaningful, if in some respects temporary, respite for struggling businesses. However, the urgency of responding to this crisis must not blind us to the deeper challenges that we face.
The measures we are debating will postpone the threat of insolvency, but giving workers and businesses real security about the future will require a more ambitious and better-targeted package of support. A significant majority of businesses that have continued to trade are currently reliant on some form of Government help. The success of that model has been its ability to deliver a one-size-fits-all remedy at pace, but the slowdown so far has been marked not just by its severity but by its unevenness.
The Business, Energy and Industrial Strategy Committee heard last month from the retail sector, for which the challenge is especially stark, with as many as a fifth of independent non-food retailers expecting to close for good and often in no position to take on additional debt. Tomorrow we will hear from the manufacturing and energy sectors, including aerospace, automotive and steel, whose needs are self-evidently of a different order, with a small number of major companies providing a significant percentage of British exports, but often reliant on a vast supply chain of small and medium enterprises, themselves in distress and in need of bespoke support. So as the economy reopens, the key measure of success for preventing insolvencies will be the Government’s ability to get help where it is required, on a sectoral basis, with a whole-supply-chain view.
It is a pleasure to serve on the Committee of which the hon. Member is Chair. I am interested to hear him talk about the differential impact on different sectors. He mentioned retail. Does he think that the Government’s policy to close retail was wrong?
I do not. The public health emergency had to be dealt with, and understandably, it had consequences for the economic emergency we find ourselves in. Retail was one example that we heard from. However, I declare my constituency interests in the aerospace sector and in the transport sector, where evidently there will be a longer tail of damage to their business prospects than to other sectors of the economy that might be able to open sooner rather than later.
That is why we need a comprehensive recovery and growth plan, which, I understand from the Prime Minister at the Liaison Committee hearing last week, will be with us before the summer recess. That plan will need to take a strategic view on what the British economy should look like in the future, and what capacity, skills and production we therefore need to protect now—with, of course, the net zero transition baked in.
On corporate governance, which the Secretary of State noted today has been part of the longer-term thinking of this Government, I worry that the Government’s determination to act quickly in the Bill has come at the cost of bringing forward long-awaited reforms, as was so eloquently posited by the hon. Member for Huntingdon (Mr Djanogly). The failings that led to the collapses of Carillion and Thomas Cook, for example, and the impact of those failings on their employees, suppliers and customers, as well as the taxpayer, were the subject of extensive work by the BEIS Committee under the leadership of my hon. Friend the Member for Leeds West (Rachel Reeves), and that work underpinned serious reform-minded proposals to protect employees and the smaller suppliers, which too often suffer most.
In response to the Government’s 2018 consultation, Ministers also made repeated commitments to strengthen governance before the point of insolvency, for instance by better incentivising shareholders to take responsibility for performance.
I do not wish to set a panacea standard for the Bill, which I of course recognise needed to come forward quickly, but there was a welcome opportunity for the Government to have a bit more to show to bear out its claims of seriousness on this issue. With that in mind, I am curious to hear what commitments Ministers can make today to ensuring that the anticipated legislation on “Good Work”, following the Taylor report, and parallel legislation to reform the Financial Reporting Council into the Audit, Reporting and Governance Authority, are introduced to the House as soon as possible.
Relatedly, the BEIS Committee’s work in the last Parliament on curbing runaway executive pay and requiring proper reporting of the gender pay gap, alongside the question of how investment decisions on behalf of British savers and pensioners should be made in such a way as to bring society-wide benefits, in line with the stewardship code, constitute a challenge which I hope Ministers will rise to, if not in the Bill, then in the short future.
I understand the Government’s hesitation to reinvent the wheel with this specific piece of legislation, but I would welcome a clear statement of intent from Ministers today on the importance of rigorous corporate reporting—including on executive pay and the gender pay gap—and the centrality of building environmental, social and governance principles into investment decisions. I agree with other hon. Members that there have been many businesses acting in the best possible good faith in very difficult circumstances, but all of us recognise, as has been debated in the House today, that some businesses might be pushing that good faith too far, and where businesses are acting in bad faith, especially when in receipt of British taxpayers’ money, there ought to be at least consequences for the worst examples.
I appreciate the Government’s determination to act quickly, but moments of crisis should broaden, not constrain, our ambition to create a better future. The Bill will come as a genuine relief to businesses in the most difficult shape, and I of course support it. But its caution should be a matter of regret, and any such continued caution could yet be the undoing of the Government’s recovery efforts in the long term. In that spirit, I gently urge Ministers to be bold as well as decisive—so that the Bill forms the start, not the end. I look forward to further discussions on this topic before our Committee.
I call Chris Clarkson to make his maiden speech.
Thank you, Mr Deputy Speaker. It is a great privilege to be called to give my maiden speech as the first ever Conservative Member for Heywood and Middleton. May I add what a pleasure it is to see you, Mr Deputy Speaker, in the Chair when I do it?
Before going any further, I would just like to say what a pleasure it is to follow the hon. Member for Bristol North West (Darren Jones). I served very briefly with him on the Science and Technology Committee, and I would like to personally congratulate him on his election as Chair of the Business, Energy and Industrial Strategy Committee. I am sure he will bring his thorough, fair and forensic approach to scrutiny on that Committee, and I wish him well.
It has also come to my attention that I am one of the last of my intake to make my maiden speech. I would like to salute all my colleagues who have, through a varied and personal collection of speeches, shown that ours is a party that now truly represents the entire country. I would like to say in particular a great thank you to my hon. Friends the Members for Eastleigh (Paul Holmes), for Hyndburn (Sara Britcliffe) and for Bury South (Christian Wakeford), who have joined me to give a bit of moral support.
At this most challenging time for our country, I would like to dedicate my first speech to the people who are rising to that challenge, both in my constituency and across the four nations of our Union: our NHS staff, careworkers, armed forces, police, posties, bin men and the hundreds of thousands of other people working tirelessly to keep us safe. They truly embody the best of what it is to be British. I know that for my part, when I have been clapping on Thursday night, it has been not just with a sense of thanks, but with immense pride that this is a country that pulls together.
I am grateful to have been drawn to speak today. I can only imagine that, when Members saw the Corporate Insolvency and Governance Bill on the agenda, Mr Speaker’s office was inundated by people desperate to speak on this most glamorous of topics. Mr Speaker may have been inundated by anxious Members, but this particular subject—sexy or not—is of great importance. The Bill will do a great deal of good for a great deal of people, and really that is what we are here to do.
What must strike Members, as it does me, is the widespread support for the Bill, not just in my constituency but across the whole country. It has the support of businesses, professional bodies, the Institute of Directors, the TUC and the British Chambers of Commerce, which welcomed the Government’s sensible and flexible steps to protect businesses from the threats they face at this difficult time.
It is vital that urgent action is taken to help those struggling and worried for their businesses. By continuing to trade in these difficult times, they will be the turbo boost our economy needs as the new normal becomes the old normal. When we have asked so much of the British people, and they have given so much more than we asked of them, it is only right that we look to give those businesses and the people who run them the breathing room they need in the closest of economic climates.
The measures will ensure that essential supplies are maintained to support trade and that companies can maximise their chances of survival, saving livelihoods as well as lives. Quite simply, the Bill will help companies to increase their chances of going on when we need them most. It will protect jobs and underpin our country’s economic recovery. It consists of measures that will support businesses through this period and, where they need them, provide new lifelines to companies in desperate need of rescue.
The corporate governance measures give directors more flexibility during this emergency to focus on the things that really matter to them and their employees. According to a study by KPMG, the north and the midlands will bear the economic brunt of coronavirus, with a slump of up to 10% in the economy of my region, the north-west. Only with the injection of the common sense that the Bill affords can business owners have confidence that their contribution to our national recovery will be recognised with the appropriate safeguards. However, another study by Deloitte says that the north-west is the most optimistic region when it comes to recovery, and that is what we always bring with us. Whether it is Lancashire, Manchester, Merseyside, Cheshire or Cumbria, the north-west will be at the heart of this country’s economic recovery.
The Government’s commitment to levelling up has always relied on opportunity and aspiration. By safeguarding that through the measures in the Bill, we are keeping our promise to the people who put us on these Benches. I know that the Herculean efforts of the Secretary of State, the Chancellor and the BEIS and Treasury teams have been felt far and wide as livelihoods and businesses from Heywood to Hertfordshire and from Middleton to Middlesbrough have been saved by the decisive action of this Conservative Government.
Today’s Bill will reinforce that commitment to a one-nation, compassionate Conservative ideal. But in these exceptional times what truly define us are the acts of kindness all too easily forgotten, such as shopkeeper Damian Edwards of Alkrington, who has worked 22-hour days to ensure that the most vulnerable in his community will have the essentials that they need; the staff and students of Middleton Technology School and Hopwood Hall College, who are producing thousands of pieces of PPE for local key workers; my constituent Win Page, who celebrated her 100th birthday by raising over £15,000 for the North West Ambulance Service; and Mike Goldrick of Heywood, whose local blind manufacturing company is now producing scrubs for the local NHS trust. Those are just a few examples of the countless reasons why I am proud to represent Heywood and Middleton—some of the finest, most patriotic and enterprising people not just in the north, but in the whole country.
The events of December’s election may seem like a distant memory now, but it is important to remember what they signify. For years, the forgotten towns of the north and midlands have waited their turn, promised so much by the people they elected only to see themselves passed over time and again. In 2010, the then Chancellor of the Exchequer, George Osborne, took the first steps on the long journey to levelling up the north of England long before it was fashionable to do so. What we now call the northern powerhouse began as a labour of love, and now forms part of our central promise to this country. It is a promise that I and so many of my new colleagues intend to fulfil.
As well as paying tribute to the wonderful people in my constituency, it is only right that I pay tribute to those who have represented it before me. For five years Liz McInnes served the people of Heywood and Middleton, and holds the distinction of being the first and only woman to have represented the seat. Before her, Jim Dobbin served for 17 distinguished years and is still fondly remembered on both sides of the House as an active MP and a true gentleman.
On a personal note, I would like to reach a bit further back to my noble friend Lord Haselhurst, who now sits in the other place, and was the last Conservative MP for the Middleton and Prestwich constituency. He is the most recent Member of my party to represent any part of my seat. His kindness, mentorship and support have been greatly appreciated during my first months as a Member of this place, and, as my hon. Friend the Member for Saffron Walden (Kemi Badenoch) would no doubt agree, set a very high bar for those who come after.
I would also like to thank the people who helped me get here. Like so many across the Chamber, I was supported, encouraged and helped every step of the way by a dedicated group of friends, colleagues from my local party, the local community, councillors, activists and concerned local residents. This was as much their victory as it was mine, and that I stand here today is a testament to their selflessness.
At this unprecedented moment in our national history, when so many are giving so much, I must also recognise two more of my predecessors, who made the ultimate sacrifice for their country. Heywood has the unique distinction of being the only town to have lost its MP on active service during both world wars. Howard Cawley of the Liberal party died at Gallipoli, and Richard Porritt, a fellow Conservative whose coat of arms is on the wall of this Chamber, was killed during the evacuation of Dunkirk; he was the first Member of this House to lay down his life in the second world war.
I am a proud supporter of our armed forces. Their dedication to our nation and its people is humbling under normal circumstances. At this time of great stress, nothing demonstrates this dedication more than their extraordinary work transforming Manchester Central in under 10 days into one of several state-of-the-art Nightingale hospitals.
Heywood and Middleton is actually a relatively young constituency by parliamentary standards, having first been contested in 1983, but the towns within it have a long and rich history. Heywood is celebrating its 750th year as a town. Once famed for some of the finest textiles in the world, it also has an important part to play in the history of this place, as the home of Lord Heywood, who foiled the gunpowder plot. I will simply say to hon. Members on behalf of my constituents: you’re welcome.
