The detrimental impact of the Corporate Insolvency and Governance Bill on defined benefit (DB) pension schemes and the Pension Protection Fund (PPF) has been highlighted forcefully by peers in the first sitting of the Committee stage in the House of Lords, which took place yesterday. The leading statements made by peers, together with the Government’s response from Lord Callanan can be found below. The statements in favour of the various amendments proposed to address the concerns around pensions make clear the very significant impact that the Bill could have by:
- reducing recoveries made by DB schemes and the PPF on corporate insolvencies that follow a new moratorium
- reducing the influence of the PPF over the terms of a new restructuring plan, and
- by undermining the protection afforded by contingent security that has already been granted to DB schemes.
So far, the Government seems reluctant to make too many concessions on these points, driven in part by its desire to push the Bill through Parliament quickly. The primary concessions secured, to date, are that the Government has indicated that it will:
- remove the super-priority status from any bank debts and other financial institution lending that are accelerated during a moratorium, and
- it will require the PPF to be given information where a company enters into a moratorium or proposes a restructuring plan.
However, the Government is so far resisting amendments which would:
- remove the priority for financial institution debt
- ensure that assets subject to fixed and floating charges cannot be sold during a moratorium without the consent of the PPF
- amend the Pensions Act 2004 so that a moratorium is an insolvency event so that it triggers a PPF assessment period, and
- have the PPF involved, with vetoes, in restructuring arrangements.
The first of these changes is almost certain to be rejected on the basis that the Government, understandably, wants to ensure that banks continue to lend to companies during a moratorium. However, there is scope for the financial institution debt that is given priority to be narrowed further (e.g. by excluding intra-company and shareholder loans) without undermining this objective.
The second, third and fourth amendments listed above are particularly important to ensure that the protection afforded to DB schemes and the PPF where a scheme sponsor is in financial distress is not undermined. But there is no indication yet that the Government is prepared to move on these.
Impact on Pension Schemes Bill
Finally, the changes that are ultimately made to the UK insolvency regime could have implications for the Pension Schemes Bill which is still (slowly) making its way through Parliament. Baroness Bowles of Berkhamstead intermatted as much in her statement to the Committee, saying:
“I am now quite glad that we have not finished the Pensions Bill because, if these new priorities are enacted, they will take a wrecking ball to the difficult consensus that was being reached on the speed of paying down deficits, and other provisions coming from the regulator regarding its powers and what it would do to make sure that deficits were paid down. We will certainly have to take into account these new circumstances in this Bill and seek follow-on protections if it proceeds largely in the format it is in at the moment.”
Extracts from Hansard – 16 June 2020
Corporate Insolvency and Governance Bill
Committee (1st day)
My Lords, I refer to my entry in the register of interests. I shall speak also to Amendments 39, 63 and 64.
I fully support the Government’s desire to assist companies in bouncing back from Covid-19, but it is neither necessary nor desirable that such a policy should seriously weaken the position of defined benefit pension schemes and the Pension Protection Fund in the event of an insolvency or restructuring. The Bill does this in several ways: by granting super-priority status to unsecured banking and finance debt, ranking it above pension scheme debt if a company is not rescued, which introduces material detriment to the level of recoveries the PPF, acting as creditor for a scheme, can achieve through insolvency proceedings; by finance debts getting preferential treatment over pension scheme liabilities by continuing to be payable during a moratorium; and by the new moratorium and restructuring plan processes not triggering a PPF assessment period or a pension scheme’s Section 75 debt, weakening the position of the scheme and the Pension Protection Fund, which would not have a seat at the table for key creditor and restructuring plan discussions and would be denied a meaningful voice on employer liability to the scheme.
The Minister wrote yesterday and indicated that the Government will bring forward amendments on a number of matters, for which I thank him. We have yet to see the text of those amendments, but I will seek to reference the Minister’s letter in what I say.
Amendment 20 removes amounts payable in respect of pre-moratorium debts and other liabilities
“arising under a contract or … instrument involving financial services”
from the exemption from the payment holiday during a moratorium and the super-priority provisions in the event of an insolvency process. Amendment 39 does the same in Northern Ireland.
