The Parliamentary Under-Secretary of State for Business, Energy and
Industrial Strategy (Paul Scully) 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...Request free trial
The Parliamentary Under-Secretary of State for Business, Energy
and Industrial Strategy ()
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.
These efforts to support businesses, largely in the hospitality,
personal care and non-essential retail sectors, will particularly
benefit women, young people and people from ethnic minority
backgrounds because of the higher ratio of persons from those
groups who work in those sectors.
The primary purpose of the Bill is to implement a simple, binding
arbitration system to resolve those outstanding rent debts. A
tenant or a landlord can refer a case to arbitration at any time
within six months of the Bill’s coming into force, and propose a
solution to the protected rent debt. Arbitrators appointed by
arbitration bodies approved by the Secretary of State will review
proposals and then assess evidence from both parties to determine
whether any relief from payment of the debt is appropriate. That
could include a reduction from the total amount to be paid,
cancellation of the debt, or an extension of the time period in
which it should be repaid. The arbitrator will make an award, and
if granting relief from payment of a protected rent debt is
appropriate, the award will set out the terms.
The arbitrator must follow the principles established by the
Bill. One key principle is that awards should only be made for
viable businesses, or those that would become viable with an
award of relief from payment. For example, a business could be
granted an award that reduced the amount of debt owed if that
reduction would allow it to become viable again. In this way, we
are actively supporting businesses that will continue to prosper
and grow, will provide jobs and will help the UK to build back
better.
(Chesterfield) (Lab)
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.
Mr Perkins
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.
While parties are able to refer cases to arbitration within six
months of the Bill’s coming into force, and while arbitration is
in progress, there will be restrictions and evictions, seizing of
property and other measures of enforcement, and certain
insolvency proceedings in respect of protected rent debt. That
ensures that the parties who cannot agree have a chance to use
this arbitration system to resolve protected rent debt before
resorting to other legal remedies. I am confident that six months
is enough time to allow tenants and landlords to apply for
arbitration, but the Bill allows for the period to be extended if
there is evidence that it is not long enough.
Throughout the development of the Bill, the Government have
engaged extensively with tenant and landlord representatives. We
launched a call for evidence in April, which gathered the views
of tenants and landlords on the current protections and the
voluntary negotiation approach, and asked for preferences on
options for further solutions. The feedback was that while
negotiations were taking place their voluntary nature was
actually hindering progress in some cases, and nearly half the
respondents said they agreed that a system of binding
adjudication would resolve the outstanding rent debt. Since those
findings, we have continued to work closely with business and
landlord representatives to help shape the Bill and support
negotiations, and, as I said to the hon. Member for Chesterfield
(Mr Perkins), we will continue to do so throughout the Bill’s
passage.
I have regularly met businesses and landlord representatives to
discuss these proposals, and the issue of rent debt in the
affected sectors in general. Following the Bill’s introduction,
we have received support from several bodies representing
commercial tenants and landlords. They recognise the efforts the
Government are making to encourage continued negotiations, and
that a system must be in place to be used when negotiations
fail.
We have also had productive engagement with colleagues from the
Welsh and Scottish Governments and the Northern Ireland
Executive, and I thank them for their continued input and
support. I have written to the Ministers from the devolved
Administrations to inform them of the relevant aspects of the
Bill and seek legislative consent where it is required.
The Bill provides a solution that should be used only when
parties have been unable to reach agreement between themselves.
We are still adamant that tenants and landlords should negotiate
where possible, but we recognise that some may never reach
agreement on what is owed and how it should be repaid. The
protections that the Government implemented during the pandemic
have been extended to give the time needed for these
negotiations. They have offered much-needed respite for
businesses fearing eviction and bankruptcy, but they cannot
continue forever, and we must act to help the market get back to
normal.
I am sure the House agrees that leaving this rent debt unresolved
would be detrimental to UK businesses and landlords, and indeed
to communities. I am glad to see that the economy is bouncing
back, but it is unreasonable to expect all businesses to be able
to pay off immediately all the rent debt that they accrued when
they were closed. We have heard from businesses and from landlord
representative groups that the voluntary approach will only get
so far, and that a binding arbitration system will work to
unblock this issue. The Bill will put an end to the temporary
protections and clear up the unpaid rent debt that is stalling
commercial tenants and landlords and preventing them from
prospering. I commend it to the House.
