House of Lords

Tuesday 9th June 2020 Lords Chamber

Tuesday 9 June 2020

The House met in a Hybrid Sitting

11:00

A minute’s silence was observed in memory of the death of George Floyd.

Prayers—read by the Lord Bishop of Derby.

Arrangement of Business

Tuesday 9th June 2020 Lords Chamber

Announcement

11:05

[The Lord Speaker (Lord Fowler)]

My Lords, the Hybrid Sitting of the House will now begin. A limited number of Members are here in the Chamber, respecting social distancing. Other Members will participate remotely, but all Members will be treated equally wherever they are. For Members participating remotely, microphones will unmute shortly before they are to speak—please accept any on-screen prompt to unmute. Microphones will be muted after each speech. I ask noble Lords to be patient if there are any short delays as we switch between physical and remote participants. Oral Questions will now commence.

Exercise Cygnus

Tuesday 9th June 2020 Lords Chamber

Question

11:06

Asked by

[Lord Hunt of Kings Heath]

To ask Her Majesty’s Government what action they took following Exercise Cygnus to prepare the United Kingdom for responding to a major pandemic.

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Bethell) (Con) [V]]

My Lords, Exercise Cygnus addressed the greatest risk in the National Risk Register of Civil Emergencies: a flu pandemic. All the recommendations from Exercise Cygnus were accepted and taken on board. Many of these proved invaluable for informing the response to Covid, including plans for legislation that would assist in response measures, for bringing back retired clinical staff, for flexing systems beyond normal capacity and for establishing a group of expert advisers on moral, ethical and spiritual issues.

[Lord Hunt of Kings Heath (Lab) [V]]

My Lords, if the Minister is so confident that the lessons from Exercise Cygnus informed the UK’s preparedness, why was the care sector so neglected? To deal with the surge of NHS patients expected in the event of a pandemic, the exercise identified that extra capacity would be required in care homes. Why was that not heeded and why, as Martin Green, chief executive of Care England, put it, was PPE redirected away from care homes and the NHS given a clear instruction in March to send people to care homes despite no testing for infection being available?

[Lord Bethell [V]]

My Lords, the Association of Directors of Adult Social Services had strong input into operation Cygnus and its recommendations were taken on board. It was however a trial run for a flu pandemic, not of the kind that Covid produced, and the demands on PPE, the health sector and the care sector were more profound than the flu pandemic trials prepared us for.

[The Lord Speaker (Lord Fowler)]

Lord Lansley. No?

[Lord Harries of Pentregarth (CB) [V]]

The Secretary of State for Health, Mr Hancock, said on 7 May that he had consulted officials and had been assured that all the recommendations had been implemented. However, Martin Green, the chief executive of Care England, is reported as saying:

“It beggars belief. This is a report that made some really clear recommendations that haven’t been implemented.”


How does the Minister reconcile these two totally contradictory stories about whether or not the recommendations were implemented?

[Lord Bethell [V]]

I assure the noble and right reverend Lord that operation Cygnus happened in 2016 and the recommendations were completed by spring 2018. However, it is possible that nothing could have prepared us for the ferocity of Covid. Operation Cygnus prepared us for a flu pandemic and not for something with the savagery of Covid-19.

[Baroness Wheeler (Lab) [V]]

The Secretary of State for Health said in relation to Cygnus and the failure to implement key recommendations and warnings on PPE stocks, ventilators, testing and tracing, and scaling up the public health system, that

“everything that was appropriate to do was done.”

To demonstrate this clearly and with evidence, why are the Government not prepared to be open and transparent and to publish the report and recommendations, or to show what action they took on findings of two subsequent major planning exercises with similar warnings: Exercise Iris in 2018, covering a possible pandemic in Scotland, and last year’s crucial national security risk assessment?

[Lord Bethell [V]]

My Lords, it is necessary for the preparations for such civil emergencies to be made in a confidential fashion so that the unthinkable can be thought and plans can be made in a trusted and benign environment. Publication of these reports is not in the national interest and we do not have plans to publish them in the future.

[Baroness Jolly (LD) [V]]

My Lords, in the Cygnus report, preparedness, response, plans and capability were found lacking. Local capacity would be outstripped in the areas of excess deaths, social care and the NHS. What findings from the Cygnus report were incorporated into the work for the current pandemic?

[Lord Bethell [V]]

The noble Baroness is in danger of misrepresenting the situation. The whole point of running a trial such as operation Cygnus is to probe the system and to find weaknesses. That it identified areas for improvement is entirely appropriate and is exactly why we run such projects. As I have explained, the exercise identified key areas where developments were made, and those developments helped us in our preparations for Covid.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, does the Minister agree that Exercise Cygnus warned, and Covid-19 has demonstrated, that we were profoundly unprepared for the pandemic shock that we knew was coming? Does he agree that it demonstrates that a focus on so-called efficiency—that is, profit maximisation for contractors and cost minimisation for Governments under austerity—is incompatible with resilience? The whole model of outsourcing and privatisation is not fit for the 21st-century age of shocks.

[Lord Bethell [V]]

The noble Baroness will not be at all surprised to learn that I do not agree with her analysis in any way. Operation Cygnus demonstrates that we did have robust systems in a great many areas and I am grateful to it for identifying some areas that we went on to improve. As for working with the private sector, I bear testimony to its enormous contribution to our Covid response. I do not agree with her characterisation of the profit motive.

[The Lord Speaker]

Lord Naseby. No?

[Baroness Finlay of Llandaff (CB) [V]]

My Lords, after operation Cygnus were estimates of the requirements for PPE checked against the 2006 influenza pandemic stockpile, given that this store was found to contain no gowns or visors, and 21 million protective FFP3 masks were missing when the store was opened for the current pandemic?

[Lord Bethell [V]]

The noble Baroness is right—if I understand her correctly—that the needs of PPE for a flu pandemic were quite different from those for Covid. It is also true that the planning did not anticipate a breakdown in global trade and a failure of the business-as-usual supply of PPE. No one could have imagined that flights would be grounded and factories shut and that the global supply chains for these key and vital products would have ground to a halt in the way that they did.

[Lord Clark of Windermere (Lab) [V]]

Is it true that Exercise Cygnus reported a shortage of ventilators, critical care beds and PPE in the National Health Service? If so, why were we singularly unprepared in all these spheres three and a half years later, at the beginning of Covid?

[Lord Bethell [V]]

My Lords, I admit that my briefing is not entirely specific, but it is my impression that operation Cygnus did not address the question of ventilators. One of the distinctive characteristics of Covid was the pneumonia response, which required an unanticipated and dramatic increase in our need for ventilators. That is one of the reasons why there was a global shortage of this key equipment. I have addressed this with the notes I have before me and will be happy to correct it if I have misunderstood.

[Baroness Brinton (LD) [V]]

The Minister has asserted that my noble friend Lady Jolly misrepresented Cygnus, but she and other noble Lords have quoted from it. The Minister said earlier that “nothing could have prepared us” for something of this severity. Surely the point of pandemic preparation is also to watch what is happening elsewhere, such as in China and Italy in January and February. Why was the government response so slow to adapt to the needs of Covid as it emerged?

[Lord Bethell [V]]

The noble Baroness conflates two separate matters. The National Risk Register of Civil Emergencies is updated regularly and assesses civil emergency risks with a five-year horizon. The ongoing monitoring of risks in overseas countries is done in a different manner. I was trying to convey to the House that operation Cygnus was a rehearsal for a flu pandemic, not for the kind of virus that Covid proved to be.

[The Lord Speaker]

My Lords, the time allowed for this Question has elapsed. We will now move to the second Question, in the name of the noble Baroness, Lady Quin.

Local Government: Economy

Tuesday 9th June 2020 Lords Chamber

Question

11:16

Asked by

[Baroness Quin]

To ask Her Majesty’s Government what discussions they have had with the Local Government Association on how national and local government can work together to promote economic recovery after the COVID-19 pandemic.

[The Minister of State, Home Office and Ministry of Housing, Communities and Local Government (Lord Greenhalgh) (Con)]

My Lords, there has been regular and substantive contact between Ministers and the Local Government Association during the Covid-19 emergency. A ministerial-led economic recovery working group has been established, made up of local government leaders from the LGA and including several metro mayors and local enterprise partnership chairs, to help inform the Government’s plans for economic recovery. The Government continue to work closely with local leaders to restart the economy and move into recovery.

[Baroness Quin (Lab) [V]]

I thank the Minister for that reply. I urge the Government to include representation from the English regions, in addition to London, in future COBRA meetings on Covid. I also urge the Government to ensure that, after a decade of cuts, local authorities have the resources they need to play their crucial role in our economic recovery in the future.

[Lord Greenhalgh]

My Lords, attendance at COBRA is on an issue and topic basis, as opposed to a standing membership. On supporting local economies, it has to be noted that £27 billion has been spent to support local areas, including £10.7 billion that has been paid out to 819,000 business properties. There are many other examples of government support and that will continue as we move into recovery.

[Lord Kennedy of Southwark (Lab Co-op) [V]]

My Lords, I declare my registered interest as a vice-president of the Local Government Association. Before the Covid-19 pandemic, our high streets and town centres were in crisis. There is a real fear that, even when it is safe to do so, many will never recover. What work are the Minister and his department doing with local government to develop a package of measures to get our high streets back on their feet and, when safe, encourage the public to use them?

[Lord Greenhalgh]

My Lords, the high street is the very heart of a local economy and a number of measures have been taken by the department. The places, urban centres and green spaces guidance which has been issued will help operators and owners on the high street and in our town centres. In addition, on 25 May the Government established a £50 million Reopening High Streets Safely Fund, as well as enabling an additional £6.1 million funding for business improvement districts in high streets and town centres.

[The Lord Bishop of St Albans [V]]

I declare my interest as a vice-president of the Local Government Association. What discussions have taken place about reviewing business rates, so that large online retail companies, which perhaps have no actual shops and many of which pay relatively small amounts of tax, do not have an unfair advantage over our small shops in our high streets which are under threat at the moment?

[Lord Greenhalgh]

The most important measure that has taken place during this pandemic is the deferral of business rates, and that is a significant measure to support businesses. I will have to write to the right reverend Prelate about the specifics on the review of business rates.

[Baroness Verma (Con) [V]]

My Lords, it is critical that businesses are included in the decision-making around reviving local economies. In my city of Leicester, many businesses have fallen through cracks because of poor communication from the council on the massive funding packages the Government have provided for businesses. Will my noble friend assure the business community that it will be closely involved in the recovery plans and that councils must demonstrate that what they are doing is open and transparent?

[Lord Greenhalgh]

My Lords, my noble friend makes the important point that, in any economic recovery, businesses will need to transform themselves and respond to the pandemic. It is fair to say that, when we looked at supporting the reopening of high streets, we engaged with businesses as well as the Association of Town and City Management. It is important to get all the stakeholders around the table so that guidance is appropriate and the support measures adequate.

[Baroness Scott of Needham Market (LD) [V]]

My Lords, the response to lockdown has shown that, where a full range of digital tools is available, people and businesses can locate almost anywhere. This could be transformative for rural economies, so will the Minister commit that, when we get details of the shared prosperity fund, there will a dedicated stream for rural areas that could work alongside new funds outlined in the Agriculture Bill?

[Lord Greenhalgh]

My Lords, I have already made the commitment that the UK shared prosperity fund will see no diminution in the support to enable us to level up our economy, including support for rural areas.

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, will my noble friend join me in paying tribute to North Yorkshire County Council and the close partnership it has formed with the local LEP to ensure that local businesses are able to access the loans, funds and grants that the Government are so generously operating at this time? I invite him to press the case for recognition of rurality and the particular plight of microbusinesses in rural areas being able to access these funds—a not dissimilar question to that asked by the noble Baroness, Lady Scott of Needham Market.

[Lord Greenhalgh]

My noble friend raises an important point: support for the economy needs to include those microbusinesses in rural areas. The figures and support mechanisms indicate that a number of businesses have received support, whether it is by grant or by business premises rates deferral, but we will look specifically into those measures as well so that we support all businesses during this pandemic.

[Viscount Waverley (CB) [V]]

My Lords, technological innovation is key in this interconnected world. I follow others in their questioning; however, the Government’s future fund appears more likely to favour larger enterprises, with SMEs possibly left behind. Will the Minister consider what role economic development departments in local authorities could play in allowing smaller businesses to benefit, thus promoting a more localised approach to economic recovery?

[Lord Greenhalgh]

My Lords, it should be noted that so far the grant scheme has gone to some 804,000 business premises. The spread of the economy for those who are self-employed, as well as small businesses, is quite considerable at this stage. I know, as a former local authority leader, that economic development is very important, not just for large businesses but for the small and medium-sized enterprises that are the backbone of this economy.

[Baroness Crawley (Lab) [V]]

While co-ordination between local and national government is essential for our recovery, are the Government also looking to be part of the European Union’s €750 billion stimulus and recovery package, which, as the Minister will know, has a regional and local dimension?

[Lord Greenhalgh]

My Lords, I am not in a position to answer that directly. I know that we are moving towards establishing a free trade agreement and a deal with our European Union counterparts, as we are leaving the EU. I will write to the noble Baroness on that specific matter.

[Baroness Bakewell of Hardington Mandeville (LD) [V]]

My Lords, I too declare an interest as a vice-president of the LGA. Local government has a key role to play in the provision of cultural services, including museums, art galleries and theatres. All these play an important part in the recovery of the economy post Covid-19 and in the mental well-being of our population. What plans do the Government have to support councils to help them reopen these vital facilities?

[Lord Greenhalgh]

It is critical to support our cultural institutions, our museums and theatres and also the people who keep those places running. Many of them are self-employed, and access to funding has been granted to many people who are self-employed as well as through the furlough scheme. On the specifics, I am sure this will feature in the local government settlement that will be finalised in the next month or so.

[Lord Kilclooney (CB)]

My Lords, while I recognise the importance of regions and local authorities in England towards the recovery of the United Kingdom economy, can the Minister confirm that there will also be consultations with the three devolved states in the United Kingdom—Scotland, Wales and Northern Ireland—which can contribute to the overall recovery of the United Kingdom economy?

[Lord Greenhalgh]

My Lords, the mission of this Government is to ensure that all four nations recover from the shock of this ghastly pandemic. Of course, there will be continued engagement and consultation with the devolved Administrations.

[The Lord Speaker (Lord Fowler)]

My Lords, the time allowed for this Question has elapsed. We will now move to the third Oral Question, so I call the noble Lord, Lord Haskel.

Covid-19: Public Wealth Investment Fund

Tuesday 9th June 2020 Lords Chamber

Question

11:27

Asked by

[Lord Haskel]

To ask Her Majesty’s Government what plans they have to establish a public wealth investment fund to support those businesses affected by the COVID-19 pandemic.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con) [V]]

My Lords, the Government have announced unprecedented support for public services, workers and businesses to protect them against the current economic emergency. Our interventions have been targeted to protect UK jobs while also protecting the taxpayer. Our aim is to protect the productive capacity of our economy and to enable a strong and sustainable recovery from this crisis. As we move through this crisis, the Government will continue to keep our economic response under review.

[Lord Haskel (Lab) [V]]

To rebuild our economy, the Government should listen to the many calling for our recovery through investment instead of paying down debt, which is where they seem to be concentrating. These are debts which some may never repay. Since I tabled my Question, investment ideas such as Project Birch have been floated, but will the Government make it clear that, in return for equity, firms should work towards our social objectives of responsible company behaviour, local levelling up and ensuring that all benefit?

[Lord Agnew of Oulton [V]]

I agree with the noble Lord that social benefit is an extremely important part of the recovery. To that end, we are consulting on our rules for public procurement at the moment to include social values as part of the scoring system.

[Lord Livermore (Lab) [V]]

My Lords, bold and ambitious schemes, such as a public wealth fund, will be necessary to support businesses in the medium term. However, we are seeing an immediate surge in insolvencies and job losses, and action is needed before such schemes can be established. What targeted help can the Minister offer the hardest-hit sectors of the economy, such as hospitality and tourism, which will take longer to reopen and recover?

[Lord Agnew of Oulton [V]]

Our first priority as a Government has been to try to protect the productive capacity of the economy, which is why we have one of the most generous furlough schemes in Europe. On the hospitality side, we have provided cash grants of £10,000 for properties with small rateable values of under £15,000, and cash grants of £25,000 for those with a rateable value of between £15,000 and £51,000. We will continue to monitor how the leisure sector recovers from this crisis.

[Lord Purvis of Tweed (LD)]

At the time of the Budget, the OBR forecast that taxpayer losses in the RBS had increased to £4.7 billion compared to the Government’s estimate of just two years ago. Would it not be better for British businesses across the UK to think more creatively about the use of our shares in RBS and to expand the role of the British Business Bank, established by Sir Vince Cable during the coalition, so that we can see the early stages of a genuine UK-wide investment wealth fund?

[Lord Agnew of Oulton [V]]

I agree with the noble Lord on the role of the British Business Bank, which has played an extremely important part in the economy over the last few years. It has given some £7 billion of finance to almost 95,000 SMEs and has been part of the distribution for much of the support over the last few months. We will continue to review the greater part that it can play.

