Thomas Cook

Debate between Lord Stevenson of Balmacara and Baroness Randerson

Tuesday 5th November 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

I am very grateful to the Minister for repeating the Statement made in the other place. The collapse of Thomas Cook is turning into an issue that needs to be carefully reflected on. It is a tragedy that it happened at all, but the more information that becomes available about the actions of the directors, and the action that they should have taken but perhaps did not, the more we are concerned about it.

There were 8,000 job losses. At the time it was widely reported that Ministers and BEIS officials had little or no discussion with the company before it entered liquidation. However, in the six days leading up to its collapse, government Ministers from Germany, Spain, Bulgaria, Turkey and Greece all made personal contact with the company with the aim of trying to rescue it. Reports from Unite the Union and Syndex have shown that £188 million would have been sufficient to prevent the collapse of the company. Yet we have heard that the Government have spent over £600 million —a lot more than £188 million—on compensation and the successful repatriation of the 150,000 stranded holidaymakers.

We have not had the benefit of a report from the BEIS Committee in the other place; it has not been able to complete its inquiry because of the Dissolution. However, I hope there will be more detailed investigations when we get back, and that we will get an idea of the proposals that might be necessary. Some issues include: audit quality problems, revealed by the fact that the auditors were not able to get to the bottom of this before the liquidation; the struggles that the auditors seem to have faced over how to value some of the financial instruments in the contracts; the fact that the same auditors had been around for far too long; and teams not using their own judgment but tending to accept what they were told by management, possibly because they were so conflicted by their having additional consultancy work. These findings have not been reported by Parliament but by the Financial Reporting Council, as I am sure the Minister is aware.

We have a bit of a mess here. Having said that, it is wonderful to hear that the Government have decided that the outstanding matter referred to in the Statement—the impact on customers who have suffered life-changing injuries or loss of income while on Thomas Cook holidays—cannot be allowed to pass. We will support that decision in any way possible if it is necessary to do so after the election.

The Minister mentioned in the Statement the success of the repatriation; we should perhaps record that too. He paid tribute to the Secretary of State, but the main burden of heavy lifting fell to the Civil Aviation Authority, which booked the planes and arranged the logistics so successfully that customers who could have been stranded for weeks, if not longer, got back within a few days of their original bookings. We should be very proud of that; the success of Deirdre Hutton and her team should be recognised.

On the substance of today’s announcement, it seems extraordinary that this should have been allowed to happen at all. The first question we need to ask is: how could it be that a company of such status and standing as Thomas Cook, which was in operation for nearly 200 years, let itself get into a situation where it deliberately insured itself against the tragedy and therefore abandoned its rationale for existing—the good care of its customers —as it went into liquidation? It is unlikely that any payments will be made to those who will be treated as unsecured creditors. We all know that. Compensation is going missing; the Government have recognised that this needs to be sorted out, and we are very grateful for that.

Can the Minister give us some idea of how this kind of situation will be prevented in future? Clearly, this was something that lay within the remit of the company’s own decisions. The fact that it had insurance cover for the very high end of the spectrum suggests that it was aware of the insurance requirement, but that cut-off is too high. Does the Minister have any ideas about how this might be addressed? I presume he is thinking about future legislation.

The statutory compensation scheme is a great idea and I am pleased that it is happening, but questions arise about how it will be financed and organised. Will it be based on ATOL and ABTA-type approaches or funded directly by the Government, or will some form of co-funding be laid against the other travel companies? If so, does the Minister have any ideas about this?

On the question of whether the official receiver would be passing on matters relating to the actions of the directors, that is clearly not a matter that we can deal with in this House. However, can the Minister say whether he has in mind that a criminal offence may have taken place? If so, it would be useful to know that this is the way the wind is blowing. If not—or if it is not possible to say—can he confirm that the legislation he is considering will ensure that companies trading on a near or actual insolvency basis will not be empowered to pay bonuses to themselves? We should be quite clear that that is what we are talking about at this stage.

I have one final question. Clearly the Government do not intend to become the lender of last resort for companies that get into trouble over travel arrangements, but this will possibly not be the only example of such things happening. Can the Minister offer some reassuring words about being prepared to look again at the wider context, should this turn out to be a more common issue? That would be helpful. Also, will this be a permanent arrangement, or just temporary until things become clearer?