There is nothing in the Minister’s letter that indicates the Government’s intention to give further attention to their decision to give such a wide range of finance debts elevated status and preferential treatment over pension scheme liabilities. We have today heard his statement on accelerated finance debt, but I will continue to press my amendment.
It is difficult to comprehend the Government’s reasoning for liabilities under financial services contracts, extremely widely drafted in the Bill. It would include unsecured lending such as shareholder loans and intercompany loans, including from a director or parent company, as well as arm’s-length regulated activities and bank debts, all getting preferential treatment over pension scheme liabilities. Others have asked similar questions in respect of SMEs and workers.
As drafted, it would allow finance parties to accelerate all debt so that the entirety of the lending would be payable under these provisions and benefit from super-priority on insolvency. There is a real risk of gaming. The noble Lord, Lord Hodgson of Astley Abbotts, and the noble Baroness, Lady Bowles of Berkhamsted, articulated such examples so brilliantly in the first group debated. From what I heard during that debate, I welcome the Minister’s statement that accelerated debt will not now have super-priority status, which addresses in part—but certainly not in whole—the purpose of my amendment.
During a moratorium, these financial debts would continue to be payable, pension scheme deficit contributions would not and the trustees could not call on any contingent assets that would otherwise be triggered by non-payment of deficit contributions. Priority for finance debts would remain. The Law Society has said:
“the Bill would create an incentive for lenders without effective security to allow the rescue of a company through a moratorium to fail, so as to force it into administration or liquidation and achieve super-priority.”
I say this without sight of the Government’s amendments, but there may remain a perverse incentive that undermines any preference the trustee or PPF may have to rescue the company.
Worryingly, liabilities imposed by the Pensions Regulator on the company for breach of moral hazard rules, such as contribution notices and financial support directives, also rank behind these financial debts. This is not addressed in the Minister’s letter. Will the government amendments address this concern?
Amendment 63, through an amendment to the Pensions Act 2004, provides that both the start of a moratorium and an application for a meeting of creditors to consider a restructuring plan would trigger a PPF assessment period and a scheme’s Section 75 debt. Amendment 64 applies similar provisions to Northern Ireland. This would enable the PPF to act as the creditor of the scheme, which would have an improved standing and vote. These are key protections that currently exist.
In his letter yesterday, the Minister advised that the Government will bring forward amendments that will: during a moratorium, give the PPF rights to information and the right to challenge the actions of the directors and/or the monitor; on a restructuring plan, provide that both the PPF and the Pensions Regulator will be entitled to receive copies of all the information sent out to creditors; and, on both procedures, grant the ability to provide creditor rights to the PPF, subject to appropriate constraints.
I welcome that the Government have recognised that the pension trustees, the PPF and regulator need the rights and authority to engage effectively during the moratorium and restructuring plan discussions, but it is unclear how meaningful those engagement powers will be without seeing the actual amendments and to what extent they will be broadly comparable with or weaker than the current safeguards available.
It will also be important to understand how any government amendments address the serious risk that the new restructuring process could give rise to the systemic dumping of DB pension schemes by companies that are financially underperforming. The restructuring plan procedure can compromise creditors’ claims and standing. It allows for a cross-class cram down and there is much speculation that this could be used to cram down the pension scheme. I ask the Minister how the government amendment would address that concern.
The relevant legislation, which gives the PPF creditor rights, is chiefly the Pensions Act 2004, which puts in place a careful framework that supports action to rescue distressed companies, while protecting the interests of pension scheme members. It does this by triggering a PPF assessment period at the start of the insolvency proceedings that aim to rescue an employer. The PPF steps into the shoes of the trustees by acting as creditor for the debt owed to the scheme. This legislation has proven effective and has delivered better outcomes.
