Covid-19: Business Interruption Insurance

Private Notice Question

Asked by

To ask Her Majesty’s Government what consideration it has given to the ability of entertainment and hospitality businesses to claim on their business interruption insurance policies where customers have been advised to stay away but no order for closure has been given.

My Lords, the Government understand that this has been an unprecedented time for these industries and that Covid-19 has indeed had a very profound impact. At the Budget last week, the Government set out a £30 billion fiscal stimulus to support British people, British jobs and British businesses. I think the noble Lord will be aware of the statement this morning from the Association of British Insurers saying that the vast majority of businesses would not be covered for business interruption of the type we are talking about under their insurance, but my right honourable friend the Secretary of State is having calls across the industry this afternoon to make sure that our lines of communication are open.

My Lords, I thank the Minister for that reply. I, too, have read the statement from the ABI. This is a major issue which has rightly received extensive and negative attention in the media. These businesses are in limbo and are threatened with ruin as a result of being unable to invoke the terms of their business interruption insurance policies. Will the Government now reconsider their policy and direct closure, as has been the case in so many continental countries? It is much more likely—although not certain, as the ABI statement makes clear—that claims will be successful in those circumstances. The other alternative is for the Government to put their own scheme in place where insurance is not available. It is incumbent on the Government to show that they understand what business is facing.

The noble Lord is quite right. Across government we are trying to understand the challenges that business is facing, which is why all Ministers are in regular, frequent conversations with the key stakeholders they represent. I referred to the package of measures in the Budget, but we know that given the scale and speed of this epidemic we need to do more and we need to do it quickly, which is why the Chancellor will be addressing the other place with a package of measures at 7 pm today.

My Lords, earlier today in the other place, during a debate on finance, it was said that Ministers in the Treasury would be meeting the insurance industry this morning, I think. The Minister said that lines of communication are open, but what is the nature of the discussions with the industry? Are the Government telling the insurance industry that it needs to refocus its effort on supporting its customers or, as the noble Lord, Lord Clement-Jones, suggested, will they underpin these businesses with, in essence, their own insurance policy?

To be clear—the noble Lord will appreciate this—the discussions are across many industries, and this industry is critical. There is something about stitching those different conversations together in terms of the overall package. On the approach, we are trying to sequence the priority issues, of which cash flow seems to be perhaps the most pressing in the short term, but I do not want to—and cannot—anticipate exactly what my right honourable friend the Chancellor will say this evening.

My Lords, I declare an interest as a director and shareholder of a number of businesses, which are set out in the register. My noble friend will be aware of the Chancellor’s announcement last week of the business interruption loan guarantee, an essential announcement which could be the difference between a business surviving or going under in the current crisis. Having spoken to a number of banks about how it will play out, the clear indication is that they do not have guidance from the Treasury about what this package will look like. We are now nearly a week on from that announcement. As noble Lords will appreciate, businesses are looking to stabilise their finances now to ensure that they keep people employed. Does my noble friend have any idea of what guidance has been given, when it was given and when businesses will hear from banks about the package of measures that could be put in place to stabilise them?

My noble friend makes a very important point. A new coronavirus business interruption loan scheme, which is being delivered by the British Business Bank, will launch in a matter of weeks—I cannot give a more precise answer than that—to support businesses to access bank lending and overdrafts. In addition, all businesses and self-employed people who are in financial distress in relation to their outstanding tax liabilities may be eligible to receive support with their tax affairs through the HMRC’s time-to-pay service.

My Lords, what might be done about theatres? Only this morning Tamara Rojo, the great ballerina and the leader of English National Ballet, pointed out that unless the Government say that theatres should close, they will have no access to insurance to cover the losses they will incur in having brought companies together and so on. Their insurers are requiring that there is a direction from government that they close in order to protect public health. Is it the Government’s intention to protect our arts, which are so important and which run on very tight margins?

The noble Baroness makes an important point about the contribution of the arts to this country. The department is extremely aware of that and is proud of our arts and anxious to protect them. On insurance, as I said to the noble Lord, Lord Clement- Jones, the Association of British Insurers has already said that the vast majority of businesses would not be covered in this way. If that is different for theatres, I will write to the noble Baroness. There was also a question about the timeliness of receiving funds in relation to insurance, but the key point is that we are looking at all possible options to support these valued sectors.

Does the Minister accept that businesses will hear the phrase “within weeks” with a chill running down their spine? This is intensely urgent. Within weeks businesses will be going bust. Even if the scheme comes in within weeks that does not mean that everybody who wants to benefit from it will get immediate support. Once a scheme is up and running, it takes time for everybody to benefit from it. Will the Minister take back to her colleagues that this is an intensely urgent issue, that a week has gone by since the Budget, that no further guidance appears to have been given, and that weeks and weeks simply will not cut the mustard as far as many thousands of businesses are concerned?

I am more than happy to take the noble Lord’s concerns—and, I am sure, those of others in the House—back to the department. What we are trying to balance here is speed, which the noble Lord rightly focuses on, and clarity, which businesses also want. We all hope that we will get more of that from the Chancellor later today.

My Lords, businesses do not need clarity, they need cash. There is an absolute need for the Government to make it clear that they will change the regulations that prevent the banks providing the support that is needed. I am afraid that the Chancellor is going to have to get himself a helicopter. This is a major financial crisis on a scale similar to what we saw following the banking crisis. If the Chancellor is making a Statement to the other place, will we get the opportunity to have a Statement and discuss these issues?

On my noble friend’s final point about the opportunity to review those issues here, I understand that that will be dealt with through the usual channels as speedily as possible. On the need for cash and the need to change regulations, I think that is the point I was trying to make a few moments ago about how we sequence this. Cash flow appears to be the single most pressing issue, and that is where we are focused.

My Lords, it is my understanding that the Statement is not being repeated later today. Could the Minister take back to the usual channels the acute concern about that? This Statement is the single most important business that Parliament will conduct this week, and I sense that noble Lords would like the opportunity to ask the Government questions about it and to give their views.

I understand from my noble friend on the Front Bench that an offer was made to repeat the Statement here today, but the usual channels agreed that the economic debate tomorrow will be used as a platform to debate it.