[Baroness Randerson (LD)]

My Lords, I thank the Minister for repeating the Statement. It raises some very serious issues. I echo the concerns of the noble Lord, Lord Stevenson, and his inquiries about how Thomas Cook came to be in this very risky situation—risky for its customers. Is it because the law simply has no coverage of this area for companies? In other words, do we need to start absolutely from scratch in terms of legal requirements for companies? Or is it that Thomas Cook actually cut corners and could potentially be judged to be on the wrong side of the law in due course?

It is absolutely appalling that people who have suffered very serious injury, and indeed died, as a result of incidents when they were customers of Thomas Cook could find themselves in this very difficult position. We all know that when a company goes into liquidation, it takes years to sort it out, even in the best of circumstances. As it stands, who has priority as creditors for Thomas Cook? In addition to that, what are the Government’s plans for plugging the gap that clearly exists in this situation after the election? The Government are looking to add a capped fund. Of course, that means there will be people who remain badly out of pocket. They will not be compensated as they should be when things have gone wrong. The official receiver is conducting an inquiry into the situation for Thomas Cook. Can the Minister explain how long it is likely to take for the inquiry to report?

I want to raise one or two other issues of concern, following the demise of Thomas Cook. They are not of the order of magnitude of what was in the Minister’s Statement, but they are still serious. The CAA has done some amazing work to repatriate so many people. I know that CAA staff were literally sleeping in the office, because they were being called on to work such long hours. This is the second time in as many years that they have had to do this job and they are clearly getting quite practised at it. It is not acceptable that staff are being put under such huge amounts of stress. Are the Government considering additional resources for the CAA so that staff are not put under quite so much pressure when this happens again, as it almost certainly will?

There are still almost 2,000 Thomas Cook customers who paid by direct debit and have yet to receive their refunds. The original promised date for refunds was 14 October. These customers are a small percentage of the total, but this is a bad time of year for people to be owed money—significant amounts of money. I would like an explanation from the Minister as to whether the Government or any agency are able to provide support to those who are now having to fill in forms. There might well be vulnerable people who find this process extremely complex and our experience is always that the most vulnerable people find it most difficult to complete bureaucratic processes such as this.

Finally, the Government promised a review of insolvency legislation following the Monarch financial crash, the purpose of which was to enable companies to continue to trade long enough to bring customers home so that that responsibility did not fall on the Government again. It has happened again, and I would like to follow up with the Minister whether that work is still ongoing and whether the Government intend to introduce a change to insolvency rules to clarify that situation.

Bombardier

Debate between Lord Stevenson of Balmacara and Baroness Randerson

Thursday 22nd November 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the noble Baroness, Lady Vere, for repeating the Statement.

Bombardier’s presence in Northern Ireland is vital to the economy there, representing as it does 8% of Northern Ireland’s GDP and about 40% of the Province’s manufacturing output. The company employs 4,000 people across Northern Ireland as a whole, so this announcement will be a devastating blow, and not only to the families who will be directly affected in the run-up to Christmas—an estimated 20,000 jobs throughout the UK are part of the company’s supply chains. Many such employees and their families may also be affected by the company’s decision.

I am sure noble Lords will recall that last year the company was under attack from President Trump, who attempted to impose tariffs of nearly 300% on Bombardier when the company was accused by Boeing of dumping its C Series jets in the US market. Will the Government join me in paying tribute to the way in which Bombardier’s unions, primarily Unite and GMB, worked closely with Michael Ryan and Bombardier’s management team at that time to fight those absurd dumping allegations?

I am sure your Lordships’ House will be disappointed that the same spirit of co-operation appears not to have been the case today; we understand from Unite that the unions were not made aware of the extent and scale of the job losses that management are now contemplating. Will the Secretary of State meet the unions to discuss how to work together on these issues?

The 490 proposed job losses are just the latest in a long line of redundancies by Bombardier: there have been over 1,700 since May 2015. The company has said that these job cuts are part of a global drive to cut costs, but it is true that a disproportionate number of the 5,000 Bombardier jobs to be cut globally will be cut in Northern Ireland. It is over 10% of the workforce there.

