Business and Planning Bill

Lord German Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Monday 6th July 2020 Lords Chamber

[Lord German (LD) [V]]

My Lords, I wish to address the issue of support for SMEs—one of the four pillars mentioned by the Minister in his opening remarks. There are alterations to the Bounce Back Loan Scheme in this Bill; some may be sensible changes to a much-needed scheme. However, research undertaken in mid-June by just one business organisation found that only 45% of eligible businesses had been able to apply for these loans, owing to overcomplicated application systems and busy phone lines. One recurring complaint was that many leading banks were saying to their customers, incorrectly, that they had filled in the application details wrongly, or that having two signatories on the business account created a problem.

I hope the Minister can reassure the House that the measures in this Bill will ensure that these problems are overcome. However, I ask the Government to consider how Parliament should scrutinise the impact of not just the bounce-back loans but the Coronavirus Business Interruption Loan Scheme. The Government’s goal is to provide a bridge over what will be, in their words, a “sharp and significant crisis”, to keep people employed and businesses afloat. Parliament therefore has a duty to keep a watching eye on the impact of this support, making these schemes as effective as possible.

The Bill before us today is designed to stimulate the demand side of the economy, which could be loosely described as getting people to spend more again. There are, however, significant sectors, apart from the ones highlighted in this Bill, which will require extra help. Manufacturing SMEs can be far down the line of feeling the direct impact of the domestic consumer spending encouraged in the measures outlined. By way of example, those in the supply chain for motor vehicle manufacturing would need to see a big uptick in people buying cars before their output would reach pre-Covid-19 levels.

This is an even bigger challenge for those supplying to the aviation sector. It is estimated that 1,400 jobs to be laid off at the Airbus wing factory in Broughton will lead to six times as many job losses in companies in the supply chain—the suppliers to the suppliers, and the makers of the smallest widgets to the biggest widgets. Small companies are deeply affected by reduced order books and will need support during the time it takes for these order books to recover, and we know that this will not be as quick as in other sectors.

In its monitoring survey published last week, the manufacturers’ association found that just under half of UK manufacturers plan to make employees redundant in the next six months; as might be expected, that is a marked increase from quarter 1. More than six in every 10 companies are planning to make between 6% and 25% of their staff redundant. Even with access to the furloughing scheme until October, many employers feel that they cannot use the scheme to protect jobs that may no longer exist in the future. So there is a danger of a real cliff edge of job losses in this sector, either at the end of the furlough scheme or earlier. These jobs will be lost right across the country and across all manufacturing sectors.

The primary ask from the UK manufacturing sector, with its 2.7 million employees, is for business rate relief, as has been provided for the retail and hospitality sectors. Will the Government publish the granular data for the bounce-back and CBIL loans schemes, so that Parliament and the public can analyse the impact and ensure that everything possible is being done to support manufacturing and the skilled workforce who are employed within it?

Business and Planning Bill

Lord German Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 13th July 2020 Lords Chamber

[Baroness Sheehan (LD) [V]]

My Lords, I will speak in support of Amendment 18 in the name of my noble friend Lady Northover, which I am pleased to say enjoys support across the House. Before I do so, I apologise for not being able to speak at Second Reading last week. I thank my noble friend Lady Northover for the comprehensive way in which she introduced her amendment, and her co-signatories the noble Lords, Lord Young and Lord Faulkner, and the noble Baroness, Lady Finlay of Llandaff, for their support.

The amendment seeks to ensure that in our attempt to find new and different ways of allowing our cafés, pubs and restaurants to survive, we do so in a way that is sustainable and safe for as many members of the public as possible, including staff. It will also make family-friendly areas safer for young children, who are particularly susceptible to toxic second-hand smoke.

I heard a few people say that extending non-smoking areas to licensed pavements should be left to local authorities to decide on an ad hoc basis, but, as in 2016, most proprietors of pubs, restaurants and cafés support extending the non-smoking area to licensed pavements. They know they will be on the front line when it comes to enforcing rules and, not surprisingly, they want the clarity and the safety from disappointed and sometime aggressive members of the public. They want the clarity that comes from everybody having to adhere to the same rules. Anything other than a national regime, underpinned by legislation, would cause confusion and, I fear, sometimes conflict.