[Lord Leigh of Hurley (Con) [V]]

My Lords, I refer to my register of interests. There is no question that we need some sort of public wealth investment bank to replace CBILS—perhaps using the old model that 3i had. However, the BBB is not the answer. It does not have the mechanics, the experience or the expertise to make the direct investments in SMEs that are badly needed. Would my noble friend meet me and other practitioners to discuss the mechanics of how we can get relatively small equity investments into SMEs in the very near future?

[Lord Agnew of Oulton [V]]

I am very happy to meet my noble friend to discuss that, but I stress that we expect the private sector to step up to the mark in investing in these small businesses in future. We have the EIS and the SEIS, and we will continue to review them.

[Lord Hastings of Scarisbrick (CB) [V]]

My Lords, given the heightened and highly appropriate focus on justice and opportunity for black and minority communities, what considerations has the Treasury given to working with existing black business finance networks, such as the number one black lending and investment agency, Lendoe, led by Mr Demi Ariyo? Will the Minister chase a reply, due a month ago, to Mr Ariyo’s letter to the Chancellor of 12 May, setting out practical and detailed advice on how to boost black business recovery?

[Lord Agnew of Oulton [V]]

I certainly commit to chasing up a reply to the letter that the noble Lord mentioned. Businesses run by the BAME community are of course vital to our economy.

[Lord Liddle (Lab) [V]]

My Lords, I want to press the Minister on the key point of principle in my noble friend Lord Haskel’s excellent Question. Do the Government accept the need to set up a mechanism whereby the state can take equity stakes in overindebted companies? Do they accept that this is vital to what the Minister describes as safeguarding our productive capacity and to a strong and sustainable recovery? Does the Minister accept that the debate is not about whether this should happen but about how it should happen? The sooner we start talking about this, the better.

[Lord Agnew of Oulton [V]]

There are two parts to that question. First, on 20 May, we announced the future fund of an initial £250 million for co-investment with businesses. There has been enormous interest in that; some 460 applications have been made up to the end of May. On the noble Lord’s reference to overindebted companies, we have to deal with the issue that the shareholders and management of those companies have contributed to that problem. They need to resolve the substantial concessions that they will have to make to their own equity, and to the lenders who have lent—and possibly overlent—to these businesses. There are two separate strands to this, but both will be active in future.

[Lord Hussain (LD) [V]]

My Lords, the Government have put millions of pounds aside to help businesses struggling due to Covid-19. How do the Government monitor the take-up of these funds by black and minority-ethnic businesses?

[Lord Agnew of Oulton [V]]

I will have to write to the noble Lord to provide specific information on that.

[Viscount Trenchard (Con)]

My Lords, if the Government were to establish a sovereign wealth fund, might one of its objectives be to invest in major infrastructure projects, such as the currently suspended Horizon Nuclear Power project at Wylfa, Ynys Môn?

[Lord Agnew of Oulton [V]]

Infrastructure is a vital part of rebuilding from this crisis. I am unsure at this stage whether it will be done through the mechanism of a sovereign wealth fund. At the moment, we have the opportunity as a national Government to borrow cheaply, which, if invested well in infrastructure, could be a simpler approach than a sovereign wealth fund.

[Lord Holmes of Richmond (Con) [V]]

My Lords, we have a tremendous challenge but a real opportunity for an economic bounce out of Covid. It needs a whole-government, whole-economy approach. Will my noble friend salute the consultation currently being undertaken by the Bank of England around a central bank digital currency, and note the positive impact that this potentially could have for the whole of the country and the economy?

[Lord Agnew of Oulton [V]]

I certainly agree with the noble Lord that it is an extremely important consultation. As he implies, any serious crisis such as this gives the country a chance to look beyond the normal way of dealing with problems. I am very hopeful that initiatives such as he has mentioned will be much more evident over the next few months.

[Baroness Altmann (Con) [V]]

My Lords, I declare my interests and congratulate the Government on the establishment of the future fund. Would my noble friend consider encouraging the use of pension funds, as well as expanding the EIS and the SEIS, so that we can boost investment in smaller companies via equity, rather than debt, and increase the emphasis on social values?

[Lord Agnew of Oulton [V]]

I agree with the noble Baroness that pension funds in this country could play a much greater role in investing in early days businesses. The noble Baroness will know better than I that how we change the investment allocations that pension funds are allowed to take is a very complicated business, but I hope that we will continue to push the boundaries on that, because there is enormous potential.

[The Lord Speaker (Lord Fowler)]

My Lords, the time allowed for this Question has elapsed.

Covid-19: UK-wide Discussions

Tuesday 9th June 2020 Lords Chamber

Question

11:38

Asked by

[Lord McConnell of Glenscorrodale]

To ask Her Majesty’s Government what discussions they have had with the Scottish, Welsh and Northern Irish Governments to coordinate a United Kingdom-wide approach to relaxing the restrictions in place to address the COVID-19 pandemic.

[The Minister of State, Cabinet Office (Lord True) (Con) [V]]

My Lords, the UK Government have worked closely with the devolved Administrations throughout this crisis. There have been discussions between Ministers and officials, and this engagement will continue. [Inaudible.] Citizens in Scotland, Wales and Northern Ireland should follow the equivalent guidelines issued by their respective Administrations.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, the diversity of decision-making between the four nations of the UK, in particular regarding health, is an integral part of the devolution settlement and is to be welcomed, not criticised. However, the diversity in communicating public information has been woeful at times during the 12 weeks of this lockdown. To the best of my knowledge, there have been no joint simultaneous statements by the Prime Minister and the three First Ministers, and no joint simultaneous parliamentary or Written Statements by the Health or Business Ministers during this whole period. Will the Minister, on behalf of the Government, give a commitment to try to do better than this as we move out of lockdown and try to avoid a resurgence of the virus next winter? Can we ensure that, even where there are differences, we communicate with clarity why they exist, and ensure that each part of this United Kingdom knows exactly what the rules and regulations are in its area?

[Lord True [V]]

My Lords, the noble Lord makes an important point. [Inaudible.]

[The Lord Speaker (Lord Fowler)]

I am sorry to interrupt but the reception is so bad on this Question that I ask the House to adjourn briefly, for five minutes, so that we can get the difficulties sorted out.

11:41

Sitting suspended.

11:53

[The Lord Speaker]

My Lords, in view of the circumstances, we will start again with the Question in the name of the noble Lord, Lord McConnell, and go on from there.

[Lord McConnell of Glenscorrodale]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

[Lord True [V]]

My Lords, with apologies to the House, I will repeat the Answer I gave earlier. The United Kingdom Government have worked closely with the devolved Administrations throughout the crisis. There have been frequent discussions between Ministers and officials. This engagement will continue. As we set out in our road map to recovery, the virus may be spreading at different speeds across the United Kingdom, and measures may need to change in different ways and at different times. Citizens in Scotland, Wales and Northern Ireland should follow the equivalent guidance issued by their respective Administrations.

[Lord McConnell of Glenscorrodale]

My Lords, the divergence of decision-making during this lockdown period is something to celebrate, not criticise. It is an integral part of the devolution settlement and has made for better decision-making for each individual health service and other aspects of government in the four nations. However, at times, the public communication of those decisions has been woeful. The lack of co-ordination between the public announcements of the four Health Ministers and the four Business Ministers—and even between the Prime Minister and the three First Ministers—has created confusion and, occasionally, distress in the four nations. I urge the Minister to give a commitment on behalf of the Government to seek to improve this co-ordination of public information, communication and explanation as we emerge from lockdown and try to avoid a second spike or a resurgence of the virus in the winter.

[Lord True [V]]

My Lords, I understand the point that the noble Lord makes. He is right that there is a devolution settlement and that these matters are devolved. Clear communication to citizens has been a priority throughout the crisis. We have tried to make clear, and have made clear, which measures apply to citizens in each of England, Scotland, Wales and Northern Ireland, including through making this explicit in UK Government guidance.

[Lord Mann (Non-Afl)]

My Lords, many families are spread across the United Kingdom. Does the Minister agree that, when it comes to the opportunity for families to reunite in person, the more integrated the approach across the United Kingdom, the fairer and better it will be for everyone?

[Lord True [V]]

My Lords, I think that the noble Lord strikes a chord with every citizen in this country when he speaks of the importance of family and the sacrifices that families have had to make. We are seeking to confront the virus as one United Kingdom. I welcome the fact that, in different places, it is now easier for family members to reunite than it was at the start of the lockdown. But I take the noble Lord’s point. We will always seek to proceed out of this crisis as a United Kingdom.

[Lord Davies of Gower (Con) [V]]

My Lords, the co-ordination between certain departments of Her Majesty’s Government and the devolved Governments of the UK has been a little confusing. Aviation is an example of a reserved matter. However, two weeks ago, the Secretary of State for Transport announced that general aviation could happen again because it was determined that the risk of contributing to increased infection was minimal. As a reserved matter, it follows that the DfT has a UK-wide responsibility for GA, yet only last week, pilots in Scotland were permitted to take to the skies while those in Wales and Northern Ireland are still waiting for the go-ahead. What discussions, if any, are taking place between the Government and the devolved Administrations about achieving a consistent UK-wide approach to general aviation?

[Lord True [V]]

My Lords, I fear that I am not a specialist in aviation matters, but I will write to the noble Lord on this important topic.

[Lord Eames (CB) [V]]

My Lords, at present, who in government is responsible for co-ordinating contact with the devolved nations? Lately, on at least one occasion, one of the devolved Administrations learned of a policy decision by central government involving public health issues from the media. Is that acceptable?

[Lord True [V]]

My Lords, good communication should always be striven for. That is the Government’s objective. At the outset of the crisis, the United Kingdom Government established a Cabinet committee structure to deal with the health, economic, public sector and international impacts of Covid-19 on behalf of the whole of the UK. Ministers from the devolved Administrations have regularly been invited to participate in these discussions. We are certainly committed to ensuring that the Administrations are informed and involved at every stage.

[Baroness Andrews (Lab) [V]]

My Lords, further to the Minister’s reply, can he now tell the House why the Secretary of State did not inform, let alone consult, the First Minister of Wales—as a matter of courtesy, let alone practicality—that he was planning to make face masks mandatory on public transport? The First Minister has put it this way:

“We’re going to have to … find out from them the extent to which they have got answers to these questions, in advance of making the decision, or whether it’s a matter of making the headline, and then worrying about the detail afterwards.”

[Lord True [V]]

My Lords, I note what the noble Baroness says, but Welsh government officials and Ministers have been involved in COBRA meetings, committees and dozens of other meetings with UK government Ministers and officials since the pandemic began. This will continue to be a key part of the planning and communication of the overall response. We strive to do the best at all times. If there are failures, they are to be regretted, but we should go forward together as a United Kingdom.

[Baroness Humphreys (LD) [V]]

My Lords, a recent Welsh political barometer poll showed that by a margin of four to one the Welsh public strongly prefer the Welsh Government’s approach to easing the lockdown. Does the Minister not agree that this pandemic has shown the ability of the devolved Administrations not only to work differently but to achieve better outcomes in response to the needs of their citizens?

[Lord True [V]]

My Lords, the purpose of the devolution settlement is to enable the devolved Administrations to respond as they believe right to local needs. I repeat that I believe that there is a high level of co-ordination, co-operation and understanding between all authorities involved in fighting this crisis.

[Lord Mancroft (Con) [V]]

My Lords, in recognising the need to co-ordinate between the Government and the devolved Administrations, does my noble friend recognise that the requirement for two-metre social distancing above all else is preventing us reopening our economy? Can my noble friend tell the House what research the Government have that leads them to a different conclusion from the World Health Organization and most European Governments, which recommend one or 1.5-metre social distancing? What steps are the Government taking to reduce this from two metres, and when?

[Lord True [V]]

My Lords, the Government are guided by science at all stages of the crisis; the advice we have given has been on that basis. The advice is constantly under review by SAGE, but I can give no guarantees as to when or whether any change will be announced.

[Lord Bilimoria (CB)]

My Lords, the Secretary of State for Health has assured us that all care home workers and patients will be tested. Can the Minister confirm that this has taken place throughout the United Kingdom? Is he aware that in Scotland, sadly, coronavirus deaths have now overtaken hospital deaths, with 46% of deaths in Scotland in care homes versus 29% in England and Wales? Surely the Minister agrees that testing patients and care workers in care homes throughout the whole of the UK should be an immediate priority for the Government.

[Lord True [V]]

My Lords, I cannot add to what my right honourable friend the Secretary of State for Health said, but I can underline one’s concern for every resident of care homes. As my right honourable friend said, that testing is available. He announced yesterday evening that the testing will be extended to a wider range of care homes, not only those for the elderly.

[Baroness Thornton (Lab) [V]]

Following on from my noble friend Lady Andrews’s question, the Minister might take on board that there are some definite communication difficulties from the centre to Wales. What specifically will the Government do to ensure that people living on the long border between England and Wales understand and abide by the different lockdown rules?

[Lord True [V]]

My Lords, regardless of where a person lives, if they are in Wales, they are subject to Welsh rules, and vice versa if they are in England. That is a clear position and one that I reiterate.

[The Lord Speaker (Lord Fowler)]

My Lords, the time allowed for this Question has now elapsed; I thank noble Lords for taking part today. That concludes the hybrid proceedings on Oral Questions.

12:05

Sitting suspended.

Arrangement of Business

Tuesday 9th June 2020 Lords Chamber

Announcement

12:09

[The Deputy Speaker (Lord Duncan of Springbank) (Con)]

My Lords, a limited number of Members are here in the Chamber, respecting social distancing, and if the capacity of the Chamber is exceeded I will immediately adjourn the House. Other Members will participate remotely, but all Members will be treated equally wherever they are. For Members participating remotely, microphones will unmute shortly before they are to speak. Please accept any on-screen prompt to unmute. Microphones will be muted after each speech. I ask noble Lords to be patient if there are any short delays as we switch between physical and remote participants. I remind the House that our normal courtesies in debate still very much apply in this new hybrid way of working. Please ensure that questions and answers are short.

EU: Trade and Security Partnership

Tuesday 9th June 2020 Lords Chamber

Private Notice Question

12:10

Asked by

[Baroness Hayter of Kentish Town]

To ask Her Majesty’s Government what progress was made in securing a comprehensive trade and security partnership during the last round of negotiations with the European Union

[The Minister of State, Cabinet Office (Lord True) (Con) [V]]

My Lords, negotiators from the United Kingdom and the European Union held full and constructive discussions last week via video conference. The talks covered trade in goods and services, fisheries, law enforcement and criminal justice, and other issues which both sides engaged in constructively. There was, however, no movement on the most difficult areas where differences of principle are at their most acute, notably fisheries, governance arrangements and the so-called level playing field.

[Baroness Hayter of Kentish Town (Lab)]

I regret that no Statement has been made here or in the Commons. Thus, we have to drag the Minister here, if you like, to report on even that much. This is not the parliamentary scrutiny promised. This was a vital round of talks, but there has been little sign of movement, as the Minister said, towards agreement. Could he explain why the Government expect only the EU to compromise in order to reach a deal without being willing to do so themselves?

[Lord True [V]]

My Lords, we are in a negotiation. The Government remain committed to a successful outcome. We believe it would still be straightforward to agree a suite of arrangements with an FTA at its core. Our position needs to be understood: we will not agree to any of the EU’s demands for us to give up our rights as an independent state.

[Lord Howard of Rising (Con) [V]]

Could the Minister say when reporting progress whether the attitude of European Union negotiators has created such difficulties during discussions that the possibilities or chances of finding common ground in many areas, such as the level playing field or fishing, have become virtually impossible? The inability of European Union negotiators to recognise that the United Kingdom is a sovereign and independent nation and to treat Great Britain as such is making compromises impossible, and will continue to do so until such time as European Union negotiators understand that Great Britain is not a colony of the European Union.

[Lord True [V]]

My Lords, I will not criticise the negotiators on either side; they have their mandates and both have said that they find the discussions professional and appropriate. However, my noble friend is quite right to say that on certain matters, as I think Mr Frost said, the EU must evolve an understanding that the United Kingdom is not prepared to accept the so-called level playing field or, indeed, to accept that we cannot be an independent coastal state regarding fisheries.

[Baroness Ludford (LD) [V]]

My Lords, the Conservative Party has long regarded itself, justifiably or not, as the party that looks after business, so can the Minister tell us why this Conservative Government are so apparently casual about the prospect of a no-deal crash-out on 31 December, despite alarmed warnings from business representatives such as the CBI, from hauliers about the lack of customs preparation at Dover, from the pharmaceutical industry about dangerously low stocks of drugs, from the business community in Northern Ireland about lack of detailed preparation for implementation of the Irish protocol, and from many others? Why is ideology trumping pragmatism?

[Lord True [V]]

There is no ideology. This is a pragmatic Government. We have close contact with business, which will intensify and continue. There is no crash-out no deal. We will leave the EU at the end of the year with either a Canada-style or an Australia- style arrangement.

