Post Office: Horizon Accounting System
Lord Callanan Excerpts(3 years, 10 months ago)
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Lord Arbuthnot of Edrom
To ask Her Majesty’s Government, further to the answer by the Prime Minister on 26 February (HC Deb, col 315), what steps they have taken in relation to the establishment of an independent inquiry into the Post Office’s Horizon accounting system.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, last week the Government announced an independent review to consider whether the Post Office has learned the necessary lessons from the Horizon trial judgments and to provide an independent and external assessment of its work to rebuild its relationship with its postmasters. The Government are keen to see this review launched as soon as possible, and we are in the process of identifying a chairman to lead its work.
Lord Arbuthnot of Edrom (Con)
My Lords, perhaps I may explain why this review is so inadequate. The terms of reference have been designed to exclude all possibility of blame falling on the Government. However, last week my noble friend told me that the Government became aware only in early 2019 that transactions entered remotely might be invisible to sub-postmasters. That was unconvincing, since the Post Office had said in open court in January 2017 that that could happen. That verified what Second Sight had said in its interim report of July 2013—but then of course it was quickly sacked. Nor do the terms of reference say anything about the likelihood of the Post Office improperly making a profit from the sub-postmasters, or about the suspense accounts or the critical role that Fujitsu played in all this. Without asking those questions, you cannot get to the bottom of this, as the Prime Minister wants. Does my noble friend appreciate that the Government appointing one of their own rather than a judge as the chairman of this review does not fill us with confidence that it will be independent of the Government?
Lord Callanan
I pay tribute yet again to the work that my noble friend has done in both Houses on this important issue, along with other noble Lords and MPs. The findings outlined throughout the Horizon judgment already provided an extensive insight into what went wrong at the Post Office, including an independent judicial view of all the facts that all sides were looking for. However, the Government now accept that more needs to be done. We want to be fully assured that, through the independent review, there is a public summary of the failings that occurred at the Post Office, drawing on the judgments from the Horizon case and listening to those who have been most affected without repeating the extensive findings already entered into by Mr Justice Fraser. The Post Office has committed to co-operating fully with the review and we, as Ministers, will hold it to that. The review will have sufficient strength and breadth to deliver in a timely manner, and I assure my noble friend that the chair of the review will be fully independent of both the Post Office and the Government.
Baroness Falkner of Margravine (Non-Afl) [V]
My Lords, I, too, pay tribute to the noble Lord, Lord Arbuthnot, but I think that the Minister is playing with semantics to the extent that he talks about how the review will be independent. Does he recognise that people want responsibility to fall where it should, whether on this Government, the previous Government, the Post Office, Fujitsu or anyone else? Does he not think that 20 years is long enough for the victims to have waited for this review? Will he please get on with it and deliver a proper, independent review to address these issues?
Lord Callanan
I can say only that I agree completely with the noble Baroness. We need to get on with it and get to the bottom of these things as quickly as possible, and that is what we are endeavouring to do.
Lord Cormack (Con) [V]
My Lords, as one of those kindly mentioned by the Lord Speaker at the beginning of today’s session, on Waterloo Day in 1970 I could never have imagined being part of a hybrid House of Lords 50 years later. I pay tribute to my noble friend Lord Arbuthnot and endorse all that he said. Does my noble friend the Minister agree that in the last half-century no well-regarded public institution has behaved with more apparent malevolent incompetence than the Post Office? Will he do his best to ensure that we do indeed have a thoroughly independent review and that those who have suffered so much are publicly exonerated and generously compensated—and can we have this done within this calendar year?
Lord Callanan
First, I offer my congratulations to my noble friend on his 50 years of exemplary service, as indeed I do to the Lord Speaker. I can only agree with my noble friend. We need to get to the bottom of this quickly. We need to get on with it, and the best way of doing that is through an independent review.
The Earl of Erroll (CB) [V]
Why has this taken five years since these miscarriages of justice were revealed to Parliament in an Adjournment debate in the Commons? What happened to the later independent report by Second Sight, which was due to be published in March 2015? Horizon was already in trouble with developments at ICL, and was nearly scrapped in the mid-1990s on the merger with Fujitsu. Perhaps it is a pity that it was not.
Lord Callanan
Of course, the Horizon court case occupied a lot of time and effort in both government and the Post Office, and it provided an extensive and, indeed, damning indictment of what went on at the time. However, we think that there is more to be done and that an independent review is the best way of proceeding with that.
Lord Browne of Ladyton (Lab) [V]
My Lords, will this review be able to be held up pending the determination of the criminal investigations that are ongoing, as well as perhaps criminal appeals? The priority should be that those damaged by the scandal are exonerated and compensated. The Government are the owner of the Post Office. Will they exercise their muscle to ensure full compensation? Indeed, Parliament, in a two-clause Bill, could legislate for exoneration of all those convicted. Surely the Government do not want to prolong the agony. What more evidence is needed before these steps can be taken to achieve the inevitable?
Lord Callanan
It is extremely important that we do not interfere with the proper consideration of these cases through the Criminal Cases Review Commission. I obviously cannot pre-empt what might happen, but I think that noble Lords will realise what I hope will happen as a result of this process. It is also important to get on with the review and to make sure that we learn the lessons from what went wrong. We also need to make sure that these things never ever happen again, because this is a terrible, terrible scandal.
Baroness Burt of Solihull (LD) [V]
The Minister seems keen to move on from this debate, but there are many faithful ex-servants of the Post Office who cannot move on, whose lives have been ruined. Does he agree that they deserve proper justice—yes or no? The noble Lord, Lord Arbuthnot, has shown that the proposed review is inadequate. If the Minister does believe in justice, will he now finally sanction an independent, judge-led inquiry?
Lord Callanan
I do agree with the noble Baroness that they deserve justice. Nothing that we can do will be able to put back together some of the lives that have been shattered and broken by this terrible scandal but I honestly believe that the best way of securing justice is through the judicial process, which is ongoing and which I cannot pre-empt. That process will run its course but then there is additional work to do; we think the best, swiftest and fastest way of doing that is through an independent review.
Lord Polak (Con)
Following on from the noble Baroness, Lady Burt, earlier this week I spoke to the lovely Rita Threlfall, who was a sub-postmistress in Liverpool from 1998 to 2010. One of six children, Rita told me how she was brought up with three guiding principles: education, hard work and honesty. Can your Lordships imagine the devastation following the Horizon-created £35,000 shortfall, when Rita was suspended and charged with theft and false accounting? She was left a mental and physical wreck. She said, “Since my dismissal, my health declined. I depend on a wheelchair, seldom leave the home, suffer with extreme anxiety. I lost my income, my health, my sanity and I am now bankrupt.” I plead with my noble friend the Minister, for the sake of Rita and so many others, to ensure that the Government set up a judge-led inquiry and remove the previous chief executive from her position as chairman of Imperial College Healthcare NHS Trust.
Lord Callanan
I thank my noble friend for drawing attention to one of the many tragic cases that have resulted from this; there are many others like it and I too have heard some terrible tales. We believe that an independent review is the best way of getting to the bottom of it. This will have essentially similar terms of reference to a judge-led public inquiry. With regard to the former chief executive, it would be very helpful if she would account much more fully in public for what she knew and for the actions that she took at the time. I have written to the Department of Health to make clear our position on her future. The Care Quality Commission is, I believe, looking at whether she is a fit and proper person for the role that she holds. I hope that it will conduct that review swiftly. Obviously, I cannot predict that, and it is not a matter directly for me, but I have written to the Department of Health to make my views clear.
The Lord Speaker (Lord Fowler)
My Lords, the time allowed for this Question has elapsed. I repeat what I said previously: if noble Lords could keep their supplementary questions reasonably short, we could get more people into the list.
Corporate Insolvency and Governance Bill
Lord Callanan ExcerptsWednesday 17th June 2020
(3 years, 10 months ago)
Lords ChamberRead Full debate Corporate Insolvency and Governance Act 2020 View all Corporate Insolvency and Governance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 114(a) Amendments for Report - (17 Jun 2020)
Lord Stevenson of Balmacara (Lab) [V]
My Lords, we have had a very good debate on this issue today. It is an accident of the way things went yesterday that we have been given this time, and I am grateful to the House authorities for allowing us to spend some time on this important topic.
The noble Lords, Lord Hodgson and Lord Vaux, gave brilliant exposés of why pre-packs are causing more harm than good, as they put it, although both were valiant in suggesting that it remained on the agenda or was a “valuable tool in the toolbox”, which was another phrase used, although the noble Lord, Lord Hodgson, said that it has been a very loose end recently. Increasingly, perhaps we need to think hard about how this should go forward.
Like my noble friend Lord Mendelsohn, I have had an interest in pre-packs since we were involved in the quite intensive discussions on the small business Act in 2015. Like him and many people, I regret that the power that was inserted into that Act has lapsed, because that seems a missed opportunity and we should be thinking hard about how that might go. Perhaps when the Minister responds he could explain again why he thinks that the amendment in the name of the noble Baroness, Lady Neville-Rolfe, should not be brought forward again. It seems that it would give him the powers that he might need in the future to take action.
The key issue here is not whether the pre-packs will continue to cause trouble but the damage that they might do to the Bill. I hope that the Minister will recall that, when we had our first meeting on the Bill and we were going through some of the main issues, I raised the question of whether the Bill would have an impact on pre-packs and vice versa. The answer I got was that, in the view of the drafters of the Bill, it would not materially have an effect one way or another. However, the evidence we have heard today suggests that that is not the case. Although the Teresa Graham report of a few years ago and its suggestion of a pre-pack pool has been working reasonably well in practice, it is still a voluntary scheme, as was picked up, and if it is indeed rewarding the good guys but not catching the bad ones, the Government are on notice to do something about that. Additionally, if the Pre Pack Pool itself falls into desuetude, obviously a major issue is looming.
The amendments here are very much autonomous, and it has been a useful debate. Of course, if they were accepted, they would effectively be saving a bad system and not introducing good regulation. As the noble Baroness, Lady Altmann, said, we need to think about a mandatory approach here. When the Minister responds, we will be looking for guidance from him about whether this is the opportunity to do so. Would he be prepared to reconsider his initial view on the amendment proposed by the noble Baroness, Lady Neville-Rolfe, to give powers back to the Government to act if they are required, or will we have to seek another opportunity?
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I thank and pay tribute to my noble friend Lord Hodgson for ably introducing this grouping and speaking so powerfully on this subject. In fact, such is the power with which he speaks that when he spoke, claps of thunder echoed around the Chamber. We do not have any of our right reverend Prelates here to advise us, but perhaps my noble friend’s amendments have support from authorities even higher than those in this House. I am also grateful to the noble Lord, Lord Vaux, for speaking so eloquently on this topic, and grateful to him, my noble friend and the noble Lord, Lord Mendelsohn, for the time that they made available for us to discuss these issues in the last couple of weeks.
At the risk of further increasing my noble friend’s blood pressure, I say to him that the measures in the Bill are indeed intended to help companies to maximise their chances of survival during the Covid-19 emergency, to protect jobs and support the recovery of the economy. That is why other measures, which would not necessarily alleviate the impact of the current emergency, have not been included in the Bill.
I will reply also to the points from the noble Lords, Lord Adonis and Lord Mendelsohn. The Pre Pack Pool wrote to me on this subject a few weeks ago, and I responded on 29 May. I understand its concerns; officials will be meeting the pool and the Insolvency Service to take forward the discussions and the concerns that it has rightly raised.
I also see that the Small Business, Enterprise and Employment Act 2015 has provided some inspiration for these amendments, which would require mandatory reference to the aforementioned Pre Pack Pool. Aside from specific considerations as to whether a requirement for a positive opinion from the pool might conflict with the strategy duties of the administrator, I would be concerned that the amendment might impose an additional burden on businesses at this difficult time. Furthermore, as my noble friend Lord Hodgson reminded us, the Pre Pack Pool operates as a limited company, and I ask whether it is right to restrict the required opinions to one source of supply.
There are already legislative and professional regulatory requirements in respect of pre-pack sales. When deciding whether to go ahead with any sale in administration, the administrator is required to take into consideration the statutory objectives of administration, which include rescuing the company as a going concern and achieving a better result for creditors as a whole. The administrator must also send a detailed narrative explanation to creditors, justifying why a pre-pack sale was undertaken. That is sent to the administrators’ regulatory body, which monitors it to ensure that administrators comply with the spirit as well as the letter of this requirement. At Second Reading, I explained that we continue to work with regulators and industry stakeholders to discuss the options for strengthening the professional regulatory requirements. I can tell noble Lords that if that fails to give greater assurance to creditors, we will consider bringing forward further legislation.
For the reasons that I have set out, I am therefore unable to accept these amendments and I hope that my noble friend and the noble Lord, Lord Vaux, will therefore be able to withdraw and not press their amendments.
Lord Vaux of Harrowden [V]
In his response, the Minister did not answer the question of whether he believes that the Pre Pack Pool is useful, sustainable on a voluntary basis, and whether it matters if it ceases to exist. Could he answer that now?
Lord Callanan
I do not want to go any further than what I said in my reply. I have been in correspondence with the Pre Pack Pool and we have arranged for officials from my department and from the Insolvency Service to meet with it further to discuss its concerns.
Lord Adonis [V]
Could Members of the Committee see before Report the letter of 29 May sent in reply to the pool, which the Minister mentioned?
Lord Callanan
In principle I have no objection to releasing that; obviously, I would need to speak to officials and to the recipients to check whether they are all happy with that. I do not know whether it was sent confidentially basis or whether it is available for publication, but I will certainly look at that.
Lord Callanan
(b) a master agreement for securities financing transactions.”Member’s explanatory statement
This amendment provides for a master agreement for securities financing transactions to be a “contract or other instrument involving financial services” for the purposes of new section A18 of the Insolvency Act 1986.
Lord Callanan
Member’s explanatory statement
This amendment changes the definition of the “relevant period” so that the term is defined by reference to the coming into force of the Schedule rather than by reference to the coming into force of the Act as a whole.
Lord Callanan
(b) a master agreement for securities financing transactions.”Member’s explanatory statement
This amendment provides for a master agreement for securities financing transactions to be a “contract or other instrument involving financial services” for the purposes of new Article 13D of the Insolvency (Northern Ireland) Order 1989.
Lord Callanan
Member’s explanatory statement
This amendment changes the definition of the “relevant period” so that the term is defined by reference to the coming into force of the Schedule rather than by reference to the coming into force of the Act as a whole.
Lord Callanan
(a) in sub-paragraph (1)”Member’s explanatory statement
This amendment makes a consequential drafting change as a result of the insertion of a second amendment to paragraph 24 of Schedule 17A to the Financial Services and Markets Act 2000.
Lord Callanan
(b) a master agreement for securities financing transactions”Member’s explanatory statement
This amendment provides for master agreements for securities financing transactions to be excluded from the operation of new section 233B of the Insolvency Act 1986.
Lord Callanan
(b) a master agreement for securities financing transactions.”Member’s explanatory statement
This amendment provides for master agreements for securities financing transactions to be excluded from the operation of new Article 197B of the Insolvency (Northern Ireland) Order 1989.
Corporate Insolvency and Governance Bill
Lord Callanan ExcerptsTuesday 16th June 2020
(3 years, 11 months ago)
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Lord Fox (LD)
My Lords, I draw noble Lords’ attention to my interests as set out in the register. The noble Lord, Lord Stevenson, in his understated way, called this a wide group of amendments and we have heard a wide and knowledgeable group of Peers speaking to it. I agree with the noble Viscount, Lord Trenchard, that we need proper scrutiny of this Bill. Whether we are here virtually or physically, cramming so many amendments into one group is symptomatic of trying to rush this Bill through. That will have unintended consequences, whether the noble Baroness, Lady Neville-Rolfe, believes it or otherwise. We are suffering from undue haste in trying to do in one day what should have been done over at least two or three days.
I will speak to a small number of amendments. On Amendment 10, the noble Lord, Lord Stevenson, queried 20 days and suggested 30 days. My question for the Minister is: why 20? What was the science and evidence that suggested that 20 was correct? The noble Lord, Lord Leigh, spoke about the courts being busy. Well, one way of relieving the courts of work would be to have a slightly longer period, because that would mean that the monitor would not have to go back to the courts so often to renew the process. Why 20 days and why not 30, or indeed some other number of days?
Amendment 2, to some extent Amendment 1 and certainly Amendment 28 ask the perfectly reasonable question of what the monitor’s role is. What is the correct qualification for the monitor? It is perfectly reasonable in a Bill such as this, with the role of monitor so central to this process, that we understand what that monitor is and who it might be. I look forward to the Minister’s comments on that.
This group, among others, contains a whole load of amendments that address what I call the creditor waterfall. Amendment 21 and, in different ways, Amendments 25 and 40, talk about the role of the banks and financial institutions and seek to restrain the advantage that those institutions can get from their special position within the creditor landscape. It is not in the Government’s interests to continue to allow these organisations the freedom of the remaining resources of a failing business. What was going through the mind of the Government when those decisions were made to set out this level of access and give financial institutions the run that they seem to get from the Bill?
