Corporate Insolvency and Governance Bill

Stephen Doughty Excerpts

Consideration of Lords amendments & Ping Pong & Ping Pong: House of Commons
Thursday 25th June 2020 Commons Chamber

[Paul Scully]

The Corporate Insolvency and Governance Bill has been a demonstration of what can be achieved in the best interests of businesses, jobs and the country’s economic future when there is collaborative work across both sides of the House. I am grateful to hon. and right hon. Members for the constructive way in which the Opposition have engaged with the Bill, both in this House and the other place.

Over the past three months, this country has faced the unprecedented hardship of needing to adhere to stringent social distancing measures due to the covid-19 pandemic, where Government had no choice but to order businesses to close their doors to safeguard the nation’s health. We recognise the huge sacrifices that has entailed, and my right hon. Friend the Chancellor has provided unprecedented economic support to businesses and workers across the country to help them make it through this challenging time.

Some UK businesses have been hit hard, with many unable to trade or facing a significant short-term reduction in demand for goods and services. As a result, many otherwise viable companies face the threat of insolvency.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

With regard to Lords amendment 75, which extends the temporary provisions to 30 September, the Minister is absolutely right that a lot of businesses can survive this crisis, but they need these measures in place. They also need the packages of support from the Treasury alongside the legislative changes. The clock is ticking for many, particularly in the theatre and entertainment industry, the steel industry and others affected in my constituency. Does he agree that we need to see financial packages too?

[Paul Scully]

I agree with the hon. Gentleman that it is important that we remain flexible. We continue to work with businesses from all sectors to ensure that we can get to a point where we can work through the gears to get a full economic recovery over time. That will mean support from the Government in all manner of ways, which we are considering.

--- Later in debate ---

Turning to the Lords amendments, we are grateful that Ministers listened to our concerns about the impact of these changes on pension funds and the voice of workers, and have amended the Bill accordingly to provide extra safeguards. There are some lessons to be learned from the passage of the Bill, however, and for the Government to think about as they plan further changes in this area of insolvency and corporate governance.

[Stephen Doughty]

I entirely endorse the point my hon. Friend is making, particularly with regard to pension schemes, because we have seen the tragedy of where this has gone wrong, such as the Allied Steel and Wire pensions scandal in my constituency, which is still affecting people today, years afterwards. Does she agree that we need to take some of the lessons from this process into protections for pension schemes and pensioners, who are expecting, having paid in, that they will get out in due course?

[Chi Onwurah]

I thank my hon. Friend for that extremely constructive and to-the-point intervention. We absolutely need to learn from this process, and we also need to ensure that not only the mistakes but the injustices of the past are not repeated, particularly now, when the economy and so many workers and pensioners are so vulnerable.

First, I hope that Ministers will learn from the experience of passing this legislation in such a hurried manner, with a mixture of permanent and temporary measures. While we understand the need for speed with this Bill, it is clear that there have been problems in combining temporary changes with permanent reforms that have been a long time coming and the lack of time for proper scrutiny. That point has been strongly voiced in the other place, and we hope that Ministers will bear this in mind when introducing complex permanent changes along with temporary measures.

Secondly, the ranking of priority debts in insolvency cases has not been changed in a number of years and concerns have been raised that this is out of date. There is no mention of FinTech or some of the new complex ways in which firms finance themselves. If further insolvency changes are planned by Ministers, they must be relevant to where the world is now.

Thirdly, the interaction between pension funds and insolvencies is very complicated, particularly around defined pension schemes. That needs to be looked at afresh. Fourthly, the lack of mention of employees in the whole Bill is a complete oversight, which is why we argued for greater recognition of, and voice for, employees during the passage of the Bill. Any further changes to insolvency and corporate governance legislation must consider how workers can be better included. Finally, there are clearly issues, as the Minister has raised, around pre-pack. They will need to be resolved.

We are pleased that we have been able to work so constructively with the Government to pass this important legislation to support business through this crisis. We are grateful for the listening ear of Ministers. We hope that this legislation will save businesses threatened with becoming insolvent through this crisis. We will keep a close eye on how the measures are implemented, and we hope Ministers will do the same.

Flats and Shared Housing: Fire Risk

Stephen Doughty Excerpts

Tuesday 28th January 2020 Westminster Hall

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

It is a pleasure to follow my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Select Committee. I am pleased to see him back in his position and to speak in this crucial debate, and I congratulate my hon. Friend the Member for Reading East (Matt Rodda) on securing it. He, the Chair of the Select Committee and the hon. Member for Strangford (Jim Shannon) have covered many of the important issues at stake. It is a great pleasure to serve under your chairmanship, Mr Gray, and I wish you all the best in the elections this week.

Housing is a devolved matter, and I pay tribute to the Welsh Government for their work on fire safety and building issues—particularly the groundbreaking law on sprinklers in buildings that was introduced in 2016; the ban on combustible cladding that was announced just last week by the Minister for Housing, Julie James; and the plans to bring forward a crucial White Paper on the wider life cycle of apartment buildings and buildings in general. There are many things here on which we can work UK-wide, as the hon. Member for Strangford said.