[Lord Thomas of Cwmgiedd (CB) [V]]

Can the Minister explain the steps the UK Government are taking to involve the devolved Governments in formulating positions to be taken in the negotiations in the light of the many assurances given by the UK Government about involving the devolved Governments?

[Lord True [V]]

My Lords, there is regular contact between government Ministers and Ministers in the devolved Administrations. Those contacts will continue.

[The Earl of Kinnoull (Non-Afl) [V]]

My Lords, Michel Barnier, in his statement of 5 June, following the fourth round of negotiations, referred to the need to have

“a full legal text by 31 October at the latest, i.e. in less than 5 months.”

Does the Minister agree with that timetable? If not, what does he think the latest date is for a full legal text?

[Lord True [V]]

My Lords, the Government still hope to have a successful outcome, as I said. Mr Frost indicated some measures that might be taken to intensify discussions. There will also be, as noble Lords know, a high-level meeting later this month.

[Baroness Primarolo (Lab) [V]]

My Lords, David Frost told the European Union Select Committee of your Lordships’ House, when asked specifically about access to EU databases, that

“we cannot accept the conditions that the EU imposes”.

How confident, therefore, is the Minister that a broad outline on data exchange and intelligence-led policing in the UK will be reached by the end of June when the Government appear to expect the European Union to compromise to meet a deal without being willing, as my noble friend Lady Hayter said, to do so themselves?

[Lord True [V]]

My Lords, we are in a negotiation. I will not second-guess what might or might not happen in the course of it. All the areas, including policing and security, which the noble Baroness mentioned, are, of course, important. Those will continue to be the subject of discussions between the Governments.

[Baroness Meyer (Con) [V]]

Given that the EU appears determined to bind the UK into the common fisheries policy and its own rules and standards, does the Minister not agree that there would actually be negotiating advantage in not reaching an agreement before the end of the transition period so that the EU would be forced to accept the reality of the UK as an independent and sovereign state?

[Lord True [V]]

I thank my noble friend for the question, but again, I am not going to second-guess the process of negotiations. I note that, on fish, the political declaration clearly set out that a separate agreement should be enforced in July ahead of the other agreements. The EU, on the other hand, continues to push for one single overarching agreement.

[Lord Wallace of Saltaire (LD) [V]]

My Lords, the February document that the Government published on the future relationship included a chapter on digital services that sets out that we need to

“encourage regulatory cooperation and a strategic dialogue on emerging technologies”.

I could not find this in the items for discussion in the fourth round of negotiations, nor does any progress seem to have been made on it. Are the Government hoping that we will continue to have regulatory co-operation in this very important emerging industry? As a fallback position, are they discussing with the Americans whether we will converge on American data regulation rather than European regulations if these negotiations break down?

[Lord True [V]]

My Lords, the noble Lord is right: there is an international dimension to these questions. We expect foreign policy co-operation broadly to be substantial with the EU, as it is with many of our international partners, but we do not think that an institutional framework is necessary to deliver it.

[Baroness Deech (CB) [V]]

Will the Minister join me in encouraging Mr Frost to stand firm and make it clear that we are willing to walk away if necessary? Can he also emphasise that after Brexit we must retain sovereignty over our defence and foreign policy? Given the EU’s ineffectiveness in relation to hostility from China and its overdependence on Russian gas regarding Nord Stream 2, can he ensure that we depart from EU defence structures and defence funds and reinforce our partnership with NATO and the Five Eyes intelligence group?

[Lord True [V]]

My Lords, the noble Baroness refers to some very important factors in our international relationships. Mr Frost is doing an excellent job for his country, in line with the decisions of Parliament and the people. As for wider foreign policy, I alluded to that in the previous answer.

[Lord Howarth of Newport (Lab) [V]]

My Lords, as the EU grasps that we will not extend the transition period, will it not recognise that it is very much in its own economic interests to set aside ideology and make a free trade deal? In any case, is it not absolutely in our interest not to be tied into contributing billions to the Commission’s new budget and subsidising a eurozone economy that was in dire trouble even before the pandemic?

[Lord True [V]]

My Lords, I try not to criticise any aspect of the European Union from this Dispatch Box but, that apart, I agree with that the noble Lord has just said.

[Lord Bowness (Con) [V]]

Does my noble friend the Minister accept that we signed a political declaration? Do the Government still consider themselves bound by that declaration, which reflected the fact that. while we keep talking about being a sovereign nation, we have nevertheless been involved deeply with the EU over the last 40-plus years? That reflects many of the existing arrangements. Secondly, when will the Joint Committee next meet? Will it recognise that the circumstances are now totally different from those at the time of the referendum—or indeed the general election—and that an extension is badly needed to achieve what the parties want by way of future relations?

[Lord True [V]]

My Lords, the Withdrawal Agreement Joint Committee next meets on 12 June. I repeat that the Government do not consider an extension of the transition necessary or desirable. It will not happen from a UK Government point of view. The political declaration sets out the potential scope of our future relationship. We and the EU signed up to it, but any agreement based on it must be balanced and represent a balance of benefits to both sides.

[The Deputy Speaker (Lord Duncan of Springbank) (Con)]

Lord Kerr of Kinlochard? No? Lord West of Spithead.

[Lord West of Spithead (Lab) [V]]

My Lords, a lightning rod for EU seriousness on defence and security co-operation is Project Galileo. Is it still the intention to have scientific, technological and industrial UK involvement in this project, despite lack of access to the classified output of the system?

[Lord True [V]]

My Lords, the UK and the EU discussed Project Galileo during the withdrawal agreement negotiations. The EU’s offer on it then did not meet the United Kingdom’s defence and industrial requirements.

Arrangement of Business

Tuesday 9th June 2020 Lords Chamber

Announcement

12:24

[The Deputy Speaker (Lord Duncan of Springbank) (Con)]

My Lords, we now come to the Conduct Committee Motion in the name of the noble and learned Lord, Lord Mance. Last week, the Procedure Committee agreed that this type of business should be conducted as physical proceedings only, with no opportunity to participate virtually, other than by the mover, in this case the noble and learned Lord, Lord Mance. There is no speakers’ list, but Members present in the Chamber are entitled to participate. Procedure Committee guidance requests that any Member intending to speak on such Motions give notice in advance. If the capacity of the Chamber is exceeded, I will immediately adjourn the House.

Conduct Committee

Tuesday 9th June 2020 Lords Chamber

Motion to Agree

12:24

Moved by

[Lord Mance]

That the Report from the Select Committee Remote voting and the Code of Conduct (2nd Report, HL Paper 67) be agreed to.

[Lord Mance (CB) [V]]

My Lords, this is a short report. It focuses on the single issue of the misuse of the electronic voting system to be introduced into this House with effect from the beginning of next week. Normally, it is impossible for Members to misuse the voting system. They must attend in person, in the Division Lobbies, and be counted by a Teller, or in the Chamber and give their name to a Clerk. Tellers and Clerks recognise them, or certainly recognise someone who is not a Member of the House.

However, there is more scope to misuse a remote voting system. A distinct possibility, which concerns have been expressed about, is that a Member might ask someone to cast their vote for them. It is the view of the Conduct Committee that this should be a breach of the Code of Conduct—that any Member who allows another to vote on their behalf should breach the code. Having someone vote on behalf of a Member should be considered a serious breach of the code, and we propose this amendment to the Code of Conduct accordingly. I beg to move.

[Lord Newby (LD)]

My Lords, in normal times a suggestion that your Lordships’ House might move to electronic voting would occasion many days and hours of debate, in Committee and in the Chamber. This Motion is merely a supplementary or consequential Motion to the Motion we passed last week to introduce this revolutionary change with literally zero debate. Having sat through many discussions on minor changes to voting procedure, most of which failed through lack of consensus, I welcome this change, because it is a common-sense change. I congratulate all those who have worked so hard to put it in place so quickly and look forward to taking part in votes on this basis from next week.

We saw in the House of Commons a similar process adopted for a couple of weeks, then dropped. I very much hope that this change will not be dropped with such alacrity and that we will at the very least keep it in place while there are Members of your Lordships’ House who, for health reasons, are unable to attend. There may be arguments for keeping it in place for at least some people permanently, but I suspect that discussions about how we get out of this system will take a lot longer than the virtual lack of discussion about how we got into it. I am very pleased that we are doing this, and I am happy to support the Motion.

[Lord Truscott (Ind Lab)]

My Lords, like the noble Lord, Lord Newby, I support the report from the noble and learned Lord, Lord Mance, and the Conduct Committee, on remote voting. However, unlike the noble Lord, Lord Newby, I would be slightly concerned about remote voting in this House in the long term. It is essential for democracy that Members interact with one another in the Chamber and in the House, so that they can crystallise their views and opinions on the issues that come before the House, but I realise that the House has already voted for remote voting, for very good reasons.

The noble Lord, Lord Newby, and the noble and learned Lord, Lord Mance, made another point about electronic voting. I was a Member of the European Parliament when there were concerns about and cases of alleged misuse of electronic voting, so the Conduct Committee is right to be concerned about this matter. For that reason, I too support the report.

[Lord Mance [V]]

My Lords, I am grateful for the comments made by the noble Lords. The noble Lord, Lord Newby, rightly said that this is a supplemental measure. It is relevant while we have remote voting. I will not comment on whether it should be indefinite or, as it is at the moment, limited to the crisis in intention.

Motion agreed.

Recess Dates

Tuesday 9th June 2020 Lords Chamber

Announcement

12:29

[Lord Ashton of Hyde (Con)]

My Lords, I thought that this would be a suitable point to tell the House about recess dates and to confirm that, because of the inevitably slow progress of business over the past three months, there will need to be some changes to our Summer Recess dates. We will now rise for the summer adjournment on Wednesday 29 July, which is one week later than originally intended. We will also return earlier in September, on Wednesday 2 September. There will no longer be an adjournment for the party conference season.

I hope to be able, at a later date, to confirm a short adjournment in either October or November, but that will depend entirely on the progress of business. I will place a copy of this statement in the Printed Paper Office, and copies are available in the Royal Gallery. I will advertise the new dates via this week’s Forthcoming Business.

[Lord Stoneham of Droxford (LD)]

Having been part of the initial discussions on this, I wanted to ask about the fact that we are coming back in midweek. It seems rather odd that we will finish on a Wednesday and then come back on a Wednesday. Would it not seem better to go on until the Thursday and then not come back until the week after the Chief Whip is proposing, given the expense of getting people here and the inconvenience of having broken weeks?

[Lord Ashton of Hyde]

My Lords, I agree that it does immediately look odd, but the reasons are that we have looked at the business that needs to be done and the dates that would allow it. The amount of time that has to pass between different stages of Bills means that it is imperative that we come back that week. I accept that for some people, myself included, it will cause difficulties, but we have looked at that. Of course, if circumstances change and we make tremendous progress, we could look at it again, but that has been communicated to the usual channels. The reason that we need to come back for those two days is to get business started during that week, but I am entirely able to look at that at a later date if it is not necessary. I take the point about two days in a week basically disrupting the whole week.

[Baroness Hayter of Kentish Town (Lab)]

I do not think that I misheard the Chief Whip, but can he indicate whether these are the same dates as the House of Commons will sit? From the nodding, it looks as if they are. I will let him answer; obviously, we understand the need to get on with legislation. However, it has always been of some interest that we should sit the same days as the Commons, wherever that is possible.

[Lord Ashton of Hyde]

The House of Commons has not announced its recess dates yet. I wanted to make sure that, as far as we were concerned, noble Lords had the earliest possible opportunity to plan. I can see why we should be aligned with the House of Commons to a certain extent, but it is an important principle that we do not always have to sit at the same time as the House of Commons. Sometimes the Commons is at a different stage of legislation from us, so every Chief Whip reserves the right to alter dates due to the progress of business. I do not know when the House of Commons is going to announce its dates, but it has not done so yet, so I cannot confirm whether they are exactly the same.

[Baroness Hayter of Kentish Town]

I am very content with that and, as I say, we understand the need for this. It does mess up my holiday, but even I might forgive the Chief Whip for that—for once.

12:34

Sitting suspended.

Arrangement of Business

Tuesday 9th June 2020 Lords Chamber

Announcement

12:39

[The Deputy Speaker (Lord Duncan of Springbank) (Con)]

My Lords, we now come to the repeat of a Commons Urgent Question on the R rate. For Members participating remotely, microphones will unmute shortly before they are to speak. Please accept any on-screen prompt to unmute. I remind the House that our normal courtesies in debate still apply in this new hybrid way of working.

Covid-19: R Rate and Lockdown Measures

Tuesday 9th June 2020 Lords Chamber

Commons Urgent Question

The following Answer to an Urgent Question was given on Monday 8 June in the House of Commons.

“Thank you, Mr Speaker, for this opportunity to update the House on progress on our plans for controlling coronavirus.

Thanks to the immense national effort on social distancing, as a country we have made real progress in reducing the number of new infections. As we move out of lockdown, we look at all indicators to assess progress in tackling the virus. Last week’s Office for National Statistics infection survey estimated that the number of people who have had coronavirus in England fell from 139,000 between 3 and 16 May to 53,000 between 17 and 30 May—a drop of over half. In terms of new cases, an ONS estimate released on Friday shows that there are now around 5,600 new cases each day within the community in England: a huge drop since the peak.

The number of new fatalities each day is, thankfully, falling too. Today’s figures record 55 fatalities, the lowest number since 21 March, before lockdown began. They also show that there were no deaths recorded in London hospitals. That is a real milestone for the capital, which, of course, in the early stages of the pandemic, faced the biggest peak. Yesterday, we saw no recorded deaths in Scotland, which is very positive news for us all. Sadly, we expect more fatalities in the future, not least because the figures recorded at the weekend are typically lower. What is more, Mr Speaker, 55 deaths is still 55 too many and hundreds of people are still fighting for their lives. Each death brings just as much sadness as when the figure was much higher in the peak. I know that the thoughts of the whole House are with those families and communities who are grieving for their loved ones.

We, of course, also look at the R rate. The Scientific Advisory Group for Emergencies confirmed on Friday that its estimates, taking into account 10 different models, are that R remains between 0.7 to 0.9, and that it is below 1 in every region of the country. That means that the number of new infections is expected to continue to fall. So there are encouraging trends on all critical measures. Coronavirus is in retreat across the land. Our plan is working and those downward trends mean that we can proceed with our plans, but we do so putting caution and safety first.

Even at the peak of the pandemic, we protected the NHS and ensured that it was not overwhelmed. We will not allow a second peak that overwhelms the NHS. We are bearing down on the virus in our communities, aided by our new NHS Test and Trace system, which is growing every day. We are bearing down on infections in our hospitals, including through the new measures to tackle nosocomial infection, such as face masks for visitors, patients and staff. Finally, we are strengthening protections for our care homes, including by getting tests to all elderly care home residents and staff.

I am glad to be able to tell the House that David Pearson, the eminent social care expert who has previously led the social care body ADASS—the Association of Directors of Adult Social Services—and has decades of experience of leadership in both social care and public health, will be chairing our new social care taskforce to drive our Covid action plan yet further. David has an impressive track record and I am delighted that he will be supporting us in leading this important work. Together, we are getting this virus under control and now more than ever we must not lose our resolve.”

12:40

[Baroness Thornton (Lab) [V]]

First, will the Minister say what weight the Government attach to the science presented in the figures that the Centre for the Mathematical Modelling of Infectious Diseases at the London School of Hygiene & Tropical Medicine published, which state that R is above one in the south-west and north-west of England? Secondly, the regularly estimated national R rate appears to be a key driver of policy; accurate measurement of R depends on a world-class testing regime, not yet in place; the likelihood is that some geographical areas may have an R close to or above one; and effective local control measures rely on knowing the local R rate. Given all that, when will the system for more accurate measurements of R agreed with the relevant local authorities be available by localities, so that this information can be used to inform and adapt the emerging local planning led by directors of public health?

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Bethell) (Con) [V]]

The London School of Hygiene & Tropical Medicine’s report is one model of more than a dozen that contribute to the SPI-M committee, which looks at modelling. We value it, but it is not the only model. Regarding the statistical analysis of R, I pay tribute to the Office for National Statistics, which has put in place a massive testing programme to look at prevalence across the country. Hundreds of thousands of tests are done. This is by far the gold standard in terms of understanding prevalence and it feeds in accurate, up-to-date information for the accurate assessment—not modelling—of R0. It is on that work that we depend.

[Baroness Brinton (LD) [V]]

On 3 June, my noble friend Lord Scriven asked the Minister which body had legal powers to implement a local lockdown. The Minister replied:

“The arrangements for local lockdowns are not fully in place. In fact, the policy around them is in development and a full decision has not been made”.—[Official Report, 3/6/20; col. 1428.]


Five days on, local authorities and directors of public health are reporting publicly that their hands are tied without the postcode data they need or the specific powers for lockdown. When will this vital decision be made so that flare-ups of Covid can be stopped?