I agree with the Government that it is in all our interests that Bombardier’s Belfast facility is successful. However, I was struck by the comment in the Statement that when the joint venture between Bombardier and Airbus was announced,

“a number of important commitments”,

were made to the Government,

“including that wing manufacturing will continue in Belfast, that the treatment of UK sites and suppliers will be equal to that of other Bombardier and Airbus suppliers, and that the strategy will be one of building on existing strengths and commitments, not on plant closures, taking opportunities to increase sales of the C Series across the globe”.

What has gone wrong here, precisely? Were the Government led up the garden path? Were these binding commitments, and can the company be held to them? According to the Statement, the Government clearly believe that these commitments still “hold true”—whatever that means. It is certainly not a very legal term. What precisely will the Government do about it?

I have a number of further questions for the noble Baroness. What recent discussions have the Government had with Bombardier regarding its global restructuring plan? For instance, it has been reported that as a result of Bombardier’s redundancies in Northern Ireland, production jobs could be created in Mexico and Morocco. What assessment have the Government made of these reports, and will they make strong representations to Bombardier on that issue?

It is estimated that there are a further 60 aerospace-related firms in Northern Ireland. What assessment have the Government made of the resulting impact on these businesses of the decision to make redundancies? What discussions has the Secretary of State had in Northern Ireland about securing alternative inward investment into Northern Ireland? Are there any government contracts in the offing, for instance?

When steel sites were being closed a few years ago, steel task forces were set up with government aid. What provision will be put in place for advice and support to Bombardier employees and families affected by this round of redundancies? Will any additional government funds be provided outside the current block grant and the special DUP-designated funding—if that is being retained—to help reskill any workers who will lose out?

Bombardier represents 8% of Northern Ireland’s overall GDP and the aerospace industry contributes £1.3 billion to the Northern Ireland economy. It is a significant slice of activity there. What steps are the Government taking to ensure these vital industries are protected in the long term?

Presumably, the Government will review its investment of over £20 million in research and development activity at the Belfast plant, which, according to the noble Baroness, was there to develop new products and improve efficiency. Can she say how much of that is in doubt now, and what steps will be taken to make sure that value of money is secured?

[Baroness Randerson (LD)]

My Lords, I start by thanking the Minister for repeating the Statement. This is a very significant development, because Bombardier is one the biggest employers in Northern Ireland. This is very sad news for the whole of Northern Ireland.

Earlier this month, Bombardier announced that it would have to cut 5,000 jobs across its global operations. Of that, 3,000 would be in Canada. It seems to me that, for a very small country, the number of jobs being cut in Northern Ireland will have a disproportionate effect. It also seems that the loss of 500 jobs, which is a considerable number, does not reflect the assurances the Government said they received from Bombardier when they made their investment in research earlier in the year.

It is a particularly bitter blow for east Belfast, where the company is based, and especially for the workers and families who will be directly affected. It is of great importance, because these are well-paid, highly skilled workers in a relatively low-paid economy. At the moment, Northern Ireland is in a particularly uncertain situation; our whole economy is uncertain, but Northern Ireland’s is more uncertain than the rest.

Bombardier’s struggle to bring in orders for its C series jets was almost certainly exacerbated by the threat of punitive US tariffs which hung over the company for several months. What are the Government doing to defend the rules-based international trade system in the Trump era? Can the Minister tell us if they are still hopeful for a trade deal with the US that benefits UK businesses?

The Government could have a vital role to play in helping these workers reskill and retrain in the face of a rapidly changing labour market. What steps are officials in Northern Ireland taking in this regard, and have the Government considered supporting people with, for example, an endowment, or an individual learning account which they can use at any stage in life to access further education or training?

The Statement says that the Government have no role in Bombardier’s decisions, as it is a private company. But that overlooks entirely the leverage given to them by the £20 million that they invested in the company this year for research, and to help it improve efficiency. Can the Minister explain what efficiencies they anticipated as a result of this investment? From time to time, the word “efficiency” actually means cutting jobs. Was there a clear agreement about job security when that money was invested?

There is, of course, a big supply chain in Northern Ireland which is also affected. Can the Minister give us an estimate of the value of that supply chain, and the number of jobs involved? Will the Government undertake to have meetings with any of those in the supply chain whose companies and jobs will be affected? Finally, the Statement refers to the joint venture with Airbus. Can the Minister assure us that Airbus is still in a good position, despite these job cuts, with its partner?

