My Lords, this is a Bill with two distinct and important measures. The first is a measure to change the valuation assumptions that are applied when making business rate determinations in the light of Covid-19. The second measure provides for the investigation and disqualification of the former directors of dissolved companies.
Let me start with the business rates measure. Clause 1 of this Bill is about how the impacts of Covid-19 should be accounted for in rateable values, the key component of business rates liabilities. This clause will ensure that the coronavirus and its effects will not be considered as a material change of circumstance for the purposes of assessing rateable values. This measure is needed to respond to the unprecedented volume of appeals received by the Valuation Office Agency since the start of the pandemic. It will provide local authorities with certainty and security against a potentially crippling financial blow. It will ensure that the law operates in the way it was designed to do, by using general revaluations of non-domestic properties to reflect the impacts of major economic events in rateable values. As noble Lords will recall from when we debated and approved the Non-Domestic Rating (Lists) (No.2) Bill, a matter which I am sure is at the forefront of all noble Lords’ imaginations, the next revaluation in England has been moved to 2023 based on the market at 1 April 2021 so that the system can better reflect the impact of the pandemic.
The pandemic has of course hit businesses hard, and the Government have responded with unprecedented support. To take business rates alone, over this financial year and the last one, we are providing £16 billion of business rates relief for retail, hospitality, leisure and nursery properties. We are introducing a further £1.5 billion of relief in recognition of the complex ways in which Covid-19 has impacted the economy and supply chains. Local government has also needed government support. Business rates provide a stable source of income for local authorities to plan the financing and delivery of local public services. The events that necessitated this measure threatened that stability and certainty in a profound way.
The Local Government Finance Act 1988 provided the source of our valuation and local business taxation systems. Ensuring that this system operates as it was designed to do is a vital part of the Government’s rationale. Business rates bills are calculated by multiplying the rateable value of the property by the multiplier or tax rate, then applying various reliefs. The rateable value of a property is, broadly speaking, its annual rental value at a set valuation date. These rateable values are updated at regular revaluations undertaken by the Valuation Office Agency, which provides a consistent tax base for all businesses and a stable income stream for all local authorities.
Of course, ratepayers can challenge rateable values outside of general revaluations for a number of reasons, such as to correct a factual error or to reflect what is called a material change of circumstances, or MCC. If not satisfied with the outcome of the challenge, the ratepayer may appeal the VOA’s decision to the valuation tribunal.
My Lords, there are many in this Committee with considerable and specific expertise in relation to the matters covered by this Bill, none more so than my noble friend Lord Sikka. I venture to speak in this debate, however, to seek clarification from the Minister on matters relating to the role of local councils.
On 25 March, Her Majesty’s Government announced that they would give councils £1.5 billion to offer grant relief to businesses, excluding retail, hospitality and leisure, that have been hard hit by the Covid pandemic. As I understand it, this relief is an alternative to any adjustment to rateable value as a result of changes in circumstances. I therefore have a number of questions for the Minister. I do not think that the basis of the calculation of £1.5 billion is known, except presumably by those who made it, nor is it unambiguously clear to me how the money will be disbursed. Can the Minister say what will happen if the fund is exhausted and whether perhaps any local councils would be expected to top it up?
Further, in regard to local councils, given that one assumes there will be criteria for disbursement, is it foreseeable that there may be disputes and possibly appeals? If there were, this would inevitably result in additional administrative and IT costs. It is not clear that any additional funding or financial support will be available to local councils to carry out these duties and responsibilities. Can the Minister tell the Committee whether local councils—their finances already hard hit, not just because of Covid but from years of cuts—will be expected to bear the administration costs of the scheme? If so, what assessment has been made of the impact on local ratepayers and local services? I look forward to the Minister’s response.
My Lords, it is a great pleasure to follow the noble Baroness, Lady Blower, who certainly made some very telling points. I thank my noble friend the Minister for setting out the purport of the legislation, which is clearly important. It is legislation that I broadly support. It clearly comes in two parts, “Rating” and “Directors Disqualification”.