[Lord Bethell [V]]

The work is being undertaken at the moment. Rather than focusing on local lockdowns, we are focusing on local action plans with a wide variety of measures, perhaps including behavioural changes as well as clinical and diagnostic interventions. It is only by working across the piece that local actors, such as local authorities, directors of public health and local infection directors, can implement the right array of measures. That holistic approach is the one we are pursuing.

[Lord Crisp (CB) [V]]

My Lords, many academics are warning of the likelihood of a second wave of the virus, and there is some evidence that it is already happening in other countries. I appreciate that the Government seek to avoid that, but what is their assessment of the likelihood of a second wave, what lessons have they learned from their first experience of lockdown, and what planning are they doing for a second wave nationally and regionally?

[Lord Bethell [V]]

The fear of a second wave is profound. We have seen what happened in Singapore and we remain vigilant. However, enormous progress is being made against the epidemic, as the noble Lord will have seen from recent figures. We have put in huge infrastructure to protect ourselves in the winter, which is the moment of greatest anxiety. That includes Europe’s biggest testing programme, stockpiling medicines, upgrading NHS capacity, the recruitment of returning staff to the NHS and—as I mentioned to the noble Baroness, Lady Brinton—the implementation of a local action plan regime which will give teeth to our measures on a local basis.

[Lord Robathan (Con) [V]]

As my noble friend has admitted, the scientific advice and modelling have been confused, often contradictory and changing as nobody knows a lot about this virus or its progress. Many believe that the virus arrived here as early as November and has swept through the population, often without symptoms. The figures for deaths may be too low or too high because nobody really knows. We have mortgaged this country’s future and our children’s future on uncertain science. The Health Secretary has now described the virus as

“in retreat across the land”.

Will the Government lift all lockdowns now, or as soon as possible, as has happened in New Zealand? Let us all hope the entire lockdown was not a catastrophic error.

[Lord Bethell [V]]

I share my noble friend’s frustration that this disease has proved a horrid and at times confusing foe, but I testify to the strength of the scientific advice we have been given. We do not expect scientists to agree. We believe that a degree of conflict is the right approach to trying to find the right answer. The role of the CMO and the Government’s chief scientist is to distil the advice of a great many sources into the best possible advice. We expect there to be a dialectic, with some form of conflict. I do not believe that we have made profound mistakes on the science. In fact, I believe that the scientists have been wise and thoughtful in the advice and recommendations that they have given us.

[Baroness Pitkeathley (Lab) [V]]

The Minister will know from research published yesterday by Carers UK—I declare an interest as a vice-president—that more than 4 million extra people have taken on caring roles at home for family and friends during the pandemic. Following the question asked by the noble Lord, Lord Crisp, I ask: in the event of a second wave, how will the Government ensure that these carers are provided with adequate PPE and access to services?

[Lord Bethell [V]]

I share the noble Baroness’s tribute to the nation’s carers. This week is Carers Week, and it is quite right that the House pays tribute to the contribution of all those who have looked after loved ones and neighbours in the manner she described so well. Support for carers has been at the front of our minds, but she rightly reminds us that we could do more in a second wave, and we are looking hard at ways of developing that support in the months to come.

[Lord Mann (Non-Afl)]

What discussions have Ministers had with their German counterparts about the success of the German test and trace system?

[Lord Bethell [V]]

I have conversations with the German Government, medical authorities and diagnostic industry on a very regular basis. I have a fortnightly call with my counterpart in the German health system. It is true that Germany had a more developed and more local testing facility than the British at the beginning of the epidemic, but since then we have built up our capacity dramatically and we regularly do more tests than our German counterparts at the moment. The testing regime being developed is already delivering fantastic results that match those of many countries.

[Lord Bilimoria (CB)]

My Lords, given that the R rate is now below one across the UK, will the Minister acknowledge that the risk of infection from reducing social distancing from two metres to one metre goes from 1.3% to 2.6% and that the WHO is recommending one metre as safe? Denmark, France, Singapore, China, Hong Kong and Lithuania have moved to one metre. A pub or restaurant can barely open with a social distancing rule of two metres, being able to operate at only 30%; with one metre, they could operate at over 70%. At one metre, you can have four times as many people in a space as at two metres. It is the difference between being in business and going out of business for the hospitality industry, which employs 3.5 million people, let alone for theatres, cinemas and the university sector. Now that the Government are saying that masks are to be worn on public transport, and given the PPE measures within the sector, does the Minister not agree that we need to get the economy back and working as soon as possible, safely?

[Lord Bethell [V]]

I completely agree with the noble Lord that we need to get the economy back, and I very much agree with his last word—safely. The CMO’s advice is very clear that social distancing of two metres makes a very big difference compared with one metre. When the time comes to move from two metres to one metre, we will very clear about that moment, and I, for one, will celebrate the reopening of restaurants and pubs, which are a source of great joy and happiness for the nation.

[The Deputy Speaker (Lord Duncan of Springbank) (Con)]

My Lords, the time allowed for questions has now elapsed.

12:50

Sitting suspended.

Arrangement of Business

Tuesday 9th June 2020 Lords Chamber

Announcement

12:56

[The Deputy Speaker (Lord Alderdice) (LD)]

My Lords, we now come to the repeat of the Statement on public order. For Members participating remotely, microphones will unmute shortly before they are to speak. Please accept any on-screen prompt to unmute. I remind Members that our normal courtesies in debate still apply in this new hybrid way of working.

It has been agreed in the usual channels to dispense with the reading of the Statement itself, and we will proceed immediately to questions from the Opposition Front Bench.

Public Order

Tuesday 9th June 2020 Lords Chamber

Statement

The following Statement was given on Monday 8 June in the House of Commons.

“With permission, Madam Deputy Speaker, I would like to make a Statement on public order. Like all Members of this House, I was sickened at George Floyd’s tragic death. His treatment at the hands of the United States police was appalling and speaks to the sense of injustice experienced by minority communities around the world. I fully appreciate the strength of feeling over his senseless killing, the inequality that black people can sadly still face, and the deep-seated desire for change. I know that it is that sense of injustice that has driven people to take to the UK streets to protest.

This Government are clear that racism and discrimination in any form have no place in our society, and we will do whatever is required to eradicate it. Of course, there is more we can do. There is more that we should all do to combat inequalities across society, to support those seeking social justice and better life chances and to offer hope, but all too often, too many are confronted by despair. It is right in any democracy, in an open and free society, that we advance these issues in a constructive, sensitive and responsible way.

The Government understand the importance of the right to protest. In normal circumstances, a large and peaceful protest would not be of concern to the authorities, because we live in a great country where our right to protest and to have our voice heard is integral to our fundamental democratic freedoms. The right to come together and express our views peacefully remains one of the cornerstones of our great democracy. Members across the House share an enduring commitment to uphold liberty and freedom of expression, on the basis of respecting the rule of law. As our nation battles coronavirus, however, these are not normal circumstances, so to protect us all and to stop the spread of this deadly disease, any large gatherings of people are currently unlawful. We cannot afford to forget that we are still in the grip of an unprecedented national health emergency that has tragically claimed more than 40,000 lives, so the severe public health risk forces me to continue to urge the public not to attend future protests. The Government’s scientific and medically led advice remains clear and consistent. No matter how important the cause, protesting in large numbers at this exceptional time is illegal, and doing so puts everyone’s lives at risk.

Let me turn to an operational update. Around 200 protests took place across the country over the weekend, attended by over 100,000 people. As many as 137,500 people have now attended Black Lives Matter protests across the UK. While the majority were peaceful, a lawless minority of protesters have regrettably turned to violence. The worst violence flared in London on Saturday evening, with missiles and flares being thrown at police officers outside Downing Street. Officers in protective equipment were deployed to arrest the culprits and to clear the area. At least 35 officers have now been injured during the protests in the capital. I salute their bravery and wish them a swift recovery. The thugs and criminals responsible are already being brought to justice. This is a fluid situation, but as of this morning the total number of arrests stood at 135.

As the ugly tally of officer assaults shows, some protestors, regrettably, turned to violence and abusive behaviour at the weekend. This hooliganism is utterly indefensible; there is no justification for it. There is no excuse for pelting flares at brave officers, throwing bikes at police horses, attempting to disrespect the Cenotaph or vandalising the statue of Winston Churchill, one of the greatest protectors of our freedoms who has ever lived. It is not for mobs to tear down statues and cause criminal damage in our streets, and it is not acceptable for thugs to racially abuse black police officers for doing their jobs. The criminals responsible for these unlawful and reckless acts are betraying the very cause they purport to serve. These protests are about injustice, but by attacking our courageous police they are acting in a wholly unjust way.

When I became Home Secretary, I vowed to back the police. I said that I would stand with the brave men and women of our police and security services, and against the criminals. I stand by that today, proudly and without apology, because, as we saw at the weekend, we ask our frontline police officers to do the most difficult of jobs: to run towards danger to ensure that we are not in danger; to put their own lives on the line to protect the public; and to uphold the rule of law and the rights of individuals against the disorder that we have seen in recent days. By doing that, the police in our country give us all the very security we need to live our lives as we choose.

That is an essential part of our freedom, because violence, disorder and crime blight communities and society as a whole. So, the police need to know that they have a Prime Minister, a Home Secretary and a Government who stand with them and will give them the tools, powers and resources they need to keep us safe—and they do. Police funding has had its biggest uplift in a decade, increasing by more than £1 billion, and we are recruiting an additional 20,000 police officers to keep our streets and our country safe. They will have my full support in upholding the rule of law, and in tackling violence, vandalism and disorderly criminal behaviour. I could not be clearer: I want to see the violent minority responsible arrested and brought to justice.

I agree with the many peaceful protestors that racism has absolutely no place in our society. Black lives matter, but police brutality in the United States is no excuse for the violence against our brave police officers at home. So, to the quiet law-abiding majority who are appalled by this violence and who have continued to live their lives within the rules, I say: ‘I hear you.’ To the police, who have been subject to the most dreadful abuse, I say: ‘You have my full backing as you act proportionately, fairly and courageously to maintain law and order.’ And to the criminal minority who have subverted this cause with their thuggery, I simply say this: ‘Your behaviour is shameful and you will face justice.’ I commend this Statement to the House.”

12:57

[Lord Rosser (Lab) [V]]

First, I express our sincere wishes for a full recovery to, I believe, the 35 officers who suffered injuries, as well as to a protestor who, I understand, was also injured. The violence and vandalism were unacceptable and can only be condemned. Police work involves the risk of danger to officers, but gratuitous and reckless attacks on the police of the kind we saw in London should not be accepted as a risk of the job. We pay tribute to the police officers who put themselves in harm’s way on our behalf.

When it comes to the statue of Edward Colston, I do not condone an act of criminal damage to remove it, but I will not miss a public statue of a slave trader. It should have been taken down many years ago.

The figures in the Statement suggest that one in 1,000 of those who participated in the demonstrations around the country have been arrested. The judicial process must now take its course. The figures indicate that it was a very small minority who besmirched significant peaceful demonstrations that might well have been larger but for the pandemic and social distancing. The Government’s own figures indicate that 999 out of every 1,000 who protested did so peacefully.

We can of course simply express criticism of those who demonstrated peacefully for breaching coronavirus regulations and guidelines, but there have been others recently in positions of real power and influence who have hardly set a shining example in this regard. We might do better to look at, and understand, what motivated the 999 out of every 1,000 peaceful, not violent, protestors to turn out on to the streets of many of our cities.

The brutal killing of George Floyd in America has been widely condemned and has also aroused strong passions around the world, including in our country, with protest demonstrations by, and in support of, black people in particular and ethnic minorities in general. The words “black lives matter” have struck a deep chord, reflecting strong feelings and indeed anger—anger about persistent and continuing injustice, discrimination, racism and being treated and regarded as second-class citizens, and with it a call for meaningful action to unite communities and confront injustices in our society.

Public Health England recently published its report on the disparities in the risk and outcomes of Covid 19, showing that black males are four times more likely than expected to die with the disease. Coronavirus has shone a light on inequalities that have long existed. Can the Minister say whether Public Health England made any recommendations in the light of the findings in its report? None appears to have been made public.

The Windrush review by Wendy Williams had damning findings and its recommendations need to be acted upon. When do the Government intend to come back to Parliament to tell us what action they will take in the light of the Williams recommendations?

A report nearly three years ago by the now shadow Justice Secretary, David Lammy, showed that black people make up around 3% of the general population but account for 12% of adult prisoners and more than 20% of children in custody. Those are disturbing statistics, and the Government should implement the report’s recommendations. In the last few days in particular, we have also heard and read testimonies from many people on how racism continues to have an impact on daily lives in our country.

The Home Secretary said in her Statement:

“I fully appreciate the strength of feeling over his senseless killing, the inequality that black people can sadly still face, and the deep-seated desire for change. I know that it is that sense of injustice that has driven people to take to the UK streets to protest.”—[Official Report, Commons, 8/6/20; col. 40.]


We need to address that sense of injustice and deep-seated desire for change as a matter of urgency. Will the Minister now commit the Government to coming back to Parliament on a regular basis to report orally on the actions that have been taken, and are being taken, since each previous update to address that sense of injustice and deep-seated desire for change to which the Home Secretary herself referred? Now is the time to avoid divisive words and instead to listen, to learn and, above all, to act.

[Lord Paddick (LD) [V]]

My Lords, this Statement is entitled Public Order and I declare an interest as being one of a small cadre of senior officers trained to lead the policing of disorder. Following my work as the police commander in Brixton—the so-called capital of black Britain—I accepted an invitation to address a University of Minnesota conference on the disproportionate incarceration of African Americans in the city where George Floyd tragically lost his life.

As the police themselves have said, and as the noble Lord, Lord Rosser, has just mentioned, the overwhelming majority of the Black Lives Matter protesters in the UK at the weekend were peaceful. There is justified anger about racism in the UK, in all its forms and in all parts of society, but there is a difference between explaining behaviour and justifying it. The appalling attacks on police officers and the damage to property cannot be justified, even though I understand that people are angry, that they feel they are not being heard, and that they believe demonstrating is the only way they can bring about change.

Policing by consent in the UK means policing with the support and co-operation of the public but when people refuse to comply with the reasonable and lawful requests of the police, officers have to switch from persuasion to the use of force, often instantly. That is difficult for individual officers and police leaders when peaceful protests turn violent. Often officers in ordinary uniform have to withdraw under a hail of missiles before officers in riot gear can replace them. It is not the police retreating or losing control of the streets; it is a necessary tactic but one that can lead to police casualties, and I send my best wishes to all former colleagues who have been affected by the violence they experienced this weekend, which, as I have said, was unacceptable.

In recent times police have deployed evidence gatherers—observers speaking into recording devices, and camera operators who record offences as they are committed—so that officers do not have to risk escalating the violence and depleting their numbers by arresting people at the peak of serious disorder. Instead, they investigate, identify and arrest those responsible after the event. It is a difficult operational decision whether to intervene at the time to prevent copycat offences, or to leave it until later, to prevent an escalation in violence and the risk of depleted police numbers being overwhelmed. But what it is not is the police allowing criminals to get away with it.

Of course, the coronavirus regulations prohibit gatherings of more than six people but this needs to be balanced against the human rights to free speech and the right of assembly, also established in statute. Unfortunately, following the Dominic Cummings fiasco, the Government are on very thin ice when people are apparently allowed to use their own judgment when it comes to obeying health regulations. Even Border Force officers are being told to “encourage” the completion of passenger location forms, and not to enforce the law on the quarantine of UK arrivals.

I have three questions that I would like the Minister to answer. First, in the light of these demonstrations, what health advice have the Government given to the police, and what PPE have the Government provided to ensure that officers are protected from coronavirus in such circumstances? If the Minister is going to say that the protests are illegal, that is clearly not stopping them taking place, and officers still need protection. Secondly, what action are the Government taking to acknowledge the justified concerns of those protesting about racism in the UK, to reassure them that they are being heard and that further demonstrations are therefore unnecessary? If the Minister is tempted to say, as one of her colleagues has suggested, that there is no racism in the UK, I remind her of the Wendy Williams report, the David Lammy review, and the disproportionate numbers of BAME people dying from coronavirus that the noble Lord, Lord Rosser, mentioned. Thirdly and finally, what pressure are the Government putting on the police service to either address the disproportionality or explain why you are 10 times more likely to be stopped and searched in the UK if you are black than if you are white, and two-and-a-half times more likely to die in police custody?

If the Minister is tempted to mention knife crime, I refer her to Home Office research that shows a 10% increase in stop and search results in only a 0.01% drop in non-domestic violent crime. If the Minister, for whom I have the greatest respect, is tempted to say that it is an operational matter for the police, why is the Home Secretary publicly criticising operational policing decisions around the toppling of the statue of a slave trader in Bristol? If the Home Secretary can put pressure on the police to make arrests, she can put pressure on the police to address disproportionality.