My noble friends Lady Kramer and Lady Bowles and others talked about the role of small and medium-sized businesses, and Amendment 22 adds small entities to the list of those with preferential treatments. Amendments 37 and 40 call for a review after 18 months of how a moratorium is dealing with SMEs. This is an entirely different review from the other reviews that crop up on later groups. It is very much about how this is really affecting businesses. I am proud to put my name to Amendments 98 and 99, proposed by my colleague and noble friend Lady Bowles, which makes wages and salaries rank alongside continuing supplier and not below them. That seems entirely reasonable and I thought that she set that out very well.
All these issues set up the central point: the Bill is not a fully formed piece of legislation. The Government have recognised that, as my noble friend Lady Bowles pointed out, by granting themselves an almost unprecedented ability to rewrite it. They know that it is not the finished article. We will have an opportunity in later groups of amendments to discuss a better way of doing that and a way of giving Parliament the power to assess and possibly rewrite the rules, but I look forward to the Minister’s reply.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I thank all noble Lords who have spoken in this debate. Yet again, the contributions have demonstrated the breadth of expertise that exists in this House. I must say to my noble friend Lord Trenchard that I would never scowl at him. This is entirely the job of the Whips and not my fault. While there is of course no overall time limit on speeches at Second Reading, there is an overall time limit on the debate in Committee. With that, I will address as many of the points as possible. I apologise to noble Lords if there is not enough time to address all their points, but I am happy to have individual correspondence or a meeting with anyone who does not feel that their concerns have been addressed.
The moratorium was a subject raised by many noble Lords. It is built on two pillars: that the directors believe that the company is insolvent or likely to become so, and that an insolvency practitioner thinks that the company is liable to be rescued having been in a moratorium—finances on one hand and viability on the other. The intention of the moratorium is not to make the creditors’ position worse nor to allow a company to delay an inevitable administration or liquidation. On the contrary, the intention of the moratorium is to rescue the company, and a rescue of the company will be better for creditors, better for suppliers and of course better for employees.
I say in response to the noble and learned Lord, Lord Hope, that, although I fully understand the intention behind his amendment, we are concerned that it would add another burden on to the directors of the company at a time when the company needs to enter into the procedure as quickly as possible. It has never been our intention that the moratorium should be used to “line up the ducks” for a pre-pack administration. Although they are subject to some criticism, we believe that pre-packs are a useful tool that allows businesses and jobs to be saved. However, as with all administrations, the likelihood of a substantial return to unsecured creditors is of course small.
The amendments tabled by noble Lords who seek to lower the barrier to entry into a moratorium to focus on the rescue of a company’s undertakings, rather than the company, could, in our view, lead to increased losses to creditors. The new moratorium provides protection for a company, perhaps further upstream than when administration is the only route open to it. If the company or corporate vehicle can be saved, the outcome for unsecured creditors will almost certainly be better than it would be through the form of insolvency that results in the sale of the company’s undertaking and its ultimate dissolution.
As has been said, the moratorium lasts for an initial period of 20 business days, although it can be extended relatively easily for a further 20 business days. In response to a point raised by the noble Lord, Lord Fox, and my noble friend Lord Leigh, we do not believe that it will lead to an increased burden on the courts. The moratorium is intended to be light touch as far as the court is concerned. Entry is by administrative filing, other than where overseas orders file a winding-up petition, rather than through judicial scrutiny. The courts get involved in longer moratoriums only if the monitor requires court direction or if there is a challenge to the monitor or to the directors’ actions. I hope that that resolves those issues.
Although, in my view, the amendment in the name of the noble Lord, Lord Stevenson, that seeks to permit small businesses an initial period of 30 business days is laudable, it does not appreciate the position that the company’s creditors are in. In our view, the moratorium balances creditor interests with those of the company.
The noble Lord, Lord Fox, asked why the period proposed is 20 days, and that of course is a good question. We consulted on what the period should be, and the clear view was that it should not be left for too long before creditors’ views are considered. The Government are confident that a moratorium with one extension lasting 40 business days is the right length. There is of course always a balance to be struck, and the company should seek the views of its pre-moratorium creditors on whether a moratorium should or should not continue.
A number of amendments have been tabled on the role and status of the monitor, including by my noble friend Lady Altmann, the noble Baroness, Lady Kramer, and my noble friend Lord Hodgson. It is important to say that only licensed insolvency practitioners—a highly regulated profession—are permitted to be monitors of company moratoriums. Practitioners are subject to very high ethical and professional standards. The insolvency code of ethics sets out five fundamental principles of ethics for insolvency practitioners. These include the need for objectivity and a duty not to compromise professional or business judgments because of bias or a conflict of interest. We believe that this strong regulatory framework underpins the independence of insolvency practitioners from those who appoint them.
Many of the amendments proposed by noble Lords, with good intention, seek to strengthen the independence of the monitor, but in our view they would in practice add nothing to the regulatory framework that monitors will already be subject to. Creditors benefit from strong protections. If they think that their interests have been unfairly harmed by the action, or indeed inaction, of the monitor or the directors during a moratorium, it is always open to them to challenge that behaviour in court. This specific right to challenge builds on the strong foundations of the regulatory framework.
In addition, employees are well protected. Requiring a statement from a trade union, alongside documents filed in court when a moratorium commences, as proposed by the noble Lord, Lord Lennie, would in our view add an unacceptable layer of bureaucracy. It might also risk a company’s financial problems being publicised before it is protected from creditor action, leading to unnecessary company failures. I repeat the Government’s view that the greatest support that we can give workers is to keep their businesses afloat, thereby saving their jobs.
Baroness Falkner of Margravine (Non-Afl)
My Lords, for clarity, I did not request to speak after the Minister; it was due to an inadvertent error that I ended up not being on the list to speak when I should have spoken. In fact, as I am speaking after the Minister, I will use the opportunity to make one or two general observations about this process that conform to what the noble Lord, Lord Hodgson of Astley Abbotts, and the noble Viscount, Lord Trenchard, have said.
This is the second Bill in which I am involved in legislative scrutiny. The first one was when we had a virtual House, and with this one we have a hybrid House. I can only concur with everything that has been said about how a hybrid House cannot work for any kind of complex or contentious piece of legislation.
These are pieces of legislation with implications that, as several noble Lords have said, go beyond the immediate health and economic emergencies. They should not be passed by this House unless and until we have the capacity to undertake proper scrutiny. Normally, my only excuse for speaking at this point would be if the Minister had said something on which I needed further clarification; I would then have spoken before he had sat down.
The idea that one is still continuing to speak to amendments in this manner is regrettable, but there is a broader point, also raised by the noble Lords, Lord Liddle and Lord Adonis: this is complex legislation, we do not know when we will revert to normal procedures, and a vaccine may not be found. I hope that this situation does not continue for very long, but it could continue for some time. In that case, do the usual channels deal with the legislation that is pertinent to the health and economic emergency that we face in this House through these proceedings, as a necessity, and therefore, park legislation that has very long-term implications for all kinds of governance in this country, until this is over? I do not blame the Government. They are trying their best to deal with an emergency facing the country. However, I wonder whether there is some level of complicity—I use that word with care—in the usual channels, that they so comfortably settle into these extraordinary arrangements. If people were truly aware of what was happening, of how we are passing legislation and how we are conducting scrutiny, even in terms of Oral Questions, they would be quite astonished.
Turning to the Bill, I am not going to use the notes that I would have used for this speech, but there are one or two things it is important to put on the record. I declare an interest as set out in the register, concerning the Bank of England, and that I am speaking in a personal capacity on this Bill. I have already spoken about the inappropriateness of doing this in this manner in Committee, but I also want to say a word or two about fast-track legislation. I sat on the Constitution Committee when it did a report on when and how Governments should use fast-track legislation. In all candour, and with the highest regard for the Minister, there are measures in this Bill that are simply inappropriate for fast-tracking through the Chamber in this way. These longer term and permanent changes should not be discussed today.
In light of that, I completely support Amendment 37 in the names of the noble Baronesses, Lady Bowles of Berkhamsted and Lady Altmann, for the Secretary of State to conduct a review of the provisions for a moratorium, and to lay a report before Parliament. They indicate that the review should be done in 18 months, which is a fair timescale.
I also support Amendments 2, 4, 8, 28 and 42, in the names of the noble Lords, Lord Stevenson, Lord Palmer, Lord Fox and Lord Hodgson, the noble and learned Lord, Lord Hope, the noble Baronesses, Lady Bowles and Lady Altmann, concerning all aspects of the independence of the monitor. The danger of the Bill not making clear the separation and independence of the monitor is a perception that there was a closeness between the directors of the company and a lack of transparency for creditors. I support those amendments essentially to assist the monitor, those insolvency practitioners. I hear what the Minister says about their own regulatory framework and the onus upon them to behave in an upright manner, but as he noted in his closing remarks, there are enough safeguards built into the regulation of insolvency practitioners whereby these amendments are otiose. I argue that by having them in this Bill—which is subject to review if Amendment 37 passes on Report—if they were entirely redundant, we could do away with them in 18 months. The Secretary of State could then lay before us the report that says that these amendments are redundant. I argue that this helps the monitor at this point, and on that basis, I intend to support them on Report.
Lord Callanan
I thank the noble Baroness. I am sure she understands that her comments about the hybrid House are not a matter for me. I have responsibilities in a number of areas, but the operation of this House is not one of them, so I will allow her to take those up with those Members who are responsible. I am merely a servant and am prepared to operate in whatever way the House sees fit.
Addressing the noble Baroness’s points about the Bill, it is important to recognise that permanent provisions have not been developed just in the short time since Covid-19. Some of the temporary provisions have, but the permanent provisions were the subject of a considerable period of consultation and engagement dating back to 2015. The process included the then Government’s review of the corporate insolvency framework, a public consultation in 2016 and an extensive period of engagement since then with a wide range of stakeholders. Additionally, the Bill includes regulation-making powers to enable changes to be made as and where necessary, so there has been extensive consultation. The intention to legislate in this area was announced in 2018, but this crisis has made it imperative. The Bill offers important new flexibilities and rescue opportunities that may help many businesses to continue trading during this crisis, which I hope the whole House would agree is the ultimate objective
Lord Stevenson of Balmacara [V]
I thank all noble Lords for the huge range of points that have been brought to bear in this debate. It was inevitable, given the way that the amendments are grouped, that we would range far and wide over the Bill. It was not a repeat of the criticism at Second Reading, because we were drilling down into important areas which in other times might have been picked up for further consideration during the later stages of the Bill, but cannot be because of the short timescale we are talking about.
The Minister made only two substantial points in his response. He is going to bring forward amendments to protect the way that debts are accrued during the moratorium period. I very much look forward to seeing those—we welcome the news. There is a concern around the House about this particular area, where we step into uncharted territory with the idea of a moratorium, and we want to protect it as much as we can. More statutory-based procedures on this will be helpful.
I disagree with the Minister that workers and employees are well looked after in this Bill. The evidence does not support that. I leave it to others to judge from the contributions that were made by my noble friends Lord Hendy and Lord Hain; they made an unanswerable case for further consideration, but if it is not to be, it is not to be and we will just have to wait for another opportunity. However, the Government are well out of step here, and that is going to cause trouble further down the track.
My original amendment, which headed the group, was not the only point raised, as I made clear, but it was about an issue that picked up a lot of support. I am grateful to those who spoke in support of it, particularly those who also had amendments down which were spoken to during the debate. This is the question of how we are going to support the new position of monitor. During the debate I was alerted to the fact that the Government had published their draft guide for monitors. It is a pity that it was not available before this debate, but at least it is now. On a quick read-through, it is interesting that it is based very much on the current IP regulations, and goes so far as to suggest some formal amendments to those regulations, to allow for the role played by the monitor to be given a backing. However, it also makes it clear that these are very temporary statements by the Government, pending further work through statutory instruments, and I am sure that is right.
Lord Stevenson of Balmacara [V]
My Lords, I am grateful to all noble Lords who have spoken in this interesting and wide-ranging debate. In contrast to that on the first group, it was quite well focused. There are only a couple of things that escaped the broader consideration of the two advisory committees we have been hearing from: the DPRRC and the Constitution Committee. Amendment 62, in my name, is oddly grouped in this debate but was meant to be helpful. I hoped that the Minister could reassure the Committee that all that needed to be done was being done to make sure the courts played their part appropriately—it is nothing to do with Parliament and, as the noble and learned Lord, Lord Thomas, said, nothing to do with the Government either.
Nevertheless, the funding needs to be there and the resources need to be available to ensure that the work is done properly to support the legislative attempts that have been made within the Bill. If it is of any interest, we tried in our amendment to add not just the judiciary but the staff of the courts, because they too have a part to play, but we found that that was out of scope, so the amendment focuses purely on the judiciary. But it should be understood to be about the court system as a whole helping and supporting the legislation moving through.
The noble Baroness, Lady Anelay of St Johns—who should know a thing or two—said very clearly that only a brave Government would ignore the DPRRC or Constitution Committee reports, and I am sure that it is not in the mind of the Minister to take them on at this stage. Our amendments are largely an attempt—and I acknowledge considerable assistance from the Public Bill Office—to put the aspirations of the DPRRC into a form that could be considered as amendments. They are not meant to be a statement of where we want to get to. They are probing amendments to provoke a response from the Government. I also think that the recommendations of the Constitution Committee, as outlined by my noble friend Lady Taylor and her supporters in Amendments 66 and 70, are exemplary because they quickly get to the heart of what we are about. They contrast slightly with the approach taken by the noble Lord, Lord Blencathra, whose excellent speech belied the fact that his way was simply to delete the clause. That would not achieve very much except make this Committee very happy but it would obviously remove the impulse which has led to where we are.
We are obviously in a situation where we need clear agreement between the various interests displayed in this debate. It really is up to the Government to assure the Committee that, in the words of the noble Baroness, Lady Neville-Rolfe—and I agree with the line she is taking—the analysis has been done properly. We need to better understand the interaction between the lengths and temporary measures—how long the temporary parts of the Bill will last and under what arrangements they can be sunset. If they are not to be sunset, what assurances and safeguards are available to this House and to Parliament as a whole? We need a full and mature consideration, but all that has to be done in a matter of days because the date for the final submission of amendments for Report is looming fast. Indeed, it will have to be the end of this week so that we can debate them in the middle of next week.
We are in a quandary. The Government need to give us an assurance about that, but I make it clear that we are happy to discuss with the Government any way in which we can help, and I am sure that others who have contributed would also do that. We are clearly at a bit of an impasse if we do not find a way out of this, but there seem to be solutions on the ground. The amendments tabled by my noble friend Lady Taylor are attractive and the idea, as the noble Lord, Lord Blencathra, put it, of taking up sensible safeguards such as making the “made affirmative” procedure the default position on this is probably the right way to go. We will need assurances that the Government will not attempt to ride straight through the long and distinguished history of Parliament trying to make sure that abuses are not perpetrated within legislation which it then cannot involve itself with. I look forward to hearing from the Minister on this and hope that he is able to reassure us.
Lord Callanan
I thank all noble Lords for their contributions on this group. I will make a few general comments before I look at the detail of the amendments tabled.
I shall comment first on what I thought was the most important contribution to the proceedings, which of course was the noble Lord, Lord Mann, making a football analogy, which is more important than this legislation. I joke, of course, because it is not, but many of us are looking forward to the recommencement of the Premier League season tomorrow. I suspect that we support different clubs, but nevertheless I am sure that we will both welcome the resumption of football. The serious point is that many of these provisions will apply to football clubs. We hope, as is the purpose of this legislation, that it will enable any of them which are struggling to be saved. The Government have already announced a substantial package of aid and support for many businesses, including football clubs; I think that the Premier League has announced a package of £125 million that is to go to other clubs. We welcome that, and of course many clubs have taken advantage of our other business support measures.
The noble Lord, Lord Howarth, asked why there are so many delegated powers and Henry VIII provisions in the Bill. It is important to address this issue directly. We introduced new procedures to help companies in financial difficulties, in particular the moratorium which we debated earlier, and the new restructuring arrangements, and there are considerable powers to enable these provisions to be reviewed and adjusted if necessary. This point was recognised by the noble and learned Lord, Lord Thomas, and I am grateful for his support. Insolvency legislation is indeed very complex. The Bill has been drafted at pace to respond to the Covid-19 emergency and it contains powers to enable its provisions to be adapted to different types of corporate body or bodies which are subject to special insolvency procedures. It will also ensure that the detail of such procedures can be amended swiftly in the light of these reforms.
My noble friend Lord Blencathra opposed the Question that Clause 1 should stand part, in order to facilitate a wider debate on the Bill’s delegated powers. I know that he wishes to understand the Government’s position across the amendments related to delegated powers and I hope to be able to respond to his points throughout my response. I note that many of these amendments have been drawn from the report on the Bill by his committee. The Government are carefully considering that report, which we received following Second Reading. I have considered the report and I have listened carefully to the views of noble Lords throughout the debate.
