We have a really lively session; it is excellent.
As a measure that will deal with an immediate problem flowing from the very rare circumstances of a pandemic, we can but agree with it. However, I have a few questions for the Minister. Can he explain the financial impact of these changes on local government? About 25% of local government funding comes from business rates, so any change, however small, can have a considerable impact on really tight council budgets. It is important for those of us who are concerned about local government, as the noble Baroness, Lady Blower, said, to know exactly what the impact will be. When the noble Lord, Lord Callanan, introduced the Bill, he emphasised the importance of certainty of local government funding from business rates.
Can the Minister explain what estimations have been made of the impact of impending rises in interest rates on businesses that have accepted government loans during Covid? The implications for what might happen are obvious. Concerning the £1.5 billion relief fund, we need to know the details and what happens when the fund runs out, as I suspect it will. Also, we need answers to the questions asked by the noble Baroness, Lady Blower, about administrative costs for local government in handling it.
Next, can the Minister say when much-needed fundamental changes to the business rate system will occur? We have been promised them for quite a long time now, and there is a lot of concern around local government and the business world that the current system is not answering the questions it needs to on town centre businesses on the one hand and digital businesses on the other, as the noble Lord, Lord Bourne, said. My concern is about warehouse and distribution centres, which do not pay their fair share by any means. That must be put right. Finally, will the Minister confirm whether a review of these measures is being planned within, say, a year of their introduction, so that we know what is going on?
I turn to Clauses 3 and 4, which relate to director disqualification. The last-minute changes to the timing of this debate have ensured that a number of people who would have spoken are not available. This includes my noble friend Lord Fox, who actually could have spoken because the Bill he has been speaking on has finished. I am sure he will be here for Committee but he has provided me with the following words, as this is definitely not my area of knowledge, let alone expertise.
He writes that these Benches welcome the intentions of the director disqualification part of the Bill. It is right that powers be created so that those who have fraudulently benefited from payments introduced to
protect businesses during Covid are brought to book and the money recovered. Like other noble Lords, we received a briefing from R3, which represents insolvency practitioners; I am sure the Minister and the department also heard from it. Its members must file a report on the directors’ conduct with the Insolvency Service when acting as officeholders in a formal insolvency process, so its experience in this is welcome. Its concerns, like ours, focus on how the Bill will actually work and how it will help the wider creditor network.
First, we should be clear about one thing. The work of the Bill should not be at the expense of investigations into insolvent rather than dissolved companies. As R3 explains:
“R3 members already repeatedly express their frustration that not all their reports highlighting suspected serious legal breaches are acted on.”
Can the Minister assure the Committee that additional resources will be available to take on the extra activity created by the Bill, rather than it cannibalising an already stretched situation? Perhaps he can offer some crumb of comfort to the wider insolvency community by talking to his colleague the Chancellor of the Exchequer about this. Given that the Chancellor is embarking on a “non-spending review”, an activity such as this which brings money both back to government and into legitimate circulation will benefit the economy and pay back many times.
Our second point seeks detail as to how in practice this legislation will recover the money. What will be the mechanisms to recoup money from culpable directors? Do the Government intend to use tools such as compensation orders? This is significant because, unlike an insolvency process, where returns are made to the creditor body, the so far little-used compensation orders normally benefit only one creditor—in this case, we guess, HMRC.
Although the Government have indicated that they will expand the number of creditors who can benefit from a compensation order, this has not been made clear in the legislation, so we have to assume they will not. Where there are multiple creditors, an insolvency procedure has to date been more successful at recovering money owed to these creditors. How will the Bill protect all the other creditors as well as HMRC? I look forward to the Minister’s response.
7.34 pm