As drafted, the Bill directly undermines that carefully structured framework. It will be important to understand how and to what extent the Government’s amendment rows back from that consequence. The 2004 Act provisions were a product of the failure of successive Governments to protect pension scheme members under UK insolvency laws. It would be regrettable if, through this Bill, history repeated itself.
The Minister’s letter sent yesterday and his statement on accelerated finance today are a significant step forward, but they do not eradicate all the key risks that many noble Lords are so deeply concerned about. I ask the Minister if, before Report, he will reflect further on the concerns that I, and no doubt others, will express today. I beg to move.
My Lords, until recently, I was a member of the board of the Pension Protection Fund. I will speak to Amendments 20 and 63. Like my noble friend Lady Drake, I have yet to digest the contents of the Minister’s letter from yesterday evening and we have yet to see the actual amendments, but I want to set out my concerns, so that they can be tested against the concessions he has made.
I fully support the policy intention behind the Bill: to help otherwise financially viable companies avoid the prospect of failure, as a result of the unprecedented disruption that Covid-19 has caused. However, alongside its temporary measures, the Bill includes permanent measures—the moratorium, the restructuring plan and changes to creditor status—that will be far-reaching. On the current drafting, there will be consequences that have the effect of reducing the protection and rights of underfunded pension schemes and the Pension Protection Fund when companies are in financial distress—protections that have been carefully built up and developed over 16 to 17 years.
Amendment 20 removes financial debts being exempt from the moratorium payment holiday and the granting of super-priority to those debts in the event of a company entering into an insolvency process. Amendment 63 provides for the triggering of PPF creditor rights and a scheme Section 75 deficit at the start of a moratorium and of restructuring plan discussions.
We cannot overestimate just how serious this is. For many years, the covenant position of defined benefit pension schemes has been based on unsecured pension debt ranking side by side with debts owed to other unsecured lenders. This has underpinned all valuation, funding and covenant discussions. The super-priority status granted to finance debts in an insolvency following a moratorium removes that base. It weakens valuations and funding arrangements and is detrimental to members of pension schemes and to the role of the PPF acting as creditor. It also affects the scheme trustees. The liabilities of the scheme—the pension promise—are usually significant and payable over a significant number of years. Unlike other unsecured creditors, trustees are not in a position to manage the exposure to the scheme’s debt by ceasing to deal with their employer. Therefore the Bill dramatically enhances the interests of the finance lenders and weakens the interests of the pensioners and future pensioners in an insolvency situation.
It is unclear why such finance steps are being given such enhanced protection when the pension scheme is not protected from the detrimental impacts of the payment holiday, and is vulnerable to lenders accelerating payments during the moratorium, so the entire debt would benefit from enhanced status and super-priority, as the noble Baroness, Lady Bowles, highlighted on the first group of amendments. I welcomed the Minister’s statement in response to that debate that the accelerated debt would not get super-priority status, in what appears to be an important concession for the Government. I am sure that noble Lords will want to look at the amendments in some detail.
Another important point is that liabilities such as contribution notices and financial support directions issued by the Pensions Regulator will rank behind finance debt creditors that are super-priority, undermining, as far as I can see, the role of the regulator and the interests of the scheme. The Minister’s letter does not address that at all. There is a real possibility that such finance debts emerging from a moratorium with super-priority status could remove any chance of recovery for pension schemes in an insolvency, and they will certainly get less than they would currently secure in a liquidation or administration.
The Minister’s letter does not appear to address many of the concerns to which Amendment 20 is directed: the rise in pensioners not receiving their benefits in full, and greater strain on the PPF. If the PPF has to raise the levy as a result, it will put additional financial pressures on other existing businesses, which is the opposite intention of the Bill’s proposals.
On Amendment 63, the moratorium is a new formal arrangement that will act as the starting point for discussions with creditors about the future of the business. As drafted, the Bill means that the PPF will be excluded from those discussions. If it has no formal standing, the PPF cannot address the risk of a deal being reached with creditors which is detrimental to the PPF, the scheme, and the levy payers, or the risk of dumping pension scheme debts by a company which is financially underperforming. It is critical for the PPF and schemes and important for all parties that they are included from the start of these discussions. The Minister’s proposals are a recognition of the concerns about the moratorium in restructuring plans, and I welcome those. Of course, I await the detail of the amendments to understand how those concerns are addressed.