My noble friend Lady Neville-Rolfe opposed the Question that Clause 39 should stand part of the Bill. I will explain. The clause enables the Secretary of State to make regulations either to extend or to curtail the periods during which the temporary provisions in the Bill operate. This is important to ensure that the temporary provisions are not in place for longer than necessary, but also that they do not expire at a time when they are still needed to protect the economy from the impact of the coronavirus emergency. Clause 40 makes similar provisions for Northern Ireland. Clause 41 ensures that where regulations are needed urgently as a result of the insolvency measures being introduced by this Bill, they can be made using the negative procedure for a six-month period after commencement. I therefore commend that these clauses stand part of the Bill.
I turn now to the amendments which seek to remove the powers to make secondary legislation conferred on the Secretary of State in relation to the moratorium. These powers enable the Secretary of State to amend, for example, definitions, defined lists and the circumstances in which the monitor can bring the moratorium to an end. In our view, these powers are required because in the future, it is possible that the Government may wish to address any unforeseen issues efficiently to ensure that the conditions for entry into a moratorium remain fit for purpose and to keep definitions up to date as new activities and entities come within the relevant regulated regimes.
Amendment 52, tabled by the noble Lord, Lord Stevenson, seeks to remove the power conferred on the Secretary of State to amend the list of exclusions set out in Schedule 4ZZA. The Government must retain this power in order to be able to react quickly to evolving situations in business and the financial world and to maintain legal certainty. Without the ability to do this, there is a risk that the Government would not be able to keep pace as new firms or types of contract emerge.
Amendment 62 would require the Government to review the impact of certain measures in the Bill on the High Court and to publish a plan to ensure that judges are appropriately trained in their implementation. I hope that it will reassure noble Lords if I confirm that we have engaged extensively with the judiciary in the course of developing these measures with the aim of ensuring that the impact on the courts is minimised. As always, the Government are extremely grateful to members of the judiciary for sharing their insights into these matters.
Baroness Northover
My Lords, I thank the Minister for that reply. He is saying two things: one, that he will be listening to the Delegated Powers Committee and the Constitution Committee; and two, that he has rebutted the various amendments. So it would be very helpful if he would consider those reports and the various amendments in this group and come forward with his own proposals well before the deadline for amendments for Report, so that noble Lords can see the extent to which he has, as he has promised, taken into consideration what those two very significant reports say.
Lord Callanan
We will, of course, issue a formal response to the DPRRC report, hopefully by Friday—but, since Report is next Tuesday, we will need to act more swiftly than that in terms of considering amendments. However, as I have said, I have listened carefully to the points that have been made.
Lord Leigh of Hurley [V]
My Lords, I thank the Minister for his remarks and all noble and noble and learned Lords from all sides of the House for a really interesting debate, agreeing on much. I think my noble friend did address the concerns raised. However, I do not feel that he addressed the concerns raised in respect of Amendment 7 at all, so I would be very grateful if, before Friday, he can communicate with me his remarks in respect of this important point. On the assumption that he will be able to do that, I beg leave to withdraw my amendment.
Lord Lennie (Lab) [V]
My Lords, I had rather thought that the Minister would speak at the beginning of this debate, as that might have obviated some of the discussion that we have had to have; he has not yet fulfilled what the Report stage amendments will be, based on the letter that he produced last night. There seem to be shared concerns among all speakers about the relative position of debt—finance debt, pension debt—and the weakness of the PPF. Does it or does it not have a seat on the discussion body? Would that be at the beginning of the discussions or, as someone put it, just a cc or copying in of the PPF into the information? Will the risk of gaming through acceleration of a company into insolvency by those who seek to gain from that position be guarded against? And so on.
At this stage, we should at least thank the Minister for his reconsideration in advance of signalling that there will be moves at Report stage. Whether they will be sufficient moves we will have to wait and see. This may not be the last word on these matters, but it may go some way towards putting in place a sensible, if not ideal, position for the PPF and the defined benefit pension scheme trustees, in the event of insolvency moratorium or restructuring plans. It is not yet clear how far he is prepared to go and it is a complex issue, as we have heard from all the speakers.
Secondly, I want to express my huge appreciation and admiration for the noble Baronesses, Lady Drake and Lady Warwick, from the Labour Benches, assisted by the noble Baroness, Lady Altmann, and the noble Lord, Lord Balfe, from the Conservatives, in their pursuit of this matter. It is hugely important to everyone that we get this right. The 2004 protection fund legislation was profound, important and lasting. It should not be put at risk by what we are attempting to do in response to the Covid crisis, whether on a temporary or permanent basis. They deserve our thanks and praise for the thorough way in which they have conducted themselves. There is much more to come but, for now, we will have to await the amendments and judge on Report whether those intentions have been fulfilled.
Finally, I urge the Minister in the meantime to take up the offer of discussions made by the noble Baronesses, Lady Drake and Lady Warwick, in advance of Report stage, to see if they can iron out any creases that there may be in what he may propose.
Lord Callanan
I thank all noble Lords for tabling amendments on this important topic. I first clarify to the noble Lord, Lord Lennie, and others that I thought it would be helpful to email noble Lords last night to inform them of my intention to table an amendment on Report because, under the new procedures, I was not able to stand up at the start of this grouping to tell people in advance. I thought it would be helpful to give people advance notice of this to stop them asking for all the things that we were going to do anyway. I thought that it might have played some part in curtailing the debate on this.
I start by reminding the House that both the moratorium and the restructuring plan are not insolvency events—they are company rescue procedures. Where the company itself can be saved as a going concern, obviously, the returns to all creditors and stakeholders of the company will be better.
I turn specifically to Amendment 20 for Great Britain, tabled by the noble Baroness, Lady Drake, and others, and Amendment 39 for Northern Ireland. I do understand the intentions behind these amendments. However, removing financial services contracts from the list of liabilities for which a company does not have a payment holiday when it enters a moratorium would mean that the company does not have to pay these liabilities during the moratorium.
The purpose of excluding these contracts from the payment holiday is to ensure that the moratorium does not affect existing financial services legislation or the operation of the financial markets, and that financial markets participants continue to have legal certainty to facilitate the efficient functioning of those markets. Not excluding them could have potentially severe consequences for the operation of the markets and, in turn, the stability of the financial system and the availability and cost of these products.
In addition, it is important to recognise that financial services firms are a key part of making the moratorium provisions work. Critically, they are not excluded from the moratorium, as I said on the last grouping, where they are a creditor to a company in distress so that they continue to support those companies. It is recognised that not excluding financial services contracts from the payment holiday definition could remove the incentive for these firms to continue to provide finance. That could leave companies in financial difficulty in a far worse-off position than they would otherwise be.
I understand the purpose of these amendments, and the concerns that many noble Lords raised during this debate and at Second Reading on the super-priority of financial services debts in the moratorium. In discussions with the various stakeholders, it has become clear that unpaid financial services debts that have been accelerated for payment during the moratorium receive this super-priority status. We would not want this to provide an incentive for financial services firms to jeopardise the rescue of businesses during a moratorium by accelerating financial services contracts for payment, so as to benefit from this super-priority of their debt in a subsequent insolvency. I will therefore table an amendment on Report to address this issue, and I thank noble Lords who have raised it with me.
I turn to Amendments 27, 63, 64 and 118. Again, I understand the intentions of these proposals. We can all agree that recent high-profile insolvency cases that featured large deficits owed to the defined benefit pension scheme were worrying. We all recognise the uncertainty that this brings for employees, both past and present, in such cases. Again, I assure the Committee that the Government recognise the need for safeguards around these pension schemes and have been working closely with key stakeholders over the last few weeks on these issues. We have reflected on the concerns raised, so I confirm that it is our intention to table amendments on Report to ensure a greater role for the Pension Protection Fund and that pension protection is made clear in the Bill. Again, I am grateful to noble Lords for their engagement on this issue. Both the amendments that I have mentioned will be tabled tomorrow to give noble Lords the opportunity to study them in advance of Report.
Let me address some of the points made. Initially, the noble Baroness, Lady Drake, and I think the noble Lord, Lord Fox, asked—he may not have done so—whether pension schemes can be crammed down. The protections that apply generally will cover a pension scheme included in a restructuring plan proposal. There are strong protections, including a high threshold for class support of 75%, and where cross-class cram down is requested and none of the members of a dissenting class are worse off than they would have been under the next most likely outcome. Importantly, even if all the statutory requirements are met, the court can refuse to sanction a restructuring plan if it is fair and equitable for it so to do.
My noble friend Lady Altmann and, on this occasion, the noble Lord, Lord Fox, asked about the debt priority of pensions and whether the current ranking is appropriate. When insolvency occurs, there is a balance to be struck in considering the order in which those owed money are paid out of the available assets. There are seldom enough funds to pay all creditors in full in an insolvency. To ensure fairness, the law requires that available funds be distributed in a certain order. Unsecured creditors are paid once the secured creditors and preferential debts, which of course include employees’ hard-earned wages and salary, have been dealt with; they share the funds that are then left over. Any deficit owed to a pension scheme ranks alongside all other unsecured creditors, which will inevitably include trade suppliers, some of which will be small and micro companies. I confirm to the noble Lord that this legislation has not changed the existing provision and that it carries on.
With those explanations, and with the notice I have given of the proposed government amendments on Report, I hope that I have provided sufficient justification for the noble Baroness to withdraw her amendment.
Baroness Barker (LD)
I thank the Minister for his reply. I had the pleasure of taking part in the legislation that set up the Pension Protection Fund in this House many years ago and I remember that we spent a considerable amount of time—much more than we have done today—looking at the issue of moral hazard and questions of timescale and decision-making. Whatever the Government come up with in the context of this Bill, people will be forced to make decisions that in ordinary circumstances they would take over several months in which they could weigh up competing claims for priority. They will have to do that very quickly.
I recognise that the Minister said that he intends to publish his amendments tomorrow, but will he undertake to have a virtual meeting with the many Members of your Lordships’ House who are clearly well versed in this subject, perhaps on Thursday, in order for there to be time for considered amendments from the Opposition on Report? The Minister is likely to find that there is not a great distance between his Benches and ours on this matter, but there may be some questions of nuance and technicality, and it would be good, for better legislation, if there could be a discussion on Thursday.
Lord Callanan
Without giving a specific commitment about Thursday, because I have a number of things in my diary, not least because I am answering further Questions in this House, I will attempt to ensure that the forum mentioned by the noble Baroness takes place before Report. Noble Lords who take an interest in this matter will get the opportunity to talk to me and the various Bill officials who are handling what is, I am sure she will accept, a complicated area of law.
Baroness Drake [V]
I thank the Minister for his reply and I am grateful for the advance notice from him yesterday evening, which I took in the spirit in which he gave it. It allowed us to make our contributions more relevant, so I thank him for that.
As my noble friend Lady Taylor of Bolton observed in the previous debate, the fast-tracking of emergency measures in the light of Covid is combined in the Bill with radical, permanent changes to the status and rights of creditors and stakeholders. This House and indeed Parliament have not had time to address the consequences of that and their significance, and we are beginning to see quite serious consequences—maybe unintended consequences—being revealed.
The moratorium is not an insolvency event, but it is the start of a process that moves towards insolvency or restructuring and it does trigger a change of creditor status. While I completely accept that a strong UK economy needs a strong, functioning financial market, there is also a question of balance. The definition of finance debt in the Bill, which is given superior status, is drafted very widely, way beyond being a simple issue of banks. On the arguments that noble Lords have put today, that balance between protecting the pensioners, on which the insolvency laws were changed back in 2004, as opposed to the interests of the financial markets, is tilted in the Bill against the pensioner and risks us going back to the position that existed in 2004 where pensioners were not protected sufficiently—or in that case, not at all—under UK insolvency laws.
I thank noble Lords who have spoken in this debate. Throughout Second Reading and Committee, we have put our concerns very clearly about how this Bill impacts the framework of protection for pensioners that has been finely crafted and built up over 60 years. I welcome the Minister’s statements because they are a recognition of the concerns that we have all been expressing.
I look forward to seeing the government amendments but hope that the Minister will reflect on the seriously held views expressed today across the House on protecting pension schemes, their members and the lifeboat scheme. If it is possible to have any discussion so that these could be considered further, that would be helpful. In view of the significance of this matter, I may wish to return to it on Report, but I beg leave to withdraw Amendment 20.
Lord Callanan
“(7) This section does not apply in relation to a floating charge that is—(a) a collateral security (as defined by section A27);(b) a market charge (as defined by section A27);(c) a security financial collateral arrangement (within the meaning of regulation 3 of the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226));(d) a system-charge (as defined by section A27).”Member’s explanatory statement
This amendment ensures that section A22 does not apply to a collateral security, market charge, security financial collateral arrangement or system-charge.
Lord Callanan
My Lords, these are a number of technical amendments tabled by the Government in my name to ensure that financial collateral arrangements, charges and securities are carved out from the effects of the moratorium. This is part of the Government’s intention to exclude certain financial services contracts from the moratorium.
I am conscious that time is getting on. I have an extensive speaking note and I can go through it in great detail if noble Lords wish me to do so, but it probably best serves the interests of the Committee if I stop at this point and let noble Lords who wish to contribute on this matter come in. I can respond at the end, rather than go through a lot of technical detail that might not be of interest to those present. That might be to the benefit of the Committee, given the late hour and the fact that we are pressed for time.
Lord Mendelsohn [V]
My Lords, I am encouraged by the Minister’s indication during the debate that the Government are open to amendments and it is useful to hear that they have published material relating to insolvency practitioners, even though I am yet to find out where we can get hold of it. However, I am not entirely satisfied by the Government’s assurance that they appreciate how to deal with some of the complexities that they have put forward. That is not least the case in this group of amendments. I would like to understand not the entire effect but the assumption of which particular cases and how many of them these amendments are likely to affect, and whether they are just technical or do in fact change some of the current core financing arrangements for larger companies.
While I welcome the progress towards a more flexible insolvency regime and appreciate the need for temporary arrangements to help to navigate the current emergency, this legislation, as necessary as it may be, ends up asking a lot more questions than it answers. The truncated process is of course, as many noble Lords have mentioned, wholly unsatisfactory not just for scrutiny but to allow the Government to consider these matters and others as they should. It defies logic that the process was done fully in one day in the other place.
It is not just that the impact assessment is based on out-of-date data and contradictory calculations; the permanent provisions were consulted on, although in their previous form they were never going to be implemented in such a piecemeal fashion. It appears to be widely accepted that it is not just the flaws but the time required to adjust this regime that will be complicated. The permanent measures will take longer to implement, and it will take time for people to get used to how they operate. The temporary measures are a bit too limited to operate in their own guise.
However, the Government cannot have it both ways. They cannot claim that these measures are to get things working in an emergency and at the same time widen the number of options, the required skills, the number of participants and the variety of arrangements required where practitioners or courts will need to be trained or practised in. And, of course, this omits some of the most significant elements that will still need to be addressed, such as whether HMRC will have a preference or take an active role in this, as well as the role of the pre-pack regime and others. It is not just a question of all the delegated powers that noble Lords have spoken so eloquently and raised such meaningful and compelling objections and warnings about. It is also that the regulatory regime is weak and unclear, and so much of this should be in the Bill.
However, we are where we are, and the Government are going to do this whatever we say. Bluntly, this is not this House’s first rodeo, but it is our job to be realistic. This legislation will require further regulation and change, and much work is already taking place in a number of the agencies or in other places that is likely to lead to measures being added to the legislation at a later date. Therefore, we should address how this will work best in the future.
The most important element here is to receive proper reassurance from the Minister of an enhanced process to deal with the implementation, review, secondary legislation and regulation of this legislation, so any clear statements and undertakings in this regard would be important, whether given here or on Report. Will the Government create a post-legislative scrutiny process or, for example, would they be keen for this House to establish a process or a committee that could provide a meaningful role? Will the provision of information be sufficient, and what sort of information will be provided to this House? What will be measured by government, so that we can properly evaluate the operation of the legislation?
What other reviews or agencies, from the professional bodies to the Insolvency Service or the courts, are currently being consulted? What part of these discussions can we be told now, and what will be made available in the future to help resolve concerns or help us to have a debate prior to legislation or regulation being brought forward? Can clearer statements be made by Ministers about how they expect it to work, so that the courts have a clear indication on what to make rulings on and how they should do so? I suspect that the courts will be slightly busier than the Minister anticipates, not least because financial indemnity insurance will provide a very adequate target for people to exercise some degree of accountability in the courts.
Of course, the affirmative procedure for regulation is all that we have, but will the Government look at how this process can be enhanced with a greater provision of information, and possibly consultation, prior to the regulations being tabled? Any such assurances on how we will deal with where we are, and how we might deal with what might evolve into a better and more robust system, would be gratefully received.