I agree what other noble Lords have said in support of the amendment and I do not want to repeat what has already been said. However, there is one last point I would like to make. To introduce pavement licensing without the attendant safeguards from exposure to second-hand smoke would fly in the face of the Government’s own rationale for reducing the two-metre safety distance to one metre-plus. The plus refers to a physical barrier such as a screen or a face covering. Allowing smoking outdoors will mean the removal of face coverings and masks, therefore more exposure for the smoker and for anyone sharing his or her airspace. If only for the sake of consistency with their own policies, the Government should accept this amendment tabled by my noble friend Lady Northover.

[Lord German (LD) [V]]

My Lords, when the smoking ban was first introduced in 2007, it had followed years of campaigning and research to demonstrate the negative effects. Second-hand smoke affects everyone. The research studies then showed breathing in second-hand smoke increased an adult non-smoker’s risk of lung cancer and heart disease by a quarter, and of a stroke by 30%. I had been chair of a committee in the then National Assembly, which is now the Welsh Parliament, investigating the case for and the effects of a smoking ban in public and workplaces, and it was introduced before the ban in England. But that case is now well established and agreed across all parts of the United Kingdom, and 10 years after the 2007 Act, in 2017, the Welsh Parliament went even further, introducing restrictions on smoking in outdoor care settings for children, school grounds, hospital grounds and public playgrounds.

The current smoking ban in England is meant to be one of a series of moves to discourage smoking. The ban is part of a trend towards policies that de-normalise smoking and it has helped create a shift in culture. Around the world, Governments are considering or instituting bans on outdoor smoking. Just last summer, Sweden banned smoking in many outdoor places, including playgrounds, train platforms and restaurant patios. Following the Welsh example, smoking has been banned in the grounds of most NHS hospitals in England. The case for preventing the breathing in of other people’s smoke is proven. It is beyond doubt; it is harmful. Given there is a ban in workplaces, moving the workplace outside on to the pavement extends the boundary of the workplace, and thereby extends the need for banning smoking within that boundary if for no other reason than for those who work within those establishments.

One of the arguments used in 2007 was that a smoking ban would damage the business of pubs, but there has been no direct negative effect on pubs. People, as has already been commented, just go outside to smoke. Therefore, if the experience of 2007 is anything to go by, and the smoking ban is introduced on the pavement facility provided by the Bill, the new and temporary outside for smokers will be an outside space away from others who are eating and drinking. In reality, not having a smoking ban may well be the bigger deterrent here. Not being able to eat or drink in a non-smoking environment, to which the public have been accustomed, may well keep them away from eating out.

Breathing in other people’s smoke is harmful. The Government have indicated that they want to go further. The experience thus far is that a ban on the pavement facility will not damage business; smokers will move away from those eating and drinking. So why not use this limited opportunity to provide an environment which is not just smoke free but is healthy for diners and staff alike? The Government can demonstrate that they mean business in the challenge to tackle the harm that smoking does to the health of the nation. I am pleased to support the amendment.

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[Baroness Altmann (Con) [V]]

My Lords, I support Amendment 46, to which I have added my name, and congratulate the noble Baroness, Lady Bowles, on her vigilance with respect to small businesses that are in a weakened financial state due to the Covid-19 restrictions; and her efforts to assist them in facing the large banks that may be trying to recover bounce-back loans, or penalise struggling firms in ways that were never intended by emergency legislation. I also congratulate the Government on their bounce-back loans initiative. However, I believe that this amendment is necessary to potentially address the asymmetry of power, which is a significant potential threat to the future of many hard-hit SMEs.

SMEs could face draconian recovery tactics, such as were employed by the infamous Global Recovery Group after the 2008 financial crisis, whether in the form of excessive fees or the taking over of business assets. The noble Baroness, Lady Bowles, is right that a court remedy is essential, not least to avoid giving a potential carte blanche to some of the less scrupulous bank executives.

Many banks wish to behave well, but this amendment is aimed at those who may not do so and is trying to anticipate and deter some of the practices that we have seen before. Bounce-bank loans are surely intended to help as many businesses as possible bounce bank, especially SMEs, rather than to offer a heads-you-win, tails-you-lose opportunity to lenders at the expense of business owners who were forced by the Government to suspend or curtail their business’s activity.

I also support the aims of Amendments 47 and 48 and hope that the Minister will listen carefully and agree to bring back amendments on Report that address this potential issue.