14:27:00
(Brentford and Isleworth)
(Lab)
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.
(Lewisham East) (Lab)
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 who have always done
the right thing, and who 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 (), travel and tourism—still
face great uncertainty for months and years ahead.
On businesses that could not cope and had to close, in too many
areas there are now vacant windows; there is no demand to take on
the vacant premises. Of course the pandemic is not solely to
blame for retail premises remaining vacant for long; the change
in our shopping habits towards more online and less in-person has
a major part to play, and in areas where a large proportion of
people are impacted by the triple whammy of rising costs of
living, the cuts to universal credit and the permanent or
temporary loss of jobs, it is no wonder that retail businesses
are particularly struggling when too many people have not enough
money left over in their pockets at the end of the month.
The commercial rent arrears built up for businesses that had to
close during the lockdowns are only one part of the challenge
facing businesses across the country, so although we welcome the
Government’s taking action through this Bill, there is still so
much more that they could do. For a start, they must address our
outdated business rates system, under which similar sized shops
pay vastly different rates and revaluations.
Mr Perkins
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 () 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 () and my hon. Friend the Member
for Leeds West () 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.
Thirdly, there is the issue of transparency and consistency in
the arbitration and appeals process and how we can ensure a fair
balance in the system between landlords and tenants. Finally, we
seek assurance on whether a brand new, fully operational
arbitration process can be in place by March next year. These are
all areas that need more scrutiny and where the Opposition will
make sure the Bill as it progresses works for businesses up and
down the country.
To conclude, I reaffirm that we welcome the Bill and the
arbitration process it creates for businesses who were in rent
arrears through the pandemic closures, but the Government must
not see this as the only action they still need to take:
businesses up and down the country have had such a difficult 20
months that they need a Government prepared to do more to support
them.
14:38:00
(Reading East) (Lab)
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 () 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.
In particular, I would like to draw the Minister’s attention to
an issue that I have mentioned to him before, and for which I
believe he has some sympathy. That is the need to have physical
bank branches in local centres. This issue has been raised in
relation to rural communities, but it is also an issue in many
urban and suburban areas and in larger villages.
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 () 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.
In addition, I would like the Minister to speed up the work on
business rates. We are calling for the current system to be
scrapped. My hon. Friend the Member for Leeds West () has spoken powerfully on
this issue. It is deeply unfair that physical businesses are
being asked to pay high levels of business rates while other
competitor businesses in out-of-town locations or online are not
being asked to pay the same level of business rates. That cannot
be right, and it is not fair. I hope that the Government will
address this point, and that the Minister will address it later
today.
I would also like to pick up on the importance of rail and other
transport infrastructure. The area that I represent is very lucky
to be the western terminus for Crossrail, and we are already
seeing enormous transformational change across the Thames
Valley—and, I am sure, in Kent and Essex as well—as better rail
connectivity brings people into town and city centres. Many towns
and cities are being rebuilt significantly because of this
investment, and if this is good enough for the south of England,
I hope the Minister will urge his colleagues to think again about
HS2 and the number of cities and towns that have been left on one
side as a result of the Government’s announcements earlier this
week.
We can see the benefits of the infrastructure in our parts of the
country, and we would like other towns and cities around the
country to share in the regeneration renaissance that comes from
sound investment in public transport leading to better
connectivity. That investment spurs retail and the leisure and
hospitality industry, and it is also crucial to sectors such as
IT and other knowledge-based sectors of the economy. We have huge
growth in that area in the Thames Valley, with businesses
relocating to Reading purely because of its connectivity, and I
urge the Minister to treat the north of England in the same way
that previous Governments, including the Labour Government prior
to 2010, treated the south.