Middleton—a town conspicuously missing from the Domesday Book, bar a passing reference to being “of great antiquity”—is home not only to Manchester’s oldest church, St Leonard’s, but also to England’s oldest pub, The Olde Boar’s Head, a beautiful timber-framed building originally built in 1632. I am pleased to say that I have frequented both, although, I will admit, one more than the other.
Lastly, in a remark that will no doubt prohibit me from any future position in the Treasury, although maybe not in the Department for Business, Energy and Industrial Strategy, mine is a seat of three halves; beyond the eponymous Heywood and Middleton, it also includes the western reaches of the town of Rochdale. The communities of Bamford, Castleton and Norden—all villages in their own right—have much to boast about, with beautiful green spaces, thriving local businesses, excellent schools and, of course, yet more superb pubs, all of which we dearly hope to see reopen shortly. These communities also require protection, as their precious green belt is under threat, and I will stand with fellow Members across the House and community groups in opposing the disastrous Greater Manchester spatial framework.
It is all too easy endlessly to wax lyrical about what an immense privilege it is to be stood here, but in all honesty I doubt that words could ever truly convey the reality of what it is to be entrusted with this responsibility. In ancient Rome, our predecessors in the Senate would invoke the maxim “Acta non verba”. As ancient as that concept is, it is not one lost to time. One of Manchester’s greatest daughters, Emmeline Pankhurst, was still calling people to action with the cry of “Deeds not words” hundreds of years later, and it holds as true today as it did then. When we get through this crisis—and we will get through it—it will ultimately be our deeds, not our words alone, that will do it.
May I say what a pleasure it is to follow the hon. Member for Heywood and Middleton (Chris Clarkson), who has paid a passionate and upbeat tribute to his constituency? It is the tradition in this House that when one gives a maiden speech, one is usually surrounded by one’s colleagues in a so-called doughnut. I congratulate the hon. Gentleman on giving the first ever maiden speech with a socially distanced doughnut.
Let me begin by saying that I support wholeheartedly the aims of the Corporate Insolvency and Governance Bill. This is a welcome response and a much-needed one in the crisis times in which we find ourselves. However, the changes are and must be just a small part of the rescue and recovery package that will be required in the long term. This Bill will provide short-term relief from overbearing creditors and give necessary protections, but to avoid a wave of insolvencies as we come off the back of this crisis and those protections begin to recede—a situation that would profoundly damage livelihoods and might have just as many damaging public health consequences as the immediate effects of the crisis—we need to have a plan for the long term that will enable our economy to bounce back in a sustainable manner. This means that the Government must go further and they must go faster.
These needs for ambition and urgency are particularly relevant to the steel industry. It is the largest employer in my Aberavon constituency, with 4,000 well-paid jobs directly employed in the Tata steelworks in Port Talbot, but with many thousands more in the supply chain. Nationwide, the UK steel industry employs 32,000 people and contributes £3.2 billion to mitigating our balance of trade deficit through the exports that are produced. It contributes £5.5 billion to the economy directly and through supply chains, and each job pays on average 28% higher than the average UK job. Indeed, steel is the very backbone of our whole manufacturing sector—from defence to transport to infrastructure—and there can and will be no post-pandemic economic recovery for our country without a strong and healthy steel industry.
As my right hon. Friend the Member for Doncaster North (Edward Miliband), the shadow Business Secretary, has rightly said, the support to the steel industry has been far too slow, and it finds itself now teetering on the edge of the abyss. I do not understand why the French and German steel industries received the liquidity injections they required, backed by their respective Governments, within 10 days of their respective lockdowns starting, yet not a single penny of Government liquidity has been made available to the British steel industry to date. I think we do need an explanation of why it has been so slow.
My worry was that the reason might be that some on the Government Benches have given up on the steel industry. I do not believe that to be the case. I do truly believe and hope that the silver lining from this dark coronavirus cloud may be that the UK Government finally recognise the need to support industries of vital strategic, foundational importance, such as the steel industry, and also that they will begin to acknowledge the value of more localised and shorter supply chains.
What we need, coming off the back of this crisis, is nothing short of a manufacturing renaissance in our country. If we are to grow the economy to meet the challenges presented by climate change, by the social care crisis and by the need to rebuild our economy post-pandemic in a serious, sustainable and balanced manner, we must significantly boost our manufacturing sector. It is currently languishing at 9% of GDP. I would strongly recommend that the Government set an ambitious target of boosting manufacturing to 15% of GDP by the end of this Parliament. We know that the Government like to chase targets. Let us have a target that can actually pull our economy together and rebuild it on the basis of a manufacturing renaissance.
Boosting manufacturing is a win-win-win in so many areas. Our economy is currently dangerously skewed towards consumption and debt. Manufacturing is about production, and that is the kind of shift that we need to make. It would boost productivity, and it is far easier to make productivity wins in manufacturing than in the services sector. It would rebalance the economy and correct the massive geographical gap that exists between the wealthiest region in our country—London and the south-east—and the poorest regions. It would reduce our reliance on China. Just look at the issues around PPE: 40% of the world’s PPE is manufactured in China. We surely cannot go back to having strategic dependence on a country such as China, which so patently does not share our democratic values and ideals.
The steel industry must underpin this manufacturing renaissance. Successive Conservative Governments have unfortunately failed to support the steel industry sufficiently over the past 10 years. For instance, UK steelmakers pay 80% more for their electricity than their French counterparts, and 62% more than their counterparts in Germany. Now, during the pandemic, the Government have failed to come up with the size of loan and liquidity for the cash-flow crisis that Tata Steel, the owner of the Port Talbot steelworks in my constituency, is facing. It is the UK’s biggest steelmaker. It asked the Government for a loan—I stress that it would be a loan, which the company would of course be contractually obliged to repay—to cover the £500 million cash flow black hole that has been caused by coronavirus for the company. The Government recently increased their large business interruption loan scheme to a £200 million cap, but that still falls well short of what the company requires to plug that temporary gap in its cash flow. What a contrast, as I say, with the French and German Governments’ actions. Within 10 days, their steel industries had the liquidity injection that they required.
The Government have now introduced Project Birch, which aims to support those larger companies that did not fall within the parameters of the business loan interruption scheme. However, we know very little about how Project Birch is going to work. Yet again, I am concerned that coming forward with a new initiative could set back the work that has been done under the framework of the previous initiative. It almost feels like we are back to square one. With every day that goes by, the British steel industry teeters closer to the abyss, so I urge the Government to make this their top priority. We need to see the action that is required happening with the greatest possible urgency. My right hon. Friend the Member for Doncaster North and my hon. Friend the Member for Manchester Central (Lucy Powell) have recently written to the Government demanding more action on UK steel, and I thank them for their efforts.
The Government must also urgently recognise that the cost of doing nothing is so much greater to the UK taxpayer than the cost of intervening. Previous research from the IPPR think-tank suggests that the loss of 4,000 well-paid steel jobs could cost the Exchequer almost £1 billion over 10 years, and that is before we count the astronomical capital expenditure cost of decommissioning the blast furnaces and steelworks. The structural cost of putting thousands of well-paid workers on to benefits, combined with the capital expenditure costs of decommissioning, would be absolutely astronomical for the British taxpayer. It would be the definition of a false economy.
The British steel industry is a 21st century industry. It builds the offices we work in, the cars we drive and the homes we live in. It is a cutting-edge industry that is doing so much to promote green growth. There is a project involving Tata Steel and Swansea University just next to my constituency called SPECIFIC, which is creating photovoltaic cells on the basis of a steel-based film, which could turn every home and office in our country into a power station. That is a steel-based product. We are not talking about metal bashing; we are talking about cutting-edge technology and manufacturing. We need to support the backbone of our manufacturing sector that is the British steel industry. We cannot afford to let that backbone break at this crucial time.
The legislation has also missed other opportunities. The Government should be bringing forward long-awaited reforms of corporate governance. I fully support my hon. Friend the Member for Bristol North West (Darren Jones), the Chair of the BEIS Committee, who I congratulate on his recent election to that position. We should ensure that directors do not focus only on profit. They must also focus on people and planet. There needs to be a triple bottom line reporting structure, and the first step is to amend section 172 of the Companies Act 2006. We need companies to adopt a much broader responsibility, not only to narrow shareholder needs and aims, but to a much broader-based stakeholder approach in setting their corporate objectives and mission.
On that note, I commend the work of my right hon. Friend the Member for Doncaster North (Edward Miliband) in his role as shadow BEIS Secretary. He has made it clear that we need a green, sustainable recovery by creating, in his words, an army of zero-carbon workers by retraining and redeploying those who cannot work into different industries. That churn will be essential as we enter the new paradigm of the post-pandemic economy and could apply in areas from home insulation to wind turbine manufacture. These are the opportunities that we see.
My right hon. Friend has also rightly pointed out that those companies that receive state support through this crisis owe obligations to the taxpayer. Those registered in tax havens who want support should come onshore before they get it. Multinationals that plan to pay dividends to shareholders while claiming the Government resources do not need to be doing that. We could also be more creative. In the long term, the Government should consider turning Project Birch into a sovereign wealth fund of the type that has boosted the prosperity of countries such as Singapore and Norway.
Let us ensure that we use this recovery to form a new partnership between Government and business—a partnership that will benefit the whole economy. Let us use this crisis as an opportunity to rethink, redesign and rebuild the British economy. However, the urgent, No. 1 priority now must be to protect the backbone of our economy, our UK steel industry; because without a strong and healthy steel industry, there can be no post-pandemic economic recovery.
It is always good to hear Swansea University get a good mention—yes, I went there.
It is a pleasure to follow the hon. Member for Aberavon (Stephen Kinnock) and his passionate response to the issues facing the steel industry, and also to hear the maiden speech of my hon. Friend the Member for Heywood and Middleton (Chris Clarkson), who seemed rather bothered that he was among the last of his intake to deliver his maiden speech. I would say to him there is nothing wrong in leaving the best till last.
I draw the House’s attention to my entry in the Register of Members’ Interests. I support the Bill and the measures it provides for business. I ran a business for many years before becoming to this place and recognise the many challenges that business owners and managers face at this difficult time. We were reminded of that by the Chairman of the Select Committee, who talked about the survey showing that 80% of manufacturing companies have seen orders fall, while 20% have seen their order books halved. These are substantial reductions in demand, and there are some sectors of the economy, in retail and hospitality, where trade is non-existent. However, those businesses continue to incur costs. Many of those costs have been defrayed by Government support, but that will never match the expense needed to keep a business going.
At the same time, many businesses face delayed payment by their suppliers, many of which would legitimately say that they are not able to pay their bills because they are not trading and do not have money coming in. The Select Committee recently spoke to the Small Business Commissioner, who is going to need to be very busy and active.
In the face of all this, the Government have been incredibly quick to respond with a broad range of measures. I thought it was rather churlish of the shadow Secretary of State not to acknowledge the great support that the Federation of Small Businesses, the chambers of commerce and the Institute of Directors have given to the many measures that businesses brought out at great pace. Everything was done very quickly. We need to see the Bill in the light of those measures: it is part of a package of measures available to support businesses in a very difficult time. Of course, the measures in the Bill have been introduced quickly. There has been some criticism of the amount of time it took to get the Bill ready and that we have to scrutinise it, but these are important measures that will support businesses and keep them alive. We need to get them on the statute book to enable businesses to survive these exceptional times.
It is important to look at the permanent measures and the temporary measures. On the permanent measures, the protection from creditors, which provides a breathing space in which businesses can adjust to a new reality to get provisions in place, is incredibly important. Such protections will be taken up by businesses that, but for this pandemic, would have been trading completely profitably over recent months. It is not the fault of the company or directors that they are faced with these challenges. It is of course in our interests—it is in the public interest—for us to enable company rescue and to prevent the failure of businesses that are experiencing short-term problems.
Many of the measures in the Bill have been described as heading in the direction of chapter 11 as exists in the United States. They do not go quite that far, but they are important steps in the right direction. It is important to remember that in many cases the companies that will be supported by the process we are discussing will be ones that have received Government support in recent months, with staff furloughed or the businesses having received grants—companies to which public funds have already been committed. It is important to consider the fact that the Bill will ensure that that earlier funding—that public money that has been made available—does not go to waste. It will be a huge shame if we do not protect those businesses that have had Government support over the past few months.