[Lord German [V]]

My Lords, I, too, support these amendments and have added my name to them. Section 140A of the Consumer Credit Act provides protections for borrowers in loans except where they are regulated mortgages or home purchase matters. The Act protects borrowers in connection with any credit agreement, except those related to home purchases, through court orders which may be awarded where the lender has gone beyond the terms of an agreement, applied the rules inappropriately or otherwise behaved inappropriately. The powers of the courts in this Act are drawn very widely and are designed to ensure that loopholes and lacunas which lenders might use to secure repayment have been covered off.

In their amendments to that Act in this Bill, the Government seek to remove the protections provided by the Consumer Credit Act where bounce-back loans have been provided. The Act provides broad powers to the court to bring lenders into line, including requiring lenders to repay moneys to a borrower, stopping lenders undertaking actions against the borrower in relation to their loan, requiring lenders to set aside any measures the court thinks are inappropriate and enforcing changes on the lender. This Bill, if unamended, would remove those protections in their entirety, except for in two circumstances.

Amendment 46, in the name of my noble friend Lady Bowles, limits the powers of these protections to the strict terms of the bounce-back loan and removes lenders’ ability to weave in other conditions, which the borrower has in respect of other loans and credit facilities, into the bounce-back loan arrangement. Adding such additional conditions is precisely the sort of hurdle which the Consumer Credit Act is designed to avoid—for example, using the terms of an existing loan with the bank to apply to the bounce-back loan, such as the level of security needed, the number of signatories required, the applicability of the borrower and so on. My noble friend has outlined the consequences of enacting this clause in the Business and Planning Bill and, in supporting her, I wish in particular to emphasise the need for Amendment 47.

At Second Reading, I spoke of the problems that many small and medium-sized enterprises are having in securing bounce-back loans with major lenders where hurdles which are not part of the bounce-back scheme are being placed in the way of companies seeking a loan. These loans may not save every company from going out of businesses, but they are certainly going to be a lifeline for some, and let us hope many.

Add to this the difficulties which challenger banks have in being able to find the cash to provide bounce-back loans, in part caused by the reluctance of high street banks to funnel funds through them at the Bank of England’s near 0.1% interest rate, and companies—particularly small and medium-sized enterprises seeking these loans—are facing increased difficulty. The Bank of England’s most recent snapshot of financial conditions in the UK raised particular concerns about the availability of non-bank finance, partly due to tight funding conditions for providers, so with high street banks giving priority to their own customers and the availability of funding making it difficult for challengers to lend, we have factors which make protection of the borrower all the more important. We have to remember that many small and medium-sized enterprises are surviving on a thread.

Business and Planning Bill

Lord German Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Monday 20th July 2020 Lords Chamber

[Baroness Falkner of Margravine (Non-Afl) [V]]

My Lords, I understand the need to follow the exhortation of the Chief Whip to be as brief as possible in today’s debate, and I will try to do my bit in that regard by speaking very briefly.

I can see the need for a speedy passage of the Bill in order that businesses, and, most importantly, the hospitality and retail sector can attempt to salvage whatever they can from this health and economic catastrophe. I also see the importance and understand the aims of Amendment 15, in the name of the noble Baroness, Lady Northover. It is entirely sensible, particularly in the light of what I have just heard from the noble Baroness, Lady Grey-Thompson, and others in this debate. I have absolutely no issue with their aims.

However, although I agree with all their motives, in my view the noble Baroness’s measures should be complemented by a more considerate and deliberative conversation about public health messages on addictive behaviour, given that the single biggest long-term public health crisis in this country is obesity and people who are overweight. This conversation needs to be part of a wider strategy on healthy living and education. Having now seen the Government’s amendment, which seems to be a sensible compromise, I will support that today.

[Lord German (LD) [V]]

My Lords, I speak in support of Amendment 15, so well moved by my noble friend Lady Northover and well spoken to by others. If in recent years you have visited one of the ever-decreasing number of countries where smoking in public places is not banned, I think you will have appreciated how awful it is. The difference from the experience in our country is dramatic, particularly if you are a non-smoker. To have second-hand tobacco smoke wafting about your food and drink is both unpleasant and nauseous, and inhaling second-hand smoke injures your health.

The distaste about stepping back more than a decade is not just because we have made the change in this country; it is because it is very much an experience to which we do not want to return. With so many of us now being non-smokers and having had the smoke-free experience for so long, we take it for granted that tobacco smoke will not be around our food and families as we eat.