[The Minister of State, Home Office (Baroness Williams of Trafford) (Con)]

I thank both noble Lords for the points that they have raised. I join them in wishing the officers who have been injured a full recovery. I understand that the figure to date is 62 and that 137 arrests have been made. I also join the noble Lords in condemning the violence. I can understand and totally concur that black lives matter but violence undermined what those people were trying to very peacefully protest about, as the noble Lords said. With regard to the destruction of the statue of Edward Colston, both noble Lords have condemned the violence, and neither are sorry to see the back of a slave trader. I can understand those points but there is a broader point about doing things in a democratic and peaceful way. Actually, that statue could have been removed years ago, had it been done in a democratic way.

It is sad that the story is no longer about Black Lives Matter but has been overtaken by violence. Behind this, of course, is the brutal killing of George Floyd; so awful was that video that I could barely watch it. Let us remember him rather than some of the violence, but we cannot escape from the need now to tackle it.

We also need to look at the public health dangers that were caused by people being far too close to one another. The noble Lord, Lord Rosser, talked about the disparities involved, with black men being more susceptible to coronavirus. No one is quite sure why that is, but it certainly seems to be the case. It is all the more worrying that so many people were gathered so closely together on Sunday.

The noble Lord asked me about the Wendy Williams report response and when Parliament will hear it. Wendy Williams was very clear, as I recall from when I read out the Statement about her report, that she wanted the Home Secretary not just to have a knee-jerk reaction to it but to take some time to reflect on it, and that is what she will do. The response will be with Parliament within the allotted time limit.

The noble Lord talked about racism continuing to impact lives and about the Home Secretary understanding the burning injustices that it inflicts upon society. She talked yesterday about a whole-government response to inequality and injustice. This does not just come down to one department; actually we are all responsible for it, and so indeed is society.

The noble Lord, Lord Paddick, talked about the overwhelming majority of people protesting peacefully, and of course he was right. He talked about how difficult it is for the police when a peaceful protest suddenly turns violent. Of course it is; they suddenly have to adjust to a different set of circumstances, often with absolutely no notice. He talked about body-worn video helping the police, and that is true: rather than making arrests at the time, they can go back to study the video. That helps from the point of view both of the police and indeed of anyone who is being accused.

The noble Lord talked about the health advice to those front-line police. The public health advice to front-line police is absolutely the same as that for any member of the public. We know that the police are well equipped with PPE, and they should deploy it as appropriate.

The noble Lord talked about acknowledging concerns about racism in this country. I acknowledge it—I came here in the 1970s as an immigrant—and I know the Home Secretary acknowledges it as well. We have made improvements in BAME recruitment to the police, but we certainly have not got there, and Sunday was almost an explosion of that frustration.

On the noble Lord’s point about black people being 10 times more likely to be stopped and searched, the most recent publication of stop and search figures for the year ending March 2019 showed that there were a total of 383,629 searches, resulting in 58,876 arrests under Section 1 of PACE and Section 60 of CJPOA. That is down from a peak of approximately 1.2 million stop and searches in 2011. Of course, the thing about stop and search is that it is designed to help those vulnerable people who might be at risk of attack themselves. However, for both Section 1 and Section 60 there is a larger proportion of those stopped and searched who self-identify as black or BAME.

[The Deputy Speaker (Lord Alderdice) (LD)]

We now come to the 20 minutes allocated for Back-Bench questions. I ask that questions and answers be brief, so that I can call the maximum number of speakers.

13:16

[Baroness Warsi (Con) [V]]

My Lords, I echo the sentiments of my noble friend and the noble Lords, Lord Rosser and Lord Paddick. As someone who has both family and friends in the police, I know the amazing work that our police do every day in this country. However, does my noble friend accept that what we saw in the small incidents of public disorder were simply the symptoms of racism, not the disease, which results in the inequalities that the protests are about? We have had the Lammy review, the Williams report and indeed the race disparity audit, which reported back in 2017. Could my noble friend give words of hope and practical examples of what the Government are doing to deal with the disease of racism that feeds the inequalities which resulted in the public disorder?

[Baroness Williams of Trafford]

I agree with my noble friend that what we saw on Sunday was a symptom of the frustration that people feel about racism, both overt and covert, within our country. We need more diversity in the workplace, in Parliament and in all sorts of areas of life. My noble friend will have heard the Prime Minister addressing the public yesterday about this and talking about how across government we need to drive this out. This is not about one particular department of government or one particular individual; it is about a public collective in terms of driving this sort of poison out of our society.

[Lord Woolf (CB) [V]]

I have listened to what has been said in the House so far and read the debate that took place after the Statement that was made yesterday in the Commons. I acknowledge the balanced approach that Members of Parliament are taking to the very real problem that has arisen here. Does the Minister agree that what has been said about what happened indicates problems in relation to the rule of law, which is so important to uphold in order to induce a sense of fairness? Is it not also clear regarding some of the problems that exist, not only the matters that we are considering today but also Windrush, that it is time that more resources were made available to the criminal justice system as a whole and that a long-term report, perhaps by a royal commission, needs to be done into the criminal justice system generally so as to improve the sense of fairness?

[Baroness Williams of Trafford]

I think the noble and learned Lord is right about the balanced approach and the importance of the rule of law. I respect those who very peacefully protested on Sunday, but of course that was completely undermined by those who just flouted the rule of law and those who put other people at risk of the virus when we are going through quite a critical stage in in trying to wipe it out. The noble and learned Lord talks about more resources for the criminal justice system. From a Home Office point of view, our ambition to recruit an extra 20,000 police officers over the next few years is well on track to be delivered. I hope that, as he says, the whole fairness of the criminal justice system will lead to a public feeling of a more fair and equal society.

[Lord Foulkes of Cumnock (Lab Co-op) [V]]

My Lords, is the Minister aware that one of the causes of the protest and the pulling-down of the Colston statue in Bristol was the failure to act on previous lawful representations about that statue and the frustration caused? Why is the Prime Minister now refusing to meet with Sadiq Khan, the Mayor of London? Why are the Government refusing to deal with legitimate BAME concerns, such as Windrush? Will the Government ever learn to start listening to peaceful representations, particularly from elected Members?

[Baroness Williams of Trafford]

My Lords, the Colston statue is in Bristol, and therefore is a matter for the elected representatives of Bristol to deal with democratically. If people are not happy with the democratic process in Bristol, they can do something about it at the ballot box. If people want to make representations to Sadiq Khan about the various statues they may object to across London, it is for them to do so.

[Lord Dholakia (LD) [V]]

My Lords, it is 72 years since the arrival of the “Empire Windrush” and three factors have remained constant. Racism and racial discrimination are a reality in the lives of the black and ethnic minority community. Geographically and economically, they find themselves in the same place that was allocated to most of them when they arrived here. Institutions and organisations seldom take into account the diversity of our nation. Mrs May’s equality audit has taken us nowhere forward. Islamophobia prevails in our political structure. Violence will never be an answer; we need a political leadership that values the contribution of our black and Asian community. Where will this come from? Is it not time that the Prime Minister and the Home Secretary spoke about the future of our multiracial Britain?

[Baroness Williams of Trafford]

My Lords, I do not disagree with the noble Lord. Parliamentary representation and leadership within government have a long way to go, but we have certainly come a long way in the last few years, in terms of the leadership of our country. The culture is changing slowly but surely, and I am very pleased that our Home Secretary is from the BME community.

[Lord Pickles (Con) [V]]

My Lords, I fully accept that there is much to do to make British society more equal and just, and I encourage the Government in their endeavours. But is my noble friend surprised that some of those who have been most critical of every easing of the lockdown have been prominent in supporting mass gatherings, risking a second wave of Covid-19? There is no getting away from the fact that these gatherings play fast and loose with the life chances of the most vulnerable.

[Baroness Williams of Trafford]

My noble friend is absolutely right: it is perverse that those most critical of the easing of the lockdown should then put themselves in a position in which not only they, but those from BME communities, are at risk.

[Viscount Waverley (CB) [V]]

The Prime Minister and Home Secretary must follow through. Having recognised that issues of endemic racism exist, they should be firmly addressed. Why not establish a progress barometer or national ratings scheme for public bodies, eventually extending to the private sector? Moving on, does the Minister concur that the UK leads the world in its humane manner of policing, and exports its training internationally? Could we not offer such to one of our closest allies, or have we done so already?

[Baroness Williams of Trafford]

To answer the second question from the noble Viscount first, it always strikes me, when I look at the police system we have in this country and at some of the methods that police have across the world, that we are lucky to have the police forces that we do. They run into danger, rather than away from it. They keep us safe and police by consent. We are incredibly lucky as a nation to have them. By a rating system, public and private, I assume he means a system of diversity. We already have that in place across government and we talk about it regularly, particularly when we celebrate International Women’s Day, when we also talk about other types of equality. The Government cannot criticise if they are not doing their job themselves, and there is improvement in diversity across all areas of government.

[Baroness Kennedy of Cradley (Lab) [V]]

My Lords, what I find most disappointing about the Statement is that it focuses on the actions of the minority, whose violent behaviour we all denounce, and not on the reasons why thousands of peaceful protesters, supported by millions from their homes, were on the streets in the first place. Would the noble Baroness correct that missed opportunity today and set out what action the Government are taking to deal with the institutional racism that exists within our criminal justice system, as regards stop and search, arrests, charges and convictions?

[Baroness Williams of Trafford]

My Lords, I agree with the noble Baroness. It is a shame that we are talking about the public order offences, which have completely overshadowed what people were trying to talk about in the first place, which was peaceful protest against the awful events that happened in America. The minority have made that impossible. The noble Baroness is right to talk about the wider point of stop and search. The Government will be working across the piece to address some of those injustices.

[Lord Mackay of Clashfern (Con) [V]]

My Lords, will my noble friend commend the example of the organiser of the justified and peaceful protests in Glasgow Green, in his efforts to protect innocent protesters from the dangers of the virus? He tried his best to ensure that they were at proper distances apart.

Secondly, it is not for the Government alone to deal with this; it is a question for all the organisations in our country to deal with. The organisation that perhaps I know most closely in this country is the Bar of England and Wales, and I am glad to know that, in recent years, the number of those belonging to ethnic minority and black communities is increasing. Last time I saw the statistic, it suggested that the proportion of such in the Bar of England and Wales is about the same as in the general population.

[Baroness Williams of Trafford]

My noble friend brings me two pieces of good news this morning. I am very pleased to note those statistics from the Bar of England and Wales. We do see improvements across the piece—in the police, in Parliament and in government departments—but there is a way to go. I am delighted that the organiser of the peaceful protest in Glasgow Green made sure not just that social distancing took place but that everything went off peacefully. That individual is to be commended.

[Lord McNally (LD) [V]]

My Lords, we are not the first society that has had to face uncomfortable truths about its past history or present injustices. Some have addressed them by inquiries of peace and reconciliation, which have allowed those societies to face up to those problems. Could the Minister consider developing the idea put forward by the noble and learned Lord, Lord Woolf, of a royal commission that could look at these matters, with a duty of peace and reconciliation? I suggest there is a chairman readily available with the retirement of the most reverend Primate the Archbishop of York, John Sentamu. He would give confidence to both sides, while such an inquiry took place.

[Baroness Williams of Trafford]

My Lords, one of the points made in the Commons yesterday was that deeds and actions will speak to issues like this the most loudly. A royal commission is one idea, but I think that across every stratum of society—from our democracy in local and national government to the institutions that serve government to the private and public sectors in our country—it is the collective effort that will make the real difference.

[Baroness Jones of Moulsecoomb (GP) [V]]

I have to confess that I am deeply dissatisfied with some of the answers we are getting today. It is no surprise that there is systemic racism in the police; it has been going on for decades and decades—the report into the Stephen Lawrence case made recommendations back in 1999. I am afraid that the noble Baroness did not answer the question put to her by the noble Lord, Lord Foulkes, because the people of Bristol have in fact tried to get rid of that statue many times, and democracy failed in that case. Will the noble Baroness please answer the question put by the noble Baroness, Lady Kennedy of Cradley: what are the Government going to do? The Minister has said that the Government are going to work across the piece, but what does that mean?

[Baroness Williams of Trafford]

My Lords, I should say to the noble Baroness, who is also my noble friend, that if democracy failed in Bristol, democracy is failing in Bristol and it is up to the people of Bristol to vote in a more effective democracy. I do not think that there is one single answer to some of the systemic issues in what we have seen. We have to work across government and all the strata of society in order to make that cultural change.

[Lord Caine (Con) [V]]

My Lords, while I completely understand, not least because of my own experience in Northern Ireland, that the police often have to make very difficult judgments in public order situations, does my noble friend agree that it is none the less vital to public confidence that the law is still enforced? Is not one of the lessons we learned from what we saw in the summer of 2011 that this is more effective when it is done quickly?

[Baroness Williams of Trafford]

I agree absolutely with my noble friend. It is not only best that it is done quickly, but it is what the public expects.

[Lord Mackenzie of Framwellgate (Non-Afl) [V]]

My Lords, when watching the violent destruction of the statue in Bristol on Sunday, I was struck by the absence of any police presence. Sir Robert Peel, in founding the police in 1829, stated that the basic mission for which the police exists is to prevent crime and disorder. Does the noble Baroness believe that the Avon and Somerset police force fulfilled that mission?

[Baroness Williams of Trafford]

My Lords, the way in which the police organise themselves for various situations is of course a matter for the police. Reflecting on the words of the noble Lord, Lord Paddick, I think that it is quite often the case that, early on, things seem to be quite peaceful and then suddenly they get out of order. However, I am sure that reflections on the events on Sunday will lead to some lessons learned.

[Lord Cormack (Con) [V]]

My Lords, no words are too strong to condemn those who hijacked the peaceful demonstrations, but I am very concerned about the size of the peaceful demonstrations and the fact that most of them did not find themselves conducted as they were in Glasgow. Will my noble friend please discuss with the Home Secretary the possibility of convening a consultation with all the responsible leaders who are concerned about these issues? Can they ensure that there are no more mass demonstrations which could endanger the life of the whole community, in particular those from black and ethnic minority communities? Could this be done as a matter of urgency and then clear guidelines issued?

[Baroness Williams of Trafford]

I must confess that I found some parts of my noble friend’s question difficult to hear. I think that what he was saying—I hope that he will nod or shake his head accordingly—is that there are lessons to be learned from Sunday in terms of not holding mass protests where the lives of black and ethnic minority individuals in particular are put in danger because of the lack of social distancing. My right honourable friend the Home Secretary made it absolutely clear yesterday that the regulations are there to be upheld and that that should be the lesson from now on in.

13:36

Sitting suspended.

Arrangement of Business

Tuesday 9th June 2020 Lords Chamber

Announcement

13:46

[The Deputy Speaker (Lord Alderdice) (LD)]

My Lords, we now come to the Second Reading of the Corporate Insolvency and Governance Bill. A limited number of Members are here in the Chamber, respecting social distancing, and if the capacity of the Chamber is exceeded, I will immediately adjourn the House. Other Members will participate remotely, but all Members will be treated equally, wherever they are. For Members participating remotely, microphones will unmute shortly before they are to speak; please accept any on-screen prompt to unmute. Microphones will be muted again after each speech. I ask noble Lords to be patient if there are any short delays as we switch between physical and remote participants. I remind the House that our normal courtesies in debate still very much apply in this new hybrid way of working.

To help manage proceedings, there will be an adjournment after the speech of the noble Baroness, Lady Falkner of Margravine, until a convenient point after 4.45 pm. After the adjournment, the debate will resume with the noble Baroness, Lady Anelay of St Johns.

Corporate Insolvency and Governance Bill

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 9th June 2020 Lords Chamber

Second Reading

13:47

Moved by

[Lord Callanan]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, we have faced, and continue to face, a global health emergency on an unprecedented scale. The Covid-19 pandemic has brought significant challenges to our country and our economy. The imposition of strict social distancing measures has meant that many businesses are facing significant short-term difficulties and, some, sadly, the threat of insolvency.

Providing support to UK businesses is at the heart of the Government’s economic response to Covid-19. The fiscal package introduced by the Government has provided billions to businesses through support schemes such as loans, grants and the job retention scheme. The Bill will provide additional support to businesses by giving them the flexibility and breathing space that they need to bounce back from the Covid-19 pandemic. To achieve that, the Bill will do the following.

First, it will introduce a package of permanent reforms to insolvency law to give businesses the space and tools required to maximise their chances of survival. Secondly, it will temporarily suspend parts of insolvency law to protect companies from aggressive creditor action and give company directors greater confidence to continue to trade through the pandemic. Thirdly, it will extend greater flexibilities to businesses, allowing them to hold their general meetings in a way which is consistent with social distancing measures, and providing more time for them to file the information they need to with Companies House. This package of measures will help give businesses the support they need to keep trading, preserving jobs and value, and laying the foundations for the UK’s economic recovery.

The first set of measures is a corporate restructuring package that will make permanent changes to the UK’s insolvency framework. The Government previously consulted extensively on these changes to the corporate insolvency regime and we announced plans in August 2018 to introduce new insolvency rescue and restructuring procedures. The Bill will implement those reforms. This package of reforms will have an immediate effect in helping companies get through the Covid-19 emergency by providing them with the breathing space that they require to help them avoid insolvency as they seek a rescue. The package contains three elements.