14:45:00
(Richmond Park) (LD)
The Liberal Democrats welcome the Bill and we hope it will be
passed swiftly in order to protect struggling businesses. I have
spoken to many businesses in my community that have really
struggled with rent bills over the past 20 months. This is been a
significant issue for many. As the Minister said, many landlords
and tenants have been able to come to terms and make arrangements
for how rent payments will be made, but a number have not been
able to do so. I am thinking in particular of Don Fernando’s
restaurant in Richmond High Street, a legendary Spanish
restaurant right by the railway station that has been there 30
years. It was unable to make such an arrangement and it is still
getting rent demands from its landlord, which is registered in
Jersey, unfortunately. This is a significant issue for the
restaurant. Only the stay of execution allowed by the moratorium
on evictions has enabled it to carry on trading. It is still open
and I was there a few weeks ago. It is doing well, but it has
significant concerns about its rent debts, so on its behalf I
very much welcome the steps that the Business Department is
taking.
Of course, this affects not only tenants. I have spoken to
landlords as well, including small landlords and landlords of
single units. In some cases, where they are letting those units
out to large multiples, some of those retail chains are just
turning round to those landlords and saying, “We are not paying.”
Up to now, there has been no mechanism to enter into a
negotiation on this. It is very much the weaker party in these
transactions that has to suffer the consequences, and on that
basis I am really glad that this arbitration mechanism is being
brought in. It will give a voice to both sides, particularly
where there are no other mechanisms to resolve the issue.
My only slight grumble is that we could perhaps have passed this
Bill sooner. The moratorium has been extended several times,
which has been welcome, but bringing this Bill to Parliament more
promptly would perhaps have allayed some fears and got the
process going sooner for certain tenant-landlord relationships.
But better late than never, as they say. It is here now and we
certainly plan to support it. I hope that we will use this
opportunity, even though we want to pass the Bill swiftly, to
scrutinise it a bit further. One of the important points we want
to raise is how arbitrators can effectively assess whether a
business would have been viable. That is an important point, and
we need to see more discussion about it. In the context of the
pandemic, many businesses had to close because of Government
instructions, but consumer behaviour has also changed radically
as a result of the pandemic. As we look back over the past 20
months, I do not know how easy it will be to say which businesses
would have been viable if their rent arrears had not built up to
such an extent.
There are lots of great businesses in my constituency that came
through the pandemic because they changed their way of working,
including developing their online offering and doing home
deliveries. We see right across our business sector, particularly
in our small businesses, that entrepreneurs will always respond
to challenges. Many businesses now look quite different from how
they looked before, which is an example of how it is difficult to
say what would or would not have been viable. Many business
owners or their family members have suffered coronavirus
infections, and they suffered untold disruption in their personal
life that will have affected their ability to run their
businesses. Again, how can we judge what would have been viable?
How would things have been different? That is a difficult
question to answer.
I welcome this further support to help businesses through what we
might call the after-effects of lockdown.
Mr Perkins
The hon. Lady raises an important point. From what the Minister
said, it sounds like a business will be eligible if the amount it
owes in rent is the difference between going bust or not. Many
businesses might have major rent payments that take them right to
the brink, going through all their savings; other businesses
might have debts that are slightly more than their rent, but the
support would make a huge difference. I fear we may end up with a
huge number of businesses being shut out of this important
redress, so I urge her and other colleagues to scrutinise this
point in Committee.
That is exactly right, and it is the point I am trying to make.
Every context and every business is different. The business
owners will have faced different challenges, and the environment
in which they trade will have faced different challenges. The
hon. Gentleman has already spoken about hospitality businesses
facing significant challenges, and it is difficult to see how we
can have one set of guidance that covers the viability of every
kind of business of every size and every sector.
In that same vein, small businesses, and even large businesses,
have seen a surge in energy costs and product costs. Does the
hon. Lady agree that there is increasing financial pressure on
businesses?
I absolutely agree. We see a maelstrom of different pressures on
businesses at the moment, and many of my retail businesses are
experiencing difficulty in getting stock for a number of
different reasons, many of which will be familiar to Members.
There are increased energy costs, and we are still facing quite
an uncertain Christmas.