The Bill will introduce a moratorium during which no legal action can be taken. I discussed with a recovery specialist the appropriateness of the amount of time that the Bill gives for that, which is 20 working days—in essence, a month, for most of us—extendable to two months. He said to me that in the context of a company restructuring that is actually not a lot of time. It can of course be extended, but for a creditor of the company who is waiting to find out what the future is going to hold and how much of the debt they are due is going to be repaid, a month or two can be a pretty long time. We need to respect the position of all the people involved. During that time there will be a payment holiday during which suppliers will not be paid.
There is then, of course, the restriction on enforcement action that a creditor can bring, which I shall talk about in a moment. That provision covers landlords, who are often being painted as the villain of the piece, taking aggressive action against companies in many cases; it seems to me that in some instances landlords need to have a view about their own better interests, and it may be better for a landlord to retain a tenant in a building, continuing to trade with Government support, and to keep the tenant in there while deferring rent, rather than the landlord ending up with an empty property for which, after a period of time, they will pick up a liability for the business rates.
Under the provisions of the Bill, companies will be able to use their breathing space to re-forecast their business. One of the challenges with the loans that we have already discussed this afternoon is how someone prepares a cash-flow forecast for a business for which the previous three months have been completely out of kilter with the historic trading pattern of the business. For directors and business owners who are in that position that would be incredibly difficult. I used to run my business on an annual basis, and would prepare my business forecast in October or November ready for January trading. I knew exactly the pattern of trade for my business, which remained remarkably stable year after year. I am incredibly sorry for businesses that have to go through that right now, as it must be extremely difficult.
I wish to raise with the Minister concerns about the termination clauses and the ipso facto change, which is permanent. If a supplier ceases to supply because of impending insolvency, that action, in critical cases, could lead to failure. Having run a business, I know that if a large debt builds up with a customer and payments are weeks and months overdue, the only action that a supplier can take is to cease supply. Businesses are often reluctant to do that, but they should have more courage and confidence in what they supply to the customer and the terms and conditions of their deal.
My hon. Friend is making an important point. Does he share my concern that there is a certain vagueness about what continuing supply might mean for a business in crisis? Does it mean that the historic pattern of supply should be continued? Does it mean that a company that is potentially insolvent has the right to demand a much greater increase in supply? It is very unclear.
That is a good point, and I hope that the Minister will consider that, because in many cases a contract has been entered into on the basis of a certain volume of business. Many businesses have contracted, so a purchasing company may not be buying the same volume. Does that provide the ability to keep the price at the original position? Price and volume go hand in hand, and there may be additional economies of scale. There are concerns, and I know that the Minister will respond.
My hon. Friend the Member for Huntingdon (Mr Djanogly) raised the issue of debts accruing because of extended payment terms. Buyers are often more interested in payment terms than the price of the product. A buyer does a great job if he manages to screw 60 or 90-day payment terms out of a supplier, rather than a particularly good deal on the product. If we can move our culture away from extended credit many of the provisions in the Bill would be rather less necessary than they are. The Minister will deal with those issues, and it is entirely right that in the Bill he guarantees that supplies that are made during the moratorium are exempt—the supplier is guaranteed to be paid once the monitor has agreed that they will continue to trade. That goes some way towards providing substantial confidence to the supplier. I am also happy with the exemption from the provisions for small companies. As the Secretary of State has said at the Dispatch Box, the usual criteria on size apply.
I want to conclude with the temporary suspension of the rules on wrongful trading, which I entirely support. Right now, business directors around the country are pretty worried about the financial viability of their businesses and their liabilities if they continue to trade, particularly if the trade position continues to worsen. The current rules are that they could be liable personally if they do not bring their business to a conclusion, even though the challenges facing those businesses are not of their making. Relaxation of those wrongful trading provisions will enable many directors across the country to sleep rather more soundly at night.
Could I just come back on that interesting point about the risk of personal liability hanging over directors? I declare an interest, as I am a director of a trading business. It fits very well, does my hon. Friend not agree, with the development of the CBIL scheme? Originally, that scheme was not very popular, because many banks insisted on personal liability for businesses and for the directors of businesses to stand behind the loans that they were giving. The current scheme removes the risk of personal liability for directors via the scheme.
My hon. Friend makes a good point, and we must provide every support to business owners and directors at this challenging time, to allow them to make decisions that will enable their businesses to continue to survive.
I declare an interest as I am a director on the board of a couple of charities. Extraordinary and unprecedented times call for very special measures. Without doubt, the Government have produced ultra-special measures to deal with the times in which we find ourselves because of the economic crisis, which has been stimulated by the covid-19 crisis that is upon our nation. I welcome the measures that the Government have taken. As I said in an earlier intervention on the Secretary of State, if Northern Ireland had not received support from the Government and those special measures, quite frankly the place would have gone bust. Those special measures indicated the strength of this Union—they kept it together and demonstrated that, to use a worn-out phrase, we are all in this together, and that, as a nation, we are able to help each other through in difficult times. That is to be commended.
There are businesses across my constituency, and up and down Northern Ireland—indeed, across the entire United Kingdom—that have survived only as a result of the extraordinary and special measures that have been put in place. I believe that we should put on record our thanks and gratitude for the fleet-of-foot way that those measures were put in place for us all.
At times, there has also been a reluctance by other sectors to step up to the mark, and I think the banks could have acted quicker. Most of the complaints that I have had to deal with came from companies that were trading, but that ran into the brick wall of the current crisis. When they approached the banks, which the Government were supporting and encouraging people to support, suddenly the banks put up road blocks and hurdles for people to cross. Of course banks must ensure that they are guaranteed to get their money back and be able to lend fairly, but to put up extraordinary road blocks in front of some companies was incredibly naive at this time, and it left a sour taste in many people’s mouths. I have spoken to some traders in my constituency who say that one of the first things they will look into as soon as this crisis is over is changing their bank because of the way they have been treated. That is a bad mark; that should not have happened or been part of this process.
Other Members have said that what is now required is an economic stimulus, and two or three important steps could be taken almost immediately to help to stimulate the economy. First, we must think differently and think big. Our country deserves a Government who demonstrate that they will provide leadership. Indeed, it has been said that without a vision the people perish, and it is imperative that the Government provide a vision, think big, and demonstrate that they are going to invest in infrastructure and stimulate the economy. They need to invest in bridges, roads, and other things to drive the economy forward. They must encourage Heathrow to get back to developing its hub plan for all regions of the United Kingdom, and stimulate that in a way that provides a vote of confidence that the economy will turn the corner, and do very well once it has.
The Government could also consider other special measures. Members have mentioned some of them, such as coupons or bonds that could be backed by Government money to help stimulate certain sectors, such as the arts or sport. Sovereign wealth funds were also mentioned, and the Government could invest in those. I think that is a good idea. It could even be pushed on to local devolved institutions, which should be looking at regional wealth funds to help stimulate the economy directly.
The huge issue that I really want the Government to look at is new technology. This is an opportunity to stimulate the economy with new technology through, for example, measures to support the development of a hydrogen hub and hydrogen power. We are a potential world leader in that new technology, which will generate employment in the manufacturing sector, use the steel made in this country to produce goods and ensure that we are able to provide something that is zero-carbon and will help the environment. We should be looking at such measures.
I am delighted that the Bill’s provisions are extended to Northern Ireland. I raised with the Secretary of State at the beginning of the debate the fact that these are temporary measures—indeed, they will expire in about 27 days if approved today. I think that they will need to be extended well beyond that. I agree with Members who have said that the earliest these measures should elapse is September, or even the end of the year, so that people have time to use the provisions that the Government have given them.
There are a number of core measures in this legislation, which I support, to provide companies with the best chance of surviving the financial difficulties of the covid-19 crisis. Providing insolvency breathing space is essential. The protection from threat of personal liability and aggressive creditor action during this crisis has been mentioned by many Members, and I agree with those provisions. Providing a temporary relaxation of rules surrounding meetings and filings during this time is also very important. The Bill introduces a free-standing moratorium for UK companies, overseen by an insolvency practitioner, to allow time for the rescue conditions to apply, with the moratorium ending if it is unlikely that the company will ultimately be rescued.
Northern Ireland is affected by this legislation in the following way. Clause 4, which inserts new part 1A into the Insolvency (Northern Ireland) Order 1989, and schedules 5 and 6 mean that the moratorium provisions are practically the same in Northern Ireland and GB. Clause 5 and schedule 7 are similar to schedule 3 for GB. Clause 6 and schedule 8 outline the timescale for these provisions and powers for the Department for the Economy. I encourage the Minister to keep in close contact with the Minister in Northern Ireland and the Executive, to ensure that the good flow of conversation and in-step approach remain, so that we can utilise the best provisions being made here at Westminster.
Clause 11 temporarily suspends liability for wrongful trading under the Insolvency (Northern Ireland) Order 1989. Clauses 14 to 17, on termination clauses, amend article 197 of the 1989 Order to cover new categories of electricity provider, suppliers of IT goods and services, which is very relevant today, and cases where utility supplies are made by a landlord, and grant a temporary exclusion for small suppliers similar to GB. Those measures are very important for small businesses in particular. Clauses 26 to 33 outline the powers available to amend corporate insolvency or governance legislation in Northern Ireland.
The inclusion of Northern Ireland in this legislation is most welcome. The measures bringing corporate insolvency more into line with that of Great Britain, at least during this time of crisis, are a vote of confidence, in that we are all going to have to emerge from this together—we will have to pool our strengths, share our responsibilities and make sure that the entire kingdom enjoys the opportunity of emerging from this crisis united, stronger and better.
This important legislation supports our companies through the financial difficulties of covid-19. What other measures has the Minister considered to continue to help companies after the initial threat of covid-19 has passed? It is important that we look beyond this. This has to be temporary. We do not want to see this as the main way forward. I hope the Minister will provide the sort of vision we talked about earlier and to which other Members have referred in their speeches. The importance of collaboration across the United Kingdom to help and strengthen our economy is the cornerstone of this proposed legislation. I hope it gets a fair wind. It will certainly have the support of Members of my party in the House today.
I start by congratulating my hon. Friend the Member for Heywood and Middleton (Chris Clarkson) on an excellent maiden speech. It made me feel slightly nostalgic, because I made my maiden speech—I was trying to work it out— 10 years and one week ago. In addition to that, I made my maiden speech immediately following the hon. Member for North Antrim (Ian Paisley), who has just spoken. The right hon. Member for Doncaster North (Edward Miliband) opened for the Opposition on that occasion as well, so there are a lot of similarities even though we are talking about a different topic today.
I rise to speak in support of the Bill. It has a lot of practical and important measures to support businesses, particularly in my coastal constituency which has many businesses in the hospitality sector. They are particularly badly affected because trade cannot resume as normal. As many Members will know, businesses in the hospitality sector do not necessarily make all their money at an even pace every month throughout the year. They are effectively losing much of the summer season when they would usually seek to raise the revenue that sees them through the rest of the year. Extra financial support at this time is therefore particularly important for businesses in that sector and I welcome it strongly for that reason.
I would like to speak about one sector that is not covered by the provisions in the Bill. I do not believe it is covered by any of the measures that have been put in place so far. It does have rather unique circumstances, but I believe it is a very important sector because of the unique role it plays in our national life—professional football. Professional football clubs are unusual businesses. They have very high turnovers but operate at very small margins. Many people would say that the big clubs in the premier league have a huge amount of money that they spend on players, but most of the income they receive is tied up in the contracts of the players who play for them. They do not necessarily have very much cash.
Clubs in league one and league two are particularly vulnerable because their revenues do not come from broadcasting. Most of the income for big clubs such as Manchester United, Manchester City or Liverpool comes from people around the world watching them play on television. For them to play behind closed doors and receive that broadcasting money gives them the money to succeed. However, for clubs that play in tier 3 and tier 4 in league one and league two, the vast majority of their income comes from playing live in front of spectators. Without that income, they have no revenue. What they have is a series of fixed costs.