On the “Rating” part, it is worth making the point that the Government have given some £280 billion of support to business since the start of the pandemic and that, during 2020-21, more than half of business rate payers have paid nothing. That support continues, and quite right too. The material change of circumstances would be a blunt instrument in the present situation and I can certainly see the point, on financial rectitude and common sense, of proceeding to the basis of valuation in 2023 on an unchanged basis. In the other place, the Public Accounts Committee has approved of that approach.
I have a similar question to the noble Baroness about the £1.5 billion of support. The noble Lord quite rightly referred to the importance of certainty for business, but there is uncertainty as to how this particular fund is going to be disbursed and which businesses will benefit from it. It would be good to hear when there will be clarity on that because, to reiterate the point, certainty is vital for business—as it is for us all in our everyday lives.
There is then the question of whether it will be enough and what will happen if it is not. The case has been well made in relation to, for example, airports. I know that might not be a fashionable point as we approach COP 26, which I strongly support, but we are all heavily dependent on airports in our everyday lives, as we have clearly seen, so it would be good to have some reassurance for that section of the community.
My Lords, the procedure for this debate before Second Reading was queried at the time of the Chief Whip’s commitment Motion. I had not realised that not only has this procedure been used only once before—namely, last October during our hybrid phase—but, so far as I know, the Procedure Committee has not reported on it. I have to say that I consider it unsatisfactory to separate in time and place the bulk of debate here from a decision to give a Second Reading some other time in the Chamber. Can the Minister confirm what discussions with the Procedure Committee have taken place about using this procedure now that we are out of hybrid mode? He may need to come back to me on that on some other occasion.
As to the matter for debate, noble Lords will know of my involvement, over a lifetime as a property professional, with business rates and local government finance and in this House, from the day of my maiden speech to the present time. With my having declared that matter, it will come as no surprise that it is the rating part in Clause 1 of the Bill that I seek to address, and that only. I do not propose to disappoint the Minister in what I have to say, but I apologise in advance because I will need a little time to explain it. I declare at the same time that I am an occupier of business premises and I benefit from a small-business exemption—but, for the avoidance of doubt, I did not claim any Covid grant or relief for the interruption of business activities.
I acknowledge that the Government have made great efforts to relieve business rate payers of many of the worst effects and burdens that have arisen during the pandemic, but it is far from the case that it has been applied equally to all, or indeed evenly across the spectrum of property. Nor has it been in any way linked to impact or means, so far as I can tell.
I also acknowledge that, having introduced measures to grant emergency relief, it might be seen as perverse to allow those who benefited from them to make further claims for the same period due to material changes of circumstances, or MCCs. However, it would be simplistic to go down that road. I do not believe that those who set about to make MCC appeals were those same beneficiaries or intended to claim for the same period, given that the duration of relief was not known at that time. Indeed, it is likely that they were not one and the same. Either way, it should be a simple matter to make provision to prevent such double counting, if indeed there is evidence of it.
My Lords, it is a pleasure to follow the noble Earl and to take part in this pre-Second Reading debate, which brings me to my first question for my noble friend the Minister. Can he enlighten noble Lords as to when Second Reading is due to take place?
I support this Bill in general, but associate myself with some of the comments from the noble Earl and from my noble friend Lord Bourne of Aberystwyth. I ask my noble friend the Minister to go back to the department and consider all possible new technologies which could assist in reclaiming BBLS, CBILS and other funds which may otherwise disappear into the ether for want of new technologies which can trace and track down such potentially fraudulent activity.
I support the Bill, but want to test the Minister to see whether we can take the opportunity of this small piece of legislation to go broader and look at the whole area of insolvency practice and potentially to consider in Committee whether it is high time to have a single independent regulator and ombudsman for the insolvency sector. They could consider both individual and corporate insolvencies and be funded through a levy. These ideas are hardly radical; they were certainly seen in other parts of our economy decades ago. This Bill offers an opportunity to look at the insolvency arena through these new governance glasses.
What is the situation now? There is a code of ethics which is voluntary. One can join a recognised professional body, of which there are currently four—there have been more—which do not necessarily act in concert or with consistency and which also act as trade associations for this part of economy, with practitioners able to shop between these RPBs if the mood suits, for reasons which we can all appreciate.
This sector of the economy is too important to be left to be governed as it currently is. It is also extraordinarily unique as an outlier when one considers it in comparison with, for example, legal or financial services.