Hospitality businesses across the country are keen to open their
doors to Christmas parties, but there is still a lot of
uncertainty about the public health situation, which will prevent
many of them from being able to make the revenue they would
expect. That will obviously have an impact on their ability to
pay their debts. As the hon. Member for Brentford and Isleworth
() said, it is not just their
rent debts; they have VAT bills, rates bills and loans to repay.
There are so many different debts mounting up as a result of
lockdown, and there is still a great deal of uncertainty, coming
from a number of different sources, on whether businesses can
count on the revenue to service all those debts. There are a lot
of pressures facing businesses.
Does the hon. Lady agree that the Government need to get on top
of the supply-chain issues, particularly in our ongoing
relationship with the European Union, the issues in Northern
Ireland and the cross-channel issues? These could potentially
have a serious impact on businesses and families this Christmas.
It is high time the Government got on with developing a positive
relationship with our neighbours.
I entirely agree. I would now normally be at the Public Accounts
Committee, which is currently looking at the readiness of UK
ports for Brexit, how well our port and logistics sectors are
dealing with Brexit and how well the Government have prepared
them. The picture is mixed, but there is no doubt that there is
more disruption to come, because we have not yet implemented all
the checks that will be required in due course. Some will come in
on 1 January, and there will be others in July 2022. It is fair
to say that we are still not through this huge period of
uncertainty, and there is a great deal more still to come.
I welcome this Bill, but I would like to see the Government do
more to help our retail, hospitality and personal services
sectors, and all the other sectors that make up our high-street
economy, because of all the positive impacts a thriving high
street has on our local communities. I want to see the Government
go a bit further to support businesses on our high street.
I am keen for the Government to consider scrapping the
upward-only rent review clause that is often in new leases.
Richmond High Street, in particular, is suffering from this
clause. We now have very high rents for all our retail units,
which is a private sector matter but we are finding that it
creates a barrier to entry for new retail, hospitality and other
businesses that might want to take up a town centre lease.
Leases are based on old-fashioned ways of doing business, and we
often find that landlords put an upward-only rent review clause
in leases. When the lease terms are renewed, the clause means
that a firmly established business that has generated a great
deal of business as a result of its location will find that its
landlord puts up the rent to such an extent that the business
cannot service it with its revenue. I am keen that leases and
rent payments should reflect underlying market conditions, which
would help a huge amount. More needs to be done. We talk about
leasehold reform a lot in this place, but I also want to see it
for commercial rents. I would welcome the scrapping of
upward-only rent reviews.
I echo the hon. Members for Chesterfield (Mr Perkins), for
Reading East () and for Brentford and Isleworth
(), who mentioned the business
rates review, which is urgent because we want to help businesses
to have better control of some of the costs of doing business.
There is no doubt that business rates are a key part of that, and
we are keen to see a review as soon as possible. A review has
been promised for many years, and business rates are a
fundamental part of the business costs that are continuing to be
a deterrent to new entrepreneurs.
We very much support the Bill, which is the right thing to do. We
want to support our town centre businesses, and there is more
that could be done, particularly on rent and rates. We are keen
to support the Bill, but we need to scrutinise the arbitration
clauses a little further.
14:57:00
(Feltham and Heston)
(Lab/Co-op)
It is a pleasure to wind up this debate, although I am sorry that
the Minister has both had to open and close.
I want to recognise some of the contributions to this debate. My
hon. Friend the Member for Chesterfield (Mr Perkins) and the hon.
Member for Richmond Park () raised the important
definition of viability and the considerations around it. My hon.
Friend the Member for Lewisham East () mentioned how we need to make
sure that all our businesses are supported through the pandemic
and into the recovery, which will continue at different paces for
many businesses. My hon. Friend the Member for Reading East
() also talked about the wider
context and about supporting and championing businesses, which
Small Business Saturday will be doing in the run-up to 4
December. It was eye-opening to be out with them in Southampton
earlier this week. This is important in the context of what we
are discussing today.
As my hon. Friend the Member for Brentford and Isleworth () said at the beginning of the
debate, Labour supports this important Bill, although we are
surprised it has taken this long to introduce it following the
announcement in the summer. We need to talk about the context
because the growing cost of business will have an impact on how
businesses pay back their rent. We have had an important set of
contributions on the urgent need for reform of business rates,
which the Labour party has also called for, and for it to be
considered alongside a much fairer taxation system to bring in a
much more level playing field between online businesses and
businesses in our communities.