The reason professional football clubs have fixed costs is that, unlike almost all other businesses in this country, they cannot restructure their debts and finances by going into administration. They are bound by the laws of their leagues to pay all their football debts in full, including player salaries and transfer fees. Unless they can meet all those costs, they will be expelled from the league. This is an application of a rule that has been the subject of court cases by HMRC and of much debate on matters to do with football club insolvency in this House in my 10 years here. That is a rule called the football creditors rule. It is a rule created by the football leagues for competition reasons to ensure that clubs cannot over-extend themselves, buy better players that they cannot really afford, go into administration to clear their debts and then resume. They have to be consistent in what they can afford through the season, but it does mean that they do not have the option of restructuring their debts. Their obligations and major outgoings are largely going to be the fixed costs of paying players.
There have already been a number of warnings that we will see this summer, because of the financial distress of lots of clubs, the mass release of a large number of players. It has been estimated that up to 1,400 players may be released without being re-signed. We had a small foretaste of that in Scotland last week when Dunfermline Athletic released 17 players.
More troubling over the next few weeks will be the fact that many smaller clubs supplement their income during the summer months when they are not playing through advance sales for the following season. Advance sales of season tickets normally come through in June, which is also when advertisers will make bookings, as will people taking out matchday hospitality packages. That money comes in in June and July and keeps the clubs going while they are not playing, but it is not going to come through now because these would be advance sales for a season that has no start date and no one knows how long it will be before things go back to anything like normal. That affects the whole hospitality sector. As I said, it is less of a problem for those in the premier league, because as long as they are playing on television, although there will be some loss of income because the package is not quite the same as it would normally be, they will still be getting their money in that way, whereas other clubs will not. There is a severe danger that some clubs will simply run out of cash in the next weeks.
My hon. Friend is making an important point. Is he aware that some banks have a blanket restriction on lending money to football clubs and are applying that restriction to CBILS as well, so even though the Government support is not supposed to have a sector-based restriction, this is being applied to football clubs?
My hon. Friend makes an incredibly important point, which has pre-empted what I was going to come on to say, although I would not make the point in quite that way. There is no doubt that football clubs would count as businesses in difficulty for a lot of lenders. The clubs that will be the most severely affected will be those that are probably trading at a loss, that have a history of debt and that rely on owners’ loans to make ends meet. They are going to be in a position soon where the cash that normally comes into the business has dried up, and even if the owner has the capability they are probably left trying to put money back into the club so that it can carry on paying the players, even though the players are not playing. The furlough scheme is great for ground staff, but it covers only a small percentage of a player’s wages, even for some of those playing in league one. So these businesses, such as they are, are going to be drained of cash, with no ability to supplement it, and they will be being asked to compete in sporting competitions and leagues where unless they pay these bills they will be kicked out.
Administrators and company voluntary arrangements for football clubs have always faced that problem, whereby even if they try to honour all the creditors at the same amount and they do not pay all the football debts in full, the club loses it golden share to play and therefore the business is almost worthless. So the administrator will honour the rules of the league, which also has the dire consequence of meaning that other local businesses that supply the club get almost nothing when a club goes bust. What we saw with Bury last year is that if no one will come and put the money in, nothing can be done and the club is expelled from the league. That is the position we are going to be in. How attractive is it going to be for an owner or a new owner to put money into a club that is running at a loss, and that has no income and no prospect of any income any time soon—perhaps for another year?
Even the idea of simply mothballing these organisations until competitive football can restart is not going to be viable, because they are bound by their contracts to their playing staff and other people, which are high. I was told by someone from the Premier League that it will probably lose £300 million in broadcasting from this season, which it will have to repay. There are liabilities in transfer payments to other clubs, in this country and around the world, of more than £1 billion, which will nevertheless have to be fulfilled. So there are real problems ahead and no ready solutions on the table for these clubs. We do need a credible plan on this. The Government could initiate a conversation with the football authorities to say that the suspension of the football creditors rule, to help clubs restructure their finances, alongside some support, would be the moment for genuine reform.
What I do not believe we should do with these businesses is chuck good money after bad. Some clubs have been poorly run and in financial distress for many years, and supporting them in that way would simply be throwing good money after bad. This is an opportunity to give many clubs the support they will need to get them through the next few months, recognising that football clubs in leagues one and two are community businesses and organisations. They are valued by and at the heart of their community, and they mean a lot to their community. These clubs should be sustained because they are very important to those communities.
What I suggest—this was referred to early in the debate when Project Birch was mentioned—is that we could look at acquiring, with public money, minority stakes in football clubs, which will give them the cash injection they need to keep going. I suggest creating an independently run fund with some public money and some money from the football bodies, in a similar way to how the Football Foundation operates to fund grassroots football. With those equity stakes to keep clubs going, there should be an opportunity for a supporters trust or a community organisation to then acquire those stakes. That would give the public resources the money back and would give the communities an opportunity to acquire a stake in the club and have much greater oversight of how it is run.
With a mechanism such as that, independent directors could be appointed to the boards of clubs, to have proper oversight and real-time financial information about how these clubs are being run. One reason why clubs are constantly in debt and difficulty is that they manage to get around the rules set for Football League clubs. Clubs in leagues one and two are supposed to spend only about 60% of their income on player salaries, but last year’s report by Deloitte showed the real figure is more like 80% or 90%. With much closer scrutiny of how they are spending their money, and with oversight by independent directors, we could start to put some of those issues right.
Football probably needs an independent body—an independent financial authority—to oversee these issues. One perennial problem in football, particularly in the Football League, is that it is really run by the chairmen of the 72 clubs in it and they are not that interested in having close oversight and scrutiny of what they do. The executive of the Football League has no real power, as these people report back to the chairmen. Therefore, an independent body to oversee all that could be important. We need to think of a creative solution that will not only provide financial stability, but create reform in the finances of football to put these clubs on a more even keel and create an opportunity for community investment and ownership in the longer term as well.
Whatever model we choose, coming fast down the track will be the problem that multiple clubs will start running out of money very soon. The problems that we saw last summer with Bury and Bolton and other communities in Portsmouth, Hereford and Darlington that have been through this before could be repeated by one club after another in the next few weeks. We need to know what the plan is, because the plan is not in this Bill—great though this Bill is. It is not in the measures that have been introduced elsewhere by Government. This is a big loophole that has to be closed.
I draw the attention of hon. Members to my entry in the Register of Members’ Financial Interests.
Mr Deputy Speaker, you know, as you have been listening to this debate, that many speakers have put this Bill in the context of the current economic situation and so perhaps I shall start by providing some of my own views. I am taken back not to when I gave my maiden speech, but to about 72 days ago when this House voted through the measures that have had the economic consequences that we are now debating how to mitigate. Seventy-two days ago, every single Member of this House—me included—supported or acquiesced in the measures that have destroyed parts of our economy and put many others on life support. So how should we come into this debate? We should follow the line that the Secretary of State took: he came here with a sense of humility that these were measures that the Government had to take. He came here not with hubris, but with humility, because I think he understood that the hands of politicians—of all of us—are all over the fact that so many hundreds of thousands of businesses in our country are facing such terrible times and that so many millions of people who are in employment, or who think they are in employment because they have been furloughed, are facing some severe economic consequences as a result.
It was our decision—the decision of every single Member of Parliament—to close the economy down, and we seek to excise from our collective memory the fact that there was any other choice. We say that we had to do it, there was no other option, but of course there were other options. Other countries have followed other paths. This was the path that every single Member of this Parliament chose, and we did it because we were frightened. We did it because we were uncertain. There is nothing particularly wrong with fear and uncertainty, but, my goodness, what a cost it will bring to our economy.
The Secretary of State was absolutely right to bring this Bill forward and to do it in such a humble way. What a shame it is, as I have sat here listening to the contributions of other MPs, that that humility has not been reflected in those contributions. No, having wrought this destruction on our economy, Members of Parliament now want to rush forward with their own ideas about how they can make the economy better, how they can make it greener, how they can level it up, and how they can give employees more rights. It is as if the parsecs of collective experience in this House of running businesses make us suitable champions for the economy of the future.
We should learn some humility. If there is one message that I have for the Government and for all politicians here it is to get your sticky fingers off British business. We should let the business leaders of this country find their way back. We should say that we are sorry for destroying lifetimes of work in a rushed decision to close down the economy. People who have been forced to see all their efforts come to nothing have spent every hour of those 72 days worrying about whether they can continue to employ their workers, and worrying about whether they can sustain themselves and their families. That angst and that anxiety stems from the decisions that we made in this House. Let us have some humility, let us follow the guidance of those on the Front Bench in this debate and let us not seek an opportunity for more political meddling in our economy as a result of what we have done. I am glad to have got that off my chest.
The corporate insolvency measures in the Bill seek to address this most extreme consequence of the actions we have taken, and therefore it is quite right that this is one of the first Bills the Government are bringing forward to deal with what the economy faces. I support the measures that the Government are putting in place. It is right to bring forward greater flexibility in the insolvency regime and, as many Members have mentioned, this has been welcomed across much of industry and the professional services, and has had plenty of time for discourse and debate.
It is also right that there should be a temporary suspension of insolvency laws to enable companies to trade through this emergency. I know from my own experience as a director that the issue of personal liability, particularly in relation to going concern, is one of absolute centrality to directors. As my hon. Friend the Member for Rugby (Mark Pawsey) mentioned, it is extremely difficult for many businesses to produce a forecast in such difficult times that will provide the certainty that the directors are actually producing a forecast that is real and achievable. Indeed, as many Members have mentioned, when it comes to banks and CBILS, banks themselves have found it very difficult to interpret the forecasts that companies are putting forward. As for the temporary easing of requirements, that seems to me to be a housekeeping exercise that the Government have judged adroitly and correctly.
I have some questions for my hon. Friend the Minister. The first is about the reputation of the UK as a safe haven for capital. We have had tremendous experience of attracting foreign investment, both in equity and debt. Is he assured that that reputation is going to continue? The efficient allocation of capital is a hallmark of an effective economy. Have the measures in this Bill been checked to ensure that all providers of debt financing to our businesses understand, accept and support the changes that he is bringing forward?
On the housekeeping measure of filing annual accounts, as the Minister will be aware, the availability of updated information is quite crucial for investors and others to make judicious decisions. Of course, there is always access to the private accounts of businesses, but in the public domain those evaluations are quite important. In his judgment about whether to extend that, he will certainly want to bear in mind the consequences for extensions of that particular aspect.
In his opening speech, the Leader of the Opposition—I do apologise; the right hon. Member for Doncaster North (Edward Miliband) used to be the Leader of the Opposition, but is now the Opposition spokesman on business—talked about some very important issues relating to the balance of rights, particularly with regard to employees and the protection of pension assets. This is something that I think the Government should consider. In fact, the shadow Secretary of State was kind enough to say that this is something the Government are considering, and I think it is right for all of us to consider what the impact of the pressure on employees will be. We saw during the urgent question earlier about the bare-knuckle behaviour of the management of British Airways that desperate situations sometimes bring forward desperate attitudes, and the long-standing rights that employees felt they had no longer seem to have any currency, so that seems very pertinent to this part of the Bill.
On the cross-class clampdown, the Government are bringing forward the ability for a court to decide whether a particular class of creditors who have not themselves agreed to a settlement should be forced to accept a settlement. We have no experience in this country—perhaps we do, and the Minister could tell me if so, but I am not aware of it—of courts being able to decide between the equitable rights of one class of creditors and those of another class of creditors in coming to a conclusion that is right for all in the round. What are the Government’s thoughts about what would be required from the courts in coming to those judgments? What is required in terms of disclosure from the courts that might be useful for the Government and the public to know? What is the Government’s view about whether there will be emerging patterns of response from the courts as they come to those intra-class decisions?