The first is a moratorium, which will give financially distressed companies breathing space from their creditors while they seek a rescue. It will last initially for 20 business days, and can be extended. During this time, legal action is restricted against a company without leave of the court. There are some time-limited relaxations of the eligibility criteria for the moratorium to make it easier for companies to enter a moratorium during the Covid-19 crisis.

The second element of the corporate restructuring package is the introduction of a new restructuring plan. This will allow companies to restructure complex debt arrangements and bind creditors to the plan as long as certain thresholds are met. As the House would expect with a proposal that has a binding effect on creditors, significant safeguards are in place for them. For example, the court must be satisfied that dissenting creditors will not be made worse off than they would have been under the next most likely outcome.

The third and final element of the corporate restructuring package is the prohibition of termination clauses. Such termination clauses are often found in supply contracts and are triggered on the commencement of an insolvency or rescue procedure. Their prohibition will mean that contracted suppliers cannot terminate contracts, or demand additional payments, just because the company has entered an insolvency procedure or moratorium. However, there are again safeguards in place for suppliers to protect them from financial hardship as a result of their being required to continue to supply. In addition, due to the impact of Covid-19 on small companies, small suppliers will be temporarily exempt from this requirement.

The Bill also introduces some time-limited measures to provide additional support for businesses during the crisis. The first of these is the temporary suspension of wrongful trading liability. Wrongful trading liability is a deterrent against company directors continuing to trade when their company is insolvent. This temporary suspension will encourage directors of companies that would be viable but for the impact of Covid-19 to continue trading without the threat of personal liability. Let me reassure noble Lords that, while we believe this suspension to be necessary at this time, directors will still be bound by the rest of their legal duties under wider company law. In addition, measures under insolvency law to penalise directors who abuse their position will of course remain in place.

The second temporary measure will help struggling businesses by removing the threat of statutory demands and winding-up petitions issued against companies during the emergency. The Government have already 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. The vast majority of landlords and tenants have been working together to reach agreements on their debt obligations. Unfortunately, however, there have been cases of landlords using aggressive debt recovery tactics, including the use of statutory demands and threats of winding-up petitions, to put undue pressure on tenants. This provision will give businesses the opportunity to reach realistic and fair agreements with all creditors.

All the temporary insolvency measures in this Bill will expire one month after Royal Assent. However, the Bill contains the required powers to extend the temporary provisions should it prove necessary to do so due to the ongoing crisis. Furthermore, the Bill contains the temporary power to make other amendments to insolvency or governance legislation. This will facilitate a rapid response to overcome the emerging challenges to businesses that result from the Covid-19 pandemic. As ever, the House will of course have the opportunity to scrutinise the use of these powers if they are needed.

The final set of temporary measures deals with meetings and company filings. The Bill makes it easier for companies, mutual societies and charitable incorporated organisations to comply with legal requirements on holding AGMs and other meetings while keeping their shareholders and members safe and respecting social distancing rules—as we are doing in this House. This flexibility applies retrospectively from 26 March, giving businesses the certainty that they will not be penalised for trying to do the right thing during the pandemic. The measures will also enable AGMs to be postponed until 30 September this year where necessary.

On filing requirements, we are giving hard-pressed companies more time to submit annual accounts, confirmation statements and various notices of relevant events, such as the appointment of a director, to Companies House. Lenders will also have more time to register a charge against a company’s assets. This follows the announcement made on 25 March that Companies House had extended the period for filing accounts. Over 100,000 companies have successfully applied for the three-month extension that is available. This measure will further ease the burdens on businesses at this difficult time while ensuring ultimately that information is still filed with Companies House within a reasonable time.

Overall, the package of measures in this Bill has been widely welcomed by businesses at this critical time. Following its passage through the House of Commons, the chair of R3 in Scotland, the trade association for the UK’s insolvency and restructuring professionals, stated that:

“The proposed legislation will give both solvent and insolvent businesses crucial breathing space and increased legislative flexibility to review options without being pushed prematurely into an insolvency procedure. This new approach could make a significant contribution to repairing the economic devastation caused by the current pandemic.”


The Government are committed to supporting UK businesses throughout the emergency. These measures are being implemented to alleviate some of the current challenges that businesses are facing, maximising their chances of survival and allowing them to continue trading and to help the UK economy bounce back from this crisis. I beg to move.

13:56

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank the Minister, his colleagues in the department and the Bill team for all the engagement that we have had on the Bill in recent weeks. I am also grateful that a number of virtual meetings have been set up for Members of your Lordships’ House. Several helpful letters have also been received. We are therefore well briefed about this sensible and proportionate Bill and cognisant of the reasons why it is being brought forward on a fast track. I can confirm that, while we will give the Bill good scrutiny, our objective as Her Majesty’s loyal Opposition is to be constructive and to ensure that our businesses get the support they need now and in the long term.  

A large number of Members of your Lordships’ House have signed up to speak in today’s debate, and we look forward to their comments and questions to the Minister. We will put down a range of amendments tomorrow based on today’s debates as well as the submissions that we have received from organisations and bodies concerned with this issue. I also thank the Library for its very helpful note on the Bill. 

The Minister said that although some of the measures in the Bill had been consulted on a few years ago, it is at heart a part of the Government’s package of measures to address the supply shock caused by Covid-19. As the impact assessment for the Bill states, the case is certainly strong:

“Early models of the impact of Covid-19 have suggested that UK GDP growth in 2020 … could range between -3% and -13%, with scenarios for corporate insolvencies ranging from 30,000 to 160,000.”


However, does this not raise the question of what is going to happen to the other corporate insolvency measures which were consulted on in 2018-19? What about the wider policy response arising from various significant corporate failures in recent years such as Carillion, which is now overdue?

We are now entering the end of the lockdown phase, and the challenges ahead are becoming clearer. There will be a huge amount to do to ensure that the recovery is as short and strong as possible so that we minimise the impact on unemployment levels and the wider economy. I agree that it would have been wrong to hold back the measures in this Bill because other proposals were not yet ready to be included, but the last thing we want is for these issues to be dealt with in silos. Provisions in the Finance Bill 2020 ensuring that HMRC is a secured creditor in insolvency proceedings are surely a classic example of this, potentially running a coach and horses through this Bill. Many issues need a cross-government approach, which is appropriate. Our insolvency framework touches almost every part of the economy and helps to create the confidence and public trust which underpin trading, lending and investment.

I turn to the Bill. We support both the permanent changes being made to insolvency law and the temporary changes being made to insolvency law and corporate governance. Others speaking today will undoubtedly make particular points about the Bill, and we look forward to the Minister’s responses. To get us started, I will mention a few areas where we will put down probing amendments.

The position of employees seems unsatisfactory, both in terms of their lack of formal involvement in the processes and in relation to outstanding pay and other claims during the moratorium. The classification of pension scheme deficits, particularly for defined benefit schemes, as unsecured creditors seems unfair and perhaps should be reviewed. Many of the companies likely to take advantage of the new measures will be SMEs, and many SMEs will be unsecured creditors in insolvencies of other companies. The current insolvency regime was introduced in 2003 and is basically unchanged since then. It gives preferential protection to secured creditors and, as noted earlier, HMRC has legislated to protect its position. Is there a case for reconsidering the treatment of unsecured creditors?

On the length of the moratorium, Chapter 3 does not contain a maximum period and there appears no overall limit on the number of extensions available. Is that right? The new position of monitor is welcome but, apart from the requirement that he or she must be an insolvency practitioner, there is no other requirement set out in statute and the appointment is left wholly to the discretion of directors, with no role for creditors. We surely need much more detail here.

As has been said, the Bill helps struggling businesses by temporarily removing the threat of winding-up proceedings where unpaid debt is due to Covid-19; and it introduces temporary measures to void statutory demands against companies during the emergency. We support those. It is important that the measures suspending liability for wrongful trading do not relieve directors of their duty of care to act responsibly and in good faith, as specified in Section 172 of the Companies Act 2006. Should these measures not be put into the Bill?

Given the time that has elapsed since the lockdown, and the continuing reduction of normal economic activity, we would not object if the Government wished to extend the initial period of the effect of the Bill to 30 September 2020, even though, as the Minister said, they have power to extend it using secondary legislation. Some of the issues I have mentioned could be dealt with by inviting the Minister to clarify on the record what the Government mean by the current drafting. In other cases, we would hope to convince Ministers that substantive action may be required in subsequent legislation, and we will be pressing them to take an early opportunity to do so.

I mentioned earlier that the measures in this Bill needed to be considered in the wider context of the changes that will be needed to ensure that our economy recovers quickly and sustainably after Covid-19. One of the most shocking recent corporate collapses was that of Carillion, because it seemed to arrive without warning, despite active monitoring by the Government, and it affected tens of thousands of workers and subcontractors. In recent years, many familiar high-street retailers have closed, leading to devastating implications for workers, their families and wider communities. These collapses raise a number of questions. Why are our systems of auditing and reporting not able to pick up possible corporate failures earlier? Who is to blame? Do we focus enough on restructuring and rescuing companies which get into trouble, and do we have the skills and experience in the professional services needed to do that?

In a recent report, the TUC argued persuasively that the insolvency law is currently too heavily weighted in favour of creditors, often the banks. Other countries, notably Germany, take a very different approach. Staff in companies which crash and burn face substantial financial losses when their firm goes to the wall. Gaps in employment law also mean that those in insecure work, including agency workers, zero-hours contract workers and the self-employed—the so-called gig economy—miss out on even basic protections. Despite promises to enact the recommendations of the Taylor review, we still have the situation in this country where all employees are workers, but not all workers are employees. Why the delay?

One of the reasons that Carillion failed was that it carried huge levels of debt, a situation that is, unfortunately, likely to recur more widely in our economy as we recover from Covid, creating inherent risks to which boards, investors and auditors need to be able to respond. Are we confident that we have the systems in place?

Over the next few years, the Government must bring forward an integrated approach to the issues raised by the recent series of corporate failures, including: more corporate transparency and reform to the role and function of Companies House; training for directors, owners and senior management of public companies; legislation for CMA reforms for the appointment and oversight of auditors, and for the Brydon recommendations on compliance and practice; better insolvency practitioner regulation; the future of “pre-pack” administrations; making the Prompt Payment Code statutory, not voluntary, and giving the Small Business Commissioner real powers to ensure that the code is enforced; and ensuring that consumers have a central role in relation to policy on financial services and decisions on mergers and acquisitions.

Finally, the Bill is aimed at helping businesses, but why are these measures not also available to individuals, millions of whom will be facing unmanageable debt? A report in the papers today suggests that British households are expected to rack up debts worth £6 billion because of the coronavirus crisis. That is on top of figures which show that, at the end of January 2020, UK household debt was around £1,680 billion. Some 12.8 million UK households have no savings or savings of less than £1,500. The Government have committed to introduce a breathing space scheme for personal debt, and to roll out the successful statutory debt management plans which operate in Scotland. We urgently need these to be introduced now.

14:05

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I draw attention to my financial interests, as in the register. Although we broadly support the Bill, it is a little frustrating. It does too much by permitting things in a fast-tracked temporary measures Bill, and too little because it has left out other important measures similarly well consulted on. The Minister may conclude that that balance is like Baby Bear’s porridge and just about right. Nevertheless, there are some lumps in the porridge. Expediency has meant that it is the business-favouring parts of the consultations that are being fast-tracked and the more social-facing, small business and employee-facing measures that are left out. I therefore ask the Minister for reassurance that the Bill is not seen as removing pressure from legislating other important reforms on corporate governance and reporting, ESG, insolvency practitioners, audit and replacement of the Financial Reporting Council. I certainly do not see it as a justification for holding off.

The moratorium provision was expected, but there may be traps in the way it works, especially in the event of a following insolvency. There are changes in the insolvency distribution waterfall, with unpaid moratorium debts, and pre-moratorium debts without a payment holiday, being given a new super-priority. Both the treatment of what becomes super-priority and what is “normal supply” disadvantage smaller suppliers. All their pre-moratorium debt is in the subordinated category and normal supply favours stronger creditors’ amounts of super-priority, as they will have contracted shorter payment terms. Will events be monitored, and rankings readjusted if the super-priority does result in outcomes with less in the pot for SMEs, unsecured creditors and pension fund deficits? Unfortunately, it also looks as though the slaying hand will be held by HMRC, with its new claims for extra super-priority, and by banks, as they are outside the ipso facto provisions. It may be that security is not exercised in moratorium, but where are the provisions that prevent banks charging special fees and hiking interest so they can profit in moratorium, or making repayment acceleration demands to secure larger sums with super-priority? Such actions will not help rescue companies, are unfair and should be restrained. That is not to say that the moratorium concept is unwelcome but, because we do not have the time now to weigh up all the checks and balances, it would be sensible to hold its operation under review, to see how it worked and for revisions in the light of unintended consequences to be brought forward.

The temporary suspension of winding-up petitions also has lumps. In a sense, it robs Peter to pay Paul and whether it is the potential petitioner or the company that is smaller, more at risk or more aggressive, is not always one way. I therefore recognise the compromise in trying to keep the period short. However, under Schedule 10, the courts could impose retrospective restoration costs on those required to withdraw petitions made under the current law. Unlimited, might that be a retrospective step too far?

I am conscious that fast-tracked emergency legislation is not appropriate for complex changes and additions, but a few simple things within the scope of the Bill could be achieved. My noble friends will say more.

I regret that there are not more provisions to assist with personal bankruptcy. Australia has raised both the payment time and the financial threshold for initiation of proceedings.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I remind the noble Baroness of the time limit.

[Baroness Bowles of Berkhamsted [V]]

What is happening in the UK? Additionally, I regret that the Bill does not include simple Companies House provisions on identity verification, enabling it to play a role in preventing rogue or criminal elements abusing the current crisis to commit fraud. Again, there has been consultation already, but how is that being followed up?

[Baroness Bloomfield of Hinton Waldrist]

I ask the noble Baroness to bring her comments to a close.

[Baroness Bowles of Berkhamsted [V]]

I intend to revert to the various matters I have mentioned with amendments.

14:10

[Baroness Neville-Rolfe (Con) [V]]

My Lords, I support my noble friend the Minister on the measures being taken here and elsewhere on business support.

Timeliness is everything in a crisis. I commend the Minister on the speed of the measures that we are debating, although I remain frustrated at the tin-eared refusal elsewhere in government to reduce social distancing from two metres to one metre and the extraordinary introduction of quarantine at our borders, which was needed in February or March but is an act of self-harm today. The problem is that both are decimating businesses. So, I particularly support the emergency arrangements in the Bill. They allow closed annual general meetings, delay filing deadlines for Companies House, and temporarily remove personal liability for wrongful trading and the threat of winding-up petitions. I speak as a director with an interest—I draw your Lordships’ attention to my entry in the register—a chartered secretary and a fellow of the Global Governance Institute.

However, company law has been built up over generations. Rapid changes can alter the balance of our much-admired corporate regulatory framework. The pension funds and insurance companies on which we depend need the opportunity to probe accounts at Companies House, especially in a fast-moving market with the sale of a struggling company sometimes being the right solution. Shareholders need to be able to hold companies to account at annual general meetings. The Bill rightly sunsets these provisions but there are powers of extension. I ask the Minister to promise that he will be sparing in their use. If not, their understandable use retrospectively to help firms from the start of the cliff edge in sales could be questioned.

The main provisions in the Bill bring forward long-planned changes in insolvency law. It is a little cheeky to use what is essentially an emergency measure for these reforms. However, I confess to doing the same many years ago when I led the work on the Food Safety Act. This reforming legislation had been in the famous Whitehall drawer for nearly 10 years when Mrs Edwina Currie precipitated a crisis by wrongly asserting that most eggs had salmonella. Our Bill then secured an immediate slot.

I note that the insolvency provisions have secured good support, having been honed in industry exchanges. They have become urgent because many companies may now be heading for insolvency as a result of our severe Covid controls. The changes give them breathing space now and if they suffer in future, but it is worth reading the impact assessment prepared by BEIS, which it kindly took me through. The net benefit is an impressive £1.92 billion when discounted over 10 years, but that netting-off hides costs of £2.9 billion, which someone must find.

We want to make absolutely sure that the Bill is fit for purpose. I understand that in one of the most difficult areas, discouraging the extraction of ransom payments is precedented in utilities and IT. I ask the Minister for an appraisal and costing of that experience before we reach Committee.

Another issue was raised with me by the British Property Federation. It wants steps taken to reinstate the provision in Section 129 of the small business Act 2015 on pre-packaged administration, which expired unexpectedly, I believe as a result of the Covid emergency. Can we solve that in this Bill?

Finally, I cannot end without commenting on one area in which I have been the most vocal and which was also the subject of legislation that I took through the House: the timely payment of smaller suppliers, and the Small Business Commissioner. Can my noble friend the Minister summarise current expectations on the scale of payment delay and advise on any plans for updated legislation at a future date?

14:15

[Lord Blunkett (Lab) [V]]

My Lords, I concur with many of the comments that have already been made. I support the thrust of the Bill.

