Commercial Rent (Coronavirus) Bill

I beg to move, That the Bill be now read a Second time.

We have made some incredibly difficult decisions, including closing certain businesses, to stop the spread of the virus during the covid pandemic. To minimise the impact on businesses, we have put in place temporary measures to stop evictions of commercial tenants for unpaid rent, restrict landlords’ ability to seize goods to recover rent owed, and prevent landlords and other creditors from instigating certain insolvency proceedings. While those measures offered much-needed protections, they also meant that in many cases rent on commercial premises went unpaid and businesses accrued significant rent debt, estimated to be £6.97 billion across the UK over the pandemic.

We are already seeing the economy bounce back, but now we need to begin the work of preparing for a new economy post covid. We cannot draw a line under covid, however. Understandably, it has not been possible for many businesses to pay the rent debt that accumulated during the pandemic. Over the past year, we have therefore worked closely with business leaders to find a solution to that accumulated debt.

In June 2020, the Ministry of Housing, Communities and Local Government published a voluntary code of practice that encouraged landlords and tenants to work together to negotiate and resolve that unpaid rent. I am reassured by the fact that many tenants and landlords have used the code. The indications are that overall rent collection is increasing but remains below average levels, especially in certain sectors.

There are cases in which negotiation is not working. The Bill will support landlords and tenants who cannot otherwise agree in resolving disputes relating to the rent owed. It will protect rent debts built up by businesses required to close during the pandemic. It will establish a new binding arbitration process that aims to find a proportionate solution that will provide commercial tenants and landlords with the clarity and certainty that they need to plan ahead and recover from the pandemic.

The Government have published an updated code of practice that sets out what the arbitration process will look like, the kind of evidence that will be considered and the key principles to which the process will adhere. The code can be used by any business to help it to negotiate and resolve rent disputes, even if it falls outside the scope of the Bill.

The Bill will protect jobs and enable a swift return to normal market operation. I make it clear that it covers only rent debt that it is attributable to the period from 21 March 2020, when restrictions on business began, until restrictions for the relevant sector were lifted, which generally happened over the spring and summer of 2021.

We believe that it is important that the Bill is targeted to support the businesses that most need it and provide swift resolution to remaining disputes, so it applies only to those tenant businesses that were mandated to close during the pandemic. They are the parts of our economy that were hit hardest, including restaurants, pubs and high street shops; the rent collected from those sectors is still lagging behind other parts of the economy. The income from many businesses in those sectors, even after they have opened their doors again, will not yet be back to normal. Many businesses will therefore have been unable to build up the cash reserves needed to pay off rent debt.

Will the Minister expand a little on how he expects the viability test to be met? It is obviously extremely important. During the pandemic, many businesses that applied for bounce back loans and the like were told they could not have the loans because they were potentially unviable owing to the coronavirus. How is the arbitrator meant to assess whether a business is viable?

I know that the hon. Gentleman is a champion of pubs throughout the country. We will be looking at those and at the hospitality sector in general.

The arbitrator will be able to take evidence from both sides—the Government will not be taking a doctrinal approach—and look carefully at the books and the profit to establish whether this is just the rent debt that occurred during that period of closure, rather than any other debts that the business might have. He or she will have a narrow focus.

I welcome the Bill—it is important that action is taken, even if it is retrospective—but often the very fact that the rent had to be found will have had impacts on other parts of a business’s funds. As the Minister works through the Bill, will he look carefully at the guidance to ensure that it does not shut out many businesses that could benefit?

Throughout the Bill’s progress, we will continue to engage with Members on both sides of the House, but also with landlords and tenants. We want to make this work, and to resolve these issues speedily but in the most appropriate way. That is in the interests of landlords and tenants. We hope that the fact that the legislation has been announced and we are taking it through the House will send a strong signal to landlords and tenants and they will not have to rely on this in the first place; we would love it if people had the conversations and resolved the issues. Landlords want their units to be filled, and tenants want to ensure that they can continue in a reasonable way, and if they can pay they should do so, as they are at the moment, because the Bill relates only to a particular period of closure.

An arbitrator should not make an award if it would make the landlord insolvent. This works for both tenants and landlords, and support for businesses must not be to the detriment of a landlord’s solvency. The Bill also makes it clear that, if commercial tenants can afford to pay the rent debt without becoming unviable, they should pay. The arbitrator will consider financial records, and any other evidence considered appropriate to determine the viability of a business or the solvency of a landlord. We have engaged with arbitration bodies to develop this approach, and I am confident that it will deliver swift resolution for tenants and landlords locked in disputes. Officials’ engagements with potential arbitration bodies has also raised awareness of our proposals, with the intention that, if Members of both Houses approve the Bill, the system will be set up and ready to go quickly.