I have done several schemes of arrangement in my previous life, and know that the courts are very used to them. We are talking about an instance where a minority of creditors would effectively be outvoted by a majority agreeing to the scheme beforehand—something that currently requires unanimity. The difference between what we have now and where we are going is therefore not actually that significant, as long as an objective judgment can be made—judges can do that; they do it all the time in the High Court—as to the financial benefit, or lack thereof, of a particular scheme to a particular creditor.
I am grateful for my hon. Friend’s clarification, but my concern—I may well have read the Bill incorrectly—is that we are talking not just about majority or minority, but about where the majority or minority lies. At the moment, the majority has to be within every class of creditors, and there might be a disabusing minority within those instances. Under this legislation, an entire class of creditors could become a minority, and even though they all agree that they do not like the arrangement, for example, they will be forced to accept it. I think that that is a difference of approach. If we are giving that power to the courts, it is important for us and for the Government to be clear about the pattern that is likely to emerge, because in that respect the provision is different and new.
I think that the Secretary of State has answered my next question, but I will ask it again if I may. Will the clauses that are designed to be temporary measures sunset automatically without a subsequent affirmative statutory instrument proceeding in the House? Will they be subject to the negative procedure, or continue without an SI to cancel them? I would be grateful if the Minister could clarify that at some point, perhaps in his closing remarks if he has the time.
It is relevant to raise the issue of companies and sectors that may take time to recover, beyond the relevant period. I think that is addressed in Opposition amendments 3 to 6. What if the directors themselves cannot reach a clear judgment that fully escapes the risks of wrongful trading? What is the position of someone on a directorship in this situation who reaches a dissenting opinion to the majority of directors on the important issue of whether the organisation is able to continue trading? That is another issue of detail that the Minister may wish to address in Committee.
The impact assessment for the Bill does not appear to address the cost of debt from these changes, essentially assuming that changing what has historically been a situation that favoured senior debt to one that is a little bit looser between different classes of debt would have no impact on how much that debt might be priced at in the future. But it is my understanding that increasing risk on an instrument might cause an increase in the price on it. That may have been considered in the impact assessment and have been negligible, but it would be interesting to see what the Government have to say.
I am interested in what happens in the circumstances that arise under the chapter 11 equivalent proceedings when the Government are a debtor or a shareholder in a business. Do the Government have a voice that is different from any other creditor? The contribution of my hon. Friend the Member for Wimbledon (Stephen Hammond) was interesting in this regard, as he highlighted the part of the Bill where HMRC becomes a preferred creditor. Well, those of us who have had to deal with HMRC as a creditor in the past would not mark it down as one of the most amenable of creditors when it comes to its own interests, and that is putting it lightly. In fact, as we are seeing in this Parliament already, HMRC is acting, both in the Treasury and in general, somewhat as a bovver boy in British industry. It does not seem to like people who are self-employed and it certainly does not like people who have a loan charge. Now it seems to want to have priority in the debt structures of our companies. Where will its ambitions end? Where will this Government’s facilitation of the taxman’s ambitions end? As a Conservative, I would have hoped that they would have ended some time ago. Perhaps I can tempt my hon. Friend the Minister to comment on that.
I am following my hon. Friend’s remarks closely. Given his opening remarks, might it not be better, if we believe in backing British business, for us to have some skin in the game? We might not get our money back every time, but overall we probably would.
After my hon. Friend’s comments about association football, of which I have absolutely no understanding at all, I will bow to his better judgment on this topic too, but generally I am not really in favour of the Government having skin in the commercial game. When they get active in the economy, they tend to blunder around and probably, with the best of intentions, make things worse. I am not saying that they should not have their role; certainly, right now, many people will want the Government to have a role. Many Members have rightly looked at the measures the Government have put in place to support business and praised them.
Of course, people need not just take our word for that. Ask people around the world which country’s Government have responded best to the economic consequences of the virus and they will say that the United Kingdom Government are No. 1, with Japan, America and Germany in the United Kingdom’s wake. That is a tremendous credit to Ministers, but I would not like to encourage them to make that participation any longer than it needs to be.
On the guidance for going concern judgments, the Department will have spoken with auditors about how they are approaching their going concern judgments this audit season. Does the Bill have any impact on those judgments? Does the Department already think that it might need to bring forward any other measures based on the independent judgments of those auditors?
I raise that because in the 2007 crisis, there was a feeling that the rating agencies had been captured by their corporate clients and were giving ratings that perhaps did not reflect the true underlying status of businesses. We are fortunate in this country already to have embarked on reforms of accounting and on the separation of accounting and other activities to limit that risk, but I just caution that we ought be aware of that in a year’s time when we look at those going concern judgments. We would not like those to come back on our accounting firms, which are doing the best they can.
In Committee, the Minister would be wise to give a few more details about the role of the monitor—my hon. Friend the Member for Huntingdon (Mr Djanogly) raised that issue—and what role the Department will have in monitoring the monitors. Is any change expected to that?
One other concern I have is that facilitating businesses to continue trading at a time when the economy as a whole may be recovering and uncertain has a hint about it of creating some form of zombie businesses, where people are compelled to provide supply, as is required under the Bill, but there is the increasing sense that those businesses are not going to make it. I may be expressing a concern based on widespread use of the insolvency practice, which may not come to fruition—let us hope that for many people it does not—but I wonder what the Government’s thoughts are about the risk of businesses existing in name but not actually being able to create a long-term future for themselves or their employees.
I mentioned the Opposition’s amendment 1, on the voice of employees on obtaining a moratorium. If that were tweaked, it would be an interesting issue for the Government to consider. I also mentioned in an intervention the powers of the small business commissioner. The Secretary of State was right to say, “Hold on a minute; that’s something that we will come back to,” particularly as we are going through this in one day. It is probably not something that we would want to put through so fast. Similarly the calls by the Leader of the Opposition—[Interruption.] I did it again. I am so sorry. It is so hard to forget that time.
The best one.
Perhaps the current Leader of the Opposition would take offence at what the shadow Minister has said. I am not sure, although if we are ranking Leaders of the Opposition, I would say that as long as they are Labour, that is fine by me.
Notwithstanding the shadow Secretary of State’s position, he raised the issue of reform of corporate governance. It is an interesting topic, and the RSA Group did an interesting review of it last year, but again I would say to the Opposition that this is probably not the time for bringing that forward.
The protection of pension schemes is an issue that the Government ought to consider quite seriously. I have had personal experience of that, and I would not like those dependent on a pension fund to find themselves somehow further at risk as a result of these issues.
I started by mentioning the position 72 days ago and some of the consequences for businesses in the interim. I wanted to be absolutely clear that every single politician has been part of causing that, and, to the extent to which the Opposition continue to be supportive of the Government, as they have been in this debate, and the Government continue to be open with the Opposition, that is the spirit that the country would expect. For those businesses that have fallen because of the crisis or are likely to fail, I would like to say that, as a Member of Parliament, I am sorry. I am sorry for all that has happened to your businesses. I am sorry for the consequences. In the case of one particular constituent—who I will not name in full, but her first name is Peta—let me say that I have worked tirelessly to find ways in which Government programmes can support what you have done and will continue to do so. However, the best thing that we can do is to restore the British economy, get the Bill passed to ensure protection for the businesses that will fall on hard times and get the economy moving again.
I thank right hon. and hon. Members for their speeches and contributions. I particularly thank the hon. Member for Heywood and Middleton (Chris Clarkson) for his maiden speech, which we all thoroughly enjoyed. We were unable to provide him with what people refer to as a doughnut, but we were here to support him. I wish him well and look forward to his future contributions.
I was pleased to hear the comments of the hon. Member for Folkestone and Hythe (Damian Collins) about where football teams will be in future, and I thank him for his knowledge of football and sport. It is critical for football teams to have the revenue that comes from crowds attending matches. I am a Leicester City supporter and have been for almost 50 years—nearly all my life, or the best part of it. A number of MPs in the last Parliament were Leicester City supporters. Some of them are no longer here, but others have taken their place, and we hope that the Leicester City supporters club in this House might grow again—it was six before—to perhaps four or thereabouts. I was pleased to hear the hon. Gentleman’s contribution and his thoughts are helpful, because the smaller clubs probably depend entirely on the revenue generated by the supporters on a Saturday afternoon or Friday night, or whenever it may be, so this is very important.
At this time of economic crisis, it is essential that we get the Bill right. I put on record my thanks to the Government for all they have done in their response. It is all very well to criticise, and easy to do so, but we should give accolades whenever they are due. It is the right to thank Government for their response and particularly the Chancellor for what he has done, because he has been excellent and has tried hard at a very difficult time.
I represent many little towns with high street shops, as well as my main town of Newtownards, which recently won the champion high street award for Northern Ireland. I am well aware that, despite the grant funding that has been allocated, alongside the tax deferral option, many of those businesses will be unable to continue trading. I want to give a clear picture of the covid 19 position for those high streets and businesses—without mentioning any names, by the way—some of which have literally hundreds of thousands of pounds of stock in their shops, yet with no outlet at all and their summer stock ready to go. They have been unable to do anything with it and their shops have been closed. It is a difficult pill to swallow. Six months ago they were running successful businesses, employing between five and 20 staff in their shops, so this has been calamitous.
My hon. Friend the Member for North Antrim (Ian Paisley) will know that I put forward a suggestion to our parliamentary group meeting that we could introduce some sort of revenue that could help those businesses. Lots of businesses are going online, and I can give the House an example of something that is happening in the Republic of Ireland. The Government there are giving up to €40,000 for each business to increase its online business or to start a new online business, and I am just wondering whether that is something we in this House should be doing as well. I know that we are talking about insolvency, and I understand that, but this is also about how we can help businesses to grow and ensuring that they can do that. The shops that I referred to are small and medium-sized businesses. There are successful family businesses but they are facing great uncertainty, so I again make the plea to be cautious, compassionate and understanding with them as they try to get through this difficult situation.
It was no surprise to read in the Library briefing that the coronavirus outbreak has led to a decline in business activity and revenue across many sectors, causing a large negative shock to the economy. The average forecast for quarterly GDP growth in the second quarter, April to June, was 16% based on Her Majesty’s Treasury’s survey of investment banks, economic research organisations and other institutions in May 2020. However, the estimates are highly uncertain, including on the extent to which the economy will bounce back. Companies and shopkeepers, and other Members, have referred to the rental issue, and I want to make the important point that every landlord needs to review their rental charges. Is it not better to have a small rent coming in than to have no rent at all, given the rateable obligations on the businesses? Is it not better to come to some sort of an agreement, rather than holding fast to what the rental figures would normally be?
The Office for National Statistics’ survey on the business impact of coronavirus reported that, between 20 April and 3 May 2020, 78% of businesses that responded were continuing to trade and 20% had temporarily closed or paused trading. I have had something come up in my constituency—I am sure that others have as well—relating to businesses that have been able to trade without having to borrow from the banks, be they in construction or in fishing and fishing vessels, or other businesses on the high street. They have conducted their business over periods of six, eight and 10 years—to give three examples without naming who they are—and they have never had to borrow until now, when hard times have hit them. It was difficult for them to go to the bank and borrow money because they did not have a credit status that the bank could look at and say, “You have always made your payments on time.” They had never had to make any payments. One of the predicaments that I have contacted the banks about is that they need to understand that those who have been able to conduct their businesses over periods of six, eight and 10 years have shown that they can well manage money without having to borrow it. I would have thought that those businesses’ credit status was therefore suitable and that there should be no difficulty whatsoever. Again, I just make the point.
I reiterate the point made by the shadow Minister in relation to the pension scheme deficits. I support his concerns about where that will end up, and I hope that the Minister will give us some clarity on that matter and maybe some reassurance. I have no doubt that he will do that. Northern Ireland has the highest rate of temporarily paused business trading, at 25%. That is the highest in all of the United Kingdom of Great Britain and Northern Ireland. I know this to be true from personal experience in my constituency, and I am sure that my hon. Friend the Member for North Antrim will have seen that among the businesses in his constituency as well. We must get the help and support needed to enable those businesses to reopen. London and the south-east have the lowest level, with some 16%.