Lord Stevenson of Balmacara [V]
My Lords, I had the benefit of a brief discussion with the Minister yesterday on these amendments. If we can get a response to the points made by my noble friend Lord Mendelsohn and the questions asked by the noble Lord, Lord Fox, we will be well served.
Lord Callanan
I am grateful for the patience of noble Lords. I propose to deal with the points raised by the noble Lord, Lord Mendelsohn. As for the technical amendments talked about by the noble Lord, Lord Fox, and other noble Lords, if it is acceptable to them, I shall write to them with the details of what we are proposing and how we propose to do it—soon, as the noble Lord, Lord Fox, reminded me. I shall get an email out to them as quickly as possible which I hope will resolve their issues, but there are no issues of principle or policy involved, since these are simply technical amendments that I think reflect the reality that the Bill, and the many temporary provisions, were drafted at pace. It is a long and complicated Bill and these issues have arisen that we wish to correct.
The noble Lord, Lord Mendelsohn, asked about the reporting structures through which the effectiveness of the measures in the Bill can be monitored. I can tell him that the Insolvency Service has for many years published quarterly national statistics, covering both corporate and personal insolvency, approximately four weeks after the end of the quarter. In response to the pandemic, the Insolvency Service now additionally publishes monthly official statistics, covering corporate and personal insolvency, approximately two weeks after the end of the month. Data on the use of company moratoriums and flexible restructuring plans will be published regularly, either by the Insolvency Service or by Companies House through their existing schedules of national and official statistics. Under the Better Regulation framework, the Government are required to publish a post-implementation review of all these measures not more than five years after commencement and the Insolvency Service is currently considering its plans for monitoring and evaluation. We will, of course, publish further guidance as needed.
With that—and I am grateful for the patience of the Committee, I know that time is getting on—I beg to move.
Lord Callanan
“(4) Subsection (1) does not apply to a provision in an instrument creating a floating charge that is—(a) a collateral security (as defined by section A27);(b) a market charge (as defined by section A27);(c) a security financial collateral arrangement (within the meaning of regulation 3 of the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226));(d) a system-charge (as defined by section A27).”Member’s explanatory statement
This amendment ensures that section A50 does not apply to a collateral security, market charge, security financial collateral arrangement or system-charge.
Lord Callanan
“(7) This Article does not apply in relation to a floating charge that is—(a) a collateral security (as defined by Article 13DI);(b) a market charge (as defined by Article 13DI);(c) a security financial collateral arrangement (within the meaning of regulation 3 of the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226));(d) a system-charge (as defined by Article 13DI).”Member’s explanatory statement
This amendment ensures that Article 13DD does not apply to a collateral security, market charge, security financial collateral arrangement or system-charge.
Lord Callanan
“(4) Paragraph (1) does not apply to a provision in an instrument creating a floating charge that is—(a) a collateral security (as defined by Article 13DI);(b) a market charge (as defined by Article 13DI);(c) a security financial collateral arrangement (within the meaning of regulation 3 of the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226));(d) a system-charge (as defined by Article 13DI).”Member’s explanatory statement
This amendment ensures that Article 13HB does not apply to a collateral security, market charge, security financial collateral arrangement or system-charge.
Lord Callanan
Member’s explanatory statement
This amendment changes the definition of the “relevant period” so that the term is defined by reference to the coming into force of the section rather than by reference to the coming into force of the Act as a whole.
Lord Callanan
Member’s explanatory statement
This amendment changes the definition of the “relevant period” so that the term is defined by reference to the coming into force of the section rather than by reference to the coming into force of the Act as a whole.
Horizon: Sub-postmaster Convictions
Lord Callanan Excerpts(3 years, 11 months ago)
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Lord Stevenson of Balmacara (Lab) [V]
My Lords, the whole country owes a considerable debt of gratitude to Kevan Jones MP, Andrew Bridgen MP and the noble Lord, Lord Arbuthnot, who have been campaigning tirelessly to expose this appalling scandal for over seven years. Too many sub-postmasters, often respected and hard-working pillars of their local community, have been imprisoned and many have been ruined financially, physically and mentally. By settling in mediation before the Horizon trial judgment was made public, the Post Office avoided public scrutiny and the facts of its transference of operational risk to sub-postmasters, persistent denials of fault and coercive behaviour were covered up. Thanks to recent TV and radio programmes we now have a lot of detail, but much more clearly needs to be uncovered.
The question that we have to answer first is whether the proposed independent review will do what is needed, as it is not a public inquiry under the Inquiries Act 2005. Can the Minister confirm that the review will have the same powers that a public inquiry would have had under statute to compel the disclosure of documentary evidence and to compel witnesses to come before it to give evidence in public?
Secondly, can the Minister confirm that the review, which presumably is being set up by Ministers, will have sufficient power to investigate the same Ministers who were responsible for the Post Office over the relevant period? Can he confirm that all the costs of the victims of this scandal who may be asked to testify and provide evidence, many of whom have yet to receive the full compensation that they seek, will be met?
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I join the noble Lord in paying tribute to all those Members from both Houses who have laboured for many years to draw attention to this unfolding scandal.
While the terms of reference for the review chime with that of an inquiry, we are undertaking a review in order to allow progress to be achieved in an accelerated timeframe. I can tell the noble Lord that the Post Office has committed to fully co-operating with the review, and Ministers will hold it to that commitment. The purpose of this non-statutory inquiry is to ensure that there is a public summary of the failings that occurred at the Post Office, drawing on the judgments from the Horizon case and listening to those who have been most affected, so that we make sure that those lessons have genuinely been learned and this cannot happen again. With regard to documentary evidence, as I said, the Post Office is expected to co-operate fully with the review.
Lord Fox (LD) [V]
My Lords, I associate myself with the comments of the noble Lord, Lord Stevenson, regarding the campaigners in this case, because hundreds of people have had their lives ruined, and sometimes ended, by this terrible scandal. The Prime Minister in February committed to getting to the bottom of this, and we have to take that at face value, but in answer to the question of the noble Lord, Lord Stevenson, I do not think it is entirely clear what powers this independent inquiry will have. Yes, the Post Office has committed, but will this inquiry actually have legal powers to command people to give evidence and to sequester evidence? Unless it is able to do that, I do not think the Prime Minister is going to get his wish—we will not get to the bottom of this. I understand the time element, but can the Minister reassure the House that this will be an inquiry with teeth?
Lord Callanan
Well, we are committed to getting to the bottom of this scandal. I can tell noble Lords that, yes, the Post Office has committed to co-operate fully with the inquiry; Ministers will expect it to do that. We expect others involved to co-operate with the inquiry as well, and if we need to take further action to make sure that they co-operate, we will be prepared to look at that.
Baroness Neville-Rolfe (Con) [V]
The Horizon case is an appalling matter. It was, as I have mentioned before, the most worrying issue that I had to deal with as a Minister, because it involved many respectable individuals with no record of criminal activity, many of whom we now find have had their lives ruined. Does my noble friend agree that the immediate need, from information already available, is to remove the Post Office’s unusual right to act as prosecutor itself, and to do this forthwith?
Lord Callanan
My noble friend makes a good point, but powers to bring a private prosecution are not specific to the Post Office. The Post Office has the same rights as any other person, whether an individual or a company, to bring a private prosecution. I can tell her that the Post Office is conducting no current private prosecutions and it has provided assurances to Ministers that it has no plans to indulge in any further prosecutions.
Lord Craig of Radley (CB) [V]
My Lords, depending on court appeals, the Post Office may be liable to pay further compensation. Does it have insurance against computer system failure? Is it obligatory for businesses to take out insurance against any serious computer malfunction? If not, does this Horizon scandal suggest that it is required?
Lord Callanan
The Post Office operates as an independent business. As noble Lords would expect, it has all the necessary insurance in place for a company of this kind. It is not, however, obligatory for businesses, including the Post Office, to take out insurance against computer malfunctions or liabilities to third parties that could result from such malfunctions. It is therefore unlikely that any of the Post Office’s insurances would provide cover for any compensation payments the business may be required to partake in.
Lord Arbuthnot of Edrom (Con) [V]
My Lords, when did the Government’s representative on the Post Office board first know that the Post Office had privileged access to sub-postmasters’ accounts, so that the Post Office or Fujitsu could alter those accounts at will without the sub-postmasters being aware of it? Was it from the Ernst & Young management letter to the board of 27 March 2011, or was it earlier than that? If my noble friend does not know, will he please write to me?
Lord Callanan
First, I pay tribute to the work my noble friend has done, both in the other place and in this House, to draw attention to this unfolding scandal. The issue of privileged access was discussed throughout the Horizon case and highlighted in the Horizon issues judgment. The Ernst & Young management letter he refers to was issued before Post Office Ltd was separated from Royal Mail Group. At the time, there was no government representative on the board. The first government representative was appointed to the board of the Post Office in 2012. The Government were aware from the information they received, such as that by the forensic accountants, Second Sight, in 2013, that branch records could be accessed remotely; however, we were then advised that any transactions entered remotely would be visible to sub-postmasters in branch. As far as I am aware, the Government were only made aware that this was incorrect early in 2019, via witness statements that were used by Fujitsu in the court case.
Lord Browne of Ladyton (Lab) [V]
My Lords, it is a privilege to follow the noble Lord, Lord Arbuthnot, on this issue, for all the reasons that have been mentioned. He deserves significant recognition for his effective leadership on this issue. While I support the call for an inquiry, already every parliamentarian, including every Minister, believes that those damaged by this scandal deserve to be exonerated and properly compensated, so how much additional evidence do the Government need before that can be achieved? For more than a decade, while covering up the truth, the Post Office spent in excess of £100 million maintaining the convictions and the impoverishment of hundreds of innocent sub-postmasters. Not one director or senior executive has been held to account. What do the Government, who own the Post Office, plan to do about this shocking failure of corporate governance?
Lord Callanan
The Horizon IT system was put in place in 1999, with the first issues being raised by sub-postmasters in the early 2000s. Mr Justice Fraser has considered what happened over this period and has set out his findings in considerable detail in the court case. Of course, the senior directors responsible at the time of the prosecutions against sub-postmasters are no longer at the Post Office. Any further proceedings against such individuals is a matter for the Crown Prosecution Service, and the courts and the justice system.
Lord Mann (Non-Afl) [V]
Being experienced, knowledgeable and of impeccable character, and having no vested interest, were seen to be the appropriate qualities required for the person to chair this inquiry. Can the Minister think of anyone better suited than the former postman Alan Johnson?
Lord Callanan
I thank the noble Lord for his question. We are actively considering who should chair the inquiry at the moment, and as soon as I have further information, I will refer it to the noble Lord.
Corporate Insolvency and Governance Bill
Lord Callanan ExcerptsTuesday 9th June 2020
(3 years, 11 months ago)
Lords ChamberRead Full debate Corporate Insolvency and Governance Act 2020 View all Corporate Insolvency and Governance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 3 June 2020 - (3 Jun 2020)
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.
Lord Callanan
I start by thanking all noble Lords, both in person and virtually, for their insightful contributions to this debate, which has shown this House at its best, and for the co-operation of many and their engagement throughout the Bill. I thank particularly the Labour and Liberal Democrat Front Benches for the co-operative spirit that they have shown. I am grateful to all noble Lords who have contributed, and who are helping us scrutinise the Bill effectively.
The points raised have highlighted the importance of the measures in the Bill and the necessity of giving them effect without delay. The permanent package of insolvency reforms in the Bill—the moratorium, restructuring plan, prohibition of termination clauses, et cetera—will provide businesses with the space and tools they need to help them continue trading and avoid insolvency during this challenging time and beyond. It is vital that we introduce these measures immediately to help UK businesses weather this crisis and, I hope, thrive on the other side.
The temporary changes to insolvency law introduced are necessary to help businesses get through this unprecedented period. The temporary suspension of wrongful trading liability will encourage directors to use their best endeavours to keep trading through Covid-19 by removing the threat of personal liability. I again reiterate that directors will still be bound by their wider legal duties under company and insolvency law.
The Bill also temporarily prohibits creditors from issuing statutory demands and winding-up petitions against companies unable to pay their debts due to Covid-19. It will give businesses and creditors the opportunity to co-operate to reach a fair agreement and help companies survive. These temporary insolvency measures are retrospective in effect and have been widely welcomed by the business community. They will apply until one month after Royal Assent and can—and will—be extended should it prove necessary to do so. Of course, any case for further extensions will be carefully considered and subject to all the usual scrutiny that this House undertakes.
The temporary changes to corporate governance that the Bill introduces will provide companies and other bodies with much-needed temporary flexibilities on meetings and filings. This is of particular importance at this critical time, when businesses are struggling to cope with reduced resources and, like the rest of us, are abiding by social distancing rules. We have been careful, throughout this process, to take account of the interests of investors and others in devising these measures.
I will now respond to the many points that have been made. Many noble Lords, including the noble Lord, Lord Stevenson, and my noble friend Lord Balfe, raised the important issue of employees’ rights. I am in complete agreement with my noble friend Lord Dobbs, who summed it up extremely well—as he usually does—when he said that the greatest protection for employees is to see their company survive. Where employees are included in restructuring plan proposals, they will be treated in the same way as other creditors, including in relation to their right to information, participation in voting and ability to make representations to the court. I can confirm to my noble friend Lord Balfe that I fully support ministerial colleagues in the other place, who said that it is expected that the court would be mindful of the interests of employees affected by a restructuring plan when deciding if that plan is just and equitable.
The noble Lords, Lord Stevenson, Lord Mendelsohn and Lord Hain, my noble friend Lady Altmann and other noble Lords asked about the classification of pensions and defined benefit schemes. Similar issues were raised by the noble Baronesses, Lady Drake, Lady Warwick and Lady Blower. Employees will want the company pension scheme to be able to pay them when they retire. If an employee is not a creditor or shareholder of the company, they cannot be included in a restructuring proposal. The interaction between pensions legislation and insolvency legislation gives rise to some extremely complicated issues, and the Government are working closely with key stakeholders to determine any implications for the Pension Protection Fund, the Pensions Regulator and pension schemes more generally.
The noble Baroness, Lady Bowles, spoke about the prioritisation of debt in relation to moratoriums and termination clauses. If a moratorium ends and is followed within 12 weeks by administration or liquidation, any unpaid moratorium debts, including those to suppliers who were obliged to continue supply under the new termination clause provisions, will indeed receive super-priority. This means that they are paid above all expenses of that administration or liquidation, including the administrator’s or liquidator’s fees and payments to other creditors, other than fixed-charge creditors.
On super-priority, the noble Baroness, Lady Bowles, and the noble and learned Lord, Lord Hope, both raised points on preventing banks profiting in moratorium. We are aware of the concerns that have been raised about the priority order of debts. We are also very conscious that attempts to game super-priority, by banks or anyone else, should be deterred. The Government are working with all the relevant stakeholders to ensure that creditors are not disadvantaged by these important measures, and we will continue to work to avoid this.
On the knotty subject of HMRC, many noble Lords, including the noble and learned Lord, Lord Hope, the noble Lords, Lord Adonis, Lord Palmer and Lord Liddle, and my noble friend Lord Leigh, raised concerns about Her Majesty’s Revenue and Customs climbing up the creditor ranking, not through this Bill but through other work that is being done. This House will of course agree—I hope—that it is important that taxes go to fund our valuable public services. This reform will ensure that when a business becomes insolvent, more of the taxes that have already been paid in good faith by its employees and customers, but which are held temporarily by the business, will go to fund public services, as intended, rather than being distributed to other creditors. This is money that has already been paid by employees but is held by the business. It is important to note that HMRC will remain an unsecured, non-preferential creditor for taxes levied directly on businesses, such as corporation tax and employer national insurance contributions.
I thank the noble Lord, Lord Stevenson, and my noble friends Lord Dobbs and Lady Neville-Rolfe for their important points on the need to extend the powers of the Small Business Commissioner. This Government intend to fulfil our manifesto commitment to consult on extending the powers of the Small Business Commissioner to advocate for and support small businesses as soon as we are able. We are keen to capture as many views as possible to ensure that the policy response is the right one. In light of businesses having furloughed staff and other priorities, we do not believe that consulting now would be the correct course of action.
The prompt payment code was raised by the noble Lord, Lord Stevenson, as well as the noble Baroness, Lady Kramer. The code now has more than 2,400 signatories. UK legislation already effectively establishes maximum 30-day payment terms for contracts for the supply of goods and services between businesses and public authorities. There are 60-day maximum payment terms between businesses, although longer payment terms may be agreed, provided that they are not grossly unfair to the supplier. To make the voluntary code mandatory without further appropriate modification would in effect set maximum payment terms for large companies when contracting with smaller suppliers.
I understand that it might seem desirable but, while setting limits on the maximum legal payment terms might address the problem of lengthy payment periods in some commercial contracts, we believe the disadvantages of a one-size-fits-all approach are of greater significance.