Finally, there is a form of super-priority in relation to a restructuring plan in the Bill. A court cannot sanction a restructuring plan if it includes a provision in respect of certain creditors, and those creditors have not voted in favour. Those creditors include a creditor in respect of a pre-moratorium debt for which the company has not had a payment holiday during the moratorium. The Law Society observes:
“In a CVA or restructuring plan, following on from a moratorium, the holders of debts for which the company did not have any payment holiday during that moratorium, which includes those finance debts, have in effect a veto right in respect of the CVA or restructuring plan.”
As to the scheme and the PPF:
“The chances of recovery are reduced or removed in an insolvency, creditor rights are weakened during the moratorium and restructuring plan discussions, and the restructuring plan process allows a plan to be imposed on a dissenting pension scheme to their detriment and to that of the PPF.”
Triggering a PPF assessment of the scheme’s Section 75 debt at both the start of a moratorium and an application to court to summon a creditors’ meeting to consider a restructuring plan would be key protections, which Amendment 63 seeks to include. Can the Minister explain how the Government’s amendment would address the need for such protection?
Given the Minister’s response to the noble Baroness, Lady Northover, at the end of the last debate, would he be willing to discuss the concerns which Members of the Committee have expressed in this debate before the Government publish their amendment in time for Report?
My Lords, I will speak to Amendment 27, which is in my name. I support whole-heartedly Amendments 20, 39, 63 and 64, as well as Amendment 118, to which I added my name.
I echo the wise words of the noble Baronesses, Lady Drake and Lady Warwick, and my noble friend Lord Balfe. It is of deep concern that the Bill did not originally encompass provisions to protect the deferred pay of workers in an insolvency or restructuring situation. Indeed, as it stands, the Bill drives a coach and horses through the protections that, as the noble Baroness, Lady Drake, so rightly outlined, were carefully crafted and put in place in 2004 to ensure that workers’ pensions were protected, having been through several years during which it was discovered that many members of defined benefit pension schemes had lost much, or even all, of the pension that they had been relying on for their retirement.
The Bill is a significant change to the usual priority order for unsecured creditors in an insolvency or a restructuring situation. It is an existential threat to defined benefit pension schemes in the UK to give super-priority status to unsecured financial debt over that of other unsecured creditors—including the associated pension scheme and the rights of the Pension Protection Fund, which protects all other defined benefit pension schemes in the UK. I urge my noble friend—I thank him for at least recognising that this is an issue and saying that the Government will table amendments—to listen carefully to the concerns expressed in the debate on this group of amendments and ensure that consultation is put in place, as other noble Lords have requested, so that we can try to get this right.
The pension promises are so important for workers but, as it stands, this legislation would appear to legitimise the actions in connection with pensions that have been considered egregious over the years. The Pensions Regulator’s reports on the pension schemes of BHS or Carillion, for example, make it clear that the pension funds were at risk of being gamed by other financial creditors passing the parcel or elevating themselves ahead of the interests of the pension schemes.
Amendment 27, for example, would ensure that if an insolvency was in the offing and the monitor applied to the court to remove protection from assets that were previously secured, such consent could not be given without the approval of the Pension Protection Fund. That is really important. With the provisions proposed in, for example, Amendments 63 and 64, the PPF would already have been involved because a PPF assessment would have been triggered. After a PPF assessment period is triggered, the PPF can come in and protect its own position and that of the pension fund; that is, the creditor rights.