Many of the construction companies involved in building these blocks are based across the UK, and many issues relating to insurance and legacy regulation are at a UK level. Co-operation between the UK Administrations, and with the UK Government, is therefore crucial to ensure that we keep our residents safe and expose companies—I will come on to some very specific concerns—that, quite frankly, should be ashamed about their buildings and their failure to live up to construction standards.

I will talk about a specific example in my constituency that has been heavily in the media in recent months: the Celestia block in Cardiff bay, which is a short distance from the National Assembly and other developments. It is one of the many developments that have brought people into the former docklands areas of Cardiff bay over the past 15 to 20 years. In my constituency we now have something over 16,000 individual apartment units in a range of different styles. Some of them are extremely pleasant, with beautiful views across the water, and they have brought in people from all over to contribute to Cardiff’s economy.

However, I am sorry to say that some very serious issues have been raised with me about defects in the buildings, and a significant number of them relate to fire safety. I do not want to name all the other blocks; as Members will be aware, one challenge that we face as elected representatives is that if we expose such things in the media, we can cause serious damage to the financial standing of owners and leaseholders, and we can create panic and fear. In the aftermath of the horrific events at Grenfell, many constituents have come to me with serious fears and concerns that have led to mental health worries and other difficulties, especially for people who live in taller blocks.

With the city’s public high-rise housing, which is run by Cardiff Council and other providers, I am pleased to say that the council has taken significant steps to address fire safety concerns and reassure residents. I pay tribute to my colleague Councillor Lynda Thorne for the work she has done on these issues for Cardiff Council; to the councillor for Butetown, Saeed Ebrahim; and to my Assembly colleague Vaughan Gething, with whom I have worked closely.

Unfortunately, we have not seen the same in the private sector. Celestia, the development, was built by Redrow and Laing O’Rourke. I am sorry to say that their response to me, other elected representatives and, most importantly, the residents of the Celestia block has been, quite frankly, shameful. The failure of the chief executive, John Tutte, and others even to respond to the concerns that I and others have raised with him shames the company. They have some very serious questions to answer.

Celestia is a huge development built in 2006, comprising 457 leasehold residential development dwellings, ranging from one-bedroom flats to multi-bedroom apartments. It is spread across seven apartment blocks in Cardiff bay that are joined together. We have been advised by residents and, more recently, in inspections that the building has several serious dangerous defects ranging across, but not limited to, fire safety. They include defective render, defective roof anchors and defective balconies, which are not safe to go out on. Sewage has spilled into people’s apartments. I was told of a sewage pipe that had been propped up on a Starbucks cup behind a wall, resulting in one of the flats being flooded with sewage. The issues go well beyond fire safety.

On fire safety, the inspections found very poor or non-existent compartmentation measures, which my hon. Friend the Member for Reading East spoke about, missing or defective external fire cavity barriers, and the use of timber cladding insulation that is not of the required standards. In response, Redrow and Laing O’Rourke have washed their hands of the issues. I have been dealing with two organisations at the block: the Celestia Action Group and the leasehold association, Celestia Management Company Ltd. Both have separately raised concerns with me.

Redrow and Laing O’Rourke responded to me. Redrow said:

“Redrow procured the services of Laing O’Rourke as main contractor…Redrow are no longer the freeholder…and any works required to be carried out would require the consent of the freeholder…Redrow acknowledge the potential issues relating to fire safety and will continue to work closely with the management company, freeholder and main contractor,”

and so on and so on, but it gives no commitment. To add insult to injury, its suggested remedy for work that will potentially cost millions of pounds on such a large block is to offer the residents a loan to pay to rectify defects that it is responsible for. That is, quite frankly, shocking and an insult to the residents in the block.

Laing O’Rourke similarly washed its hands of the issue, saying:

“We are aware of the background to the issues raised in your letter. The present situation is that the current building management company has engaged third party technical advisers”—

blah, blah, blah.

“We have fully co-operated…We are however unable to comment further on the issues raised in your letter whilst the technical review is in progress.”

From a pride point of view, I think of what I would do if I were involved in a company responsible for a building with so many defects, particularly relating to fire safety, which put residents’ lives at risk to the point that South Wales Fire and Rescue Service had to intervene and issue orders that could have resulted in the immediate evacuation of the building. Thankfully, it was possible to undertake some immediate remedial work, so that was not required, but the fact that work had to take place within the next 12 months shows the scale of the problems.

I have met Councillor Lynda Thorne and Cardiff Council to discuss building control and environmental safety, and they are working closely with South Wales Fire and Rescue Service to try to address some of the immediate concerns. There are also issues relating to access for fire appliances around the building. Such access involves a path on the edge of the docks that often floods, and the fire service is understandably worried about being able to get appliances round to the side of the high-rise building.