I want to talk about the immediate situation and, therefore, the moratorium. I welcome it but, like my noble friend Lord Stevenson, I think that, in its initial implementation, it is in danger of being too short to be meaningful to many small and medium-sized enterprises. It is about enterprise and entrepreneurship—that is, not just maintaining what we have now but encouraging and supporting those coming out of the virus crisis, as well as providing a bedrock for the future. Would the Minister be kind enough to say a little more about the intentions of using secondary legislation if the initial moratorium period is not to be extended in the Bill?

It would also be useful to know more about the positive role of insolvency practitioners, rather than their negative one. There is potential here to be extremely helpful to those who have a major part to play in the future of our economy but currently face a dangerous potential cliff edge if investors trigger their demise.

Mention has been made of corporate responsibility, not least by my noble friend; I agree in relation to employees but it also applies more widely. I wonder whether we could encourage larger companies to see their supply chain as crucial to them rather than sometimes exploiting their weaknesses, because this is very much about where power lies. I also wonder whether they could mentor and support as part of the recovery programme, and therefore be a positive gain.

I very much welcome at least temporary help with personal liability. For people taking up the opportunity to start a new business and those who are clinging on to survival by their fingertips, personal liability and the reputation that goes with it are important. If we can get this right and avoid those people who deliberately exploit the situation then come back in a different guise with exactly the same company—the bad eggs, to echo the reference made by the noble Baroness, Lady Neville-Rolfe—while ensuring that personal liability absolutely does not discourage people or create unnecessary fearfulness at this moment in time, that would be a very substantial step forward.

It is important that these measures, temporary as many of them are, are seen in the context of the long term. We should therefore see what works and try in future to build in those aspects that have been beneficial to both British enterprise and our wider social well-being.

14:18

[Baroness Kramer (LD) [V]]

My Lords, I have long argued that the UK needs an equivalent to the US’s Chapter 11, so I welcome the Bill. However, the history of Chapter 11 legislation in the United States has not been straightforward. Many companies turn not to federal law but to state law for greater ease of use, speed and cost. Given the complexity and the probability of unintended consequences, I join those who believe that the permanent measures in the Bill, in contrast to the temporary Covid-related measures, should be properly reviewed with a sunset clause or similar mechanism.

I also believe strongly that the Government should drop the provisions in the Finance Bill which would give HMRC, as a creditor, primacy over other creditors. If that is not dropped, small suppliers will be even harder hit in a ripple effect which our economy cannot afford and which in the long run damages the national tax take even more. I want the Government to use the Bill to give greater protection to small creditors, typically trade creditors, in an insolvency.

We know that most small businesses are at a disadvantage when negotiating with big businesses. They often find that they have to accept long payment terms if they are to win a contract. They also find themselves pressured into providing payment holidays. Small suppliers are being put at risk, especially in these uncertain times. The public sector pays its suppliers promptly. The last report from the Financial Services Ombudsman showed that only 1% of payments from public sector bodies took over 30 days and most were within 15 days.

The picture is not the same in the private sector. Late payments to small businesses rose to £23 billion in 2019 compared to £13 billion the year before, according to Pay UK. Last November, long before Covid, the Chartered Institute of Credit Management had to suspend 20 firms from the prompt payment code for failing to honour their commitment to pay 95% of all supplier invoices within 60 days. These were huge and famous companies, including GlaxoSmithKline, AstraZeneca, Unilever, IBM and Diageo. If the public sector can pay in 15 days, the big players in the private sector can pay in 15 days, never mind failing to meet 60 days. I am hoping for changes in the Bill that will strengthen the position of small suppliers. At the very least, the Government should exclude from any of their procurement processes any company that does not observe the prompt payment code in all parts of its business, not just in its government contracts. There is a very strong argument for a tougher prompt payment code and for making the code mandatory.

Secondly, under the moratorium offered in the Bill, payments due to small entities should be paid no later than the end of the first moratorium, not subject to a rolling moratorium which could run for a year or more and, frankly, sink the small supplier. If the moratorium fails and winding up follows, small entities should be pari passu with claimants who refuse to give payment holidays, on the grounds that payment holidays given by smaller entities are invariably given under duress. Many banks, for example, never give payment holidays—for example, for overdrafts—and so have priority in wind-up.

Lastly, I want to explore the issue, raised by my noble friend Lady Bowles, that SMEs can be disadvantaged if they are encouraged to exclude themselves from supplying the company in a moratorium, because that is when payment is best assured. I am sure there will be many more points as we deal with the details of the Bill, but this House understands the direction in which I am now urging the Government to move.

14:22

[Lord Hope of Craighead (CB) [V]]

My Lords, this is a formidable Bill. Some years ago, I edited the chapters on companies and insolvency law in a practitioners’ textbook and I used to practise in this field myself, so I have some insight into how extensive and complex these subjects are. I pay tribute to those responsible for putting the Bill together. At first sight they appear to have covered the ground very well, but their product has been a challenge for us in this House as we try to master this emergency Bill in such a short period of time.

I have no problem, in principle, with the temporary provisions about meetings of companies and other bodies, or the extension of the periods for filing accounts and providing information for the registration of changes in corporate governance. These are sensible measures in a situation where deadlines of that kind are incapable of being met. The wrongful trading provisions and the provisions about corporate insolvency, however, need to be looked at more carefully. Concern has been expressed about the phrase,

“the court is to assume that the person is not responsible”,

in Clause 10, which is about the suspension of liability for wrongful trading. Can the Minister tell the House whether this assumption is intended to be irrebuttable? If it can be rebutted, the protection the clause offers will be less certain than the word “suspension” in the clause suggests. Directors, who, as has been pointed out, may be subject to action for other breaches of duty, will need to know where they stand in this respect.

As for the moratoriums, it is not difficult to see the value of these for companies in financial difficulty, but giving protection to debtor companies that delays the taking of remedies against them by their creditors is bound to have implications for the creditors too as time goes on. It is important to get the balance right between these two competing positions. My impression is that the banks are content, for the time being, not to press too hard on companies that are in difficulties, and the property market is in such an uncertain state in present circumstances that there is little incentive for the holders of fixed securities to call them in. However, in the longer term, as creditors become less relaxed about the situation, challenges will arise that will need to be faced up to. That may be a further reason for keeping the provisions of the Bill under careful review.

I have one or two particular points to make. Further thought needs to be given to limiting debts that are eligible for priority as moratorium debts in order to avoid abuse of that privileged position and, as has already been suggested, damage to the position of HMRC as a preferential creditor, given the immense harm that situation may create, particularly for other creditors. On the notification requirements in Chapter 3(A), should the company not be required to provide a list of its creditors when making the application, to assist the monitor? As for Chapter 3(A9), should there not be a limit on the number of extensions, and an overall limit on them without the creditors’ consent? As for Chapter 5(A35), to avoid the abuse of the process should there not be an express duty on the monitor to ensure that the company does not undermine rescuing it as a going concern? I hope to come back to these and other details in Committee.

14:27

[Lord Balfe (Con) [V]]

My Lords, I too start by thanking the Minister, not only for his clear presentation of the Bill but for his letters and briefings; they have been most useful. I shall make just a couple of points. They concern members of trade unions as well as employees who have a legitimate interest in what is happening due to this Bill. I speak as someone who has a son who runs a small business, so I am not completely unfamiliar with this. It is important to remember when we pass this legislation that employees also have legitimate interests when restructuring plans are adopted. I realise that, particularly in small enterprises, the level of trade union membership is very low; however, whether in a union or not, employees deserve protection and to be taken into account.

I would like the Minister to clarify, on the record, his attitude to protection for people who work in these businesses. In the debate in the other place, the Minister said:

“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”.—[Official Report, Commons, 3/6/20; col. 952.]


I would like the Minister to say that he is happy with that statement, made by a Minister in his own department, and to place it on the record in the House of Lords. I would also like him to confirm that the Government expect courts to satisfy themselves that plans placed before them are indeed mindful of the interests of employees, if necessary by inquiring whether there are any relevant trade union staff associations or other bodies and whether they have been consulted and have any views to place before the court. We cannot just leave it to the court to hope that things go right: they need to be proactive, to an extent.

I also hope the Government will consider giving pension scheme deficits the status of a priority creditor. This would give them priority over unsecured creditors, and in defence of this proposal I remind the House that a pension scheme is as much a part of an employee’s income as the rest of their monthly or weekly salary. It represents, in short, deferred earnings: it is not a bonus at the end of one’s working life but something that accrues daily throughout it. As such, I believe it has a right to be considered near the front of any queue. I look forward to hearing the Minister’s response to these points and hope he will feel able to clarify them for the record.

14:30

[Lord Mann (Non-Afl)]

My Lords, in any major economic crisis—and this is part of the current world crisis—there will be winners and losers. I was quite amused but not surprised to hear that the hot tub industry is doing incredibly well as people with sufficient money are installing them in their garden—in lieu perhaps of holidays to hotter climates. There will be winners, and entrepreneurs will be critical in coming out of any economic recession. There has been some fascinating research into how new entrepreneurs were critical to economic regeneration in the southern states of the US after some of their climatic disasters.

Some of them will be winners. There will also be losers, some of which may be big and well known. I do not wish to pour gloom by suggesting which kinds of companies, but household names may not survive the next six months, because of how shopping is changing and may permanently change as a result of consumer behaviour.

Therefore, this Bill has many importances—some perhaps beyond its initial worthy impetus. One area that has less accountability and is more poorly regulated than elsewhere is that of insolvency practitioners. From my experience, they always seem capable of charging the fees they are entitled to charge but sometimes, in cases where I have assisted companies, they do not seem to do a great deal more than that. That is a small sector that needs stronger regulation.

There are also landlords exploiting the situation, some of them offshoring, doubtless often for tax purposes, and in receipt of taxpayer support, and endangering the small, emerging businesses—which are sometimes well located and paying higher rents—which are precisely the businesses that will be the engine of recovery and which could be killed by cash flow. The invidious position of those offshoring is not addressed here and could be considered.

Pension funds have been raised already. If major, traditional, long-standing companies end up being the losers, some of them will have major pension funds. It is not just the social justice question, which is of significance in itself, but the economic repercussions for both the local economy and the UK economy if a group of pensioners or soon-to-be pensioners have a significantly lower purchasing power when they have a higher propensity to spend. So the protection of pension funds deserves more attention in the progress of this Bill.

There is also the question of employees. I have assisted people going to employment tribunals where the assets of the company and the directors remain; they start trading again on the same premises, doing the same work the next day, having got rid of a lot of people who then find that, even if they win in a tribunal, there is nothing to claim from. That is not a sensible way to run any economy. The Minister may wish to comment on whether this Bill will have any impact on strengthening that position.

Finally, there is the question of football clubs. That will be a big one that we should be very aware of, in terms of some of the names that may go under.

14:34

[Lord Wei (Con) [V]]

My Lords, I declare my interests as a company director with involvement in a number of firms that are affected by the current crisis. I welcome this Bill. We need to do what we can to enable firms to weather this particularly difficult situation. In the time that I have, I will highlight from some of the conversations I have been having in the marketplace an observation that there seem to be at least three types of company situation, although I am sure that there are more.

Broadly, there are companies that were basically already insolvent or on very thin margins before the crisis hit us, those that are temporarily insolvent but which are resilient and have a future, particularly those that have a pivot or a plan—we know the stories of much being done in incredibly innovative ways to pivot businesses; for example, pubs becoming supermarkets and drive-through cinemas massively expanding on stately homes—and there are those that are solvent and doing well but, frankly, have taken advantage of the various available schemes and liquidity to give themselves an extra cushion.

There is a danger that, as we move forward, agencies, regulators and financial institutions will not be able to distinguish between these three types of organisation. I am particularly keen that this Bill should provide some of the framework for that greater understanding. For example, a business with great prospects that has for whatever reason decided to delay reporting or to take advantage of some of the measures in this Bill may find later on that it impacts either their credit rating or certain non-legally controlled matters such as the decision to grant invoice discounting, which can sometimes be a pure business decision and not one necessarily governed by law.

We are hearing stories of company directors not being able to get mortgages currently because they are taking advantage of the various available schemes. Is there a danger, as I am hearing from certain quarters, that banks may force businesses into voluntary insolvency in exchange for equity? Under these measures, it may well be that, if I am a bank that wants to avoid being lumped together with other creditors in an unfavourable situation, it would be better for me to withdraw the overdraft to a business unless it gives me equity in that business, which would mean that I would be protected from that creditor-type situation.

Finally, there needs to be a longer-term view. Can we use technologies such as blockchain and give businesses a new option that is not just debt or equity? There are all kinds of instruments: sharing of royalties; securing or collateralising risk within a supply chain, which means that businesses do not always have to rely just on cash from creditors or new investors; starting to separate the delivery of essential goods and services within a supply chain from the actual survivability of a business, as we have seen in the banking world and could do for our supply chains.

Is this thinking around the three layers being taken into account? How can we avoid a cliff edge in a month’s time, when lots of businesses might start filing for bankruptcy—do we need to taper this over a long period? What are the Government doing to ensure that credit agencies and other bodies make wise business decisions that may not be governed by these laws but which will still have a huge impact on whether we have a zombie economy or one that will thrive and pivot into the new age to come?

14:39

[Lord Adonis (Lab)]

My Lords, I follow the noble Lord, Lord Wei, in spirit as well as in order, because of his significant concluding remarks on political economy about supporting companies that do not need to be forced into insolvency because they have fundamentally sound business models. I have a question for the Minister, leading on to a wider point.

My question, which shows that I am not an expert in company law, but which will become increasingly significant. particularly if the emergency measures are extended, is: in what order do the Government come as a creditor? My understanding is that where the Government take the form of HMRC as the taxman they are a preferential creditor under the provisions of the Finance Act. However, a lot of the Government’s priority for being repaid will come through coronavirus business interruption loans and other forms of financial support, which could conceivably include furlough support if that is continued into the medium term. I would welcome the Minister’s explanation of this, but my understanding is that where the Government come in the queues depends on what category of government support it is. If it takes the form of a coronavirus business interruption loan paid through a bank, they simply come in the order of the bank. There is no provision for the Government to get any recognition of the fact that they have possibly pumped huge sums into companies through, for example, furlough provision. I would welcome the Minister’s confirmation of that at the end.

However, the wider political economy point behind this is stark staring obvious. It is important that we stand back from the minutiae of company law. The fact of the matter is that in a lot of these companies the organisation that has put most money into the company, particularly in the recent past, will be Her Majesty’s Government, through furlough support, business interruption loans or possibly, if the Government chose to exercise discretion in the matter, their ability to reschedule or suspend payments due to HMRC.

The question that surely arises is: are the Government taking a strategic approach to their own role as a creditor across the various different forms of credit that they are providing to maximise the health of the economy? My understanding of the Bill is that that is not taking place at the moment. Understandably, we have a lot of very techy changes to insolvency and company law, essential for dealing with the immediate crisis we face in the next few weeks, but the point I make to the Minister is: would it be sensible for us to stand back from this and look, in a political economy sense, at the role the Government could play in sustaining the strength of the economy by pooling all the support they are providing to companies—those covered by the Bill with the Government as a creditor for loans, those covered by other legislation, such as the priority given to HMRC under the Finance Act, and those that do not appear to be covered at all, but which are hugely important, such as the furlough support—and for the Government themselves to take a view? That might well, for example, involve the Government taking stakes in companies as a means of sustaining them over the medium term, rather than forcing them, even if it is in a somewhat elongated provision, into insolvency.

That leads to the comment I would like to make. We have, of course, been here before; we are not reinventing the wheel in terms of very serious economic shocks. During one of the greatest shocks of the last century, the financial crisis of 1929 to 1931, John Maynard Keynes—maybe the greatest gift of this country to economic science in history, apart from Adam Smith—argued that the solution to dealing with the crisis faced then, with mass company insolvency in the 1930s, was not wholly in the public or the private sectors, but rather that the Government should

“experiment with all kinds of new sorts of partnership between the state and private enterprise. The solution lies neither with nationalisation nor with unregulated private competition; it lies in a variety of experiments, of attempts to get the best of both worlds.”

That is the position we face now. I would very much welcome some reassurance from the Government that they are looking at these wider political economy considerations.

14:43

[Lord Hodgson of Astley Abbotts (Con) [V]]

My Lords, I begin by thanking my noble friend for his explanation of the Bill’s proposals. Secondly, I draw the House’s attention to my entry in the register of interests as a director of several companies that would be affected by the Bill’s provisions. It has been made clear that the Bill has been brought forward because of the pandemic. I understand and support that. Nobody who has been a director of a limited company will be unaware of the dangers of trading while insolvent, and who can judge what is solvent in the present very confused circumstances? This aspect of the Bill has my support for a further reason: all the provisions are time-limited, so even if our inevitably rushed judgment proves faulty the sunset clauses will ride to our rescue.