I have already mentioned the protections that the Government rightly provide to stop commercial tenants being evicted or their businesses being wound up owing to rent debt during the pandemic. The measures introduced during the pandemic were designed to be temporary, offering much-needed respite to businesses unable to trade. We have already extended protections to continue to support businesses as needed, and to provide the time required to draft the legislation and put it before both Houses for consideration. In place of those measures, the Bill establishes a targeted intervention.

I thank the Minister for his speech and for introducing the Bill. Let me reassure the House that I hope to make a slightly more cohesive speech then the Prime Minister managed on Monday when he spoke to the CBI about the Government’s approach to business, but Members are welcome to intervene if I do start making car noises or talking about Peppa Pig.

We generally welcome the Bill, and it will be welcomed by retail businesses up and down the country, because it creates an arbitration process for disputes between landlords and commercial tenants on rent arrears caused by enforced closure during the lockdowns, and also the subsequent impact on businesses’ income and their ability to meet their outstanding rent demands, including outstanding service charges. It also restricts enforcement action for the recovery of rent arrears debt through the county courts for six months.

We accept the need for a fair arbitration process that deals with commercial rent arrears, and the need to ensure that that process works. There are some aspects on which we will seek further information, but before I come to them, I want to address the context in which this short and specific Bill is being introduced. Until this morning, we understood that it was to be a joint Bill between two Departments. It will not surprise the House to know that, as a shadow Levelling Up, Communities and Housing Minister, I shall be responding to the Minister as though he were the Communities Minister, because there are a number of aspects of communities and levelling up that I wish to address.

My Lewisham East constituency has among the largest number of small businesses in London. Brilliant councils such as mine, the Borough of Lewisham, can only go so far in supporting small businesses, especially when their budget has been cut by the huge amount of 63% since 2010. What businesses across our country really need is the Government to see them through this very difficult ongoing period, and they need a recovery plan in place.

My hon. Friend is absolutely right. This Bill is specific and closely drawn and, as I will go on to say, there are a lot of other challenges still outstanding for businesses and the communities in which they sit that the Government need to be working on as well.

We of course recognise how tough the last 20 months have been for so many businesses and the pain of the pandemic has impacted across the economy, but it has been particularly hard on small businesses, especially family-owned businesses which are anchored in their communities—businesses that have spent years, even decades, doing the right thing such as supporting their staff and investing in their skills, and putting back into the local area. There are countless examples of businesses that have always done the right thing, and saw a downturn after they followed public health regulations and they closed.

I of course acknowledge the support that the Government provided for businesses during the pandemic —bounce back loans, VAT deferrals, rates relief, the furlough scheme, and the rents-based schemes—but too many businesses missed out on many of these schemes: those refused loans because their bank was not on the Government-approved list; or supply-chain businesses to sectors such as hospitality whose customers were required to close but they were not. They missed out.

Despite the relief schemes, many are still struggling; loans and VAT deferrals still have to be repaid, and those not yet making a profit are still required to pay their bounce back loan. Labour has sought to amend the rules so that a business has to repay its loan only when it is making money. The pain has been particularly hard on small independent businesses and family-owned businesses, which are anchored in their communities, and many sectors—such as the arts and events, and, particularly in the constituency of my hon. Friend the Member for Feltham and Heston (Seema Malhotra), travel and tourism—still face great uncertainty for months and years ahead.

I am grateful to my hon. Friend for talking about the fact that although we support the Bill in its narrow terms, it could have offered much more, and particularly grateful for her making the point about business rates. I remember being in the shadow Business Department team back in 2014, and the Government were promising to change the business rates system back then. We have had any number of talks about it since, and so many businesses on the high streets know how unfair the regime is, yet we still have not had that action. Does my hon. Friend welcome the announcement of my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) that a future Labour Government will address this unfairness?

My hon. Friend anticipates what I am about to say: this is about not just similar sized shops paying vastly different rents, but revaluations that result in exorbitant rises—by 200% for a business in Brentford in my constituency. Yet again the Chancellor has kicked the can down the road on business rates reform, as his predecessors have done before him. Businesses cannot afford the further dither and delay that we keep seeing from this Government, and of course I welcome the announcement by my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) and my hon. Friend the Member for Leeds West (Rachel Reeves) that Labour will abolish the outdated business rates system and replace it with a fairer system that creates a more level playing field and breathes life into our high streets.

Then there is the Chancellor’s latest tax hike, a 1.25% increase in national insurance contributions, a double-whammy attack on our businesses; just when they need support, this Government decide it is time for a tax hike.