My Lords, I am very glad to follow my noble friend Lord Holmes of Richmond. I associate myself with some of the remarks made by my other noble friend, but particularly underline the very real importance of the speech made by the noble Earl, Lord Lytton, who has a lifetime’s experience here.
I must begin by declaring an interest that, for almost half a century, I have from time to time given advice to the Machinery Users’ Association, which was founded as long ago as 1884 to advise—I see the noble Earl nodding—industry and business on the rating of plant and industrial machinery. There is real concern in the association on behalf of its many members in many businesses and industries. There is an element of retrospectivity in this legislation, which is not good.
I am also somewhat disturbed by the way in which we are debating Second Reading but not debating Second Reading. This was scheduled to be taken on the Floor of the House on 26 October. It was then scheduled to be taken on the Floor of the House yesterday. The change, I might say, had nothing to do with the tragic events of Friday; it had been announced before then. I do not really think this is the way we should legislate when the legislation is very broad-ranging.
I will say nothing about the directors—with broad agreement over that section of the Bill, I do not need to—but we have real uncertainty facing many businesses. The noble Earl put this very graphically in talking about the £1.5 billion. When will we know how this will be distributed? What will be the criteria? We ought to know. Business ought to know.
I asked the MUA to give me one or two examples. I will not detain or weary the Committee by going into great detail, but I am told that the owners of a former British Home Store in Barnstaple, in Devon, cannot market it or let it—they could not begin to let it during lockdown—yet they were required to pay 100% of the rates and were not entitled to a retail discount. For another totally different company, a tenant in Sloane Street—an exclusive address, with costs to match—had premises effectively vacant from the beginning of the first lockdown. This could be replicated up and down the country. I do not dissent at all from anything the noble Baroness, Lady Blower, said about the importance of business rates to local authorities, but local authorities will get nothing at all if they are surrounded by bankrupt businesses, and it is very important—even at this late stage in the progress of the legislation—that the Government come clean a little more clearly.
My Lords, I am delighted to participate in this debate. I particularly commend the speech by the noble Lord, Lord Holmes of Richmond, and agree with almost everything that he said. I will confine my comments to the second part of the Bill, relating to insolvency. It is unlikely to achieve its aims.
The Bill assumes that the Insolvency Service will act in a timely manner, but it is hard to find much evidence to support that. Carillion collapsed in January 2018. Only on 12 January 2021 did the Insolvency Service apply for director disqualification orders against eight directors and former directors of Carillion. To date, none has been disqualified. BHS, which was mentioned earlier, entered administration on 25 April 2016 and liquidation on 2 December 2016, but it was only on 5 November 2019 that former BHS director Dominic Chappell was disqualified for 10 years. A number of executive and non-executive directors, including the BHS chairman, were severely criticised in the joint report by the House of Commons Work and Pensions Committee and the Business, Innovation and Skills Committee, but to date none has been disqualified. It is business as usual.
Of course, little people get picked on. The Bill has not really been preceded by any changes to the law relating to the formation of companies. Anyone, from anywhere in the world, can form a limited company in the UK. There is no authentication check on the identity of individuals forming the company, its directors or its shareholders. Private companies in the UK need one director only, who must be a natural person, and the BEIS website very helpfully tells people that directors do not have to live in the UK. How on earth will the Government enforce the UK legislation against directors who do not live in the UK?
Public companies need at least two directors but only one of them needs to be a natural person. The other can be a shell company located in an opaque tax haven where absolutely nothing is known about directors of companies. There are plenty of examples of that. UK-registered companies have around 7 million directors at the moment. I hope the Minister can tell the Committee how many of those are resident outside the UK or are bodies corporate registered in opaque tax havens. How many of those named are fake and do not exist? You can use any name you like.
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The MCC system was not designed to reflect changes in economic factors, market conditions or the general level of rents. The 1988 Act was not designed with Covid-19 in mind, and the MCC system has never been used in response to an event with such economy-wide impacts as Covid-19. Moreover, the Government are clear that relying on the MCC system to help businesses that need further support in light of the pandemic would be misguided. It would mean significant amounts of taxpayer support going to businesses with properties such as offices, many of which have been able to operate normally throughout the pandemic, of course. It would also mean resolving such disputes through the courts. This could take many years and would create additional uncertainty for ratepayers and local councils.
