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Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020

Debated on Monday 11 January 2021

The Committee consisted of the following Members:

Chair: Christina Rees

Coyle, Neil (Bermondsey and Old Southwark) (Lab)

† Docherty, Leo (Aldershot) (Con)

Fell, Simon (Barrow and Furness) (Con)

† Fletcher, Mark (Bolsover) (Con)

Grady, Patrick (Glasgow North) (SNP)

Graham, Richard (Gloucester) (Con)

Hillier, Meg (Hackney South and Shoreditch) (Lab/Co-op)

McDonagh, Siobhain (Mitcham and Morden) (Lab)

Moore, Robbie (Keighley) (Con)

Saxby, Selaine (North Devon) (Con)

† Simmonds, David (Ruislip, Northwood and Pinner) (Con)

† Solloway, Amanda (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

Stafford, Alexander (Rother Valley) (Con)

Tarry, Sam (Ilford South) (Lab)

† Tomlinson, Michael (Lord Commissioner of Her Majesty's Treasury)

† Western, Matt (Warwick and Leamington) (Lab)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

Liam Laurence Smyth, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee

Monday 11 January 2021

[Christina Rees in the Chair]

Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020

I remind hon. Members to observe social distancing and sit only in places that are clearly marked. Hansard colleagues would be most grateful if Members sent speaking notes by email to

I beg to move,

That the Committee has considered the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020 (S.I. 2020, No. 1483).

It is a pleasure to serve under your chairmanship, Ms Rees, and to cover this debate on behalf of the Under-Secretary of State for Small Business, Consumers and Labour Markets, my hon. Friend the Member for Sutton and Cheam (Paul Scully). I well understand the importance and impact of insolvency regulation. The regulations were laid before the House on 9 December 2020.

Since the emergence of covid-19, the Government have been swift to act, providing support to businesses affected by its impact on health, to give them every chance to survive and get through this period of uncertainty. Since March, businesses have benefited from a package of Government support targeted at saving jobs and livelihoods, such as the furlough and job retention schemes, as well as billions of pounds in loans, rates relief, tax deferrals and grants.

Today, all areas of Great Britain are again subject to restrictions put in place to limit the spread of the virus and to help save lives. Those restrictions are crucial to stop our NHS being overwhelmed while we wait for everybody to be vaccinated, but the adverse effects that these essential measures continue to have on many businesses, particularly those in the retail and hospitality sectors, have been well documented. Once again, the Government have been quick to react to the recent announcement of further national restrictions, with a new £4.6 billion package of lockdown grants to support businesses and protect jobs in the retail, leisure and hospitality sectors, which have been hit particularly hard.

The regulations will continue to help companies by extending to 31 March 2021 the temporary suspension on issuing statutory demands and the restrictions on company winding-up petitions. These measures, which were first introduced by the Corporate Insolvency and Governance Act 2020, were extended by earlier regulations from the end of September 2020 to 31 December; the present regulations extend them further.

Since they were introduced last March, the measures have helped to protect many viable companies from aggressive creditor enforcement during these difficult trading times. The temporary restriction on company winding-up petitions means that a petitioner must satisfy a court that any debts are not covid-19 related. The extension will further help to support companies while national restrictions continue to affect the trading capability of many of our businesses. Although these measures are intended to help companies that may be subject to aggressive creditor enforcement, the Government have been clear that they are not to be seen as a payment holiday; where companies can pay their debts, they should do so.

In addition to the protection that the measures give, they are also intended to give companies with unavoidable accrued arrears that have been caused by the pandemic time to take advice from restructuring professionals and to negotiate and reach agreements with their creditors wherever possible. I know that many companies have done so successfully, and I am grateful to them; I urge others to do so and to plan for the post-covid future with confidence.

I know that many businesses and their business representatives will welcome the continued support that the regulations will give them during these really very uncertain times, but I also recognise that these measures will mean a further period of uncertainty for creditors, in which their rights to enforce recovery of their debts will be temporarily suspended. We do not take this action lightly, and we will review carefully before taking any further decisions when the extension expires at the end of March. I commend the regulations to the Committee.