Then there is the permitted development rights changes and the impact that they will have, and in some cases already have had, on our town and village centres. The geographical hearts of our communities are threatened, particularly with the most recent changes brought in on 1 August that will make it easier for high street shops and businesses to be converted into poor-quality slum housing, with local communities and councils powerless to stop it.

I will finish by touching on a few areas where we would want to ensure further scrutiny of this proposed legislation as it moves forward. First, on the levels of arbitration fees, we know how tough things have been for businesses and want to ensure that they are not pushed over the edge with excessive fees in the new system. Secondly, as has been mentioned, there is the question of the viability of businesses and how they are assessed. Many businesses, especially those reliant on international travel and in other sectors that have been impacted in the long term by coronavirus, are still facing business slowdown even today. So I hope the Government will put in place a fair and reasonable assessment of viability, ensuring no business that can survive is left behind.

It is a pleasure to speak in this important debate. I welcome the Bill but want to echo the words of my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) by raising a series of important questions about how it will operate, in particular whether the Government’s desire to set up the arbitration work so quickly is realistic given the pressure on the business and public sectors at this time. I also want to draw the Minister’s attention to a number of related points that I wish were dealt with in the Bill, in particular physical retail businesses being treated fairly in comparison with online businesses.

At the outset, I want to put on record my support for our small businesses: they are the lifeblood of our economy and it is vital that all political parties support them. As the Reading and Woodley MP, I am currently running a campaign asking our residents to nominate their favourite small business, and I encourage other colleagues to do the same, because it is important for us to show our support for the small—and indeed the large—business sector after what the country and the world have just been through.

I would like to raise the issue of retail in Reading, and to encourage the Minister to look into the wider issue of the balance of Government policy in favour of online retail versus physical retail. As a London MP, he might know that Reading is the retail centre for central southern England. Retail generates thousands of jobs in our community, many of which are highly skilled, long-term jobs. People enjoy their work deeply and are passionately committed to retail. As my hon. Friend the Member for Brentford and Isleworth rightly said, the role of retail in place-making and establishing vibrant town and city centres is fundamental. I would like to ask the Minister, when he responds to the debate and in his further consideration of the Bill, to remind the House of the work that the Government are doing to level the playing field between online businesses, which seem to have so many advantages these days, and physical businesses. Physical businesses are referred to in the Bill, which deals with the issue of rent arrears, but I believe that there is much more work to be done and I urge him to address that when he speaks.

My hon. Friend’s comments are also pertinent to my area, where we have seen so many local banks close. That has caused a great issue for people in my local community, because they now need to travel further to different parts of the constituency and the borough, and the queues are longer. For older people and people who find it difficult to move around freely, this adds an additional burden, as well as having to wait longer in the queue. I am really frustrated by it. It is a serious issue when local banks have to close, because it has such an impact on so many people in our community. The Government really need to see what more they can do to support local banks. I really hope that local banks are listening to my hon. Friend’s speech and to what I have just said.

I thank my hon. Friend for her comments. She has stolen part of my speech, but she has done so very graciously.

Branch closures are an issue in suburban areas, as the Minister knows well. Travel times can be considerable at busy times of the day, and there are access issues for elderly and disabled people. Another important point that I am sure my hon. Friend the Member for Lewisham East (Janet Daby) would have made had she had the chance is that many small businesses are still receiving their takings in cash and they need to bank that cash safely. They want to be able to go to a physical bank to do that. I understand that the Department is doing some interesting work looking at pilots for shared services for banks in rural areas, and indeed there is a pilot in Essex. Perhaps the Minister can update the House later when he speaks on this important issue. It is of great concern to many local small and medium-sized enterprises in Reading, Woodley and many other areas across the country and I hope that he will be able to address it. I also hope that he will encourage the banks to work together to ensure that there is interoperability of IT systems and other back-office functions so that they can support each other and support our small businesses. They really should be focusing on this important issue at this time.

I would also like to draw the Minister’s attention to some related points, some of which have been mentioned by my hon. Friend the Member for Brentford and Isleworth. It is important, as we consider how to support small businesses at this difficult time, to look at the issue in the round and consider other aspects of support that the Government should in my view be offering. First and foremost, there are small businesses, many of which are micro-businesses, that missed out during the pandemic, and I would like the Government to look again at the issue of those businesses that were left behind. They include those that were set up in all good faith at the start of the pandemic but did not have three years of accounts and were therefore unable to claim any support. There are a number of other worthy and worthwhile groups that deserve further attention from the Government, and I ask the Minister to address the matter when he speaks later. This is a matter of huge significance to many of my constituents. I have had constituents in tears while speaking to me about this issue on the telephone, but unfortunately I was unable to offer them any help because of the limitations of Government policy.