We are having this debate in an important week, as we know that
business needs the Government to be on its side—perhaps the
Minister will not be able to say anything about that. That is an
incredibly important part of how we go forward and work towards
the recovery—we are just at the beginning of that. The Prime
Minister’s embarrassing speech to the CBI at the start of the
week was an issue because confidence in the Government is knocked
when the Prime Minister does not give a speech that suggests they
understand the challenges businesses are facing and the crucial
nature of getting the recovery right to make sure that it is
sustainable.
The Bill will legislate for a binding arbitration process to be
used where business landlords and tenants cannot agree on how to
deal with outstanding rent arrears. It also expands on existing
restrictions on enforcing business rent arrears to ensure that
they cannot also undermine the arbitration process, which will be
in place for six months from Royal Assent. As we have heard from
hon. Members, the covid pandemic has hit businesses hard,
affecting disproportionately those at the frontline in our high
streets and communities, which have been forced to close or
restrict trading from March last year.
Labour recognises the need for a fair arbitration process to deal
with commercial rent arrears. That is why we will scrutinise the
legislation in detail in Committee, having raised some of those
broader concerns today, to ensure that the proposals are
effective and accessible, and fairly balance the interests of
relevant parties. Our principle is that no otherwise viable
business should face the significant burden from rent arrears
without due arbitration and a burden-sharing process. The guiding
principle must also be focused on fairness and on the long-term
interests we have in British businesses and supporting them to
provide much-needed employment across the country.
Labour has also called for the Government to help ease the covid
debt burden faced by firms across the country by creating a
British business recovery agency. The reason why we would want to
convert the bounce back loan scheme into a student loan-style
arrangement is so that businesses would have to start repayments
to the British Business Bank only when they are making money. It
is important that we have an integrated set of policies on
business recovery so that we do not deal with one aspect while
there are crises in other areas of life for businesses.
My hon. Friend is closing this debate brilliantly. Does she agree
that this week we have been reminded of how much businesses need
a responsible Government, who take speeches to the CBI very
seriously?
I thank my hon. Friend for her contribution. I had referenced
that and she makes the point powerfully; it is important that we
have a Government taking their responsibility to business
seriously and showing the nation that they are doing that. The
Prime Minister’s speech did more for the sales of Peppa Pig than
for supporting business recovery across our country.
Rent debt is a heavy burden for landlords and commercial tenants,
and we need a solution that will be in the interests of both.
This is a big issue and although we do not know its full scale,
the Bill’s impact assessment—the Treasury analysis—notes that the
total amount of deferred rent liabilities could be about £9
billion by March next year. That is why we need a policy solution
that is fair, fast, trusted, affordable and accessible, so I hope
that the Minister will be able to tell us how confident we can be
that the system will be in place and what the next steps will be
to ensure that.
Labour also called for action on rent debt and the wider business
costs in the summer. The Minister will know that before then. I
had met UKHospitality, the British Beauty Council, the Federation
of Small Business, the Night Time Industries Association and many
of those stakeholders to discuss the ongoing commercial impact of
covid. Those stories, which he and I still hear, showed the
strain on and perseverance of those who have fought against the
odds to keep going. As has been highlighted by the 3 million
excluded campaign, far too many had been excluded from Government
support and still struggle.
Luke Hersheson, a renowned hair stylist who is backing the “Save
Our Salons” campaign, said earlier this year:
“In March this year my salons will have been closed for 260 days
out of 365. Running a business for more than two thirds of a year
with no income at all is incredibly challenging. When the tap is
turned off salon businesses are still paying landlords, they’re
still paying utility bills, insurance costs and subsidising
furlough pay.”
That is a powerful statement about how businesses were struggling
and yet were still wanting to do their bit in the community and
support, at the frontline, our communities in getting through
covid.
