Insolvency — House of Commons, 2021-04-28
Topic: Mixed Topics
Lucy Maria Powell (Labour, Centre-left): Well, here we are again. The Minister and his officials, who have heard me make the same speech numerous times, are in for a little treat today, because I am going to detour slightly from my usual remarks, which have centred a bit around "I told you so" on extending these provisions. Today I also want to touch on some of the wider insolvency framework issues that I think are pertinent now I welcome the Government’s extending the safety net for businesses in distress because of the pandemic. As I said when we supported the emergency legislation last year, we welcome any measures that support businesses that close to keep us safe. We argued then that the protections in the 2020 Act should be extended over a longer period of time. I think this is now the third time—possibly the fourth time—that we have come together to extend them, on each occasion, unfortunately, causing real uncertainty and worry for businesses in the run-up to each previous expiry date As the economy reopens and restrictions ease, it is right that these measures are kept under review. Through the crisis, we have called on Ministers to ensure that economic support matches the public health measures in place. While we have seen welcome support for workers through the furlough, there have still been gaps in Government support that they have repeatedly failed to address. There is a cash crisis facing firms with high ongoing overheads but still no income coming in and those excluded from all Government support, and little or no help for those sectors still closed and likely to be closed or uncertain for some time, such as travel, large events and weddings, and the visitor economy As I have said before, we are very concerned about the levels of debt facing businesses, whether that is through the loans they have taken, the VAT they have deferred or the rent holiday they have had, but soon have to start repaying. These measures are welcome in staving off creditors, but they just kick the can down the road, and do little to change the fundamentals facing so many firms of large covid debt and low or no takings while the fight against covid continues. The bombshell that businesses face remains real, and that is why Labour has argued for a student loan-style scheme, in which covid debt can be repaid as businesses grow, so that we do not see waves of insolvencies. There is nothing in the provisions today to deal with those fundamentals Turning to the Corporate Insolvency and Governance Act provisions in general, it is clear that some of the issues we have warned about are coming home to roost, particularly when we look at the impact of Greensill Capital’s administration on the Gupta Family Group and Liberty Steel. The Government have consistently ducked the need for wider reform of our insolvency laws, particularly in providing greater protection and support for key industries and their workers. We argued for and sought to amend the legislation to this effect, and it is not too late for the Government to act It is clear from reports that the gulls are circling, and regardless of whatever judgment people make about GFG, the Liberty Steel plants are a critical asset to our economic and national security, and employ thousands of highly skilled workers directly and through the supply chain. The company must be given time to refinance, but if that is not successful, then the Government must keep every option open and have a plan for all eventualities to save the UK steelmaking capacity and its supply chain. However, our insolvency laws mean that there is no safe place to refinance or protect this company’s assets until it might be too late, all the while leaving the company searching for refinancing while trying to retain the confidence of suppliers and customers, who risk the most should it fail In the US, they have chapter 11 to shepherd important industries facing distress. There, the authorities are able to wrap their arms around strategically important companies to allow them time to resolve difficulties, refinance or restructure. The chapter 11 process, should we have that here, would have created a better context for the refinancing of Liberty Steel, without the spotlight and falling confidence. We argued for its inclusion in the Corporate Insolvency and Governance Act 2020. Ministers could have brought forward changes on that today, but unfortunately they seem content to let the company fail first. We know that this has a high cost for the suppliers as well Even without changes to the insolvency laws, if there is a political will, there could be a way. Ministers should not be bystanders. They should intervene early, before liquidation if necessary, and that would mean that workers would not lose their accrued services benefit as well as protecting the supply chain. When the Minister gets to his feet, I hope that he will reflect on the wider point about how we can protect nationally important businesses in future and assure us that his Government will do whatever it takes to save Liberty Steel from insolvency.