Instead, the Bill will clarify the law such that coronavirus, and the restrictions put in place in response to it, cannot be used as the basis for making a successful MCC challenge or appeal. It will ensure that changes to the physical state of the property can continue to be reflected in rateable values as and when they occur, irrespective of whether this is as a result of coronavirus, but that the general impact of the pandemic on the property market will not be reflected until the next revaluation in 2023. This approach will provide much-needed certainty to councils and ratepayers alike.
We have of course worked closely with the devolved Administrations on these and other matters over the last 18 months. Following a request from the Welsh Government and amendments tabled on Report in the other place, the Bill will extend to Wales as well as England. Scotland has begun its own legislative process, which mirrors our approach.
The Government welcomed the support of Labour Members in the other place. The Public Accounts Committee also recorded its approval for the Government’s approach, as did the local government witnesses in Committee. These endorsements speak to the fundamental soundness of the policy rationale behind the business rates measures in the Bill.
The second part of this Bill addresses the problem of potential abuse of the process whereby companies are struck off the register and dissolved. I am proud to pay tribute to the resilience and determination of the many thousands of British company directors who have steered their companies through challenges from lockdowns, social distancing, and other restrictions on trading, all of which were necessary to limit the spread of Covid-19 and to keep our country safe. The responsible and effective stewardship of companies has helped to save countless jobs and livelihoods and will continue to provide an invaluable contribution to the economy as it recovers from the effects of the pandemic.
Unfortunately, there will always be those few individuals who do not comply with their duties as directors, and who do not act in the best interests of the company, its employees, or its creditors. It is important that that majority of honest and diligent directors, and the wider public, are protected from the potentially very damaging actions of those few bad apples. Directors who behave recklessly or irresponsibly can expect to have to answer for their conduct and may face proceedings to disqualify them from acting in the management of a company. Evidence to support disqualification action comes from investigation of companies and the conduct of their directors, and I would like to explain a little of how this process works in practice.
For insolvent companies, conduct is investigated through powers in the Insolvency Act 1986 and the Company Directors Disqualification Act 1986. Insolvency officeholders submit returns to the Secretary of State, reporting on the conduct of the directors in question. These are vetted, and where misconduct is suspected, it is assessed on the basis of public interest; for example, how much harm there has been to creditors and the wider public. Further investigation may be undertaken through examining company records and seeking information from third parties, including creditors, and directors themselves will also be asked to provide information and given opportunities to explain their actions. Where evidence of misconduct is found, a period of disqualification may then be sought. Investigations may also occur in live companies, using powers in the Companies Act 1985.
This Bill extends the circumstances in which the Secretary of State may investigate the conduct of directors to where the company has been dissolved without being subject to insolvency proceedings. It will extend the deterrent effect of the disqualification regime to those directors who abuse the company dissolution process. The Government consulted on this measure in 2018, when it was welcomed by stakeholders. Implementation is now particularly important to help reduce the risk of the fraudulent avoidance of repayment of government-backed loans made to businesses to support them during the pandemic.
It is an unfortunate fact of life that people who abuse the system will seek to take advantage wherever they can, so counterfraud checks were built into the lending process for bounce-back loans. For example, as a condition of the guarantee agreement, lenders were required to undertake appropriate anti-fraud and anti-money laundering checks before loans were made, and if they did not, they would not be able to call on the Government’s guarantee in the event of a borrower’s default. The new power to investigate and disqualify former directors of dissolved companies will back up those anti-fraud measures by deterring wrongful avoidance of repayment, and so help to ensure that public funds are protected. It will also pave the way to seek compensation from disqualified directors guilty of misconduct that has caused loss to others, including in relation to bounce-back loans.
Noble Lords may also be interested to hear about other actions taken by my department to minimise the risk of companies fraudulently avoiding repayment of their bounce-back loans. In March 2021, the department entered a blanket objection to any company with an unpaid bounce-back loan being struck off the register. This has prevented almost 51,000 companies, with total unpaid loans of over £1.7 billion, being dissolved. This action has ensured that lenders can continue to make recoveries on loans due to be repaid and will ensure that the public purse is protected. I commend this Bill to the Committee.