The industries with the largest proportion of businesses that have temporarily paused trading are the accommodation and food services, at 78%, and the arts, entertainment and recreation sectors at 80%. A small number, just less than 1%, responded to say that they had permanently ceased trading in that period. Of the businesses that continue to trade, 61% reported that their turnover had decreased and 25% reported that turnover had fallen by more than 50%, although I am aware of some whose turnover has fallen by as much as 80% to 90%. Almost all businesses—99%—reported coronavirus as being the reason for the turnover reduction outside of the normal range, so it is very clear what the issue is.
The Government responded to the circumstances they were presented with and did their best, given the fear we all had of coronavirus and all the uncertainty. They were trying to get us to a position where we were able to lessen the number of deaths. What would have happened if we had not done anything? What would have happened if the Government had just said, “Plough on ahead”? We would be in the most calamitous, destructive time ever, and I think we have to thank and congratulate the Government for what they have done.
The largest fall in turnover was in accommodation and food services. The pharmaceutical and agrifood sectors are incredibly important for me in my constituency. Tourism and hospitality rank up there at the highest because the economic focus of the local council, Ards and North Down Borough Council, is tourism and hospitality. That is where the growth is. That has been the growth for the past three to four years and it will be the growth for the next three or four years as well, but we need to ensure that help is there for tourism and hospitality to get out the other side. Some of the hotels need that. We have some clarification on hotels in Northern Ireland, and that is good news. It gives the hotels a chance to try to book for the end of July onwards. We have to try to ensure that things are going in the right direction.
The Government have helped those who are self-employed and those who have furloughed staff. Under no estimation can we doubt that that has helped greatly to ensure that things go forward. These are unprecedented times, and while I must thank the Government again for all the steps they have taken and for going the extra mile, I have real concern about many businesses that need more. I am referencing not failing businesses, but businesses that were thriving, doing well, creating employment, creating opportunity and boosting the economy, and they can thrive again.
I was pleased on 20 March 2020 when the Business Secretary announced that the Government would introduce measures at the earliest opportunity, together with temporary covid-19-related measures intended to help companies avoid insolvency. Following that, I welcomed the Government’s announcement on 23 April 2020 of other measures to protect companies from the aggressive use of statutory demands and winding petitions, particularly by commercial landlords. I welcome those measures to help business and to step in where possible. I further welcome the mixture of permanent changes to insolvency law and temporary changes to insolvency law and corporate governance to ensure that we help at this time but do not tie our hands for the future.
The proposal in the helpful document is that the help for businesses would be from 1 March 2020 to 30 June 2020 and one month after the provision comes into force. Will the Minister confirm that, in the event of the pandemic’s impact on businesses continuing beyond the end of that period, the provision may be extended for up to six months using secondary legislation, and that the process may be repeated? It is important that we know that, because it is not just about the short-term measures; it is about the longer term to encourage businesses to be able to do more.
To conclude, on behalf of the people and businesses of Strangford, whom I am very privileged to represent, I thank the Government for their financial intervention, but I ask for more short-term support, more help with tax deferrals and greater help with staffing problems. We will get through this, but I believe that the business sector is the only way we can. We will reap the benefits from anything that we pour in at this time. Those entrepreneurs will end up repaying more than the help they receive with the income that will be allowed to be generated.
I support the Bill. I understand the reasoning behind it, and I support it fully. As my hon. Friend the Member for North Antrim said, we understand that the implications will be for Northern Ireland as well. It is good to have that in place, but I ask for further grants to be allocated for special circumstances. That, however, is a debate for another day. As others have said, tomorrow will be a better day, but we have to work towards that day.
It is a pleasure to speak after my hon. Friend the Member for Strangford (Jim Shannon); we have spoken in many debates on business issues before and he is a huge champion of business. It was also a pleasure to listen to the maiden speech of my new colleague, my hon. Friend the Member for Heywood and Middleton (Chris Clarkson). It is great to have another Conservative northern Member of Parliament to champion the cause of the northern powerhouse. He neglected to mention Yorkshire, and particularly north Yorkshire, in his list of areas in the north that will contribute to the recovery, but I will have a word later. It was a fantastic speech.
I draw the House’s attention—of course, in all these types of debates—to my entry in the Register of Members’ Financial Interests. I am still involved in business to this day. I am also the chair of the all-party group on fair business banking, which has talked about many of these issues over the last months and years. In my view, the CBILS and BBLS are a huge success, but there are problems, particularly with the CBILS, in terms of making sure that banks do allow money to go out the door based upon the business being a viable business on 1 March. There are still issues about banks assessing the ability of the business to pay the loan back over a period of time. In particular, there are sector-based issues—football clubs being one and house builders being another. Banks seem to be translating from a standard lending policy into a CBILS lending policy, which cannot be right. That was never the intention of the Government scheme.
On the Bill, I am a strong supporter of the measures being brought forward by my right hon. Friend the Secretary of State, particularly on the moratorium and the opportunity to restructure. That has been planned for some time to give businesses breathing space. Irrespective of the covid crisis, at any point in time, many businesses can be salvaged through this process. It has happened in the US for many years—it is known as chapter 11—and it is absolutely the right thing to do.
I will not talk in detail about the Bill, because many others have, but I will talk about some of the things that I think we need, as well as this legislation, that would make a significant difference. There are some outstanding issues that the Minister and the Department are aware of and they have consulted on some of them, particularly about moving from a self-regulation basis for insolvency practitioners to a single, truly independent regulator. There are some very important issues that we have seen over recent years in terms of conflicts of interest that will carry on despite the Bill. The moratorium and the opportunity to restructure will help to some extent, but the conflicts of interest will carry on. This is particularly because most insolvency practitioners who are appointed to carry out work on an insolvent business are appointed by the major creditor, which tends to be the bank. It is a panel appointment by the bank and clearly, people rarely bite the hand that feeds. So if most of the work that the insolvency practitioner—who is supposed to work independently of any individual creditor and in the best interests of all creditors—is getting is from the banks, they are more likely, in our experience, to work in the interests of the bank.
It is even worse than simply the facts of what happens in the insolvency. On many occasions, we are talking about large accountancy practices, such as KPMG, Deloitte, Ernst and Young, who are appointed by the banks prior to insolvency, for example, to carry out a supposedly independent business review—paid for by the business but instructed by the bank. They have been brought in to do an independent business review, which is supposed to give a fair representation of the business, and that accountancy practice then becomes the insolvency practitioner and can earn hundreds of thousands of pounds of fees in the insolvency, which is a clear conflict of interest.
This issue has been brought up for decades in this House. I found two debates in 1999 when this conflict of interest was mentioned. It is something we need to deal with. This has featured in many of the issues we have seen over the last decade or so, particularly around the last crisis, where we had tens of thousands of businesses that were put into administration by the banks—this is a matter of public record—particularly by RBS and Lloyds Banking Group. Tens of thousands of businesses were put into insolvency inappropriately. A fair percentage —around 20%—of those businesses were viable, but there is not one instance of an insolvency practitioner deciding to sue the bank and saying, “Your business has gone into receivership as a result of creditor misconduct.” In other words, the bank is forcing the business into administration. Never has there been a case in which an insolvency practitioner who is supposedly independent and working for all the creditors has said, “There is something wrong. We need to take the bank to task.” There has not been one instance. We have pushed for information, and we have received emails from accountancy practices saying, “We would never sue a bank—we would never litigate—because of the conflict of interest.” There is a huge conflict of interest, and huge sums lie at the heart of this.
We are talking about thousands of businesses in this situation. This is systemic for every bank and almost every insolvency practitioner, but I should like to discuss a particular case, because it reveals the nature of the issue. We are talking about tens of thousands of businesses, and we have to understand that there are tens of thousands of people—individuals—whose life’s work has been taken from them, along with hundreds of thousands of jobs. These are very serious issues.
The case I wish to raise is that of Arthur Holgate and Son. This is not a sub judice issue, and I have obtained consent from the business to discuss it. It is a tangible example of the problems that arise. It was a family-owned business that ran caravan parks and turned over about £2 million. It was a significant business that, like a lot of other businesses, sold a swap that put it in danger, which increased the cost of loan servicing a great deal. That became the matter of a redress scheme, because of the inappropriate sale of complex financial instruments to businesses that were not sophisticated.
When that came to light, with a route for redress, the business approached the scheme and was offered £300,000 in compensation, despite the fact that its losses totalled £1.4 million. Ultimately the business failed and went into administration. It was taken off the owners—it had been in the family for generations—but it was one of the few businesses that we have come across that had the financial wherewithal and tenacity to get this thing through to court. On the courtroom steps, compensation was settled at about £10 million by Barclays bank.
We need to look at the actions of the insolvency practitioner as well as the actions of Barclays bank. Despite the fact that the insolvency practitioner is supposed to work independently, it did not do so. It colluded in bringing about the failure of the business and as a result the distribution of assets from the business effectively went to them and to the banks. Deloitte was the insolvency practitioner. This is not an isolated case: Deloitte was fined this year for its administration of Comet—many Members will remember that—and it was given a £1 million fine for failing to manage a conflict of interest in that case. We need to deal with this, as we are not dealing with it in the legislation.
Deloitte was brought in to undertake an independent business review for the bank to see whether the business was viable and able to get through its financial difficulties. It charged the business £50,000 for that work, which was paid after the business was declared insolvent on a preferred creditor basis, which is against the law.
There are many concerns, but the most disgraceful part of this case was the correspondence between Barclays and Deloitte. Barclays effectively told Deloitte to ignore the directors, although they were running the business and knew it best. In fact, I can quote from one of the emails sent internally in Deloitte, which said: “Be careful of swallowing the Paul Holgate line”—Paul Holgate being one of the directors of the business—“that it’s somebody else’s fault”. He kept saying to them, “It’s not our fault that we are in this position. This is because the bank sold us a swap.” He was right, but Deloitte deliberately did not put that information in the business review and did not even mention the swap at that point in time or when the insolvency happened. Another email sent internally in Deloitte said, “We do not want to appear critical of the bank.” That is because of the conflict of interest, and it cannot be right.
We must put a Chinese wall between consultancy work that a bank requires an accountant to do and that very accountant then being able to do the insolvency work, because there is a clear conflict of interest. In this case, there were fees of £400,000 for Deloitte to carry out the insolvency work. Had it just done the £50,000 report and said, “This business is fine. It’s actually your fault because of the swap. If you settle that problem, the business will carry on trading fine,” Deloitte would have got £50,000, and that would have been it.
My hon. Friend talks very persuasively about this, and I have found myself nodding along to everything he has been saying for the last several minutes, but he keeps on referring to a conflict of interest, when surely what he is talking about is better named corruption.
Order. Before the hon. Gentleman answers the intervention, although he has not spoken for an inordinately long time—indeed, other Members have spoken for much longer—he has spoken for well over 10 minutes, and I have to ask him to conclude pretty quickly, because it is in the interests of everyone that the Minister is able to answer the debate. Members have asked questions, and we must have time for that.
Thank you, Madam Deputy Speaker. I will try to move on quickly.
A lot of this information is supplied by the then business owners. Deloitte actually perjured itself in court on many of these issues. All this arises because of the conflict of interest. Deloitte should have sued the bank, but that simply does not happen. This stuff happens because of the unholy alliance of vested financial interest, which we must eliminate.
The moratorium will help tremendously, but we also need to do what the Department has said it is keen to do: move away from self-regulation, which is how the sector is currently regulated. We need to recognise professional bodies and move to a single regulator—an ombudsman. We must put a Chinese wall between the accountancy practices that do the consultancy work and the insolvency practitioner.
We must also give individuals more power. In my view, we should allow the business to challenge the appointment of an insolvency practitioner and the approach of an insolvency practitioner, to effectively recognise creditor misconduct within the insolvency process, and let them take their complaint to a tribunal there and then. In Comet’s case, it was eight years down the line before the situation was resolved. It must happen there and then. We must have an ombudsman supported by a tribunal that can support businesses who feel that the insolvency has been carried out incorrectly.
