Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill — House of Commons, 2021-06-28
Topic: Domestic Commerce
Seema Malhotra-Saluja (Labour, Centre-left): I am grateful for the opportunity to respond to the debate on behalf of the Opposition and to consider the contributions made by hon. Members. I also thank the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully), for the meeting we had beforehand, in which we were able to discuss aspects of the Bill and issues that have been raised in the debate We have had some very positive and helpful contributions, including from the hon. Member for Thirsk and Malton (Kevin Hollinrake), with whom I have worked closely on mortgage prisoner issues and other areas of financial services regulation. He brought his characteristic clarity to the debate, raising issues including prosecutions for fraud and the resources that are necessary for us to be able to act. The speech by the hon. Member for North Norfolk (Duncan Baker) was so clear that it did not require an intervention, and I thank him for it. The hon. Member for Strangford (Jim Shannon) made the important point that Northern Ireland businesses should remain on the same footing as those in the rest of the UK. The hon. Member for Richmond Park (Sarah Olney) was right about the debt burden that businesses are facing, which is one reason why the Opposition have called for a flexible debt repayment scheme based on what businesses earn. That continues to be an essential part of how the Government must support businesses going forward As my hon. Friend the Member for Manchester, Withington (Jeff Smith) outlined at the start, the Bill contains some positive measures and we support its going forward. However, we want it to deliver for businesses and local authorities and to bring justice to unscrupulous company directors, and it also needs to be workable for the Valuation Office Agency and the Insolvency Service. However, there are significant gaps in the detail, which must be addressed if the Bill is to achieve its aim Clause 1 rules out covid-related material changes in circumstances in relation to business rates appeals. We understand that assessing thousands of appeals would not be the best use of the Valuation Office Agency’s time when a full revaluation is due to take place in 2023. However, it is vital that this change is coupled with the £1.5 billion relief fund for businesses that have been badly affected by the pandemic but that have so far missed out on business rates reliefs—a point well argued by the Federation of Small Businesses, and I will come back to that point and to concerns that it may not cover everyone. The funding should also support businesses and supply chains that have been unfairly overlooked for so long Confirmation that the fund is an alternative to adjustments to rateable values as a result of material changes in circumstances appeals also provides much-needed certainty to local authorities. Since 2013 business rates revenue has formed an increasingly substantial part of local government revenue. While this reliance on business rates is imperfect and longer-term reform is needed, a large fluctuation in income at the tail end of the pandemic would be the last thing that local authorities need, and the Bill makes that less likely However, the lack of detail around the £1.5 billion fund is worrying. Since the figure was announced in March, businesses and local authorities have had no further detail on how the amount was calculated, how it will be allocated and who will be eligible, nor is there guidance on how it should be administered. Councils are expected to develop and set up local schemes to deliver this business grant relief, but they cannot start the process until they receive their individual allocations and until the Government publish national guidance setting out the parameters for the scheme We are concerned that the allocations will not begin until the Bill has passed through Parliament, meaning that payments are unlikely to be made until September at the earliest. Businesses and local authorities are united in crying out for clarity on the distribution process, for clear and straightforward award criteria and for simplicity and speed in getting the funding out. Waiting until September will mean that many businesses will not survive long enough to benefit, especially in the light of the decision to postpone the next phase of unlocking and the fact that economic measures have not been continuing in lockstep with public health restrictions The Government previously said that this grant-based approach was to ensure that relief could be awarded more quickly than if it was sought under a rating appeal, so again, why the delay? I reiterate that the Government must publish an early release of the funding allocations and eligibility criteria, and I urge the Government to work closely with local authorities and the Local Government Association to make sure that that guidance is as clear as possible There are also further questions to ask about how the Government calculated the figure of £1.5 billion. What assurances can they give that it will be sufficient to support the businesses that have struggled so much without rates relief during the pandemic? I would be grateful if the Minister could cover that in his closing remarks. While the £1.5 billion discretionary fund has been broadly welcomed, the ruling out of material changes in circumstances rate appeals, as he knows, will have come as a disappointment to many businesses. Have the Government made an assessment of how many are likely to have been affected by the closing off of this avenue and how much they would have been able to claim back otherwise? Did these sums inform the Government’s calculation of the £1.5 billion figure The Minister will also be aware of the concerns of airports such as Heathrow, Gatwick and Manchester, and the need for a proper deal for aviation, which, so far, the Government have failed to bring forward. Heathrow has continued to pay its £120 million annual business rates bill in full despite the plummeting passenger numbers, so has the Minister undertaken an assessment of the impact that the Bill will have on the operation of pieces of national infrastructure such as airports? Was any consideration given to exempting them from the provisions I will make a few comments on the directors disqualification aspects of the Bill in clauses 2 and 3. It has long been known that a small number of directors of companies fraudulently use the dissolution process as a way of avoiding paying back loans, and this has become a particular concern with the covid-19 bounce back loans. With the dramatic increase in the number of company dissolutions this year compared with last year, there are fears that a minority of rogue directors have sought to use this mechanism to avoid repaying state-backed loans. It is therefore right that the Bill aims to close the dissolution loophole, allowing directors who have unscrupulously dissolved their companies to be punished and deterring others from doing this in the future Additionally, applying to court to have dissolved companies restored is time-consuming and costly to the public purse. It is right that the Bill removes this hurdle to tackling business corruption, but it is unfortunate that it comes now rather than three years ago, when a Government consultation, which the Minister referred to in his opening remarks, on the Insolvency Service’s powers saw the majority of respondents agree that there was a gap in powers in relation to directors of dissolved companies. If action had been taken more promptly, as I think the Minister would agree, the significant exploitation of the bounce back loan scheme may never have happened in this way My hon. Friend the Member for Manchester, Withington raised Labour’s concerns about how additional investigations will be funded and the need for adequate resourcing of the VOA and the Insolvency Service. R3, the insolvency and restructuring trade body, has highlighted its members’ concerns that not all their reports to the Insolvency Service are acted on, even where serious breaches of the law are suspected, due to resourcing issues. So how do the Government intend to address this while also ensuring that the Insolvency Service stands ready to take on a potentially even bigger case load I would add that if resourcing delays result in investigations going beyond three years since the company is dissolved, and that consequently means that a Government run out of time to apply for a disqualification order against a culpable director, that would be an utterly unjust outcome and an incentive for the phoenixism that we want to see end. It would also surely fail the public interest test, so, finally, will the Minister explicitly clarify whether the Government plan to use compensation orders against disqualified directors? The Government’s approach to this must be made clear so that there is efficiency in returning funds to the public purse and other creditors can be monitored and evaluated properly I hope that the Government have been able to take note of the issues raised during this debate. Labour will keep pushing for these vital improvements and particularly for swift guidance and the release of the £1.5 billion relief fund. With many of the hardest-hit businesses yet again facing uncertainty following the extension of covid restrictions, we owe it to them to make this Bill genuinely helpful and not one more thing to worry about.