In passing—I appreciate that it is probably beyond the pay grade of both Ministers—I look forward to the Budget next week and perhaps some indication of some tax changes so that digital businesses and the Netflixes of this world, which clearly have not been paying enough tax on a fair basis, are perhaps brought into a position where they pay a fairer tax. I hope that we will get some indication of when that is going to happen.
I move to the second part of the legislation, which relates to “Directors Disqualification”. As the Minister rightly said, this disqualification change predates the Covid pandemic. In a sense, it has nothing to do with Covid; it is something important that needs to be done quite independently of Covid. I appreciate that we all have a great interest—quite apart from tackling the fraud—in ensuring that the bounce-back loans are properly dealt with, but it would be good to hear that this is not the sum total of what is intended here.
It has been a serious issue over a period of time that directors have used the ability to dissolve their company to dodge the impact of insolvency legislation. I hope this is not going to be limited to the bounce-back provision, and I hope the Government are minded to use the Insolvency Service more widely to tackle other frauds. Many creditors of companies are in a very parlous position because of this considerable loophole, which has been abused over a period of time.
I certainly welcome the partial closing of the loophole, but it would be good to hear that the Government intend to move further than that. It has been suggested by the Insolvency Service that more than 5,000 dissolutions of companies a year have sidestepped the insolvency protections of the Insolvency Act 1986 and the Company Directors Disqualification Act 1986. This particular legislation deals only with the protection offered by the Company Directors Disqualification Act. It does not seem to do anything about the Insolvency Act protections, because we do not know that the company is necessarily going to be brought within the purport of the insolvency legislation. There are considerable protections in that 1986 Act that will not govern these companies, notwithstanding the provisions in this legislation.
As I say, this legislation is worth one or two cheers but not three because, as far as I can see, it does not go far enough. It would be good to hear that the Government recognise that and intend to take it further to protect other creditors and to tighten it regarding those who abuse the provisions of the Companies Act—the ability to operate through a company and the separate personality provisions entailed in that. I look forward to hearing more on that point.
I also want to raise the point about reimbursement. This deals with the disqualification of directors and tightens that particular screw for directors using dissolution inappropriately, but as far as I can see it does not do anything directly in relation to them disgorging the profits that they have made fraudulently. It is important that that should happen. The Minister referred to this in a rather vague, amorphous way, but it would be good to hear specifically what it means. Is this going to be by virtue of a compensation order? How is it going to be done?
Further to that point, given what I have said about the number of companies that come within this particular provision—up to 5,000 a year, on a calculation made by the Government themselves—what are we doing about the resources for the Insolvency Service? It is stretched already and, if it is expected to take on this extra work, it will need extra resource if, as we all hope, it is to do the job appropriately.
I support the legislation, but we should not run away with the idea that it solves all the problems in this area. It does not, and we will need more action.
MCCs have always been available where substantial change has affected the assumed annual value of property; a supermarket opening up down the road, affecting traditional high streets, or changes in highway arrangements, affecting trade—that sort of thing. However, the Government suggest that this was never intended to address an issue of global impact such as a pandemic. From the dawn of rating under the statute of Elizabeth I to the General Rate Act 1967—on which I cut my professional teeth—and on to the present day, there has been plenty of time to ponder such matters, and yet we have this measure only now. Coincidence? I think not.
The reality is that in the pandemic some sectors did well, others realigned their processes and activities to stay afloat, and a further group floundered and continue to do so. It is not correct to say that the pandemic produced a general downturn lasting for more than a year, which is the usual benchmark for dealing with material matters for rating valuation purposes.
It is a concern that the Government took so long after the commencement of the lockdown to come forward with a measure of this type. Effectively, a year elapsed before the Government chose to lay, initially, a statutory instrument with prospective effect, with the promise of a Bill with retrospective effect—which is where we are now, of course. I do not believe that proper consultation with business rate payers was part of that process.
The courts have been at pains to point out that rateable values are meant to represent the benefit of occupation to the occupier. Where government prevents or limits such beneficial use, rateable values should reduce—but not, it seems, where HM Treasury deems otherwise. As a result, appeals against assessments on grounds of MCCs were made in good faith, in time, and were validated long before the end of March 2021. No attempt was made to avoid this wasted cost and effort during the period when doubtless many public servants were furloughed, but equally the resources were there to consider and act in an appropriate and timely manner on such issues. The Valuation Office Agency was actively involved in negotiations regarding these MCC appeals, in conjunction with ratepayers’ representatives.