I am pleased that the Government have gone some way to recognise that in their amendments, but I do not think that they have gone far enough. The arrangements for this Bill are partial and temporary, and for England only. Noble Lords will be aware that the ban on smoking in public places began earlier in Wales than in England. I am pleased that Wales was a pathfinder then, and it now looks like it will be so again. The Labour Health Minister in Wales has just announced that he will bring forward legislation to prohibit smoking in the spaces outside pubs and restaurants and that the ban will be permanent. I hope that his party colleagues in your Lordships’ House are listening to that.

Of course, that legislation is moving with the non-smoking times. As more and more people give up tobacco smoking and public health improves, so the introduction of smoke-free areas around places such as those proposed by the Labour Minister, along with children’s play areas and the precincts of schools and hospitals, is a logical step. As the smoking minority of our population has got smaller, smokers have become more and more used to moving away from others in public places, and this amendment proposes a logical next step. There is no evidence that it will diminish the number of people who go to pubs and restaurants. In fact, the opposite might occur and people might be encouraged to attend because they know that smoke will not be wafting around them.

I have one question for the Government on their proposal. Your Lordships are of course familiar with our own arrangements for separating smokers and non-smokers on the Lords Terrace: a physical barrier is in place between the two areas. Can the Minister explain whether the legislation proposed by the Government requires a physical barrier to be put in place between the two sectors? Will it be a solid barrier through which smoke cannot pass and, if so, at what height? Smoke drifts and floats about, and without clear barriers it would pass between the tables of smokers and non-smokers alike. Without making it clear that that issue will be dealt with, this problem will not be eradicated. So it is obvious to me that Amendment 15 is the way to go in order to get clarity on this issue.

[Lord Balfe [V]]

My Lords, I am surprised that we are even having this debate. Pubs are closing every week. No one seems to realise that one reason for that is that they are in many ways not very pleasant places to be in. I can say without any doubt whatever that my wife and I would not go near a pub that permitted smoking. It is as simple as that. If you want to get rid of your middle-class clientele and close your restaurants, start allowing smoking. It is not just acceptable in a place where you go to dine.

The government amendments include a “smoke-free seating condition” so that any premises that provide outdoor seating for smoking will also

“make reasonable provision for seating where smoking is not permitted.”

We have been down this route before. I have flown around the world for 50 years. We used to have smoking and non-smoking sections on aeroplanes and it did not work. That is why planes are all non-smoking today. We used to have ashtrays in hotel rooms and there was an overhang of smoke if a smoker had been in there. Then hotels started to introduce smoke-free floors and found that they were so popular that they started to ban smoking, before it was banned anyway because it had started a lot of fires. Hospitals used to have seating areas where patients could go outside for a smoke. That was stopped because it was recognised that the ambient smoky atmosphere was bad for the people who did not smoke.

I hear time and again that this is a temporary provision, just like income tax, that will be brought in and disappear after a year. I do not believe that. I think that some of these provisions will be permanent. The noble Lord, Lord German, mentioned Wales. There will be a tendency to say, “This system works. We’ll carry on with it for another year and maybe another year after that”. So I really do not see it as working. I welcome where the Government have got to, but I do not think that they have gone far enough. I am pretty neutral on the thing because I will not in any case go near a pub or restaurant that has smoking, but I urge the Government to go some way further, to grasp this particular bull by the horns and say, “We’re not having smoking in places that serve drink or food”.

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[The Deputy Speaker]

I now call Lord Naseby.

Let us go to Lord German and then we will try to return to Lord Naseby.

[Lord German [V]]

My Lords, I support this amendment, tabled by my noble friend, because, put simply, it would do two things. First, it would put beyond doubt the protection which borrowers of bounce-back loans have against their lenders pursuing punitive action if they default. Secondly, given the relatively low take-up of these important loans, it would give reassurance to companies seeking to use the facility provided by the Government as essential finance to keep them in business and retain employment.

Companies may have been, or are, hesitant to take out these loans for a variety of reasons. For example, they might be worried about repayment, the ongoing viability of their business or whether they wish to continue trading. But to respond to these fears, the Government must assist by providing the maximum level of certainty on what happens if the borrower cannot repay the loan. The guarantee to the lenders is that the Government will bear the cost of defaulting. This is very welcome, but that guarantee is given to the lender and not to the borrower. There is some protection in place to prevent the lender taking further actions against the borrower, but the legislation before us takes away most of the ultimate protections for a borrower—to have recourse to the courts.

My noble friend has outlined these issues in great detail. I am grateful to her for the forensic manner in which she laid out the borrower protection arguments for this amendment. I will not repeat the detail on the missing protections that she has given.