At the moment we have a system whereby trustees carefully work out integrated risk management proposals to ensure that the contributions to the pension scheme demanded of employers are reasonable and proportionate in terms of helping the company to survive and thrive, but also protecting the scheme should the company not do so. In that regard, many schemes have been pledged assets belonging to the company so that, if insolvency occurs, they will be available to boost the pension scheme. Under the current proposals in the Bill, without Amendment 27 the assets pledged to the scheme would potentially disappear and the banks would potentially secure themselves a win-win situation while jeopardising the interests not only of the pension scheme attached to the company in question but of all other defined benefit schemes protected by the Pension Protection Fund and the millions of members in those schemes. I hope that my noble friend will listen carefully and take seriously the concerns expressed across the Committee that banks should not be given preferential status.
I would also like to pick up on what my noble friend the Minister said in the debate on the first group of amendments: that the intention behind the moratorium is not to make creditor positions worse. However, in the context of a defined benefit pension scheme, should the Bill’s measures not be amended in line with the types of amendments proposed here, there will be a fundamental change if an insolvency winding-up or administration takes place within 12 weeks of the moratorium, and the moratorium and pre-moratorium debts take priority over creditors such as those with Section 75 unsecured pension debt.
I welcome my noble friend the Minister’s comment that the Government plan to bring forward their own proposals to address some of the concerns covered by my Amendments 94 and 95, and I thank the Law Society very much for its help and support in addressing these inconsistencies or insufficiencies in the Bill. I hope that my noble friend will bring forward amendments to ensure that pension schemes are protected, that contribution notices and financial support directions are not overridden, and that the pensions of scheme members across the country—pensions on which they rely for their retirement security—are not significantly jeopardised by this well-intentioned and important Bill.
My Lords, it is a pleasure to follow many speakers with great experience in the pensions world. As the Minister said in speaking to the first group of amendments, the objective of moratoriums in this legislation is that they will succeed and that companies with a hope of surviving will do so. But that will not always be the case. Insolvencies or other arrangements may follow. The moratorium structure rewards those who continue to supply, with an enhanced priority in a subsequent insolvency. It rewards financial institutions in a particular way that is identified as giving priority to creditors, including those who would have just ranked alongside pensions as unsecured creditors but are promoted above them.
As has already been mentioned, the Minister said in responding to the first group of amendments that some change will be made to exclude accelerated debt from super-protection. That does not sound like even as much as was covered in the group 1 amendment of the noble Lord, Lord Hodgson, which I signed, but it is a start. Nevertheless, I am still concerned that it elevates all financial debt above pensions, as explained by the noble Baroness, Lady Drake. If I heard the Minister correctly, he implied that without being given priority, in return for none of the things that bind other companies, banks would not play ball—I paraphrase what was actually said. The reason why the banks will play ball is to get benefits. That still means that they will make greater demands and ask for bigger fees. They will still accelerate payments even if they do not get priority, but that will still suck funds out, because banks do not have a payment holiday.
I am attracted somewhat to what the noble Lord, Lord Balfe, said on whether the PPF will survive. I note that having to stand behind pensions actually comes from European legislation. I believe the UK was taken to court on this subject. Do the Government still stand behind legislation protecting pension benefits, or is that a piece of EU legislation headed for the dustbin of broken promises?
Like other noble Lords, I think that the Government need to think further about the legislation’s effects on pensioners, the Pension Protection Fund, the Pensions Regulator, pension trustees, companies contributing to the PPF, which will face elevated contributions, and those self-same companies facing deficit repayment schedules that will need to be greater to compensate for the actions in this legislation, as well as the fact that many schemes are much further in deficit because of the current crisis situation that we are in.
Also, what does this blackmail change—I call it “blackmail” because that is what it sounded like when the Minister explained it—to the insolvency waterfall say about the stability of legal agreements and contracts in the UK, if securities that have been pledged to pension funds can be sold from under them through a retrospective law change made without any warning or notice? That is what this priority change is. “Moratorium” might have been trailed, but “moratorium” means delay, not a change of priorities and the inclusion of financial institutions in special arrangements for no consideration—for that is what it is: no consideration. It is more than simply consequential to the running of a moratorium.
Various amendments in the group aim to prevent harm to pensions, and my probing Amendment 118 suggests that the PPF should be consulted in any compromise arrangement. It could or probably should be made stronger and require consent, but then I do not really need to speak to it because the noble Baronesses, Lady Drake and Lady Altmann, have come up with extremely sound, detailed amendments. I support them and commend them to the Government.