One of the residents wrote to me to say:

“Although the most shocking fire safety issues were only discovered in the last year or so, the majority of the defects from a cost point of view have been known about for many years, yet you”—

Redrow—

“have refused to put them right. These aren’t defects caused by wear and tear, or poor maintenance, they are fundamental construction defects. Indeed, I haven’t once heard an argument put forward by either company”—

Redrow or Laing O’Rourke—

“that the defects are a fault of leaseholders, and my understanding is that the reason you aren’t paying to put them right is because you are hiding behind legal loopholes. Morally, I find your attitude absolutely disgusting. I like many others, am currently stuck in an apartment that is”

potentially worthless.

“I would like you to explain to me why, after buying this apartment in good faith, I am essentially out by”

a very large sum of money. They asked why they should have to pay the sum,

“instead of you—the builders and developers of the complex.”

Celestia Action Group told me and other elected representatives in December that, despite its attempts to secure a standstill agreement with Redrow—there is a belief that Redrow has been dragging out this process to go over a 12-year period to try to avoid its responsibilities further—Redrow rejected that. Celestia Action Group believes that there is a deliberate attempt to try to frustrate the interests of the building’s leaseholders and residents.

Celestia Action Group is equally shocked by the proposal of a soft loan, not least because Redrow did pay out for and rectify the issues at the Ropeworks building in Barking. My right hon. Friend the Member for Barking (Dame Margaret Hodge) raised that issue at the time. The block was built at around the same time as Celestia and there are very similar issues, and yet Redrow paid out there. Why is it one rule for a block that the company built in Barking and a different rule for a block that it built at about the same time in Cardiff? I believe that the company was building similar blocks to similar standards in other cities around the UK at the time. Clearly, it was attempting to get away with avoiding its responsibilities in a couple of places to save itself money, and in other places it was paying up.

The company is predicted to make £406 million in pre-tax profits this year, so I understand residents’ outrage at its failure to deal with this problem. John Tutte himself received something like £2 million annual compensation, so the loan that the company is offering the residents in Celestia is about 50% of what he gets, let alone what the company makes. Understandably, people are absolutely shocked. I was delighted to join residents protesting when, to our shock, Redrow was being recommended for an award in Cardiff bay just before Christmas. I stood outside another building where the awards ceremony was taking place, protesting with residents. Many of them had not had the courtesy of a response from Redrow and Laing O’Rourke. Many residents attending the awards ceremony live in the block of flats and were unaware not only of the scale of the building’s problems, but of Redrow’s and Laing O’Rourke’s failure to deal with them.

There are some very serious issues here, and we have heard about the wider context that they sit within. It is clear that such issues occur across the United Kingdom. They relate to serious defects in fire safety and other building construction standards. They go back many years, and companies simply wash their hands of them, often by self-certifying, not having adequate inspections and offering worthless guarantees. Then, when problems are identified, instead of doing the right, moral thing—rectifying the issues and coming to agreements with leaseholder associations and others—they simply try to wash their hands of them and bat them off to somebody else. It is not good enough. The senior management of Redrow should sit down with me and the residents of Celestia in Cardiff bay. There needs to be much wider investigation and regulation of the industry, particularly because in cities such as mine—my hon. Friend the Member for Reading East said the same—new apartments blocks are going up all the time. This is about not just the high-rises, but the lower-rise blocks, too. I am sorry to say that I am frequently told about serious concerns and problems.

I will continue to work with my Assembly colleagues and others, and I am pleased by the work that they and Cardiff Council are doing. The UK Government must look at the matter too, and companies such as Redrow and Laing O’Rourke should take responsibility for their shocking and shameful behaviour.

--- Later in debate ---

[Esther McVey]

The hon. Member makes a very good point. Those are exactly some of the measures that we are looking at, to make sure that the remediation is done in the best way, while being mindful of leaseholders.

[Stephen Doughty]

Does the Minister agree that it is inappropriate for companies such as Redrow to offer soft loans to people to deal with things that were not wear and tear but fundamental building defects, in relation not just to cladding but to many other aspects of fire safety? Those people should be allowed to access insurance and opportunities to remediate that do not bear down on them financially. It was not their fault, and they should not have to pay.

[Esther McVey]

The hon. Member makes a good point. I wonder whether we could have a meeting to talk about some of the things we think should be put in place, so that I can make representations to the Secretary of State and the Chancellor.

I would like to leave some time for the hon. Member for Reading East to make his closing remarks, but first I want to talk about the stringent rules that private landlords must follow. By law, privately rented properties must already be free from the most serious health and safety hazards, which include fire. Landlords must put up smoke detectors on every floor, and they must have gas boilers and installations checked every year. Earlier this month, we laid before the House regulations requiring landlords to carry out safety inspections at least every five years, and to prove that the electrics in their property meet the legal standard. If they do not, the landlord must get the work done to make them safe.

The hon. Member for Glasgow East (David Linden) mentioned electrical safety inspections and the safety of electrical goods that people buy and plug in at home. He asked whether we could work with the Department for Business, Energy and Industrial Strategy and other Departments to ensure that such goods are safe. That is a fair point. We do work across Departments, but we need to do that as well as we possibly can. Landlords must ensure that all fire escapes are clear—