Taking the two reasons I have outlined for supporting this amendment separately, on the first it is clear that many lenders, mostly large high-street banks, will already have banking arrangements with those who are seeking or have taken out these bounce-back loans. In Committee, I quoted examples of this relationship possibly being used to influence the behaviours of lenders. Put simply, they have financial power over their borrowers through that continuing relationship with them. Other lenders, many of them now trying to lend money under these schemes, have difficulty in getting their hands on the 0.5% interest cash that the Government have made available to lend, largely because the big banks will not funnel these funds through to them, on the “Why should we help our competitors?” principle. This means that the big banks will have a bounce-back loans advantage, most frequently with their existing customers.

On the second reason, the Government estimate that many more of these loans will be needed—perhaps four times as many—to protect small companies from going under, given the consequent unemployment that would cause. These loans need to provide protection for the borrower in a way which will not deter them from proceeding. The fallback of court protection from the poor behaviour of the lender provides a higher level of reassurance to borrowers, in line with the current legislation.

I share the Government’s hope that these loans can provide a lifeline to many companies. They are a very good response to the pandemic. This amendment would support the Government’s ambition and strengthen the case for businesses considering taking out these loans by removing the concern that default could lead to unfair sanctions being imposed on them.

[Baroness Kramer (LD) [V]]

My Lords, first, I thank the noble Baroness, Lady Penn, for her willingness to talk virtually to a number of us who have been focused on this issue; however, I came away from those discussions almost more confused than I went into them. This House will be aware that the financial regulators—certainly the FCA—do not regulate institutions but activities. One of the activities it cannot regulate is commercial lending, which is on the far side of what is generally called the regulatory perimeter. A slight sleight of hand is, to some extent, made available to sole traders, micro-companies and the very small end of small businesses so that they do merit some protection, that typically coming in the form of an appeal to the ombudsman. Although the ombudsman has very limited power to actually make sure that any remedy is effected, there is at least one to go to.

For companies that do not fall into this category—my noble friend Lady Bowles provided the detail, so I will not repeat it—there is no form of protection; the FCA has no standing. Therefore, when those companies are put into default and the banks come to collect on their debts, their only resort has been to the courts. Under this arrangement, that is now removed from those companies if they have taken out a bounce-back loan. I really do not understand why the ability to go to the courts to protest unfair treatment has been removed.

The Government have full knowledge that the FCA cannot act under these circumstances. I suppose that, occasionally, somebody in government will argue that the FCA can turn to the Senior Managers Regime, but, as we all know, having listened frequently to the testimony from Andrew Bailey, only in very rare instances would the regime apply. Indeed, the FCA has been very reluctant to use it, even in some very egregious cases; in fact, I would be interested to hear from the Minister the number of times the FCA has actually used it. It is not a workable mechanism for trying to force the banks to provide fair treatment to the larger end of SMEs if they go into default under their bounce- back loans.

The Bounce Back Loan Scheme is brilliant, but I am very concerned that it will end up with a stain on its character when, in 18 months’ or two years’ time, we have a chain of companies that are clearly being treated unfairly by the banks and both the Government and the regulators stand back and say, “There is nothing we can do. This was an unregulated activity, only contract law applied, and we have disallowed these companies’ ability to go to the courts to seek any form of redress”. Frankly, it is a tragedy and a scandal in the making.

I am not sure it has been made clear to companies that when they apply for bounce-back loans, it is caveat emptor and they will be without even the normal range of protections should they go into default. If I understand correctly, the Government have decided to disapply the right to turn to the courts as part of an enticement to the banks to participate in the Bounce Back Loan Scheme. I cannot believe that that concession should be given; and if it was asked for by the banks, I am even more worried because, as we know, the banks seek opportunities to make profit—that is the business they are in.

Perhaps the Minister is not that familiar with the RBS and GRG scandals. The GRG was a profit centre. The RBS staff who were part of the GRG were looking not only to get loans and interest repaid but to make an additional profit, particularly by seizing assets. Under the various contract terms, they could identify firms that would value those assets. The owners or borrowers could argue that the assets were being valued at well below market value, but had no means of enforcing that, and of course we know from the various reports that followed that it was not infrequently the reality that assets were valued very low, triggering the default, and months later, having been seized by the bank, were resold for multiples of the valuation.

The mechanisms that the banks use when they have the opportunity to put a company into default are frequently outside the boundaries of what any of us would consider fair and appropriate. I do not understand stripping away from companies any possible route to a remedy under those circumstances.