Corporate Insolvency and Governance Bill

Lord Liddle Excerpts

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

[Lord Liddle (Lab) [V]]

My Lords, I commend the Government for their urgency in bringing forward this legislation. It is clear that, as a result of Covid, we face a potentially massive corporate crisis affecting companies large and small. Through the moratorium and the associated measures, the Bill provides a breathing space for a restructuring plan—so it is part of the solution, but not the whole solution. As the noble Earl just explained, we certainly do not want a repeat of the way some banks and creditors behaved in the aftermath of the 2009 financial crisis. They certainly did not act in either the interests of the companies or the public interest.

Many speakers have referred to corporate rescues and highlighted various bad business practices resulting from them. I have a lot of sympathy for that, but in our present situation it is absolutely essential that there is an effective corporate rescue mechanism that enables firms with a sustainable future to survive. That is why this legislation is so important.

The noble Lord, Lord Leigh of Hurley, thinks that this rescue mechanism can be financed by the private sector; I am sceptical. I think that the private sector will come in only if it thinks it can buy the assets cheaply and have total freedom, without constraints, to do what it wants with them. I think we will see a need for a massive conversion of debts that companies cannot afford to pay into public equity. The noble Lord, Lord Agnew of Oulton, acknowledged this at Question Time today.

We need a public debate now about how this rescue operation will be organised. There is a great lack of institutional capacity on the part of government to do it; it cannot just be done from the centre. My advice to the Government is to try to devolve the decision-making regionally and expand the role of the British Business Bank. However, none of this rescue will work if, first, HMRC sees its main priority as trying to secure the money it is owed—that would be one hand of the Government not being aware of what the other is doing —nor, secondly, if the Treasury tries to vet every single decision, which would just be hopeless.

Business, of course, has to face up to greater responsibilities, but I think that for small and medium-sized companies we should adopt a lighter touch. The key thing there, in my view, is that public policy should promote a culture of employee engagement. When it comes to the larger public corporations and rules about what dividends can be paid, how much executives can earn and how pensions are to be protected, all that will be inevitable in this process of rescue.

I have a final word for my Labour colleagues. We should not see this as an opportunity to impose heavy-handed regulation and public control on business; we should be trying to move to a reformed, sustainable capitalism. I agree with my noble friend Lord Adonis, who quoted Keynes’s remarks about the need for experimentation in public/private ownership: what we need is a new era of public/private ownership