I realise that the Minister indicated in his email last night that some movement in this direction will happen. He has also said that the Government will give creditor rights, which is the issue covered by Amendments 63 and 64 in the name of the noble Baroness, Lady Drake, but the extent and effect of those rights is important. I therefore remain concerned. Changing the ranking of creditors also opens up questions about, “Why just that change?” There are arguments, with which I have a lot of sympathy, that say pension deficits should have a higher ranking in insolvency anyway, given their origin as deferred pay. We will come to other provisions on that in the next group.
I am now quite glad that we have not finished the pensions Bill because, if these new priorities are enacted, they will take a wrecking ball to the difficult consensus that was being reached on the speed of paying down deficits, and other provisions coming from the regulator regarding its powers and what it would do to make sure that deficits were paid down. We will certainly have to take into account these new circumstances in this Bill and seek follow-on protections if it proceeds largely in the format it is in at the moment.
In summary, this group has four sensible proposals, independently made from across the House, that have significant overlap: scrap the financial institution priority, which weakens the position of pensions; ensure that pledged securities are not sold without the consent of the PPF; amend the Pensions Act 2004 so that a moratorium is an insolvency event and triggers a PPF assessment period; and have the PPF involved, with vetoes, in restructuring arrangements. I commend a composite of those arrangements to the Minister and I hope that productive discussions can follow because, welcome though the moves already flagged are on the PPF having creditor rights, we need to make sure that they fit the bill and that pension deficits do not still face significant losses.
I thank all noble Lords for tabling amendments on this important topic. I first clarify to the noble Lord, Lord Lennie, and others that I thought it would be helpful to email noble Lords last night to inform them of my intention to table an amendment on Report because, under the new procedures, I was not able to stand up at the start of this grouping to tell people in advance. I thought it would be helpful to give people advance notice of this to stop them asking for all the things that we were going to do anyway. I thought that it might have played some part in curtailing the debate on this.
I start by reminding the House that both the moratorium and the restructuring plan are not insolvency events—they are company rescue procedures. Where the company itself can be saved as a going concern, obviously, the returns to all creditors and stakeholders of the company will be better.
I turn specifically to Amendment 20 for Great Britain, tabled by the noble Baroness, Lady Drake, and others, and Amendment 39 for Northern Ireland. I do understand the intentions behind these amendments. However, removing financial services contracts from the list of liabilities for which a company does not have a payment holiday when it enters a moratorium would mean that the company does not have to pay these liabilities during the moratorium.
The purpose of excluding these contracts from the payment holiday is to ensure that the moratorium does not affect existing financial services legislation or the operation of the financial markets, and that financial markets participants continue to have legal certainty to facilitate the efficient functioning of those markets. Not excluding them could have potentially severe consequences for the operation of the markets and, in turn, the stability of the financial system and the availability and cost of these products.
In addition, it is important to recognise that financial services firms are a key part of making the moratorium provisions work. Critically, they are not excluded from the moratorium, as I said on the last grouping, where they are a creditor to a company in distress so that they continue to support those companies. It is recognised that not excluding financial services contracts from the payment holiday definition could remove the incentive for these firms to continue to provide finance. That could leave companies in financial difficulty in a far worse-off position than they would otherwise be.
I understand the purpose of these amendments, and the concerns that many noble Lords raised during this debate and at Second Reading on the super-priority of financial services debts in the moratorium. In discussions with the various stakeholders, it has become clear that unpaid financial services debts that have been accelerated for payment during the moratorium receive this super-priority status. We would not want this to provide an incentive for financial services firms to jeopardise the rescue of businesses during a moratorium by accelerating financial services contracts for payment, so as to benefit from this super-priority of their debt in a subsequent insolvency. I will therefore table an amendment on Report to address this issue, and I thank noble Lords who have raised it with me.