Wearing another hat, I chair your Lordships’ House’s Secondary Legislation Scrutiny Committee, which has been looking at, examining and reporting to the House on a great number of coronavirus regulations. There has emerged a tendency of the Government to try to tack on to coronavirus regulations some permanent changes to our law. These may not be objectionable, but they pass through under the radar of the coronavirus regime. We have been drawing these to the attention of your Lordships’ House in our weekly reports. Mixed provisions in regulations, which are of a lower order of significance, are one thing; mixed provisions in primary legislation, leading to statute law, which is what we have here, are quite another. Under the guise of the requirements of the pandemic, the Government are rushing through—I use that word advisedly—permanent changes to the insolvency laws of this country.

Let me be clear: I am not opposed to changes and review of insolvency laws. Some 15 years ago, I sat where the noble Lord, Lord Stevenson, would be sitting if he was in the House, leading for the Conservative Party on what became the Companies Act 2006. We brought together every aspect of company law with two exceptions, one of which was insolvency law, because the complexities were too great for us to reconcile them there and then. So, 14 years later, I quite understand that the situation will not have improved, but it remains an immensely complex area, reconciling the irreconcilable. It is an area where unintended consequences, as the noble Baroness, Lady Bowles, pointed out, crop up with unhelpful frequency and where there are people who seek to exploit gaps with unattractive and unregulated behaviour.

What am I concerned about? My worries include the changes to the creditor position of HMRC; the ability of creditors to game the system where the banks and financial institutions are sufficiently bound into the new approach; the future role of the pre-pack watchdog; and provisions for appointing monitors and for ensuring that they are not conflicted. All these are no doubt answerable, but they are not properly answerable in a rush.

To conclude, I understand the need for this legislation to be passed speedily, but I deplore permanent changes to our laws being made under the guise of the pandemic. I hope that my noble friend will consider tabling amendments to apply sunset clauses to the whole Bill. The Government will get their Bill and we could then come back to these very knotty and conflicting issues in calmer times and with the benefit of some real-life experience. In his opening remarks, my noble friend referred to the R3 briefing from Scotland. The R3 briefing from England makes it clear that it is not clear about the detail yet. Indeed, the Minister’s own departmental website quotes Jennifer Marshall, a past president of the Insolvency Lawyers’ Association, as saying that she is looking forward to

“digesting the detail with interest.”

If these two people, with their great experience, are not able yet to understand the detail, surely we should not be rushing these provisions through now.

14:48

[Baroness Drake (Lab) [V]]

My Lords, I draw attention to my registered interests. The Government’s desire to allow distressed companies a breathing space while exploring a potential rescue is fully understandable, but fast-tracking cannot ignore an unintended consequence. The Bill weakens the position of DB pension schemes and the Pension Protection Fund in the event of insolvency or restructuring. It grants super-priority status for unsecured banking and finance debt if the moratorium is followed by an insolvency or restructuring, ranking it above pension scheme debt. Importantly, trustees might not be able to enforce a security that they have in place with an employer, such as a floating charge or a security over property. That is a big issue if the scheme’s covenant and valuation had been tied in with that security.

If the company does not emerge from the moratorium intact, elevating this class of unsecured creditors could be materially detrimental to the level of recoveries that the PPF, acting as creditor for a scheme, can achieve through insolvency proceedings. The moratorium and restructuring plan process will not, as it stands, trigger a PPF assessment period or a scheme’s Section 75 debt. This means, and here is the rub, that the Pension Protection Fund is not engaged as a creditor for the scheme. It will not have a voice in the restructuring plan discussions and new arrangements intended to shape the future of a company, which is the scheme’s sponsoring employer. Without a trigger to engage as a creditor, the PPF’s ability to secure better outcomes for the scheme is damaged, yet some finance parties could accelerate all debt and loan payments during a moratorium, so the entire finance debt benefits from the super-priority.

The case of Arcadia brings these concerns to life. There, the original CVA proposed a cut in deficit reduction contributions by half. It was the PPF, exercising creditor rights and working with the regulator in the absence of the new super-priority, which influenced a significantly better mitigation outcome, including security over group assets, £100 million in cash and increases in deficit contributions after three years.

Again, 12% of the Pension Protection Fund’s assets, around £4 billion, come from recoveries from insolvent employers. It is a critical income stream reducing the strain on other employer levy payers. I do not believe the Government intended that the PPF would not have a seat at the table for key creditor discussions or would be denied a meaningful voice on employers’ liability to the scheme. That could not have been intended when the restructuring plan procedure can compromise creditors’ claims and standing and a cross-class claim can impose it on creditors. The restructuring plan involves court oversight and approval, but it is unclear what rights of challenge the PPF would have, what standing the regulator would have and how a pension scheme claim would be valued for voting purposes.

Changes to the Bill are needed to ensure that the moratorium and restructuring plan discussions trigger a PPF assessment period or a passing of creditor rights to the PPF giving it a seat at the table and influence to address some of the implications of unsecured finance debt being granted super-priority over the pension scheme. In the helpful briefing session the other day, the Minister advised us that the department is having discussions with the DWP and the PPF. I hope they turn out to be positive, but in Committee appropriate amendments will need to be considered.

14:52

[Baroness Burt of Solihull (LD) [V]]

My Lords, like my colleagues, I give an overall welcome to this legislation. I understand that the urgency of helping businesses during the pandemic and its aftermath necessitated bringing it forward now, but can the Minister assure us that the missing bits, particularly on corporate governance, will be brought forward in a timely manner? In the time available I shall pick up a couple of issues of particular concern to small businesses, and I would like to record my thanks to R3 for its assistance.

My concerns are regarding the position of suppliers, particularly small suppliers, in two respects. First, under the new essential supplies provisions, small suppliers are required to continue supplying a company which has succeeded in obtaining a moratorium. Given small suppliers’ position at the bottom of the creditor waterfall, what protections will be in place to prevent small businesses having to continue supplying an entity that may then enter an insolvency procedure? Secondly, while the moratorium is welcome, there is concern that some larger creditors may game the moratorium by scheduling large repayments during that period, thus ensuring they get paid above other, smaller creditors. I expect the Minister may receive an amendment so that only interest and charges incurred during the moratorium rather than scheduled debt repayment can be eligible for super-priority in a subsequent insolvency procedure.

However, none of the provisions in the Bill will help business in continuing to trade after the pandemic if Part 4 of the Finance Bill, which changes the order of preferential creditors on insolvency, comes into being. Small suppliers will not only find themselves at the bottom of the pecking order for payment but in all probability will find access to credit, particularly from floating charge lenders, cut off. Floating charge lenders, who lend against a changing asset, such as stock, are very important, particularly to small businesses. They came into being after the rules on preferential creditors were changed in 2002 to what they are today, so why change it back just when they are needed more than ever? Who would continue to lend if the chances of getting their money back in the event of insolvency were severely diminished?

The Government have not published a proper impact assessment or the data used to arrive at the anticipated revenue to the Treasury of £185 million, but UK Finance, the body that represents many floating charge lenders, while noting that it is difficult accurately to model the policy’s impact on business lending, estimates that the policy could hit lending by well over £1 billion per annum and possibly far more. How can this be a cost-effective measure for anyone? At the very least, can the policy be paused so that a proper impact assessment can be done or could a 12-month cap on age debts eligible for preferential status be imposed? Would the Minister consider an amendment ensuring HMRC’s preferential claim does not outrank floating charges created before December 2020?

The Minister and I have discussed this issue before, and I hope that in his response he will update the House on the outcome of discussions he has had with his colleagues in the Treasury.

14:57

[Lord Vaux of Harrowden (CB) [V]]

My Lords, insolvency rules are a delicate balance between giving a business the best chance of survival while protecting the position of creditors. In these difficult times, it is appropriate to move that balance a little towards the survival of the business for the greater good of the economy, so I generally support the Bill.

I want to raise two issues that relate to the protection of creditors. First, and echoing the noble Baroness, Lady Burt, the Bill prevents a much wider range of suppliers terminating a contract when a company enters the insolvency procedure. This is a permanent change. The Bill gives a temporary exemption to small companies during the current pandemic, which presumably recognises that continuing supply may be disproportionately difficult or risky for a small company, but this exemption is only temporary. This is an area where I think the Bill may have tipped the balance too far from protecting creditors. Will the Government consider a permanent exemption for at least the very smallest businesses which are most likely to be at risk in this situation?

Secondly, like several noble Lords, I want to raise pre-packs. Around one-quarter of administrations involve a pre-pack deal where the sale of all or part of a business is agreed with a purchaser, often a connected party, prior to the company being put into administration. Pre-packs can be a useful and appropriate business rescue tool, but there is a very strong perception of a lack of transparency and there are concerns that they allow directors to create so-called phoenix companies and simply dump the creditors.

In 2014, the coalition Government commissioned the Graham report. It highlighted that nearly two-thirds of pre-packs involved sales to connected parties. It said that, as well as lacking transparency, pre-packs that involve related parties often involve very limited, if any, marketing and that returns to creditors are often lower. Indeed, unsecured creditors are more likely to receive nothing in connected cases than in unconnected cases.

The Graham report recommended the creation of a pre-pack pool of experienced business people who could provide an independent opinion on whether the proposed pre-pack was reasonable. The pool was launched in 2015. Referral to the pool is purely voluntary and is initiated by the connected party. The Graham report also recognised that this voluntary approach might not work and said that, if that was the case, the Government should consider legislating. Unfortunately, the voluntary process has not worked. Only 10% of connected party pre-packs are being referred to the pool, with just 21 referrals last year. Indeed, the Pre Pack Pool oversight committee has recently written to the noble Lord, Lord Callanan, saying that it believes that the body is unsustainable unless referrals are made mandatory.

As mentioned by the noble Baroness, Lady Neville-Rolfe, the Small Business, Enterprise and Employment Act 2015 included a power to make it mandatory. That power had a five-year sunset clause, and it was allowed to elapse unused just a couple of weeks ago. According to the Times, the Insolvency Service blamed Brexit, the general elections and the pandemic for the failure to use these powers. The insolvency and restructuring trade body R3 has also expressed disappointment that no action has been taken to improve confidence in this important business rescue tool.

The Bill gives us the opportunity to fix that. It is important that we act quickly, given the unfortunate likelihood of higher numbers of companies becoming insolvent. Will the Government consider adding a clause to the Bill to make the referral of connected party pre-packs to the pool mandatory? That would be a very simple but important way of making sure that the balance between saving a business and protecting creditors is appropriate and transparent.

15:01

[Lord Dobbs (Con)]

My Lords, the Bill is about climbing out of lockdown and getting back to proper business. If only we could do the same in this House. This debate is not a Second Reading, not as any of us would recognise. During Second Reading of this Bill in the other place, in the physical reality of the House of Commons, there were 16 interventions on the Secretary of State. We know that that makes for better legislation and better government, yet there will be none of that today.

I am here in person simply to show that it can be done. The risks, and there are risks, can be assessed by each of us. We spend our lives assessing risks for others, so why not for ourselves? I thank all those who have worked so hard to get us this far but, without wishing to be discourteous, I say this to the usual channels: “You have struggled mightily and already achieved the very difficult. Now achieve the impossible.” We have a job to do, like every doctor, nurse, porter, police officer, teacher, tour operator and shop owner in the country, so bring us back. Keep us in business too.

And so to the Bill. I declare my interests, particularly in the hospitality and creative sectors, which are suffering terribly. Many of us are not down by 20% or 50% but are flat on our backs, so the Bill is important. It says that we do not know precisely what to expect so we must be adaptable and flexible to deal with all the unintended consequences mentioned by the noble Lord, Lord Hodgson. A 20-day moratorium is great, but for many struggling businesses will not be long enough. Ministers must be ready to consider extensions, make rapid decisions, be flexible and learn as we go if we are to succeed not simply in salvaging what we already have but in building anew. We will need to be quick on our feet.

The Bill is just a start. We will probably need to strengthen the powers of the Small Business Commissioner; simplify planning applications; make sure that invoices are paid promptly, as the noble Baroness, Lady Kramer, emphasised; clarify and probably curtail the role of many quangos; speed up decision-making; and ensure that regulators use their pencils, not simply suck them—give businesses the benefit of the doubt and free up free enterprise, in a simple phrase.

When we look back on the last few months, I suspect that we will find that British industry was more than able to provide PPE in abundance, and quickly, but we lost out because those innovative firms in the private sector simply did not fit the parameters set by Public Health England.

There is no place called “safety” right now. We will have to take a few risks along the way but the Bill seeks to strike a balance. Businesses mean jobs. Many employees fear losing their jobs right now, and understandably so. The best protection that we can give those employees is to keep their companies afloat and ensure that more new companies are floated. The Bill is a very good start.

15:05

[Lord Mendelsohn (Lab) [V]]

I refer to my entry in the register of interests, particularly in restructuring and distressed investments. I welcome the introduction of the Bill, which recognises the extraordinary economic stress and uncertainty by tilting the balance towards restructuring and saving companies. I thank the Minister for his openness and engagement. I am happy to support the measures, especially those that are permanent as a step towards the UK having an insolvency regime that is not just to deal with the economic consequences of the pandemic, but is part of a global process of change started off by the financial crisis.

There is much to go through in Committee on the detailed provisions, so I will outline just a few issues and constructive suggestions that I hope the Minister will address to ensure that these reforms can work to their best and quickly in practice.

The changes to the creditor-in-possession system will be a tweak in a positive direction. However, debtor-in-possession financing is the most effective form of restructuring support as it incentivises existing share- holders, creditors or sponsors to put more cash in. If financing is dependent on new players, that adds a lot of complexity. Does the Minister plan to encourage debtor-in-possession finance through registration?

Do the monitors really have to be licensed insolvency practitioners? The skill sets are not the same. Will the Government consider a suitable threshold for qualified experienced accountants from other fields, even if on a temporary basis? That would certainly help to address the issues around conflicts, cost and availability.

Revenue and Customs as a preferential creditor could adversely affect the availability of funding, especially asset-backed lending, and have a major unintended impact on credit arrangements, unless we can see some clear view of how HMRC will operate. Indeed, under the new Crown preference system HMRC could use its voice to make sure that creditors get a fair deal from post-moratorium planning. Will HMRC publish anything on how it or even the Insolvency Service might work or skill up and operate under these provisions?

Pre-packs will become a more obvious way to game the system. Their exclusion is a charter for abuse. Even prior to the more general review, will the Government consider a simple amendment to make it compulsory for pre-packs to go to the currently voluntary pre-pack panel? The opportunities to game the system are inherent in the language of the moratorium. Will the Government consider that the comparator should not be “winding up”—that is, liquidation—but should be at least as good as “going concern administration”?

The moratorium freeze on payments works well for smaller companies but does not help larger employment-heavy companies as there is no say on bank debt, high-yield bonds or complex financing arrangements. These tend to be the issues that need most restructuring. Will this be dealt with by regulation?

The regulatory framework is not addressed but it is crucial to ensure that the system operates fairly, efficiently and effectively. Can the Minister please give some assurance on what guidance will be given to the judiciary on how to use this and to practitioners on how to use the courts, and on what will be published for us to see during the passage of the Bill?

The oversight of issues around late payment, the abuse of supply contracts and other areas that deal in particular with small businesses are not adequately protected, but they could be by use of the Small Business Commissioner. Will the Government bring forward such an amendment in Committee?

Regulation is required to make sure that potential conflicts and operations of monitors have the right robust system. We cannot really rely on the old cosy world of professional bodies. Can we receive assurances about how the obvious weaknesses in regulation will be plugged and what resources will be applied to it?

Lastly, will the Government include in their regulations provisions to bring in both the Pensions Regulator and the Pension Protection Fund at an earlier stage, to be able to participate and ensure that pension schemes are properly considered?

15:09

[Baroness Jones of Moulsecoomb (GP) [V]]

My Lords, my concern about this Bill is the same as my concern about the Government’s wider response to the current economic crisis, which is that no thought appears to have been given to the risks of propping up failing, climate-destroying businesses. For example, the Bank of England has been giving hundreds of billions of pounds of cheap loans to oil and gas companies as part of its Covid-19 relief efforts.

Although it is essential that we support viable, positive businesses through the coronavirus crisis, the Bill completely misses the mark when it comes to addressing the much larger and longer-term climate and ecological emergency. It should make provisions that contribute to the 2050 net-zero carbon emissions target; it should contain provisions that prevent public money bailing out carbon-spewing, filthy companies and industries; and it should build a framework for managing the winding-up of planet-destroying companies, which will have no future in a net-zero world.

Trillions of pounds globally are tied up in the assets of these dirty industries, and almost everyone’s pension pot will be invested in them. Much of these companies’ value will evaporate into thin air when the necessary policies are imposed to reach a net-zero world. The Government should act now to manage this decline in a socially just way, protect pension investments, and prevent precious public funds being wasted in propping up these polluting companies, which will inevitably be consigned to the dustbin of history.

I support the points made by the noble Baronesses, Lady Neville-Rolfe, Lady Kramer and Lady Burt of Solihull, on the issue of timely payments for smaller companies, which are most vulnerable to this crisis. We need to think about how to make it easier for them to survive.

I want to pick up on a point made by the noble Lord, Lord Dobbs, with which I strongly disagree—that somehow a virtual or hybrid House of Lords is not an effective way of holding a Government to account. He cited the House of Commons, where there were many in