I thank the noble Lord, Lord Stevenson, my noble friend Lord Bourne and others for raising their concerns on the need for directors to continue to act in good faith when wrongful trading liability is suspended. Let me reassure them and other noble Lords who raised this point that directors will still be obliged to comply with their normal duties, as clearly set out in the Companies Act. Other remedies will remain available where directors do not meet acceptable standards of behaviour, such as fraudulent trading provisions. I therefore hope that noble Lords will agree that, with these provisions stated elsewhere, putting them in the Bill is unnecessary.
I pay tribute to the noble and learned Lord, Lord Hope, for raising an important point on the role of the court, as mentioned in Clause 10, in relation to wrongful trading. Let me reassure him that the wording of the clause is sufficient to direct the court to make an assumption. It does not invite an argument to the contrary. The noble and learned Lord may be aware of similar provisions elsewhere in insolvency legislation which create the possibility of rebuttal. For example, where a preference payment is made by a company, which may be clawed back by a liquidator, and the recipient is a connected party, it is presumed to have been made with the intention of putting the recipient in a better position in the event of insolvency “unless the contrary is shown”. The last part of that provision creates the opportunity for rebuttal, and Clause 10 does not use such language.
The lack of transparency of pre-packs was raised as a concern by a number of noble Lords, including the noble Lords, Lord Vaux and Lord Mendelsohn, and my noble friends Lord Hodgson and Lady Neville-Rolfe. The Government recognise creditors’ concerns about pre-packs, particularly where the sale is to a connected party. If strengthening of professional standards and the existing regulation do not deliver increased creditor confidence in connected pre-pack sales, the Government will look to bring forward further legislation.
The noble Baroness, Lady Bowles, asked whether Companies House undertakes scrutiny of information submitted during this emergency. The register of companies is continuously under scrutiny. It was accessed more than 9.4 billion times in the financial year 2019-20. With so many eyes viewing the data, any errors, omissions or worse can be identified and reported. Companies House undertakes numerous checks on the validity of information, both at incorporation and throughout the life of the company as new information is submitted. Companies House will continue to be vigilant during the current period. Compliance with the extended deadlines is still expected, and the existing offences and penalties for late filings, as set out in the Companies Act 2006, will continue to apply.
In addition, my noble friend Lord Wei asked whether late filings should be reflected in the credit rating of a company. This is already the case. Extending the filing deadline will therefore ensure that filings are not classified as late. This will help directors to focus on managing their businesses without being diverted by credit rating changes based on temporary practical impediments to filing while the Covid-19 restrictions apply.
The noble Lord, Lord Vaux, the noble Baroness, Lady Burt, and my noble friend Lord Blencathra raised concerns regarding small suppliers once termination clauses are prohibited. We think it right to give a temporary exemption to small companies at a time when many are suffering due to the pandemic. I entirely understand and sympathise with noble Lords’ concerns and the desire to assist small companies; the intention is to do so for as long as necessary in the current economic climate. I assure them that if the protections are needed beyond their present expiry date, they can be extended by statutory instrument. In addition, we have built in numerous protections for suppliers who are required to continue supplying a company during a moratorium or other insolvency procedure, including allowing suppliers to apply to a court for permission to terminate a contract if continuing supply would cause them hardship.
My noble friend Lord Dobbs mentioned the need for the moratorium to run beyond 20 business days. The initial moratorium period of 20 business days can be extended by the company by a further 20 business days, and further extensions beyond that can also be made with creditor or court approval.
On timing, the noble Baroness, Lady Falkner, asked whether there was a limit to the number of times a moratorium could be extended. While creditors can agree to extend a moratorium a number of times, they cannot agree cumulatively to extend beyond one year. A court may extend beyond one year but, when doing so, it must consider the interests of pre-moratorium creditors and the likelihood that the extension will lead to a rescue of the company.
During the debate, we have heard several questions about moratoriums, including from my noble friends Lord Hunt, Lord Flight and Lady Altmann. I assure the House that the qualifying condition of entry into a moratorium is that it is likely that the moratorium will result in the rescue of the company. This will be assessed by the proposed monitor of the moratorium prior to their agreeing to take the appointment.
On the lack of a requirement to seek support from the secured creditors, the moratorium will enable companies to act early, which we hope will increase the chance of a successful rescue. For unsecured creditors, the new moratorium can be accessed only if the company is likely to be rescued as a going concern in the opinion of an insolvency practitioner. Where a rescue is achieved via the moratorium, all stakeholders of a business, including secured creditors, will benefit.
On her point about individual bankruptcy, I assure my noble friend Lady McIntosh that the Government recognise fully the impact of Covid-19 on individuals. We will continue to monitor the situation as a whole and consider whether further measures are needed. Credit card companies and other lenders have been required by the Financial Conduct Authority to offer payment holidays to people struggling to make repayments at this time, and it has issued guidance to lenders about offering mortgage payment holidays and halting repossession actions.
I appreciate the points made by the noble Lords, Lord Stevenson, Lord Mendelsohn, Lord Palmer of Childs Hill and Lord Mann, and my noble friends Lord Hunt, Lady Altmann and Lady McIntosh on insolvency practitioners acting as monitors. Insolvency is a highly regulated profession. Insolvency practitioners are qualified members of a recognised professional body who are required to abide by legislative, professional and ethical standards. There are strict educational and professional competence requirements for becoming a practitioner, and the vast majority are highly professional individuals with a great deal of expertise in insolvency and business rescue. Where an insolvency practitioner fails to comply with required standards, they can be subject to disciplinary sanctions by their authorising body, which, in the most serious cases, can involve them having their authorisation to practise withdrawn. I hope that this goes some way to alleviating noble Lords’ concerns.
As the noble Lord, Lord Blunkett, rightly said, the role of insolvency practitioners is positive rather than negative. They can offer professional advice to companies on the best options available and may help businesses to avoid insolvency where appropriate, as well as ease the process where it is inevitable.
The noble Baroness, Lady Jones, spoke about the green recovery. My department is committed to a recovery that is as green as possible, and it is of course responsible for energy and for COP 26.
I turn to the point raised by my noble friend Lady Anelay about charities and the impact that the Bill will have on that sector. As my noble friend said in her contribution, it is important to listen to those closest to the third sector. Colleagues at the Department for Digital, Culture, Media and Sport have developed these measures alongside the Charity Commission. The commission has indicated that it will take a proportionate approach where members’ meetings need to be postponed or held virtually in order to comply with social distancing, even if that is contrary to the rules of the charity’s governing document. In such cases, the Charity Commission advises trustees to record their decisions, attendees and the time of the meeting in order to demonstrate good governance of the charity. I hope this will provide some reassurance to my noble friend and to those charities that the regulator will adopt a sensible and flexible approach in the current difficult circumstances.
We have heard a number of concerns about the limited time available to scrutinise the Bill, and I totally accept the points made by many noble Lords. These concerns were rightly highlighted and raised by my noble friends Lord Blencathra, Lord Flight, Lord Shrewsbury and Lord Trenchard. The Bill contains a series of familiar measures; in fact, many of these insolvency measures have been consulted on and refined over many months. Her Majesty’s Government were always seeking to bring forward reform to the insolvency regime that would bring our regime in line with those of other nations with similar economies. Covid-19 has, sadly, made the need for these measures more acute.
The other provisions in the Bill are all temporary. If the Government wish to extend their operation, both Houses will have the opportunity to scrutinise the relevant order. In addition, any regulations made after the Bill will of course be subject to the usual scrutiny.
The noble Lord, Lord Stevenson, asked whether there was no limit to the overall number of times that the temporary measure can be extended. At present, all the temporary insolvency measures will automatically sunset one month following Royal Assent. The Bill contains a provision enabling these temporary measures to be extended by statutory instrument where appropriate. The Government have every intention of making use of that provision if the protections are needed beyond their present expiry date. The maximum time period for which the temporary measures can be extended by statutory instrument is six months and the power to extend can be used more than once, so there is no absolute sunset.
The noble Baroness, Lady Kramer, asked for the Bill to sunset the permanent measures. The permanent provisions have not just been developed in the short time since Covid-19 first appeared; they have been the subject of a considerable period of consultation and engagement dating back to 2015. This process included the then Government’s review of the corporate insolvency framework, a public consultation in 2016 and an extensive period of engagement since then with a wide range of stakeholders. Additionally, the Bill includes regulation-making powers to enable changes to be made as and where necessary.
At present, all the temporary insolvency measures will automatically sunset the month after Royal Assent. These measures all have significant impacts on the normal working of various parts of insolvency legislation and the business community, and they will need to be considered and scrutinised by Parliament when determining when the temporary measures should be extended and for how long. The Government also have the power to bring any temporary measures to an early end if they are no longer required.
My noble friend Lord Trenchard also raised a point on the introduction of retrospective legislation. The decision to make certain aspects of the Bill retrospective has been taken for specific policy reasons. For example, in the case of the suspension of wrongful trading, retrospection takes effect at the time the Covid-19 emergency began, rather than when the Bill is enacted.
I thank the noble Lords who raised the use of Henry VIII powers. I thank the chair of the Delegated Powers and Regulatory Reform Committee, my noble friend Lord Blencathra, for his comments on these powers. We all look forward to receiving the committee’s report on the Bill, which I think is due tomorrow. The Bill contains powers to enable its provisions to be adapted to different types of corporate body or bodies subject to special insolvency procedures, as well as to ensure that the detail of the procedures can be amended in the light of these reforms. Delegated powers are also included to extend the temporary provisions should it prove necessary and to make other temporary amendments to insolvency law to deal with the effects of Covid-19 where needed.
The noble Baroness, Lady Northover, raised a point about impact assessments on the Bill’s measures. The impact assessment estimates that the three permanent changes to the UK insolvency framework will result in net benefits totalling over £1.9 billion in today’s prices. The equivalent annual net direct cost to business of the three permanent changes to the UK insolvency framework is estimated to be minus £222.9 million. In other words, we estimate an overall £222.9 million annual net benefit.
I will respond to the point from the noble Lord, Lord Fox, about WUPs and the Covid test: how, in this climate, the creditor will be able to show that the test has been met, and whether it is to be fleshed out by the courts. Whenever legislation creates a new legal requirement, it will of course be for the courts to consider how the test should be applied in individual cases. Indeed, this measure is no different. The test of whether Covid-19 has caused the company’s difficulties is indeed intended to present a high bar. The measures in respect of statutory demands and winding up petitions are intended to temporarily enforce the forbearance from creditors that the Government have called for.
I will be happy to meet the noble Lord to discuss trade credit insurance. He also asked about what happens if directors do not co-operate with the monitor. The legislation enables the monitor to bring the moratorium to an end if the directors fail to comply with the rules. These include providing information requested by the monitor and paying certain debts due during the moratorium period.
In closing, since 23 March this country has faced unprecedented hardship as a result of the stringent social distancing measures necessitated by the Covid-19 pandemic. As noble Lords are all aware, UK businesses have been hit hard as a result, with many unable to trade or facing a significant reduction in demand for their goods and services. Consequently, many otherwise viable companies face the threat of insolvency.
The Government are committed to doing all we can to support businesses during this challenging time to ensure that they can bounce back once the pandemic is over. The measures introduced by the Bill offer vital support alongside the substantial fiscal support packages for businesses and workers already in place. It is crucial that these measures are brought forward as a matter of urgency to protect those businesses. They will provide the flexibility and breathing space needed by businesses large and small to ensure their survival now and as the country emerges and rebuilds from this crisis.
Oil: Changes in Global Markets
Lord Callanan Excerpts(3 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Howell of Guildford (Con)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper and draw attention to my interests as listed in the register.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
The global Covid-19 pandemic has resulted in unprecedented falls in demand in global energy markets and increased market volatility. The Government are closely monitoring developments and assessing the implications, including for the UK’s oil and gas sector and for climate change, with an emphasis on the importance of a clean, resilient recovery and international security. In doing so, we are in regular contact with international partners.
Lord Howell of Guildford
I thank my noble friend for that reply. Does he agree that, with the average spot price of crude oil now around $25 to $30, having been down to almost zero the other day in the US, we are back at about the same cost per barrel as in 1970, which at that time was about $3 to $4, before the rise of OPEC? Is it not likely to stay that way, given the worldwide supply surplus, together with the huge demand reductions that he has just referred to? Do the Government see this as a good prospect? Could relatively cheap energy and low petrol prices help post-Covid economic recovery and maybe clip Mr Putin’s wings as well, or are there some dangerous costs and disadvantages, such as a further blow to the North Sea and the transformation to green energy being made a lot more difficult?
Lord Callanan
As my noble friend has implied, there are of course advantages and disadvantages. Around 11% to 13% of our domestic oil demand and around 47% of domestic gas demand are currently met through domestic hydrocarbon reduction. Any significant impact on oil production and prices would lead to an increased reliance on imports and therefore a loss of revenues from the North Sea. Of course, there are benefits as well—certainly regarding motoring costs and so on.
Baroness Falkner of Margravine (Non-Afl)
My Lords, the Minister will recognise that there is a perverse logic in that low oil prices reduce incentives for companies to move to cleaner technology. Will he consider the case for a higher carbon tax price or a tax as part of the future carbon pricing system to counter the slump in the oil markets and to retain pressure for green growth?
Lord Callanan
Of course, the UK already levies two carbon prices on fossil fuels, both through the European Emissions Trading Scheme and with a separate carbon price support mechanism. Over the summer of 2019 we consulted on options for long-term carbon pricing and we intend to publish a reply shortly.
Lord Moynihan (Con)
My Lords, I refer to my interests as declared in the register. The oil markets have responded positively to the latest OPEC agreement, but does my noble friend agree that high on the list for the Government’s investment strategy will need to be an urgent and supportive top-down, bottom-up review of the UKCS oil and gas industry, including those involved in decommissioning?
Lord Callanan
We understand that this is a troubling time for this vital sector for the economy. We are in regular contact with the industry. It is taking advantage of our unprecedented financial recovery packages and we will continue to monitor the situation.
Baroness Meacher (CB)
My Lords, as the economy picks up following the Covid-19 pandemic, the UK, with its considerable technical knowledge, has an opportunity to lead the world in producing sustainable energy. The Minister referred to contacts with other countries. Can he say a little more about those contacts, which will help to ensure that we benefit from this extraordinary situation?
Lord Callanan
As well as maintaining contacts with other countries, we invest considerable funds in helping countries in the transition and in promoting their domestic carbon reduction targets. The noble Baroness makes an important point and we will keep that in mind.
Lord West of Spithead (Lab)
My Lords, oil was trading at over $34 a barrel for West Texas Intermediate and $32 for Brent Crude by early Monday—up from a month ago, but 50% less than at the beginning of the year. The impact on fracking has been huge. There are fewer rigs now operating in the USA—some 600 or so less than at the beginning of the shale revolution. Low prices and market volatility have serious implications for countries that rely on oil exports, with, I believe, considerable impact on global security. The volatility also strengthens the need for the UK to speed up development of nuclear elements of our electrical energy supply. Can the Minister tell me when Hinkley Point C and the next new nuclear power station after that will be connected to the grid, and confirm that work continues despite the Wuhan virus?
Lord Callanan
The noble Lord is right to draw attention to the implications for international security from low prices and the impact that it will have on producing countries. We will continue to monitor the situation closely. We believe in a diverse energy supply in the UK, including nuclear. I cannot yet give him a specific date, but we will want to get the new nuclear power station on stream as quickly as possible.
Lord Oates (LD)
Can the Minister assure us that the Government will resist the siren voices of those proffering a false choice between action to tackle climate change and action to rebuild the economy? Will he confirm the Government’s commitment to net zero by 2050 and that they will urgently establish schemes to promote a job-rich green recovery?
Lord Callanan
I can agree with all the points that the noble Lord has made. We are committed to our 2050 target and we are committed to a green and resilient recovery.
Lord Naseby (Con)
How will we help the Arab world to adjust, particularly our friends in Saudi Arabia and Qatar? Alongside that, as far as the UK is concerned, does Covid-19, on top of these changes, mean that domestically we will have to reappraise the rate at which we can implement climate change policies?
Lord Callanan
Our 2050 targets are now legally binding. We are committed to them and do not believe that there is any need to review them. We believe that we can continue with those targets and prioritise economic recovery at the same time; we do not believe that they are mutually exclusive.
Lord Alton of Liverpool (CB)
My Lords, as Nigeria, Africa’s biggest country, seeks $7 billion of emergency funding from the IMF to offset the crash in oil prices—from which Nigeria receives 70% of its revenue—what assessment have we made of the effects of the crash on the economy and social cohesion of Nigeria and of how we might use some of the £800,000 which the UK gives Nigeria every day in overseas aid to help it address the deep-seated structural problems and reliance on oil exposed by Covid-19?
Lord Callanan
The noble Lord makes an extremely good and valid point. The Foreign Office and the Department for International Development will be closely monitoring the situation. We have a close affinity with people in Nigeria and we will do all that we can to help them; he will be aware of our very large aid budget in that country.