Space Policy

Debate between Lord Stevenson of Balmacara and Baroness Randerson

Wednesday 18th July 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for repeating the Statement made earlier in another place. We welcome this investment in the UK space sector. Having said that, the ink is scarcely dry on the Space Industry Act, a skeleton Act focusing, quite rightly, on important insurance concerns and on making sure that this fledgeling sector is not stifled at birth by planning issues, complaints about noise or nuisance or environmental concerns. If it is to thrive, the industry we all want to see will require a strong regulatory framework, so when will the secondary legislation that the Minister referred to be brought forward for consideration by this House?

The global space economy market is currently valued at around £160 billion and it is estimated that it will grow to nearly £400 billion by 2030. Most of the expertise and activity is based in the USA, so setting up in direct competition is certainly a bold step. We have heard today that the UK industry is worth £13.7 billion and employs 38,000 people which are big numbers. The target set out in the Statement is 10% of the global market, or £40 billion, which is a big jump. We need a bit more detail about how the Government intend that to happen. The Minister might be aware that the Government’s industrial strategy promised £1 billion of investment in space technology over four years. This announcement is significantly less than that. When do the Government expect to announce the release of further funds for developing spaceflight capabilities? Since there has been some mention of it in the Statement, when will the Government publish a sector deal for space which might also give us some of the detail of how the money is to be created and spent?

Finally, the proposed vertical spaceport site in Sutherland will be the northernmost operational spaceport in the world. As a Scot, I am all for the message this sends to the UK and to Scotland—and indeed for the support it implies for the union. As I am sure the Minister will acknowledge, however, spaceports are overwhelmingly sited near the equator. This is not just for the weather; it is where the earth’s rotational speed is highest, allowing rockets to harness an additional natural boost. There is a point about polar orbits which I recognise, but this is an outlier decision. Can the Minister confirm that the funding announced today takes into account the potential extra costs associated with this location? Can he also set out the countervailing arguments that were used in choosing this location? Linked to this, what steps are the Government taking to ensure a fair regional distribution of space sector supply chains and the associated impact this will have on good jobs in the sector across the whole of the United Kingdom?

[Baroness Randerson (LD)]

My Lords, these announcements are good news for Sutherland and Cornwall—if we have in future a space industry to use them. I am a member of the EU Sub-Committee on the Internal Market. We recently visited Harwell, which is mentioned in this Statement. The scientists working in the industry there are very concerned, rather than very excited, because they are already being squeezed out of aspects of the Galileo programme. They reported that companies and highly skilled individuals in the industry are already moving abroad and companies are planning to move abroad in the future.

There is something very Alice in Wonderland about this Statement, in that it avoids mentioning the Galileo programme. Also, of course, it avoids mentioning Horizon. There is also something rather Alice in Wonderland about the naive enthusiasm for President Trump’s promises for trade, because they have already proved a rather uncertain basis on which to predict the future. My first question to the Minister is: have the Government now received assurances from the EU that we will be able to continue in Galileo? By that—this is a key point—I mean: will we be able to be awarded contracts under the Galileo programme as well as to undertake research as part of the scheme? The scheme involves paying in and getting out as part of the research programme. As I understand it, the problem that has been raised in relation to Galileo would have an impact on our right to receive commercial contracts.

Secondly, the amounts of money in the Statement are welcome—of course they are—but this is a very expensive industry. As the noble Lord has just said, the Government have promised relatively small amounts of money here in comparison with the overall figures previously mentioned in terms of investment in the industry. So I should like to press the Minister for more detail about planned future government investment in the industry. How does that £2 billion pan out over the next few years?

Lastly, I live in Wales, and I should have liked to see Wales included in this. North Wales offered a potential site for a spaceport. That was supported by the Welsh Government and could have been a very useful partnership. Once again, the people of Wales are in a position where we have put forward a plan for large-scale investment but it has been rejected. First, it was electrification across south Wales, then it was the tidal lagoon in Swansea and now it is the spaceport. A pattern is developing here, and it is a very depressing one if you come from Wales. Why was Wales not awarded this? Was it considered as a serious contender and, if not, why was that information not given out earlier so that expectations in Wales were not raised?