I have received representations from, among others, Heathrow Airport—referred to by the noble Lord, Lord Bourne of Aberystwyth—and some advice from rating experts Gerald Eve. If ever there was an MCC event sufficient to interrupt the operation of the nation’s largest airport, this had to be it. While late in the day a grant scheme was set up, it was capped at £2 million per hereditament, so amounted to a flea-bite of a concession in something like the Heathrow rates bill.
Worse than that, it selectively, and, I suggest, unreasonably, failed to address the issues affecting very large assessments and operations such as Heathrow and Gatwick, which to all intents and purposes were completely shut down by force of law while, at the same time, support was given to other types of activity that were still able to keep going, as we have heard. It is therefore hard to comprehend precisely what sort of a material change of circumstances would afford any relief to such a large enterprise, given the effect of the Bill. Nor does it dispel the impression of selective discrimination against a specific class of undertaking.
It is not just about mega-businesses of this sort—many others have suffered equally. Although the productivity may have held up, the double overheads of supporting remote working staff and maintaining empty office buildings have none the less been significant. The Government have protected office tenants from being hounded by their landlords to pay rent for space that they were prevented from physically occupying but have offered them zero protection when it came to business rate bills. That seems to be nothing short of double standards.
The Government have promised to set in place a £1.5 billion discretionary business rates relief fund in place of the MCC reductions that this Bill will now negate. I doubt whether many local authorities will exercise discretion in favour of an international airport, or indeed any but a relatively local cause célèbre, however significant the larger employment and economic activities are of big undertakings that underpin local economies and employment.
The explanatory paper produced at the same time as the SI gives examples in which a ratepayer with a £95,000 assessment might get £7,300 of relief, despite their turnover collapsing to zero. What that tells us is that any benefit is likely to be minimal and that £1.5 billion is a drop in the ocean. To follow what other noble Lords have said, could the Minister please clarify how the Government arrived at this sum of £1.5 billion as appropriate recompense for ratepayers badly impacted by the pandemic? Having been announced in March 2021, in the 2021 fiscal year, does this sum relate only to that year, with nothing further, or is it intended that there should be some further funding for 2021-22?
I find it disturbing that a deliberate decision has been made not to provide information as to how the £1.5 billion will be apportioned between councils and how they should make decisions as to which businesses in their areas should receive some of it—until, that is, this Bill is passed. Of course, that leaves businesses and billing authorities alike in no position to make any plans in relation to it. Can the Minister explain why he cannot today publish a draft of the proposed allocation of the £1.5 billion to each local billing authority and share the draft guidance planned to be issued to councils explaining the circumstances in which the Government believe that businesses should qualify for a share of the cash?
The apparent intention is to make the distribution according to the official data on the impacts of the pandemic on different sectors and not according to estimates of the impact on a property’s value. All this is apparently to ensure
“an even and more proportionate allocation of support”.
We were told that this would enable a speedier payment of support than would have been possible under the usual MCC appeal rules. I am afraid that I do not entirely follow that.
I feel that this is a matter of a veil of obfuscation. Fundamentally, it is about protecting Treasury income streams, first and foremost—and I am afraid that it is just too bad if businesses crumble. It lacks equity and fairness; the most desperate of businesses will be least able to mount a case or may have already gone under, waiting in desperation for government support that has failed to materialise. There is nothing in prospect for those at tipping point now. I have long said, and will say again, that if HM Treasury can think of nothing better to do than to disadvantage businesses which suffer serious losses, due in significant part to government edict, it will be of small concern to it that, in response, reduced exposure to a tax on business floorspace—perhaps by trading increasingly on the web—becomes a standard business plan and, for those who cannot avoid it, a fetter on the nature and extent of the financial risks they will be prepared to underwrite on behalf of the taxman. The moral hazard in all this is that it continues to underpin government willingness to game the system without taking adequate responsibility for the outcome. I suspect that, by the time the £1.5 billion fund kicks in, it will be too little and almost certainly much too late.