Lord Grantchester (Lab)
The one constant in the oil market is increasing volatility and falling demand as the world economy has to move towards zero-carbon systems. Realising this, large oil companies will need to accelerate zero-carbon plans to diversify their portfolios away from oil without causing redundancies. Given the climate challenge, what are Her Majesty’s Government now doing to encourage this?
Lord Callanan
The noble Lord is right. Companies across all sectors will be vital in our work to meet our 2050 net-zero targets. We want all business leaders in all sectors to make ambitious emissions reduction plans to help meet the commitments that we have set out under the Paris agreement.
Baroness Bowles of Berkhamsted (LD)
Given oil-related job losses and the likely continuing reduced oil demand, will the Government promote faster repurposing of UK oil-related industries, especially in the light of the EU revisiting the idea of building champion industries through joint state aid?
Lord Callanan
We want to encourage those industries to diversify as quickly as possible. Many are doing so and have already announced plans, but, ultimately, of course, this will be market led with government incentives being provided; we are doing that.
Lord Reid of Cardowan (Lab)
At the time of the Scottish independence referendum, oil was running at over $100 a barrel. Given the steep fall in the price of oil, what estimates, if any, have the Government made of the present state of the Scottish economy with respect to strengths or fragility?
Lord Callanan
The noble Lord makes a powerful point. The independence plans of the SNP have been thrown into disarray by the low oil price—we all know the economic forecasts it made at the time. We are of course in close contact and collaboration with the Scottish Government on all these matters. We will continue to assist and help them in their plans going forward.
The Lord Speaker (Lord Fowler)
That brings this group of questions to an end. Again, I congratulate the Minister and colleagues on getting in all 10 questioners on the list.
Covid-19: Businesses and the Private Sector
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My apologies; I thought the muting was done centrally. I thank my noble friend Lord Dobbs for securing this important debate. The excellent, well-informed contributions from many noble Lords demonstrated the excellent range of expertise across our House.
It goes without saying that these are extremely difficult times, and there is no question but that they would be a lot more difficult were it not for the role of the private sector. This is of course a national effort, as the noble Lord, Lord Wallace, reminded us, involving community, democracy and the voluntary and public sectors all working together. Business and the wider private sector have played a critical role too, as many other noble Lords pointed out. Its generosity and ingenuity have helped us to protect the NHS, save lives and shield the economy from the worst of this virus. I put my gratitude on the record. It is of course impossible to name all the companies that have played a part, or even all the ways in which they have helped, but I would like to echo many noble Lords and give the House just a small flavour. Since the crisis began, we have witnessed businesses adapting with impressive speed to operate safely and safeguard jobs, not least in the food sector, as my noble friend Lord Caine reminded us. I include in that smaller shops such as corner shops, which the noble Baroness, Lady Kennedy, spoke about.
Companies such as Interserve and KPMG have played an integral role in building our Nightingale hospitals, as many noble Lords observed. Without the prompt response from construction companies and the efforts of builders and engineers, we would not have been able to bring those hospitals online with such speed. We have seen many firms supporting the vulnerable alongside the voluntary sector, with energy suppliers agreeing to assist customers facing difficulties, and companies such as Brakes, Bidfood and Holiday Inn getting food to the vulnerable and providing rooms for the homeless. Across the country we have watched private companies turn their manufacturing might towards meeting the demands of the pandemic and supplying medical equipment to our vital NHS front line.
In the north-east alone—my home region, if the House will forgive me—we have seen the Barbour factory in South Shields shift from producing wax jackets for the world to making gowns and scrubs for local hospitals. Rolls-Royce in Tyne and Wear, and indeed elsewhere, played its part in the ventilator challenge, producing medical ventilators for the UK. The same is happening up and down our nation. As mentioned by the noble Lord, Lord Dobbs, our leading world fashion houses have gone from luxury fashion to protective kit, delivered to the front line by eBay, Amazon and many others. I am sure my noble friend Lord Lang will be delighted to hear that.
The need for hand sanitiser has mobilised cosmetics and drinks companies large and small, with companies such as Chivas Brothers in Scotland sending tankers of Strathclyde grain spirit rattling down the motorway to make gel for our front-line NHS staff. Meanwhile, pharmaceutical companies are collaborating with our universities to support the Government’s plans to boost testing. As the noble Lords, Lord Blunkett and Lord Bilimoria, pointed out, such private-public collaboration is absolutely critical to the effort. I recognise the point made by the noble Lord, Lord Liddle, on public-private partnerships as well; it was important to make that observation. Our outstanding life sciences sector will help us to produce the vaccines that we need once one has been found. As the noble Baroness, Lady Northover, pointed out, we have considerable expertise in the UK in this area.
All in all, there has been overwhelming support from business and the wider private sector. We are grateful for every offer of help that we have received, just as we are grateful to the business leaders, trade associations and representative bodies that have given up their time to help shape the Government’s response to this crisis. My noble friend Lord Bourne spoke about the support that the private sector has offered to the public sector, and so it is with central government. I should point out that these organisations, alongside others such as Be the Business, are providing critical support, guidance and information to businesses as well as regularly meeting my colleagues and me in BEIS to tell us about the situation on the ground. We all listen carefully to everything that they have to say to us. It was their feedback that helped us to make changes to the Coronavirus Business Interruption Loan Scheme in April, which has now loaned over £7 billion—banning personal guarantees for smaller loans, for example, and extending the scheme to small businesses.
It was in response to their concerns that we introduced the bounce-back loans scheme at the end of last month to make sure that the smallest businesses can access the credit that they need within days. I am pleased to tell the House that this scheme has now issued loans worth £14 billion. It is because we have listened that we will soon be introducing the Corporate Insolvency and Governance Bill, which was introduced in the other place yesterday. This will help to support businesses through these very difficult times, with new options for company rescues and corporate governance measures, giving directors more flexibility to focus on what matters most during the pandemic.
As of yesterday, we have launched the Future Fund, issuing convertible loans to innovative companies facing financing difficulties due to the virus, helping them to weather the crisis. We have also worked closely with business, industry bodies and trade unions as we have developed the safer workplace guidance for firms. As the noble Lords, Lord Liddle and Lord Hendy, said, the input from trade unions was vital here. This guidance is helping businesses to reopen safely and get our economy going again—and we will continue to work with trade associations, responsible trade unions and other representative bodies to do so. We know that business is the engine that will drive our economic renewal, and rebuilding our economy is now critical, as my noble friend Lady Noakes said. We recognise the difficulties that businesses face, as many other noble Lords have mentioned. The noble Baroness, Lady Uddin, for instance, mentioned caterers. I would indeed like to congratulate the Bangladesh Caterers Association, as well as the Muslim community, on their efforts, as mentioned by the noble Lord, Lord Sheikh.
As we rebuild the economy, the green sector will play an important role: driving growth, positioning the UK at the forefront of clean technologies and helping us to meet our net-zero target by 2050.
Many excellent points were made during the debate and a number of questions posed. Noble Lords will understand that it is impossible for me to respond to them all, from 50 speakers, but I will go through as many as possible in the available time and hope that noble Lords will accept my apologies if I do not get around to their point.
The noble Lord, Lord Balfe, raised an important point on small businesses. The Government are committed to a corporate tax system that is competitive but fair. We will not tolerate anyone, including large businesses, treating tax as an optional extra. Her Majesty’s Revenue and Customs subjects large businesses to an exceptional level of scrutiny and secured £10 billion in additional compliance revenue from the largest and most complex businesses in the UK in 2018-19.
The noble Lord, Lord Bilimoria, asked about the government-guaranteed loan scheme. Across the Government’s business interruption loan schemes, businesses can access loans of between £2,000 and £50 million. We have carefully considered what size of guarantee gives lenders confidence to provide finance to SMEs; an 80% government guarantee on lending is an important tool to ensure that lenders have sufficient skin in the game when lending large government and taxpayer-backed loans.
The noble Baroness, Lady Jones, asked a number of questions. I will take them in turn. First, all farms and food businesses are eligible for the various financial support packages provided by the Government, including the Coronavirus Business Interruption Loan Scheme and the bounce-back loan scheme. We will continue to monitor the situation and to work closely with all the food and farming sectors to assess and respond to emerging issues as they arise, working closely with our colleagues in Defra. The noble Baroness also asked about the school food voucher scheme. This is, of course, a matter for the Department for Education but I reassure the noble Baroness that the Government recognise that it may not be convenient or possible for some families to visit one of the supermarkets on the scheme. The DfE are working to see whether additional supermarkets can be added to the list. Schools are best placed to make the decisions for their children, families and communities. We encourage those schools to utilise a local solution supporting eligible pupils—for example, purchasing vouchers direct from a local provider.
My noble friend Lady Buscombe talked about the high street and asked about reducing social distancing measures. The science about Covid-19 transmission is of course complex. As a precaution, Public Health England recommends trying to keep two metres away from people as much as possible. The second step, set out in the Government’s road map from 1 June, covers non-essential retail. The timing of businesses’ reopening will depend on the latest assessment of the risk at that time because the risk of transmission is higher in environments that are indoors, require more physical contact or encourage crowds. We have set up task forces to work with these sectors to develop Covid-19-secure guidelines for them to follow when it is safe to do so. We have seen examples of how supermarkets and other essential shops have implemented the social distancing guidelines to operate safely. Further work will need to be done alongside sectors currently closed to ensure that they too can operate safely.
The noble Baroness, Lady Kennedy, asked for an update on the Government’s consultation on shop worker abuse. Any incident of violence or abusive behaviour towards retail workers is completely unacceptable and especially so in current circumstances. Retailers and staff are working hard to accommodate customers and implement social distancing measures to keep the public safe. We recognise that there is more to do. That is why the Government launched a call for evidence on violence and abuse towards shop staff to help strengthen our understanding of the scale and extent of the issue. During the Westminster Hall debate on protection of retail workers, the Minister for Crime and Policing committed to publishing the Government’s response in March. However, as the Government’s communications must focus on tackling Covid-19, publication of the response has been delayed; we will endeavour to publish the call for evidence as soon as practicable.
The noble Baroness also asked about ensuring food supplies. I assure her that retailers are continuing to monitor their supply chains and are taking all necessary steps to ensure that consumers have the food and supplies that they need.
The noble Lord, Lord Addington, asked what will happen to those with disabilities in new job markets. In their manifesto, the Government committed to reducing the disability employment gap. They are actively monitoring the impact of Covid-19 on the labour market, including on those with disabilities and on other groups. Of course, employers must comply with the requirements of the Equality Act 2010 and ensure that they do not unlawfully discriminate.
I thank the noble Lord, Lord Burnett, for his question about the liabilities of the chairmen and directors of multi-academy trusts, and I thank him, too, for giving me advance notice of his question. I assure him that I have raised this matter with colleagues in the Department for Education, and I will ensure that he gets a speedy reply on this important matter.
My noble friend Lord Moynihan raised an excellent point regarding the UK oil and gas industry, which is continuing to provide essential energy to our economy throughout the epidemic. The Prime Minister gave an update on the quarantine regulations last week, and further information on this will come shortly.
In response to the noble Lord, Lord Tyrie, my department and the CMA have been working together closely to develop the proposals made by his organisation in 2019. For example, following a commitment made in June 2019 by the previous Secretary of State, we are looking into the possibility of putting the CMA’s powers on an administrative basis. This will allow the CMA itself to decide whether there has been a breach of consumer law, rather than having to go to court.
The noble Lord, Lord Fox, asked about struggling farms. I assure him that all farms and food businesses are eligible for the various financial support packages provided by the Government, including the Coronavirus Business Interruption Loan Scheme—the bounce-back loan scheme. We will continue to monitor the situation and to work closely with all food and farming sectors.
The noble Lord, Lord Stevenson, asked about the green new deal for the economy. As we recover from the Covid-19 pandemic, the Government intend to deliver a UK economy that is stronger, cleaner, more sustainable and more resilient. Defra and BEIS are working closely together on this. I agree with the noble Lord that as we and other countries recover from Covid-19, the decisions that we make today will either lay the foundations for sound, sustainable and inclusive growth or they will lock in polluting emissions for decades and, in so doing, make our society and the planet more vulnerable to the interlinked challenges of public health, climate change and biodiversity.
This pandemic has, of course, had terrible consequences but it has also shown the best of us: the courage of our key workers, our community spirit and the resilience of our nation. Finally, I agree with my noble friend Lord Hunt of Wirral that it is indeed an inspiring tale of the ability and willingness of business to embrace its role in this great national effort, both to defeat the virus and to power our economic recovery. For that, I, and I am sure the whole House, is hugely grateful. I thank my noble friend Lord Dobbs for securing this important debate.
Weights and Measures Act 1985 (Definitions of “Metre” and “Kilogram”) (Amendment) Order 2020
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Lord Callanan
That the Virtual Proceedings do consider the draft Weights and Measures Act 1985 (Definitions of “Metre” and “Kilogram”) (Amendment) Order 2020.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, this order was laid before the House on 16 March 2020. The purpose of this statutory instrument is to update the Weights and Measures Act 1985 with new definitions for the metre and kilogram units of measurement. I emphasise that this does not represent any change in policy; it is simply about updating the unit of measurement definitions in UK law to align with those agreed internationally. It ensures that UK legislation is in step with the rest of the world.
I emphasise that the values of the units of measurement themselves are not changing. A kilogram will weigh the same as it did before the definitions were amended and a metre length will also still be the same. Therefore, there will be no direct impact on business or consumers. Businesses will not need to change their weighing or measuring equipment and consumers will have no need to be made aware of the changes. Perhaps I may give some background for the aid of noble Lords, providing the context of the changes that have been made and the processes that sit behind them.
The new definitions have been approved by the International Bureau of Weights and Measures. Currently 102 countries, including the UK, are members or associated members of the bureau. In fact, the UK was a founding member in 1875, alongside France, India and the US, recognising, even then, the need for consistency and accuracy of measurement to support fair and effective international trade.
The UK has remained at the forefront of both legal and scientific metrology for over 140 years since the bureau was founded. The bureau’s key objective,
“to … be the coordinator of the world-wide measurement system, ensuring it gives comparable and internationally accepted measurement results”,
is relevant even today. It ensures that the International System of Units—also known as SI base units—is uniform and accessible for the purposes of international trade, high-technology manufacturing, human health and safety, protection of the environment, global climate studies and the basic science that underpins all of those.
An accurate and agreed standard is essential to ensure consistency in weights and measures across all these applications. For example, it is critical not only that medicines are measured accurately to ensure correct dosage, but that consumers of any goods sold based on measurement have transparency and get what they pay for. This is vital, as in the UK some £342 billion-worth of goods are sold based on the measurement of their quantity, equating to some £6.23 billion every week. In addition, £280 billion-worth of goods per year are weighed or measured at the business-to-business level.
Originally, the definitions to determine the value of a unit of measurement were based on physical standards. Historically these might have been references to parts of the human body, utensils, or amounts that animals could carry. In more recent times, the physical standards became more sophisticated. For example, until now the kilogram was defined by reference to a piece of platinum and iridium that was held in a vault near Paris. As the definitions have developed, they have moved away from physical standards, as those physical standards can deteriorate over time and become less accurate. Even the slightest dust or cleaning can lead to deterioration of the metal and affect accuracy.
Until now, the kilogram was the only remaining definition based on a physical standard. Following decades of discussion, scientific research and testing, the new definitions for seven base units of measurement were agreed and recognised by the International Bureau of Weights and Measures in November 2018. The new definitions were deemed by the bureau to come into effect on 20 May 2019. Under the EU withdrawal agreement, we are proposing to implement the definition changes on the same date as member states of the EU: 13 June this year.
The seven base units of measurement with these new definitions are the metre, kilogram, ampere, second, candela, mole and kelvin. The definitions that we are concerned with today are those of the metre and kilogram. The new definitions are based on a set of seven defining constants, drawn from the fundamental constants of physics and other constants of nature, from which the definitions of the seven base units are deduced. For example, the value of a kilogram can now be determined from Planck’s constant, which remains accurate under all circumstances. It is interesting to note that the redefinition of the kilogram was made possible using technology developed here in the UK. The UK’s National Physical Laboratory, one of the leading national metrology institutes in the world, played a key part in the redefinition of the kilogram. This change ensures that unit of measurement definitions are scientifically robust and accessible to all globally. It also ensures uniformity and accuracy and will stand the test of time, because no dust or cleaning will affect them.
For the UK to stay in step with the rest of the world and meet our obligations under the withdrawal agreement, we have taken steps to amend our legislation. In September 2019, regulations amended the definitions for all seven of the SI base units in the Units of Measurement Regulations 1986 and made amendments to certain definitions in the Weights and Measures Act 1985. Those amendments, in Statutory Instrument 2019/ 1211, were made using powers under Section 2(2) of the European Communities Act 1972 and are timed to come into force on 13 June 2020.
