My Lords, these regulations were laid before the House on 11 February. We have shared a long and difficult journey since restrictions were first needed in March 2020. As individuals, we have had to endure the very necessary but nonetheless difficult requirement to socially distance, with limits on where we can go, what we can do and who we can see. That, of course, has had an impact on businesses, with many having to close temporarily, and many more being able to trade only under very tight restrictions.
I am sure noble Lords all shared my sense of optimism when, on 22 February, the Prime Minister was able to set out the road map for the staged lifting of restrictions in England, with plans for Scotland and Wales being published by the devolved Administrations soon after. We can at last look forward to a return to normality in the months ahead. This would not have been possible without our wonderful NHS workers, both in their caring for sufferers from the virus and in their astonishing efficiency in the successful rollout of our unprecedented vaccination programme. Over the next few weeks, businesses that have been closed for many months will be able to reopen and trade, initially subject to certain limitations but, if all goes well, free of restrictions in parts of Great Britain from late June.
Noble Lords will recall that the Corporate Insolvency and Governance Act 2020 provided urgent support for businesses severely impacted by the effects of the pandemic. Temporary measures such as suspension of the use of statutory demands and restrictions on winding-up petitions, and the suspension of personal liability for wrongful trading, were put in place to allow viable businesses the best possible opportunity to survive.
New insolvency and business rescue procedures were also introduced, which will allow companies breathing space to decide on the best course of action in the face of financial distress, or to use a new formal restructuring process. As a contingency, and to enable the Government to rise to meet unexpected challenges and strains on the corporate insolvency regime as a result of the pandemic, the Act provided the Secretary of State with a general power to make temporary amendments or modifications to the effect of specified insolvency and governance legislation through regulations.
This power was needed because at that time we just did not know what the future would bring. We had hoped, of course, that the pandemic would have run
its course by autumn last year, but, sadly, as we all know, that turned out not to be the case. The general power meant that the Government could act quickly to make the urgent changes needed to prevent unnecessary insolvencies, to allow the regulatory and administrative frameworks to deal with any impact of the pandemic on case numbers, and to mitigate the impact of the legislation on the duties of those with corporate responsibility.
As this was such a wide power, its use was restricted. It can be used only for the purposes I have just mentioned, and only where the temporary change was in response to the impact of the pandemic. The general power can be used only where the need is urgent, the provision being made is a proportionate response to the challenge being met, and exercising that power is the only way to achieve the desired outcome. In addition, the Secretary of State has a duty not only to assess the impact of using the power on those affected by any changes but to keep any regulations made using the power under review and to revoke them if they are no longer needed.
The legislation creating this general power also specified that it would sunset on 30 April 2021, although that date could be extended by further regulation. The original expiry date for the general power was set when we all hoped that the pandemic would be over and life would return to normal by the autumn. It would allow the power to be used while businesses were recovering and adapting to life after the virus.
While we were of course hoping to be free of restrictions in June, businesses have suffered the impacts of the virus for a year now, and we may need to be able to use the general power while the economy recovers. The unprecedented package of Government support which has been put in place has so far allowed as many otherwise viable businesses as possible to survive, saving jobs and livelihoods in the process. But there is of course no question of it being business as usual as soon as lockdown restrictions are fully lifted. Indeed, the Office for Budget Responsibility is not expecting the economy to have fully recovered until the middle of next year.
These regulations use a power in Section 24(3) of the Corporate Insolvency and Governance Act 2020 to extend the sunset date of the general power, and will mean that the Secretary of State will be able to use it for a further year. Extending the period during which we can use the general power will mean that we can continue to be able to act quickly should the need arise, to give the best opportunities to allow viable businesses to survive the pandemic, and, in the process, save jobs and livelihoods.
The general power could, in addition, be essential to any strategy that we need to deal with any extraordinary pressures on the administrative and regulatory regimes. I can reassure noble Lords that the Government’s ability to extend the life of the general power is not open-ended. In particular, any further extension of the power is limited by Section 24(4), which prohibits the power being exercised after 24 June 2022—that is to say, for two years, starting with the day after the Act conferring the general power was passed.
It is important to note that these regulations do not introduce a new power but rather extend an existing one which we think is still needed. The general power
has been used once since its creation to revive the suspension of personal liability for wrongful trading when national restrictions were reintroduced late last year. That suspension has not been extended, due to the apparent improvement in trading conditions at the time of its expiry at the end of September.
There are no specific plans to use the power again at present, but this could of course quickly change, and it remains an essential part of our toolkit in dealing with the impact of the pandemic on business. I commend these draft regulations to the House.
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