Of course, part of the answer is much more frequent revaluations—that, of course, is well beyond the scope of this Bill—but there was supposed to be a fundamental review of business rates, and many expected it to have progressed beyond the 2017 findings. I invite the Minister to give us an update on that if he is willing, but it is no wonder that some on the political spectrum suggest abolishing business rates altogether. It does not need to be so. It would be a perfectly good, fair and cheap-to-run system save for government insistence on overworking it and, essentially, unfairly treating businesses ever since the arrival of the poll tax in 1990. It is a salutary tale of mismanagement, and Clause 1 of this Bill continues the fundamental error.
I leave your Lordships with this thought: what else follows from this further incursion into business rate payer protections and stability of local government budgets?
What could we achieve with this Bill if we took a couple of amendments in Committee? We have the opportunity to end this inconsistency, to bring clarity and to stop the perception of conflict and, in some situations, the actuality of conflict. It is better for IPs and for everybody—better for businesses and better for the entire economy—bringing confidence to all involved, and confidence in this part of the economy. Any economy relies not just on brilliant businesses being built and succeeding but on how we deal with businesses when they get into difficulties. It is so important that this is run efficiently and effectively. If we see that a company is distressed and goes into insolvency procedures, how effectively could it be operated? Potentially, it could maintain employment, supply chains and the local community, if run optimally.
This is too important to be left as it currently is, and it was foreseen six years ago in the Small Business, Enterprise and Employment Act, in which powers—yet to be implemented—were given to the Secretary of State to have a single regulator for this service. Would my noble friend agree that six years is long enough to wait? If we bring amendments forward in Committee, it would make complete sense to implement that part of the Act.
We have the opportunity to end inconsistency and bring coherence and confidence to this sector and the wider economy. I look forward to returning to these points in Committee. I wish the Bill a swift and safe passage through Second Reading, whenever that might be, and I look forward to my noble friend’s comments at this and future stages.
The sum of £1.5 billion sounds extraordinary and magisterial—to all of us in this Committee it is—but not when spread over a whole country. How long is it for? What precisely will happen when revaluation comes about in 2023? I am delighted to see the noble Baroness nodding vigorously, because these questions must be answered. People’s livelihoods and the livelihoods of local authorities depend to a large degree on this. It is a most unsatisfactory piece of legislation. It is two pieces of legislation cobbled together. One of them I do not particularly dissent from, because nobody could conceivably approve of fraud, and fraud perpetrated at the expense of the taxpayer during a pandemic is about as low as you can get. We would all agree with that. However, the rating put on at the beginning is a different subject which needs more comprehensive and joined-up thinking.
I am sorry that my noble friend Lord Callanan has been called away, but I ask my noble friend who will reply to this debate whether we can have some conversations, if not before Second Reading then at least before Committee, because it would not be beyond the wit of man and certainly should not be beyond the wit of government to table one or two amendments that would bring a degree of cohesion to the Bill. It should be accompanied by a reasonably detailed statement about how this £1.5 billion is to be used.
I could go on, but I will not. However, I am very grateful to the noble Earl, Lord Lytton, for bringing his lifetime of professional experience to our deliberations.
Companies House acts mainly as a filing box and rarely performs any meaningful checks. Thousands of companies have directors whose addresses are in offshore jurisdictions and it is impossible for the UK to call foreign nationals to account for corporate offences. Can the Minister again please explain how the Insolvency Service will act against those individuals?
UK company law also permits nominee shareholdings and directorships, which enables concealment of the identity of real controllers and beneficiaries. How will the real controllers of companies be disciplined or disqualified? The Government also act in a very inconsistent manner when taking action against the filing of false information. I will give the Committee a pretty well known but real example.
Individuals connected with the mafia in Italy formed a company in the UK with the name Magnolia Fundaction UK Ltd. The company’s officers used Italian to file information at Companies House. When translated into English, the document said that the name of one of the directors was “The Chicken Thief”. He gave his occupation as “fraudster” and the address given was “The Street of the 40 Thieves in the town of Ali Baba, Italy”. Companies House dutifully accepted such documents. When the matter was raised in the House of Commons on 14 September 2017, the Minister said,
“No action has been taken”—
I think the sound of the Division Bell is the cue for me to stop. I will return to the actions of the Chicken Thief afterwards.