There is one final thing I would like to say. I completely support the removal of the right of forfeiture from landlords and the suspension of winding-up orders. Some businesses, particularly very big businesses, are abusing that privilege—I would name Boots and WHSmith —by effectively saying to landlords, “We’re not even talking to you.” That is completely inappropriate. Ideally, those measures should come with the condition that a company cannot take dividends if it is benefiting from those measures. With that, I will happily conclude.
I concur with what many Members have said about the maiden speech from my hon. Friend the Member for Heywood and Middleton (Chris Clarkson); it was an excellent maiden speech indeed, as I am sure everybody would agree. I also concur with what my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) said about landlords at the end of his speech. I spoke a couple of weeks ago to the Hitchin Property Trust, which owns a big part of Hitchin town centre, and the trust talked about the behaviour of some of its tenants; I will not name them, but they are very big corporates and are behaving in a similar way to that which he described. We have to look at that.
I do not know about you, Madam Deputy Speaker, but I was struck by the speech by my hon. Friend the Member for North East Bedfordshire (Richard Fuller). It was one of the best speeches I have heard in this House for long time. It is very important that none of us forget that every lost business is not just a line on the balance sheet or a statistic in a newspaper—it is a drop in income for a family; it is a mortgage that might be lost and a home that has to be sold; it is somebody’s life’s work up in smoke because of something that happened that was completely not their fault. I speak as somebody who has worked in business and in the City of London. My wife is currently running a family business, and I have seen the worry that she has gone through. Many of our friends, constituents and various other people—hundreds of them—have gone through similar worries over the past 72 days. When we consider the Bill and any of the other actions we are taking, we all need to bear in mind those people and those businesses.
The moratorium process in the Bill is a very good measure indeed. It provides a formal breathing space for a business to gather itself, take a pause and work out a restructuring plan that means that the business—and that means assets, jobs and people—can survive in a sustainable way going into the future. We should all commend that process.
There has been some discussion about certain creditors who will in effect be bound in. I cannot remember the name of the provision—somebody needs to rename it—but I think it is cross-class cram-down. It is awful. I like to think of it as the debt equivalent of the sort of drag-along right for a company that equity shareholders have. It feels a bit more like that to me and I much prefer that terminology. The point is that the scheme of arrangement that we can make under the moratorium process can be orderly and can lead to discussion, not just with the creditors and the company but with the court. Indeed, together we can work out a way forward. That is a very sensible provision.
I do have a couple of questions, though. First, bearing in mind how busy the court may be in the next 12, 18 or 24 months, have the Government thought of any provision for giving additional resources to the court and thought about how things are set up? Schemes of arrangement take a minimum of around three months to go through, so we do need to consider the practicalities of this happening en masse. If the process works as well as I hope it will, there will be a lot of moratoriums, so that is an important point for the Government to consider.
Connected with that, have the Government considered more of a mediation process contained within the moratorium? Does it always necessarily have to go to court? I may have missed that in the legislation. If it does not have to go to court, what is the process whereby we can have something similar to a scheme that does not go through a court, so as to help by not jamming up the High Court? As I say, there may be a lot of traffic going through.
There has been some discussion throughout this good and well-informed debate about the Government’s economic actions to try to save the economy from the public health measures that we have had to take. I completely agree that the Government have been foremost in the world—not just in Europe but in the world—in the actions that they have taken. We have heard criticism of the CBIL scheme. It is important to note that it is hard, practically, to get so much money out of the door in a way that observes a basic understanding that each business is a real business, with a real balance sheet, that can pay its debt. Yes, there have been problems, but let us not allow them to get in the way of our saying, “This is a really, really good economic response.” I know that the Minister, the BEIS team and the Treasury have worked tirelessly over the past few weeks and months, to ensure that that scheme works as smoothly as possible—and indeed, generally, it is working better and better all the time.
People may criticise the banks on this, but every situation is different, and we should bear it in mind that there are difficulties in pricing anything in the economy right now. Therefore, a bank, has to think about whether it might have big losses come Q4 this year or Q1 next year and has to think about whether money can be paid back and if it would have to take 20% of the loss, as is the case under the CBIL scheme. If people think that the Government—the British taxpayer—should pay 100% of every single loan that goes to every company, they should say so; but if they accept that that would not necessarily be the right thing for the taxpayer to do, and that the banks must therefore be involved, we must understand the worry that the banks have about big losses in the next 12 to 18 months. We do not want a banking crisis on top of what we already have.
I want to reflect on where we go from here—with the proviso that we are at least getting towards the conclusion of the health crisis. Obviously, I shall not put a timeframe on that, because none of us know, but if we are approaching that point, we shall be left with a hugely indebted corporate sector. If there is a hugely indebted corporate sector, notwithstanding the measures in the Bill—and indeed other measures—even the businesses that survive will find it very difficult to grow, carrying a huge amount of debt. We shall have to recapitalise large parts of the British corporate sector, and in this House in the weeks and months ahead we need to think about how we do that. The Bill could be one of the ways in which we start that process.
It is a pleasure to be on the Front Bench and at the Dispatch Box again as the shadow Business Minister, although I would have much preferred to make this speech safely and socially distanced in sunny Manchester—no offence.
I reiterate the thanks of my colleague, my right hon. Friend the Member for Doncaster North (Edward Miliband), to the Minister, the Secretary of State and their teams for all the engagement we have had on the Bill. Our objective, as the Opposition, is to be constructive, and to ensure that businesses get the support they need now and in the long term, to keep the number of insolvencies in the coming weeks and months as low as possible. As my right hon. Friend said, we support the overarching objectives of the Bill. However, we hope the Government can give us some reassurances in Committee. Many others today have voiced similar concerns.
I thank many colleagues from across the House for their speeches in this interesting debate. Obviously, the highlight was the maiden speech of the hon. Member for Heywood and Middleton (Chris Clarkson), who was a bit nervous about coming last out of his intake; but as a fellow Mancunian, I reiterate that the best was definitely saved till last.
Although we back the Bill today, we are clear that it should be the last resort for many businesses. There is much more for the Government to do now to support businesses so that, as my hon. Friend the Member for Bristol North West (Darren Jones) eloquently put it, the measures debated today are not necessary. Every previously viable business that needs to call on these insolvency changes because of our decision to shut down the economy for public health measures, is a business that has been failed. Ministers have recognised the huge scale of the situation, with the unprecedented support they have established to retain jobs and support businesses. That has been the right thing to do and we have supported it. However, as we enter the end of the lockdown phase, the challenges ahead are becoming clearer. More must now be done to rescue more businesses, and ensure that the recovery is as short and strong as possible. We must stop a second, and possibly a third or fourth wave of insolvencies arising from unmanageable debts and creditors. Any business that goes bust as a result of public health measures will lengthen and deepen the recession and leave long-lasting scars on unemployment levels and the wider economy.
Labour Members firmly believe that the cost of not doing all we can now to save businesses will be far higher than the cost of action today. Ultimately, the taxpayer will pay for the cost of failure, through lost tax revenues and higher unemployment over many years, not months. The Government need to renew their support package over the coming period, as it is now clear that the easing of lockdown will be longer and more complicated than was predicted at the start of this crisis. That is why we suggest that the temporary measures in the Bill should be extended today, rather than waiting until later.
Preventing insolvencies today, in and of itself, will not stave off insolvencies tomorrow, if the Government do not take a long view and ensure that businesses do not face a cliff edge. A second wave of support and sector-specific action is also required. Critically, if the recovery is based on unmanageable debt, it will be no recovery at all. In the immediate rescue phase, businesses and business organisations are asking for more discretionary grant funding to support the hardest hit businesses that have so far missed out, more flexibility with the furlough scheme, simplification of the CBIL scheme, and many other measures that have been mentioned today. Those include more clarity and joined up working on business critical issues such as quarantine measures, safety in the workplace, childcare, and shielded employees. The Government must not fall into complacency and think that their actions so far have been sufficient, because a second wave of support is urgently needed.
We have heard from a number of colleagues, notably my hon. Friends the Members for Aberavon (Stephen Kinnock) and for Cardiff South and Penarth (Stephen Doughty), and the hon. Members for Folkestone and Hythe (Damian Collins), and for Strangeford (Jim Shannon)—
It’s not Strangeford!
Sorry. Strangford. It’s just that the Member of Parliament reminds me of that—no, I’m only joking.
The economic emergency we are in is affecting different sectors of the economy in different ways, some particularly and devastatingly harshly. This will be a sectoral recession, and the Government response must reflect that. We have raised with Ministers the serious issues facing our manufacturers, car manufacturing, steel makers, the aerospace and defence industry, aviation and tourism, the hospitality industry, and other areas such as football. The crisis is also affecting supply chains in those sectors, and we have already seen job losses at premier British companies such as Rolls-Royce and McLaren. There have been layoffs in the airline industry, despite the furlough scheme, and despite warnings from many industry bodies about the failure to provide adequate support and liquidity to business now. Will the Government step up with the more urgent response that is needed for those sectors, which so many Members have asked for today?
Project Birch has potential, but talking must quickly be followed by action. The promise of jam tomorrow will not pay the bills today. The feedback I get from businesses, especially some of our most important and largest employers, is about how slow the discussions with Government are, compared with the urgency of the cashflow problems. For example, our world-leading aerospace, aviation, tourism and travel sectors now face what could be a final blow from the confusion and mixed messaging about quarantine measures.
As the former Prime Minister Gordon Brown said, and as the hon. Member for Hitchin and Harpenden (Bim Afolami) has warned, the scale of the debt that companies are taking on to survive this crisis is huge. We will see a debt-laden recovery, with demand unlikely to return to normal quickly for many. Coupled with that debt, the recovery is likely to be weak, deepening its economic impact, and with insolvency spread over the months ahead.
Once companies have to start paying back loans, further insolvencies are likely to follow, with recovery choked by high levels of unemployment, and low levels of confidence. Are the Government exploring with business organisations and the finance sector ways to mitigate the month-13 problem of Government backed loans with a more long-term solution, as was suggested earlier?
Finally, we need to do more to increase and generate demand through a green recovery plan, as the hon. Member for North Antrim (Ian Paisley) described, and to address the youth unemployment crisis. The Government must seize the opportunity to bring forward pipeline projects to put British businesses at the forefront of the green and digital revolution.
Turning to some of the specific measures in the Bill, we support both the permanent changes to insolvency law and the temporary changes to insolvency law and corporate governance, but with some caveats. A balance must be struck between allowing businesses to survive through the crisis and not removing essential protections for creditors, pension funds and employees. The trade unions and others here today have raised some serious concerns about this, with good reason, and I will say more on that in Committee.
We believe that there must be no revision of the directors’ duty of care to their employees and suppliers. The Bill must ensure that SMEs and smaller suppliers are protected when larger companies go into administration. As the hon. Member for Dudley South (Mike Wood) and others have said, the temporary measures need to be extended today.
The Bill is a big missed opportunity to address corporate governance accountability, as the hon. Member for Huntingdon (Mr Djanogly) outlined. The collapse of Carillion was a national scandal. Yet again, corporate greed and very shaky indebted finances led to the taxpayer paying the price of directors’ failures. While those directors and shareholders reaped all the gains during the good times, the collapse of Thomas Cook more recently exposed these failings further, with the taxpayer once again footing the bill for failure. We had a conversation earlier about equity stakes, but the taxpayer in effect does have an equity stake in many businesses—but only in paying for the costs of failure, not in reaping any of the rewards of success. Ministers consulted on changes to insolvency law after these collapses, and some of these changes are in the Bill, but, inexplicably, other important ones are missing.