I turn to Amendments 27, 63, 64 and 118. Again, I understand the intentions of these proposals. We can all agree that recent high-profile insolvency cases that featured large deficits owed to the defined benefit pension scheme were worrying. We all recognise the uncertainty that this brings for employees, both past and present, in such cases. Again, I assure the Committee that the Government recognise the need for safeguards around these pension schemes and have been working closely with key stakeholders over the last few weeks on these issues. We have reflected on the concerns raised, so I confirm that it is our intention to table amendments on Report to ensure a greater role for the Pension Protection Fund and that pension protection is made clear in the Bill. Again, I am grateful to noble Lords for their engagement on this issue. Both the amendments that I have mentioned will be tabled tomorrow to give noble Lords the opportunity to study them in advance of Report.
Let me address some of the points made. Initially, the noble Baroness, Lady Drake, and I think the noble Lord, Lord Fox, asked—he may not have done so—whether pension schemes can be crammed down. The protections that apply generally will cover a pension scheme included in a restructuring plan proposal. There are strong protections, including a high threshold for class support of 75%, and where cross-class cram down is requested and none of the members of a dissenting class are worse off than they would have been under the next most likely outcome. Importantly, even if all the statutory requirements are met, the court can refuse to sanction a restructuring plan if it is fair and equitable for it so to do.
My noble friend Lady Altmann and, on this occasion, the noble Lord, Lord Fox, asked about the debt priority of pensions and whether the current ranking is appropriate. When insolvency occurs, there is a balance to be struck in considering the order in which those owed money are paid out of the available assets. There are seldom enough funds to pay all creditors in full in an insolvency. To ensure fairness, the law requires that available funds be distributed in a certain order. Unsecured creditors are paid once the secured creditors and preferential debts, which of course include employees’ hard-earned wages and salary, have been dealt with; they share the funds that are then left over. Any deficit owed to a pension scheme ranks alongside all other unsecured creditors, which will inevitably include trade suppliers, some of which will be small and micro companies. I confirm to the noble Lord that this legislation has not changed the existing provision and that it carries on.
With those explanations, and with the notice I have given of the proposed government amendments on Report, I hope that I have provided sufficient justification for the noble Baroness to withdraw her amendment.
I thank the Minister for his reply and I am grateful for the advance notice from him yesterday evening, which I took in the spirit in which he gave it. It allowed us to make our contributions more relevant, so I thank him for that.
As my noble friend Lady Taylor of Bolton observed in the previous debate, the fast-tracking of emergency measures in the light of Covid is combined in the Bill with radical, permanent changes to the status and rights of creditors and stakeholders. This House and indeed Parliament have not had time to address the consequences of that and their significance, and we are beginning to see quite serious consequences—maybe unintended consequences—being revealed.
The moratorium is not an insolvency event, but it is the start of a process that moves towards insolvency or restructuring and it does trigger a change of creditor status. While I completely accept that a strong UK economy needs a strong, functioning financial market, there is also a question of balance. The definition of finance debt in the Bill, which is given superior status, is drafted very widely, way beyond being a simple issue of banks. On the arguments that noble Lords have put today, that balance between protecting the pensioners, on which the insolvency laws were changed back in 2004, as opposed to the interests of the financial markets, is tilted in the Bill against the pensioner and risks us going back to the position that existed in 2004 where pensioners were not protected sufficiently—or in that case, not at all—under UK insolvency laws.
I thank noble Lords who have spoken in this debate. Throughout Second Reading and Committee, we have put our concerns very clearly about how this Bill impacts the framework of protection for pensioners that has been finely crafted and built up over 60 years. I welcome the Minister’s statements because they are a recognition of the concerns that we have all been expressing.
I look forward to seeing the government amendments but hope that the Minister will reflect on the seriously held views expressed today across the House on protecting pension schemes, their members and the lifeboat scheme. If it is possible to have any discussion so that these could be considered further, that would be helpful. In view of the significance of this matter, I may wish to return to it on Report, but I beg leave to withdraw Amendment 20.
Amendment 20 withdrawn.