It is a pleasure to serve under your chairmanship, Ms Rees. I do not think that this afternoon’s proceedings will detain us overlong; as colleagues who have taken part in past debates on statutory instruments that extend measures in the Corporate Insolvency and Governance Act will know, the Labour party fully supports measures to protect businesses from insolvency and to extend the duration of the temporary measures to restrict the use of statutory demands and winding-up petitions until the crisis that businesses face has abated. We agree with the Minister that the measures needed to be extended from their previous expiration date of 31 December 2020 to 31 March 2021.

However, although we certainly support the regulations, I think it fair that we take this opportunity to say to Ministers, “We told you so.” When the Act was debated on the Floor of the House, we urged Ministers to give the measures a longer deadline than proposed. We did so again, and they have since been extended. Ministers should have been more realistic when drafting the Bill and taking it through the House, and ensured that the next safety net for businesses during the pandemic was more robust and realistic. Indeed, initially these measures were not going to be extended, while others were extended; we are glad that Ministers heeded our calls to include these measures in the extension.

Of course, the reason Ministers did not initially extend the measures is that they were, to be frank, complacent about tackling the virus. They thought—wrongly and, I am afraid, regretfully—that the public health emergency would be over and that the measures would not need to be extended. If only they had been right—for the sake not just of our businesses but of our communities, too.

The Government must ensure that businesses have a safety net, as they continue to operate in very challenging circumstances. It must be comprehensive, long term and based on business need, not a last-minute scattergun approach or a sticking-plaster solution. Many businesses face a cash crisis as a result of the pandemic, with trading levels terrifyingly low compared with 2019-20. That is particularly true in the hospitality industry and its associated supply chain, where thousands of businesses are still struggling under very tough restrictions.

As the crisis has dragged on, we have had further national lockdowns to accompany the local restrictions in place. Even otherwise open businesses have experienced huge falls in demand, including those associated with aerospace, the automotive sector, airlines and many others. In order to save jobs and livelihoods, Ministers must do all they can to keep afloat key employers in sectors that are vital to our recovery. I think we all agree that measures such as the furlough scheme are welcome, but as we have argued, if businesses go bust, there will be no work for furloughed workers to go back to.

These extensions will go some way to protecting businesses from predatory creditors. However, although they provide temporary relief, I am hearing from business organisations—I am sure the Minister is, too—that they have many concerns about the cliff edges that businesses will still face when all the measures come to an end at once in March. The Minister said that she is thinking about steps to ensure that there is no cliff edge in March as far as these measures are concerned. What thought has she given to ensuring that businesses will not face a cliff edge in March, such as they did at the end of December? As I am sure the Minister will be aware, many firms are hanging on by their fingertips, particularly given the frankly inadequate support they receive if they close, which is worth less than that provided in March last year. Even with the new one-off grants announced last week, businesses are getting less than was offered in March, while operating in a much tougher climate.

I think we all agree that the best way to recover our economy is to save businesses and jobs now. However, rather than just talk the talk, Ministers need to walk the walk and ensure that there is a proper plan in place for businesses to recover and for our economy to grow and come out of this. Although the measure under discussion is a very welcome element in that wider plan, I am sure we all agree that we need a longer-term plan to ensure that this represents not a further cliff edge but the start of a process to ensure that businesses can recover and trade well and profitably in the future. I look forward to hearing the Minister’s comments on how that can best be done.

I thank the hon. Member for Southampton, Test for his contribution and his support for the legislation. The points raised highlighted the importance of the measures being extended by the regulations, and the necessity of extending them again so that businesses can continue to benefit from them. As I mentioned in my opening remarks, this Government have given unprecedented support.

In response to the hon. Gentleman’s question about the cliff edge, since the emergence of covid-19, businesses have received billions in loans, tax deferrals, business rate relief and grants to support them and help save jobs, and the recently announced package of targeted measures to provide ongoing essential support as social restrictions are reintroduced in many regions.

Since March last year, businesses have continued to face an exceptionally challenging time, none of which could have been predicted. They have been unable to trade, or their ability to trade at full capacity has been restricted due to social distancing measures. The regulations will provide the much-needed continued support for businesses to concentrate their best efforts on continuing to trade and build on the foundations of our economic recovery. I sincerely hope that companies and their creditors will come together in good faith to maintain the future trading relationships and secure the benefits to both themselves and the economy as a whole.

I thank the hon. Gentleman again for his valuable contribution to the debate, and I commend the regulations to the Committee.

Question put and agreed to.

Committee rose.