The Weights and Measures Act also contains the definitions of the metre and kilogram units of measurement. I have been advised that amending them requires the use of powers provided for in the Weights and Measures Act itself. That is why this new statutory instrument is before your Lordships today: to amend the Weights and Measures Act definitions of the kilogram and the metre. This will ensure that all of the UK’s law is consistent and up to date, and that we are complying with the terms of the withdrawal agreement. Our intention is that this amendment should come into effect alongside the Weights and Measures Act 1985 (Amendment) and Units of Measurement Regulations 1986 (Amendment) Regulations 2019, which is SI 2019/ 1211. That will happen on 13 June this year.
To conclude, this statutory instrument is simply about making UK legislation consistent and up to date, reflecting the new scientific definitions that underpin the legal and scientific metrology framework. There is no policy change. This is simply a technical change to ensure that the UK is in step with the rest of the world and therefore meeting our obligations under the withdrawal agreement. I emphasise once again: there is no direct impact on businesses or consumers, and I commend this order to the House. I beg to move.
Lord Callanan
My Lords, I too thank noble Lords for their valuable contributions to what I thought was an extremely interesting, albeit short, debate. Of course, metrology is a subject that may at times seem a little remote and archaic, but it is actually of fundamental importance to all our lives: from the medical weighing of babies to the food that we eat, metrology affects us all in everything we do. As soon as humans started to trade, they needed common units: for measurements to have meaning, they must use common standards. That is why it is so important that we have agreed global standards that can ensure accuracy wherever they are used. I remind noble Lords once again of the huge volume of goods sold in the UK alone on the basis of measurement of their quantity. It is £342 billion- worth of goods, equating to £6.23 billion every week; and a further £280 billion-worth of goods per year are weighed or measured at the business-to-business level.
I shall now address some of the points raised during the debate. I start by thanking the noble Lord, Lord Liddle, for his very kind remarks: I too enjoyed sparring with him over Europe, and I am sure there will be lots of opportunity to do that in the future. I can confirm, in response to the noble Baroness, Lady Northover, that we do have capacity to build our own mechanisms now that we have left the EU, and that the Government are committed to maintaining the UK’s role as a leader in international metrology and in science.
In answer to the queries raised by the noble and learned Lord, Lord Hope of Craighead, no tradesmen will have to change their practices as a result of these changes. The value of the units of measurement themselves are not changing, as I said in my introduction: a kilogram will still weigh the same as before the definitions are amended. We are adopting the new definitions to ensure that the UK remains at the forefront of metrology, which is where we want to be, and, while this does implement a European directive, which we have agreed—of course, we are obliged to do so under the withdrawal agreement—that is not the most significant aspect from our policy perspective. These changes have the support of the British science community, led by the National Physical Laboratory, and they reflect our ambition for the UK to remain a leader in international science.
My old sparring partner, the noble Lord, Lord Foulkes, raised the question of a legislative consent Motion. I am pleased to tell him that units and standards of weights and measurement are reserved in Scotland under Schedule 5 to the Scotland Act 1998, and therefore it was not necessary for any legislative consent Motion to be tabled. That said, of course we have made contact with all the devolved Administrations to inform them of the proposed changes, and no objections have been raised. I can also confirm that this order does not extend to Crown dependencies or British Overseas Territories. These are separate jurisdictions and must make their own provision for updated units of measurement.
The noble Lord, Lord Rennard, raised the question of progress on metrication. The Government recognise that many people have an attachment to the imperial system and a preference to use imperial units in their day-to-day lives. At the same time, we recognise that the majority are not familiar with imperial units and that the use of metric is a necessity for British businesses to compete in markets around the world. The system that we have in the UK takes account of both preferences—the need for both imperial and a single, comprehensive set of units of measurement—by allowing for indications, in trade use, to be provided in imperial and metric, as people so choose.
It is important that consumers can tell how much of a product they are buying so that they can easily make comparisons to identify the best deal. Being able to compare prices and quantities is a fundamental principle of fair trade, and that is why, on the whole, today we have a single metric system of units of measurement. However, now that we have left the EU—much to the chagrin of the noble Lord, Lord Liddle—it is entirely for the UK alone to decide on any future approach to meet the needs of all British people and businesses.
My noble friend Lady McIntosh of Pickering asked about enforcement. I can confirm that trading standards’ responsibilities and resources are not affected. Enforcement of the Weights and Measures Act will remain the responsibility of local authority trading standards departments.
In response to the question about consultation, statutory consultation was undertaken in accordance with the requirements of the enabling powers in the Weights and Measures Act. On 15 August 2019, the Government wrote to organisations representative of those with an interest in the changes, setting out the approach that we intended to take to update the legislation and seeking their views. They were asked to respond by 27 August 2019.
I can give my noble friend the names of some of the consultees: the National Physical Laboratory; the British Standards Institution; the UK’s national accreditation body, UKAS; the Royal Society; the Royal Academy of Engineering; the Institute of Physics; the Institute of Measurement and Control; the Legal Metrology Experts Group, representing trading standards departments; and the UK Weighing Federation, representing manufacturers of weighing equipment. Discussions were also held with the NPL, and no concerns were raised by any of the stakeholders. As I said earlier, a statutory consultation was undertaken in accordance with the requirements of the enabling powers.
The statutory instrument before your Lordships will bring in, on 30 June, the changes that are needed to maintain pace with the international definitions. I close by reiterating that no policy change is involved here. Although it is important, this is simply a technical change to ensure that the UK is in step with the rest of the world. In making the change, we will also be meeting our obligations in line with the EU withdrawal agreement. A kilogram will weigh the same as before the definitions were amended and a metre will still be the same length, but now they will be based on the most up-to-date science. I commend this draft instrument to the House.
Covid-19: Business
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I thank both noble Lords for their questions, of which there were a number. I will endeavour to answer as many as possible.
On return to work, reducing pressure on the transport system is one reason we are encouraging everyone to work from home if they can. Where this is not possible, we are encouraging people to avoid rush hour to help maintain social distancing. We are also encouraging people to walk and cycle where they can and have recently announced a £250 million emergency active travel fund, the first stage of a £2 billion investment.
The noble Lord, Lord Stevenson, asked about the new legislation. I can confirm that the guidance is non-statutory and does not change the obligations relating to health and safety, employment or equalities. Currently, employers have a duty under UK law to protect the health and safety of their workers and other people who might be affected by their business. This includes considering the risks that Covid-19 represents. Currently open businesses should review their risk assessments in line with the new guidance and introduce any additional measures they consider reasonably practicable to mitigate the identified effects of the new virus.
On non-compliance, where the HSE identifies employers who are not taking action to comply with the relevant legislation and guidance that control public health risks, it can consider a range of enforcement actions. Health and safety legislation is enforced by the Health and Safety Executive, the Health and Safety Executive for Northern Ireland and local authorities. If the enforcing authority finds that an employer is not taking action to properly manage workplace risks, a range of actions are open to it, including offering specific advice and issuing enforcement notices. An enforcement notice is a legal document that requires an employer to take action as required, creates a legally binding requirement and can ultimately lead to prosecution.
The noble Lord, Lord Stevenson, asked about the R-number. I will give him a scientific answer: if R is below one, on average each infected person will infect fewer than one other person. The number of new infections will fall over time. The lower the number, the faster new infections will fall. Where R is above one, the number of new infections is accelerating; the higher the number, the faster the virus spreads through the population. SAGE assessed that at the beginning of the epidemic R was between 2.7 and 3. Currently, it says that it is between 0.5 and 0.9, meaning that the number of infected people is falling. As our priority is to protect the public and save lives, we will ensure that any adjustments are compatible with the five tests. The information on R is published twice weekly on the website of the Medical Research Council Biostatistics Unit.
I think it was the noble Lord, Lord Fox, who asked me whether we are confident that the HSE and local authorities have enough resources to enforce this. Yes, we are. As I said in the Statement, we have announced an additional £14 million for the HSE for extra call centre staff, inspectors and equipment. Government will resource local authorities as necessary, as we understand more about the workload that Covid-19 entails for them.
Baroness Verma (Con)
Can my noble friend confirm that businesses in multioccupancy properties where business rates are shared among the businesses and added to the rental agreement are able to access business grants through local authorities? Many businesses I have spoken to have said that they have not been able to do that so far. If not, what is available and how quickly can they access it? Like all businesses, they are having to make adjustments for safe working, and this all comes at a cost.
Lord Callanan
I thank my noble friend for her question. We have announced a package of support to help businesses with their ongoing business costs in recognition of the disruption caused. This package includes the small business grant fund, specifically for hereditaments in England that were eligible for relief on 11 March under the small business rates relief fund. The funding is to support small and rural businesses which are ratepayers on a property, as these businesses are more likely to have ongoing fixed costs during this period. Unfortunately, businesses that were not eligible for percentage SBRR relief on 11 March are excluded.
Nevertheless, there are other new measures to provide support to those businesses, including CBILS, deferral of the next quarter of back-payments for firms until the end of June, representing a £30 billion injection into the economy, and a new fast-track finance scheme providing loans with a 100% government guarantee. In addition, there is also the bounce-back loan scheme, which will ensure that the smallest businesses can access loans in a matter of days. We are working currently with local authorities to try to make sure that this support is delivered as fast as possible.
Baroness Drake (Lab)
My Lords, the Government have to transition out of lockdown through a precarious route that protects people’s health, rebuilds the economy and phases down the exceptional measures. The manner of that journey and the impact on different communities is of huge national interest and requires consensus within Parliament and across the devolved and local governments, which in turn will drive greater public and business confidence. The transition out of the job retention scheme, for example, could, depending on how it is handled, trigger widespread redundancies and business closures. What further initiatives will the Government take to build and to hold a consensus with Parliament and the devolved and local governments on how these national interests can best be met? Because at points they are currently not. Can we have greater clarity on how and when they will share their plans going forward on the phasing down of current emergency financial measures and their replacement with the second-wave support package so that people can understand the consequences and plan?
Lord Callanan
The noble Baroness makes a number of good points. We are endeavouring to work with other political parties. The Opposition have been consulted on many measures; of course, the devolved Administrations are present in many of the meetings at which these decisions are taken; similarly, we regularly host conference calls with local authorities to try to communicate information as much as possible. Ultimately, she makes a very good point, and we will endeavour to proceed with the maximum consensus possible.
Lord Clement-Jones (LD)
My Lords, I cannot see any reference in the guidance on working safely, or the FAQs, to the arts and entertainment sector. This is a really badly hit but massive contributor to our culture and economy. Surely, if house viewings can restart, musicians and other creative artists, many of whom are suffering real financial hardship, can be given a clear indication about when they will be able to return safely to work, rehearsal, performing and recording. If estate agencies can open for business, why not museums and galleries and certain other arts and entertainment facilities? What guidance do the Government have on this? Can the Minister pledge that creative workers, along with live performance venues, will be financially supported for as long as necessary?
Lord Callanan
The noble Lord makes a very good point. I can tell him that earlier today we announced five new ministerial-led task forces that have been set up to develop plans for how and when currently closed sectors can reopen safely following the publication of the UK’s road map. This includes a DCMS-led task force considering some of the sectors he refers to: recreation and leisure, including tourism; culture; heritage; libraries and entertainment. As part of this scientific-led approach, each task force will work across government and engage with key stakeholders to ensure that the guidelines are developed and that those sectors can reopen as quickly as possible.
Baroness Falkner of Margravine (Non-Afl)
Does the Minister accept that, in the social distancing measures they have given for business, the 2-metres distance is not necessarily a measure that is recommended by the World Health Organization? The WHO recommends only 1 metre, and other countries have differing metrics—1 metre, 1.5 metres and so on. Does he accept that it is fairly onerous for businesses, some of which just do not have the capacity to keep that kind of distance? Will the Government review it as practice evolves and as the rate of R starts coming down?
Lord Callanan
Of course, we are always reviewing these measures and acting on scientific advice. I think we all have to accept that that scientific advice will evolve as the knowledge of the virus increases. The noble Baroness, as she usually does, makes an important point: these are things that we keep under constant review, so that we can get the country back to work as quickly as possible.
Lord Balfe (Con)
My Lords, one of the good things that has come out of this crisis has been the way in which people work together and in particular the contribution of the trade union movement to working with the Government. I know that the unions welcome the positive attitude of the Government. I would like a reassurance, which I am sure that the Minister will be happy to give, that they will continue to work with the unions. As these measures wind down, of course there will be a lot of detailed points, but where responsible trade unionism and a listening Government come together, I hope that we can continue to have the good relations that we have had up until now. I welcome the Minister being able to confirm that the good relations with the trade union movement will continue.
Lord Callanan
I am indeed happy to confirm to my noble friend that we are very happy to work with all responsible trade unions, and we included them in developing this guidance and we are happy with the many constructive contributions that we receive. We continue to work with them on developing sensible guidance for business that gives UK workers the utmost confidence that they can return to work safely. Of course, we will always consider any new, sensible suggestions.
The Deputy Speaker
Lord Hendy. Lord Hendy? We do not have Lord Hendy, so I call Lord Bilimoria.
Lord Bilimoria (CB)
My Lords, we are grateful to the Government and the Chancellor for all the help for business, including the extension of the job retention scheme until October. However, the Statement on workplace guidance makes no mention of testing at all, and today it is almost two months since the director-general of the WHO said, “Test, test, test”, and the Prime Minister has said that there is now a target of reaching 200,000 tests a day by the end of this month. Will the Minister tell us whether companies and businesses have access to testing for their workforces so that employees can be tested when they go to work? They can then have the confidence if they have a negative test that they can work knowing that they are healthy, and their colleagues and consumers can also have that confidence. Is testing available widely to employers and businesses now?
Lord Callanan
The noble Lord makes a very valid point. Our priority remains that testing patients to inform their clinical diagnosis is extremely important. We are also offering tests to all essential workers, including NHS and social care workers with symptoms, anyone over 65 with symptoms, anyone with symptoms whose work cannot be done from home and anyone who has symptoms of coronavirus and lives with any of those identified above. Yes, testing is extremely important. The Prime Minister has addressed that we have a strategy that we are working towards.
Baroness Pidding (Con)
At the beginning of the coronavirus crisis and the introduction of lockdown, in many communities throughout the country, especially in our villages, it is our small local businesses such as independent bakers, greengrocers and butchers who provide essential services. They have really stepped up to the challenge, often working extraordinarily long hours and having to make significant adaptations to their working practices to ensure a safe environment for both staff and customers. In the coming weeks, we hope to see people attracted back to our towns and high streets as we move towards the gradual reopening of retail outlets. That is of course hugely welcome. However, will my noble friend join me in urging the public not to forget those small community businesses that were such a lifeline, and still are, and repay them with their continued patronage?
Lord Callanan
My Lords, as always, I am very happy to join my noble friend in paying tribute to the many small community businesses up and down the country that play such an important part in our community life, and our message to them is a simple one. We will stand by them. We have announced an unprecedented range of measures to help them get through this extremely difficult and challenging period. The bounce-back loans scheme, which I am sure my noble friend is aware of, is a 100% government-backed loan scheme for small businesses. Any business will be able to borrow between £2,000 and £25,000 and have access to that cash, literally, within days. Those loans will be interest-free for the first 12 months. Businesses can apply online in a short and simple form. I totally agree with my noble friend that we need to stand by these businesses.
Lord Campbell of Pittenweem (LD)
My Lords, in the present circumstances it is clear that many businesses —particularly small ones, as has been mentioned—are desperate to avoid liquidation or bankruptcy, with employees in turn equally desperate to keep their jobs. In those circumstances, how can we be confident that both will not be tempted to cut corners?
Lord Callanan
That is why we have put in place such a strong enforcement regime. We have given extra resources to the Health and Safety Executive and local authorities to help them enforce these demands. Ultimately, it is a matter of trusting in the many sensible, established companies up and down the country to do the right thing for their employees. Most companies are endeavouring to do that; it is in their interests, and that is why they are successful. We will not hesitate to take enforcement action against the small minority that do not.
Lord Dobbs (Con)
My Lords, the only way we will recover is to grow our way out of this mess and create new wealth. Does my noble friend accept that the Government’s overwhelming priority is to get business back to work? To do that, our firms will need as much certainty as we can possibly give them. Does he agree that the suggestions we heard in the debate yesterday that the trade deal with our friends in the EU should be delayed—perhaps by up to two years—is, frankly, delusional? How can we expect employers and employees to do their job if they do not know what the rules will be for years to come? There are no easy options, but does he not agree that endless delay is the daftest option of all?
Lord Callanan
My noble friend is tempting me to go back to my previous role on Brexit. Of course, we will approach the negotiations constructively. I am sure he will be delighted to know that our position has not changed. We will not agree to any of the EU’s demands to give up our rights as an independent state. We are committed to getting a deal by the end of the year and will not extend the transition period.