Ensuring that viable businesses are able to survive into the
future is part of the responsibility of the Government. Members
have discussed how small businesses are the backbone of our
economy. We see that in all our constituencies—my constituency
has more than 5,000 small businesses. We know that the almost 6
million small businesses across the country account for 99.9% of
the business population, three fifths of employment and about
half of the turnover in the private sector. As the Minister
alluded to, many that will be affected and which may need to draw
on the scheme in this Bill may well be women-led businesses and
ethnic minority-led businesses. Perhaps he will tell us how he is
going to make sure that the opportunities provided by this
legislation will be known about by those who might need them. How
is the ability to seek a reference for arbitration going to be
made known to businesses at the frontline in our communities, so
that they do not get to the end of six months of struggle and
find that it is too late? It is crucial for our recovery to make
sure that that is understood and we have that ongoing partnership
between the Government and business large and small. We are going
to need that to make sure that our economy starts to fire on all
cylinders, which is what we want to see, in a recovery that is
sustainable. We want to start to see a recovery that generates
the profits and then the taxes to sustain our economy.
The challenge of dealing with rent debt that has accumulated is
particularly acute because businesses are also having to deal
with a wave of rising costs. Government incompetence led to
Britain being harder hit than other countries by the supply chain
crisis, ongoing issues and steep rises in energy prices. Those
are huge blows to businesses as they approach Christmas, which
should be the time when they are hoping to claw back profits in
order to make up for stresses earlier in the year. The
cost-of-living crisis has also seen consumer confidence knocked,
as we know. Last month, it dropped to its lowest level since
April, thus reducing consumer spending in all our communities.
That has been compounded by the inexplicable decision by the
Government to cut universal credit for 6 million families in
October—returning just a small part of that was not good enough.
In my constituency, this will take £18 million out of the local
economy. The Government’s jobs tax, which the Opposition oppose,
is also due to come in right at the time when debt protections
ease and businesses are expected to pay back costs they could not
afford during lockdown.
The Minister will be aware that all of those compounded pressures
will cause a potential crisis for businesses come next April. We
know that not all sectors of the economy will recover fast. That
point was made by my hon. Friend the Member for Brentford and
Isleworth. Aviation, travel and tourism, and parts of hospitality
will recover at a slower pace. These measures are set to be in
place for six months from Royal Assent. It will be helpful to
know how Ministers plan to review whether an extension of a
further six months will be required and how they will bring those
considerations to the House.
The Bill strikes an important balance between the duties of
tenants and of landlords and builds on the code of practice for
commercial tenancies that was announced in the summer and revised
most recently in November. Will the Minister respond to the
points raised about how the viability of businesses is to be
determined? A key task for arbitrators under the Bill will be to
assess how viable businesses are. There are some relevant
comments in the code of practice, but the Minister will
understand the Opposition’s concern about what qualifications we
can expect arbitrators to have so that they can make that
assessment. How will the panel of arbitrators be pulled together?
What will be the criteria for and what scrutiny will there be of
their capabilities? What does the Minister really mean by “a
viable business”? Over what time period will viability be
assessed, given that different sectors will continue to recover
at different rates? Has the Minister considered a simplified
appeals system in case there are disagreements about arbitration
decisions? Will he comment on the consistency of the arbitration
framework? There is currently no great detail on it and there is
a risk that different arbitration bodies and arbitrators will
take different approaches to cases, resulting in inconsistent
decisions.
Businesses are facing a difficult and now costly recovery from
the pandemic, with rising costs coming downstream. I am sure the
Minister will want to assure the House that he will make sure
that the arbitration process is affordable. What plans do the
Government have to make sure that the fees do not preclude access
for those who need support?
The Bill is welcome, but it is narrow in respect of addressing
the overall issues that businesses face and will continue to face
as we recover from the pandemic. It will be a slower recovery for
some sectors than for others. The Bill provides necessary support
for businesses with their rent debt if agreement has not been
reached, along with an arbitration process, which must be fair
and implemented quickly. If the Conservatives really cared about
business health, they would use this opportunity to go much
further in the provision of support in respect of business rates
reform and the other costs and supply-chain issues that are
hitting businesses and consumers hard.