Over the coming months, as the recession takes hold and complex financial arrangements are pushed further towards breaking point by the new loans that these companies have, we are no doubt going to see the collapse of more household names and large corporates. Why have the Government not taken this opportunity, which we stand ready to support, to bring forward the long-awaited reforms on tackling bad corporate governance and protecting creditors, employees and, ultimately, the taxpayer? We also think it is a missed opportunity to have given the small business commissioner more powers and teeth, as the hon. Member for North East Bedfordshire (Richard Fuller) seemed to agree.
This is a speedy process for this Bill. It is a very large Bill, and we are expediting its passage through both Houses very speedily, so we are relying on Ministers to take on board some of the concerns raised today in the spirit of us working together. We will come back to some of these missed opportunities in Committee, but, to close, I urge the Minister to press his colleagues, including the Chancellor, to do more now to protect companies from insolvency. This Bill provides a small and important safety net and breathing space, but much more needs to be done and more quickly to prevent businesses from needing that breathing space in the first place. I hope that the Government will heed the warnings of business and provide further support so that the recession to come does not leave deep and lasting damage to our economy and employment.
May I first welcome the hon. Member for Manchester Central (Lucy Powell) to her place? I thank her and the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband), for the engaging way in which they have spoken to officials. That has expedited the passage of this legislation, and our discussions—including with the SNP spokesman, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) —have been particularly fruitful.
Unfortunately, I cannot respond to every question in the short time available to me now, but I hope that we will pick up some of these discussions during the next stages of the Bill. I thank all right hon. and hon. Members who have spoken for their contributions to the debate, not least, as has been mentioned, the excellent maiden speech of my hon. Friend the Member for Heywood and Middleton (Chris Clarkson). May I add my happy birthday regards to Win Page? My hon. Friend talked about the fact that the general election seemed a long time ago, and made the point about the Olde Boar’s Head—and a haircut for me as well—so congratulations.
As was mentioned by my hon. Friend the Member for Rugby (Mark Pawsey), the Institute of Directors and the Federation of Small Businesses have been incredibly supportive of the measures in this Bill. We welcome that support. It will help businesses that are struggling with the effects of the covid-19 crisis and lay the foundations for economic recovery in the UK. The insolvency reforms in the Bill will provide vital and urgent support for businesses to help them through the period of instability and to help them recover from the impact of covid-19 as the economy fully emerges from this crisis.
On a point of order, Madam Deputy Speaker.
I will take the hon. Gentleman’s point of order after the Minister has finished, unless it is immediately urgent to his speech.
Well, it is timely.
I am guessing that it could well be timely, but the Minister has a very limited time in which to speak, and he should finish his speech first. Then I will take the hon. Gentleman’s point of order.
Thank you, Madam Deputy Speaker.
The corporate restructuring package in particular will be of immediate help to companies in financial distress, which need further regulatory tools to help them recover. This Bill provides that. It will enable UK companies undergoing a rescue or restructuring process to continue trading, giving them breathing space that could help them avoid insolvency. I want to reassure right hon. and hon. Members that the temporary changes to insolvency law that are necessary to help businesses get through this unprecedented period will consider very carefully any case for further extensions to these powers, and they will be subject to the full scrutiny of the House.
The temporary prohibition on creditors filing statutory demands and winding-up petitions for covid-19-related debts will support the Government’s programme to help companies survive the covid-19 emergency. It will temporarily remove the threat of statutory demands and winding-up petitions being issued against otherwise viable companies by creditors not following the Government’s advice to show forbearance at this time.
Furthermore, temporarily removing the threat of personal liability for wrongful trading from directors who tried to keep their companies afloat throughout this emergency will encourage directors to continue to use their best efforts to trade during this uncertain time. The governance measures will provide temporary flexibilities on meetings and filings at a time when businesses are coping with reduced resources and restrictions due to social distancing measures.
Let me quickly address a couple of points made by the right hon. Member for Doncaster North. First, he is completely correct to say that, although there will be a temporary suspension of wrongful trading liability, directors will still have legal duties under wider company law. Those duties will remain in place, as will measures under insolvency law to penalise directors who abuse their position. I understand the suggestion of the right hon. Gentleman and the hon. Member for Inverness, Nairn, Badenoch and Strathspey that the temporary insolvency measures should be extended to 30 September 2020. At present, all the temporary insolvency measures will automatically sunset a month after Royal Assent. I can reassure them, though, that the Bill contains provisions enabling those temporary measures to be extended by statutory instrument where appropriate. The Government have every intention of making use of those provisions if the protections are needed beyond their present expiry date. It is a truly fluid situation and we do not want provisions to be in place for longer than is necessary.
The temporary measures all have significant impacts on the normal working of the business community, and the case for extending the measures will need to be considered against those impacts. Any extension should rightly be scrutinised by Parliament, but the Government will not hesitate to extend if that is required.
The right hon. Member for Doncaster North also raised a fair point on the need for employees to be protected in regard to restructuring plans. That point was also raised by my hon. Friend the Member for North East Bedfordshire (Richard Fuller). The aim of these measures is to restore the viability of struggling companies, thereby boosting the economy, saving jobs and protecting long-term investment. Yes, employees could find themselves as creditors in a restructuring plan, but in those circumstances, they will benefit from the same protections that are in place for other creditors and members. This will include the provision that they must be no worse off through the plan than they would otherwise be in the next most likely plan, and it will, of course, take into account their entitlement under employment legislation.
Importantly, a court can refuse to sanction a plan if it is not fair and it is equitable to do so. When making this assessment, one would expect the court to be mindful of the interests of employees in any pension schemes affected by that plan. If a restructuring plan is not agreed, it is worth remembering that the company might enter an insolvency proceeding, which would almost certainly produce a worse outcome overall for all involved. The company might stop trading altogether, which would put all employees at risk of losing their jobs. The Government are in the business of protecting jobs.
The right hon. Member for Doncaster North also raised concerns about CBILS and CLBILS, as well as the bounce-back loans. The Government have listened to helpful feedback on the business interruption loan schemes in recent weeks. That feedback has also shown that the smallest SMEs, some of which have perhaps not used finance in the past, are struggling to get their finance applications approved as quickly as they need, as we heard earlier. That is why the bounce-back loan schemes, which are fast for lenders to process and for businesses to access, have been launched.
On 27 April, the Chancellor announced the new bounce-back loan scheme, which will ensure that the smallest businesses can access up to £50,000 of loans in a matter of days. The scheme went live on 4 May. Businesses can complete a short, simple online application in up to a few hours. Under the scheme, there is no need for lenders to ask for complicated cash-flow forecasts or ask difficult questions about the future, which means those applications can be submitted and processed rapidly. Almost 700,000 have been have already been approved.
I thank my hon. Friends the Members for Wimbledon (Stephen Hammond), for Rugby and for Huntingdon (Mr Djanogly) and the hon. Members for Inverness, Nairn, Badenoch and Strathspey, for Bristol North West (Darren Jones), for Aberavon (Stephen Kinnock) and for North Antrim (Ian Paisley) for their contributions. I should say to my hon. Friend the Member for Wimbledon that the Charity Commission has confirmed that it will look favourably on charities that have been unable to hold their AGMs in the normal way, but asks that they write down their decisions to prove that they have done due diligence in holding a virtual AGM or delaying their AGM.
I applaud the passion of my hon. Friend the Member for North East Bedfordshire in standing up for businesses being able to come out of the recovery, as we motor through, changing gears. We will not go back immediately to how things were in January; we have to work with business and listen to business. I am grateful to all other Members who have spoken today.
These new measures complement the Government’s existing far-reaching economic support package for businesses and workers through this emergency. Today’s debate on these measures reinforces the importance of responding to the concerns of UK businesses and providing them with much-needed support during this difficult time. We are in the midst of a global emergency, in which otherwise economically viable businesses are facing the risk of insolvency because of covid-19. We must protect them as best we can. It is imperative that we act now to support our businesses and do what we can to ensure that they survive, preserve jobs and support future growth. Clearly, our first priority is to protect lives, but restoring livelihoods, protecting businesses and getting the economy motoring is also essential. That is why it is imperative that we act now. The measures in the Bill will provide businesses with the flexibility and breathing space they need to continue trading during this difficult time and support the nation’s economic recovery.
Question put and agreed to.
Bill accordingly read a Second time.
On a point of order, Madam Deputy Speaker. I apologise to the Minister; it was not my intention to be rude to him by interrupting him earlier.
We have gone past seven o’clock, as you will have noticed, Madam Deputy Speaker, which means that the motion in the name of the Leader of the House that pertains to virtual participation in proceedings during the pandemic will—I think this is the Government’s intention—be a “nod or nothing” measure. There can be no debate, and if it is opposed, it therefore falls. I have tabled an amendment and I have no intention of withdrawing it. I would want to contest the motion, and I understand that the amendment would be selected by the Speaker if it were to proceed. It is my understanding that it cannot now proceed. Nobody needs to object; it simply cannot now proceed because it is opposed business. Is that your understanding as well?
I am grateful to the hon. Gentleman for his point of order. He will understand that I did not want to hear it during the Minister’s winding-up speech because it would have taken time away from the Minister, which would not have been fair, as many people had asked questions that required answers from the Minister.
The hon. Gentleman refers to motion No. 4, on virtual participation in proceedings during the pandemic. He has just publicly made me aware that he intends to press his amendment and will not withdraw it. That means that the motion is effectively contested. As it is a contested motion, I will not be able to put the main Question, so the simple answer to the hon. Gentleman’s point is that he is correct in his analysis of the situation. In case other people are confused, I will make this point again when we come to motion No. 4.
On a point of order, Madam Deputy Speaker. I just want to be clear, for the avoidance of doubt, that although I tabled an amendment to the same motion that was also selected, I have withdrawn that amendment and will not be pressing it.
I am grateful to the right hon. Lady for informing the House of that matter. As Mr Speaker had selected three amendments, having one amendment that continues to be contested settles the matter.
On a point of order, Madam Deputy Speaker. The Opposition do not want to withdraw our amendment.
I am grateful to the right hon. Lady. Arithmetic is my strong point: I had three amendments. One has been withdrawn. That means that I have two amendments left. It does not change the constitutional position.
On a point of order, Madam Deputy Speaker. I was here at 7 o’clock and it did not appear that the Government moved the business of the House motion that was due to be moved at 7 o’clock. It is probably a technical matter, but it now seems to me that if there were to be a Division on the current Bill, it would be a deferred Division. Is that correct?
No, it is not correct. There was no need for the 7 o’clock motion to be moved, because of the terms of the business of the House motion relating to today.
On a point of order, Madam Deputy Speaker. Yesterday, I intervened on the Leader of the House to ask about the possibility of introducing proxy voting to enable people to vote remotely during the current way in which Parliament has been organised, and the Leader of the House said that that matter had been referred to the Procedure Committee, chaired by the right hon. Member for Staffordshire Moorlands (Karen Bradley), who is in her place. Today at Prime Minister’s Question Time, the Prime Minister said that the Government were proposing to introduce proxy voting. Have you had any notification from the Government that they intend to table a motion tomorrow introducing proxy voting for Members other than those who are on maternity leave, and to provide time for that matter to be debated and voted on?
Now, I thought that we were doing very well, because all the other points of order that I have just taken were real points of order, and it is such a pleasure to have real points of order. I appreciate that the hon. Gentleman raises an interesting point, but it is not a point of order for the Chair. I have a feeling that the hon. Gentleman will be able to ask those questions tomorrow.
Before we move on to the next item of business, which is the Committee stage of the Bill, in order to allow the safe exit of Members participating in this item of business and the safe arrival of those participating in the next item of business, I am now suspending the House for five minutes. I would be grateful if hon. Members would leave the Chamber.
On a point of order, Madam Deputy Speaker. May I clarify my earlier point of order on motion 4? I understand that there have been further discussions with the Government and the Opposition. I rise to withdraw our amendment, because I understand that a new motion will be put down tomorrow on proxy voting.
I am grateful for the right hon. Lady’s point of order and for her clarification. I will do my arithmetic again. Having started with three amendments, I now have two withdrawn, so there is one amendment left. I am grateful to the right hon. Lady.