Lord Wood of Anfield (Lab)
My Lords, as the Government try to navigate a gradual return to work for millions, I am sure the Minister will agree with the central importance of the need to dovetail the financial ambition of winding down the furlough scheme with the public health ambition to protect workers going back to their workplaces. In particular, I know there are worries that the Government will with one hand reduce support for furloughed workers sometime after the end of June and, with the other, demand workplace health and safety conditions that make a return to normal work impossible. I am thinking of establishments such as smaller cafés and restaurants and small entertainment venues. Can the Minister assure those businesses that the end of furloughing will be conducted in a co-ordinated, sector-specific and company-specific way, to ensure that some firms do not have a situation in which the Treasury expects a return to work while BEIS and the Health and Safety Executive make such a return impossible?
Lord Callanan
We have extended the scheme significantly to support firms through the transition out of lockdown. We are doing right by them and expect those firms to do right by their staff. As the economy gradually reopens, it is fair that firms begin to pick up some of the cost of their workers’ salaries, but we will of course want to do this in a specific and phased way to make sure that these businesses can manage to survive and trade their way back to success.
The Deputy Speaker
After the noble Baroness, Lady Ritchie of Downpatrick, I will call the noble Lord, Lord Hendy. I call the noble Baroness, Lady Ritchie of Downpatrick.
Baroness Ritchie of Downpatrick (Non-Afl)
My Lords, yesterday the Ulster Bank published a report showing that for the first three months of this year there was a contraction in business activity put down to coronavirus. Can the Minister describe the work that the Government, working with the Northern Ireland Executive, will now do to assist private sector businesses in Northern Ireland to survive the pandemic and to ensure that they can continue with some form of financial and economic activity?
Lord Callanan
My Lords, as the virus of course does not respect borders or boundaries, we will continue to work very closely with all the devolved Administrations, including the Northern Ireland Executive, to support consistency for employers and a four-nation approach to kick-starting the UK economy. As I set out in previous answers, we have announced a range of unprecedented measures to support the UK economy.
Lord Hendy (Lab)
My Lords, each of the eight guidance notes published on Monday advises:
“Workplaces should not encourage the precautionary use of … PPE to protect against COVID-19 outside clinical settings”.
That advice is surely contrary to the clear statutory duty set out in the Personal Protective Equipment at Work Regulations 1992 to provide PPE to any employee in respect of whom risk has not been eliminated by other measures. The importance of this duty is magnified in the light of the Office for National Statistics report to which my noble friend Lord Stevenson referred, which identifies various occupations at an increased risk of death from Covid-19. Will the Minister indicate whether the guidance might be reconsidered in each of these eight notes?
Lord Callanan
Where workers already wear PPE for protection against non-Covid risks such as dust, they should of course continue to wear this. In relation to Covid-19 specifically, we have worked very closely with the medical community to develop this guidance and we will of course be guided by the science so that we do not put lives at risk in future.
Lord Leigh of Hurley (Con)
My Lords, when I saw that there was to be a Statement on business, I hoped it would include further guidance on the financing of business. While I congratulate the Government on their immediate and world-beating assistance to companies through debt, it is not the long-term answer. Does the Minister agree that the next step in helping businesses will be to help them repay the debt and that, to do that, they will need equity funding? First, will he tell me what steps will be taken for modest amounts of equity to be invested in SMEs? Secondly—I draw your Lordships’ attention to my registered interests—can he tell me what the Government will do to help those companies that struggle not with raising money on public markets but with the costs of being on a public market, exacerbated by MiFID II and enormous regulation? This has meant that those markets are now shrinking, which will consequently make it difficult for UK plc to raise the equity it will need to flourish.
Lord Callanan
As usual, my noble friend raises very good points. I point him towards the future fund, which will be launched this month and will provide convertible loans ranging from £125,000 to £5 million to UK-based companies, subject to at least equal match funding from private investors. These convertible loans may be a suitable option for many businesses that rely on equity investment and are unable to access the CBILS. These companies will be vital in ensuring that the UK retains its world-leading position in science, innovation and technology.
Lord Blunkett (Lab)
I assure the Minister that I am very supportive of trying to overcome the challenge of persuading people to go back to work without ending up with gross pollution and congestion. However, in light of the interview that the Secretary of State for Transport undertook this morning on Radio 4, what advice are the Government giving to employers who find that their staff are refused access to public transport, whose consequent late or non-arrival at work puts their jobs in jeopardy?
Lord Callanan
Of course, we want employers to be as flexible as possible and to consider, for instance, staggering arrival and departure times from work to enable people to avoid peak times wherever possible. As I said, we are also encouraging people to walk and cycle wherever they can; we recently announced a £250 million emergency active travel fund to help with that. Ultimately, it will require both employees and employers to work together to take into account each other’s needs and to use common sense.
Lord Bruce of Bennachie (LD)
Given the decision of the devolved Administrations to maintain their guidance to stay at home and to limit the return to work, will the Government carefully monitor the path of the virus across the UK? If there is significant variation in the incidence of cases or deaths between England and the rest of the UK, will the Government revise the guidance in their documents? Can the Minister give an assurance that workers, companies and, indeed, Governments in the devolved Administration areas, or indeed anywhere in the United Kingdom, will not be penalised for maintaining a cautious approach which might prevent a second spike?
Lord Callanan
Of course, we keep these matters under constant review. It is not our intention to penalise anyone. We want to continue to work together with the devolved Administrations in all parts of our United Kingdom.
Baroness Altmann (Con)
Given the costs of the commendable measures taken by the Government to protect jobs, can my noble friend the Minister tell the House whether the Government will consider raising some of the funding for the job retention schemes by issuing specially targeted pension-fund gilts, for example, which pension schemes could use to better match their liabilities, and for which they have significant funding?
Lord Callanan
My Lords, the Prime Minister has said that we will do whatever it takes to win the fight against the pandemic. My noble friend has made an interesting suggestion, which I will certainly pass on to the Treasury, but the PM has declared to businesses and workers that we will stand by them. As I have said in previous answers, we have announced an unprecedented range of support measures for businesses, such as CBILS and the bounce-back loan scheme.
The Earl of Caithness (Con)
My Lords, I declare my interests as in the register. I congratulate my noble friend the Minister and the Government on the clear, detailed advice that has come out in the last 48 hours.
I would like to ask my noble friend about estate agency. Given that this poses a considerable extra burden on people, with estate agents, surveyors et cetera coming to their houses, and given that we know there have been a number of rogue agents breaking the Government’s current laws, does he agree that there is an urgency to appoint a regulator of property agents with power to act against rogue agents? They now pose an extra threat to people who are in fear of this disease?
Lord Callanan
Since the lockdown restrictions were implemented in March, more than 450,000 people have been unable to progress their plans to move house. All buyers and renters will now be able to complete purchases and view properties in person, and estate agents, conveyancers and removal firms can return to work—while, of course, following the appropriate social distancing guidelines. If employees have concerns about their employers’ compliance they can raise them, ultimately, with the HSE or their local authority.
Lord Dholakia (LD)
My Lords, the country is well aware of the front-line contribution of our diverse communities during the present crisis. A disproportionate number have lost their lives. The Minister mentioned in the Statement that the Government consulted approximately 250 stakeholders in their preparation of the guidance notes. What consultations have taken place with key black and ethnic minority organisations? Has the Minister consulted catering organisations on their dietary requirements at the present time?
Lord Callanan
The noble Lord makes a good point. The number of ethnic minority communities that seem to be adversely affected by this virus is indeed very concerning. I can confirm that we have, of course, fulfilled our equality duties within the guidance. We have had this subject constantly at the forefront of our minds as we formulated this guidance. We have consulted widely across all business and industry.
Lord Truscott (Ind Lab)
My Lords, I declare an interest as set out in the register. Does the Minister recognise that many millions of the self-employed in SMEs will not benefit from the Government’s generous furlough scheme and, in many instances, cannot yet go back to work? Will the Minister at least commit the Government to extending the self-employed income support scheme until the end of October?
Lord Callanan
I thank the noble Lord for his question. As I have said in response to earlier questions, we keep these schemes under constant monitoring and assessment. We are always open to modifying or extending them if it proves necessary.
Baroness Hooper (Con)
My Lords, in the international context, can my noble friend tell us what consideration is being given to helping firms and businesses whose trade depends on imports and exports? For example, is there any special advice relating to transport, particularly given the crisis in air transport? Are British embassies overseas being fully kept up to speed on all developments and requirements in this area, because this is also important and relevant to small and medium-sized enterprises?
Lord Callanan
The noble Baroness makes some very good points. In my view, it is essential that all businesses experiencing increased costs and disrupted cash flow as a result of the virus are supported. The FCO is working to monitor closely coronavirus throughout the world and we are using our diplomatic network to do our utmost to help all British companies.
Lord Flight (Con)
It looks as though the most important long-term change resulting from the coronavirus crisis will be a huge increase in the number of people working from home, which will in turn have other big economic effects. The Government’s five key pieces of guidance refer to working from home as only a good thing; the main territory not so far addressed is the personal tax implications of millions of people working from home. Will the Government stick with the existing tax laws or introduce a simplified standard tax deal relating to their premises for those who work from home?
Lord Callanan
My noble friend makes a very good point. I agree that this crisis will result in a long-term increase in the number of people working from home. When an employee must work from home, for example because of the crisis, the employer can pay them a small amount per week, free from income tax and national insurance contributions, to cover additional costs such as heating and power. Alternatively, of course, they can reimburse their actual expenditure. I will certainly ensure that my noble friend’s comments are passed on to the Treasury for consideration for any future tax changes.
The Deputy Speaker
My Lords, that concludes the questions on the Statement. I thank all noble Lords for their concise questions and the Minister for his concise answers. The Virtual Proceedings will now adjourn until a convenient point after 8 pm for the Urgent Question repeat.
Coronavirus Business Interruption Loan Scheme
Lord Callanan Excerpts(4 years ago)
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, as of 6 May, loans worth over £5.5 billion were issued under the Coronavirus Business Interruption Loan Scheme for 33,812 businesses. The bounce-back loan scheme was launched on Monday 4 May, and nearly 160,000 loans, worth almost £5 billion, were approved in the first three days of the scheme’s operation. The Government continue to monitor the schemes and to work with the financial services sector to ensure that companies receive the full benefit from the support available.
Lord Razzall (LD)
Does the Minister accept that, although the number of loans is quite large, the number of SMEs receiving them as a proportion of the whole is relatively small? Is he concerned that, under the two existing schemes, banks are primarily lending only to people to whom they would have lent anyway in normal times? This is particularly hitting the hospitality and retail sectors.
Lord Callanan
The noble Lord is right that only a relatively small proportion of the total number of SMEs have applied for or received loans. However, it is important to remember that not all businesses want loans, and of course other government support schemes are also available to help them through the crisis.
Baroness Drake (Lab)
My Lords, the Government have to ease people back to work safely, increase the flow of funding to SMEs and avoid scarring unemployment. SMEs employ 60% of private sector workers, and many are now critically dependent on both government-backed loans and job retention schemes. Withdrawing these measures too soon when their very purpose is to keep jobs and businesses going will undermine them. When will the Government publish their road map for phasing out the CBILS and job retention schemes, and what impact will that have on structural employment and the longer-term stimulus package for SMEs?
Lord Callanan
The Government will continue to monitor and review all their business support schemes and make changes where necessary. I am sure that the noble Baroness has noticed that this afternoon the Chancellor will be making a Statement in the House of Commons on the job retention scheme and the Government’s wider economic coronavirus support package. I am sure that she will get more information then.
Lord Palmer of Childs Hill (LD)
My Lords, under the bounce-back scheme, interest is charged at 2.5%, but under CBILS lenders are charging considerably more. At the same time, banks are paying savers interest of less than 1%. My noble friend Lord Razzall talked about the small number of SMEs taking up loans under the scheme. Does the Minister agree that banks have a different idea of “We are all in it together” compared with the rest of the population?
Lord Callanan
No, I do not accept that criticism of the banks. They have worked extremely hard, as have the British Business Bank and the department, to try to get as many loans approved as possible for businesses that want them. The Government are—certainly through the bounce-back scheme—supporting 100% of the amount of those loans. Therefore, a lot of work is going on in all the sectors to try to help the businesses that require support.
Lord Caine (Con)
My Lords, I strongly commend the Government for their support for business during this crisis. Can my noble friend give more detail of the operation of both the business interruption scheme and the bounce-back scheme in Northern Ireland, which is predominantly an SME economy? Will there be regular updates on the number of successful applications, along with their value? Is he aware of concerns among some big players, including the Bank of Ireland, that they have yet to be accredited for the bounce-back scheme? Finally, has any assessment been made of support available in the Republic of Ireland and how it compares with what is on offer to business in Northern Ireland?
Lord Callanan
I know that my noble friend takes a close interest in matters in Northern Ireland. These schemes are available to businesses across all regions of the UK, and many lenders acting in Northern Ireland have received accreditation. However, we are working to get more lenders fully accredited as quickly as possible. Fourteen lenders have now been accredited for the bounce-back loan scheme and we are seeking to get more approved as quickly as possible.
Baroness Lane-Fox of Soho (CB)
Smaller companies will rely on the future fund for support, yet the Government have said that companies are required to have already raised £250,000 to be eligible. This will put both diverse funders and locations outside of the south-east at an enormous disadvantage. How will the Minister ensure that the future fund will neither deepen existing inequalities nor perpetrate new ones, particularly when, as I understand it, all 13 advisers to the fund are men?
Lord Callanan
We have introduced a comprehensive package of measures designed to support any business facing difficulties in this period, including the various loan schemes and grants and support for the self-employed. Start-ups may be able to access CBILS or the bounce-back loan scheme if they fulfil the eligibility criteria. We keep them constantly under review to ensure that as many businesses as possible receive the support that they need.
Lord Stevenson of Balmacara (Lab)
My Lords, unlike the pubs that they supply, most of our small breweries are not eligible for grants or business rate relief. As a consequence, over half of them have not been able to access any financial help from the Government. Two-thirds have stopped brewing completely and there have been many redundancies. Will the Minister agree to meet urgently with officers from the small independent brewers association to see whether a satisfactory solution can be found to this problem?
Lord Callanan
Small breweries are a subject close to many of our hearts. We are responding rapidly to feedback to ensure that all eligible businesses, including breweries, can feel the full benefit of support that is available through the package. I would be very happy to join the noble Lord in meeting representatives if that is required.
Baroness Burt of Solihull (LD)
I do not expect the Minister to agree with me but it seems to the business community that the business interruption loan scheme has largely failed SMEs because the banks were not prepared to take the risk. Now, the Government are taking the risk with taxpayers’ money through the bounce-back scheme but small businesses applying for a bounce-back loan are still expected to take the full risk, which many are hesitant to do. What difference to take-up do the Government estimate that the introduction of the bounce-back scheme will make?
Lord Callanan
As I said in an earlier answer, a huge number of loans have been approved—160,000 in the first three days of the scheme—so I am afraid that many small businesses do not agree with the noble Baroness.
Lord Haskel (Lab)
CBILS is much criticised for being slow due to the many checks. This approach is much more suitable for equity investment. Will the Government create such a vehicle instead, to help create new ways of working and particularly to help those firms already overloaded with debt?
Lord Callanan
As I said in earlier answers, there are a number of different support packages besides CBILS, including the furlough and direct grant schemes. A number of supports are in place for all businesses. I do not accept that the systems have been slow to operate. As I said, 160,000 loans were approved under the bounce-back scheme in the first few days of operation.
Baroness Warsi (Con)
I draw the attention of the House to my interests as listed on the register. I congratulate the Government on their package of measures to support both businesses and individuals during this difficult period but, as my noble friend the Minister will appreciate, time is of the essence for businesses. Does he therefore have an average figure for the time between applications for business investment and bounce-back loans and the arrival of funds into company accounts? Secondly, on the furlough scheme, I understand there will be an announcement later today by the Chancellor. Has any consideration been given to the minimum furlough period for employees and whether it would be appropriate for a more flexible approach to be taken for those companies—many businesses—which are working week-on, week-off to cope with ad hoc business conditions?
Lord Callanan
I can tell my noble friend that many bounce-back loans are being approved within a day. We are getting the money out to companies as quickly as possible. I am sure she will understand that I do not want to give out information in advance of what the Chancellor might say in Parliament this afternoon.
Lord Taylor of Warwick (Non-Afl)
My Lords, ethnic minority business owners have historically found it more difficult to access bank loans and other finance. In many cases, they operate microbusinesses where they would have to be almost a prophet to accurately forecast their profit. Have the difficulties faced by ethnic-minority business owners been factored in?
Lord Callanan
The noble Lord raises a good point but CBILS is open to businesses across all sectors in all parts of the country. We continue to monitor and review the implementation of all our loan schemes and we will not be slow to make any necessary changes. If the noble Lord has any specific information about difficulties being experienced by ethnic-minority businesses, I would be very happy to see it.
The Lord Speaker (Lord Fowler)
My Lords, I regret that the time allowed for this Question has elapsed.