15:12:00
With the leave of the House, I will speak a second time to sum up
the debate. I appreciate and very much value the constructive
nature of the debate and the comments and positive notes on the
Bill’s purpose. I shall concentrate my remarks on the issues
raised that relate directly to the Bill. I do not apologise for
the fact that the Bill is narrow.
The hon. Member for Richmond Park () asked why legislation did not
go through earlier; we extended the moratorium for several
months, rather than for just a quarter so that we could get the
Bill right. We spent that time working with the arbitration
services to make sure that we have the capacity and expertise—on
which I shall say a little more later—that we need. We have also
worked with landlords and tenants, because we have to strike a
really delicate balance: we are, in effect, intervening on a
contractual arrangement between two private bodies. A lot of the
other support that the Government have given has been in the form
of relief on various taxes, including business rates and VAT;
through direct grants; or through the guaranteeing of loans. The
Bill is very much about the moratorium, and our unwinding from
that involves our stepping into private contracts, which we would
not do without due care and attention.
The hon. Member for Brentford and Isleworth () talked about the scope of the
Bill and eligibility. By targeting the support, we can be sure to
get the arbitration cases through quickly and resolved
quickly. We clearly need a solution to the debt and do not want
cases to drag on for years. If the scope of the Bill were too
wide, capacity would start to be swamped, so in trying to help as
many people as possible we would end up helping nobody. It is
really delicately balanced.
Nevertheless, I appreciate the fact that over the past 19 months
there have been significant difficulties for people we have not
been able to support with the £352 billion-worth of financial
support we provided as we wrapped our arms, as best we could,
around the economy to protect jobs, livelihoods and businesses.
By resolving the rent debt for a business within the Bill’s
scope, we will help not only that business, but its immediate
supply chain and all the individuals who contribute towards its
success, by getting that business back on a level footing. I hope
Members understand why we have targeted the legislation in the
specific way we have and how it will deliver support where it is
most needed.
The hon. Member for Brentford and Isleworth also talked about the
availability of arbitrators, as did several other Members. I
reassure Members that we have worked closely with the arbitration
bodies and the market is ready to deliver. Our engagement with
arbitration bodies has raised awareness of the proposals and we
will continue to engage with interested bodies so that the system
is up and running as soon as the Bill comes into force.
We put out a call in respect of arbitration earlier this month
and there have been a number of respondents. The arbitration
bodies that have demonstrated an interest in becoming approved
bodies are already widely recognised and respected in the field
of arbitration for the accreditation services they provide to
their arbitrators. That accreditation acts as a quality-assurance
service. There is a statutory duty on approved arbitration bodies
to ensure that the lists they maintain contain only arbitrators
who appear to an arbitration body to be suitable by virtue of
their qualifications or experience. An approved arbitration body
also has a duty to remove arbitrators from a case on any one of
the grounds for removal specified in the Bill—for example,
when
“the arbitrator does not possess the qualifications required for
the arbitration”.
The Secretary of State also has the statutory power to withdraw
approval from a body if it is no longer considered suitable to
carry out the functions of an approved arbitration body.
The hon. Member for Feltham and Heston () asked how we are going to
communicate the changes. It is important that the parliamentary
process has signalled the introduction of legislation and, along
with continued conversations between the Government and the
Opposition, that will raise its profile, but we will have to do
more direct communication through business-representative
organisations, banks and accountants—the kind of intermediaries
that all businesses tend to have. There is lots of work to be
done, but we want to make sure that we get it right on the front
foot.
On how much arbitration will cost and whether it will be
affordable, the party that puts forward the case for an
arbitration will pay an application fee to the arbitral body. If
both parties agree, the fee can be split between landlord and
tenant at the point of application. When making the award, the
arbitrator must require the other party to reimburse half the
fees paid or to pay
“such other amount as the arbitrator considers appropriate”.
The price will be set by the arbitration bodies, although the
Secretary of State retains delegated powers to set a cap on the
fees charged. For similar schemes, there is a £1,250 application
fee, with additional costs if the parties choose to progress to a
hearing. Our preference—not just about cost, but about speed so
that we get things resolved for both parties—is an online,
documents-based process to keep costs to a minimum and to ensure
that the process is available to all.
The hon. Member for Feltham and Heston also asked about
demonstrating viability.
The Minister has given a figure of just over £1,200 as a
comparable amount. Given the Secretary of State’s power to
introduce a cap, is the Minister signalling the Government’s
intention to introduce a cap and the amount it might be set at?
If so, what is the assessment of affordability for the context in
which the Bill has been introduced?
I do not want to pre-empt further consideration of the Bill,
further discussions with the arbiter or, indeed, the Bill’s
passage, but it is clear that tenant businesses will already be
struggling financially, given the problem that we are trying to
solve with the Bill.
We will make sure that, if we do introduce a cap, that is done at
a limit that is consistent with the market, with the overall aim
of not preventing small and medium-sized enterprises from
accessing the scheme. The cap, though, will be variable. It will
be on a sliding scale relative to the amount of protected rent
debt that we used to determine the cap should it come in, and we
will ensure that it is proportionate for each case. We do expect
otherwise viable businesses to be able to afford the cost of
arbitration.
On viability, there is no specific definition of what constitutes
viability, because, clearly, business models vary hugely. In
clause 16, there are factors that arbitrators should consider
when assessing the viability of a tenant’s business. Within the
wider code of practice, there is also a non-exhaustive list of
evidence that could be considered when determining viability and
affordability.
Hopefully, that has covered a number of the direct issues. I will
not go too heavily into some of the other areas that extend
around high streets. Suffice it to say that having put £352
billion-worth of support into the economy—including into those
hard-pressed sectors, including retail, hospitality, leisure and
personal services —we have 352 billion reasons to get the next
bit right to make sure that we can have the Reading East that I
remember. Probably some of those businesses have gone since I was
at university 30-odd years ago, when I enjoyed far too much
hospitality—the Purple Turtle, the After Dark Club, the Turk’s
Head, and the Ye Babam Ye kebab shop, he says going down a Ricky
Gervais memory lane in Reading East. Indeed, I have also had many
a happy meal in Don Fernando’s in Richmond. We want to make sure
that we can protect these hard-pressed sectors.
rose—
I will briefly give way to the hon. Gentleman if he tells me
whether any of those businesses are still open.
They are still open, yes. I am grateful to the Minister for his
tour of Reading town centre, and I am also a big supporter of
many of those businesses. Will he come and visit Reading with me
to look at the specific issues that some of the local businesses
face, in particular how some of our small businesses on our local
high streets cope when there is no longer a bank?
The hon. Gentleman is absolutely right about the need for access
to cash and access to banking services. I am always happy to come
to Reading. It is important that banks—and post offices where
banking pilots are under way—remain that cornerstone of social
value on the high street.
Finally, I went off track when we started talking about Peppa
Pig. Children in 118 countries know about Peppa Pig because it is
a hugely important British brand and British export worth £6
billion to the economy—that is just Peppa Pig itself. I dare say,
though, that the people behind Peppa Pig probably will not need
the Bill. It will be those smaller businesses on our high streets
up and down the country that do, and that is what this Bill is
here to do.
The Bill provides that resolution for the remaining rent debt
accrued by businesses required to close. It will deliver key
Government objectives, protect jobs and help to prepare for a
new, stronger economy post covid. I look forward to discussing
the Bill further in Committee, but for now, I commend it to the
House.
Question put and agreed to.
Bill accordingly read a Second time.
Commercial Rent (Coronavirus) Bill (Programme)
Motion made, and Question put forthwith (Standing Order
No.83A(7)),
That the following provisions shall apply to the Commercial Rent
(Coronavirus) Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not
previously concluded) be brought to a conclusion on Thursday 16
December 2021.
(3) The Public Bill Committee shall have leave to sit twice on
the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously
concluded) be brought to a conclusion one hour before the moment
of interruption on the day on which those proceedings are
commenced.
(5) Proceedings on Third Reading shall (so far as not previously
concluded) be brought to a conclusion at the moment of
interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not
apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(.)
Question agreed to.
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