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directly as interim trustee where there is no likelihood of any call being made on public funds to finance the sequestration. We are actively considering specific amendments to the Bill which would enable such an arrangement to operate. I realise that that aspect of the matter concerned several hon. Members earlier in our discussions.On the basis of a proposal, originally put forward by the Scottish Insolvency Practitioners Joint Liaison Committee, whom the Government have consulted extensively on the Bill, those arrangements would allow a creditor or debtor to nominate an insolvency practitioner in cases where there are sufficient assets to finance the cost of the sequestration. Provided that we can be satisfied that such an arrangement is workable and will not give rise either to limping sequestrations or a future demand on public funds, we would be prepared to consider amendments to the Bill in Committee to deal with that matter.
The enactment of the Bill will improve the handling of sequestrations for the benefit of debtors, creditors and taxpayers. It builds on the experience of operating the 1985 Act and rectifies the flaws that can be clearly perceived in its administrative arrangements. I recognise the legitimate concerns that have been expressed about the effect of several provisions. I hope that I have given sufficient assurance that the Government will approach the Bill's Committee stage constructively. We are prepared to listen carefully to reasoned arguments. I have no doubt that the Bill will emerge strengthened from that process, and I commend it to the House.
4.13 pm
Mr. Donald Dewar (Glasgow, Garscadden) : I beg to move, to leave out from "That" to the end of the Question and to add instead thereof :
"this House declines to give a Second Reading to the Bankruptcy (Scotland) Bill because of the inadequate opportunity for consultation between the Government and interested bodies in Scotland on the contents of the measure."
I must confess that Scottish politics are full of unexpected pleasures. The House will not be surprised to hear that no one's heart missed a beat at the news in the Queen's Speech that the law on bankruptcy in Scotland was to be adjusted. However, the Bill has turned out to be interesting. It is full of unlikely facts, bizarre circumstances and at least a hint of a reversal in normal political roles.
I enjoyed watching the Under-Secretary of State, the hon. Member for Eastwood (Mr. Stewart), who seemed to have been brought from the substitutes' bench as a late replacement for the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) to introduce the Bill. He clearly enjoyed the prospect less and less the more he read about it. It is not a fit fate for such an enthusiastic member of the No Turning Back group to find himself presiding over such a snappy little nationalisation measure. If that is part of the striving for a better character in Scotland that we are promised by the Government, I welcome it.
Today's event is unusual : the debate is about the merits of the matter. The House is being invited to give a Second Reading to the Bill, but there is a sub-theme--the question why the Bill is being debated here at all. As the Secretary of State factually reported, the Bill was discussed for not one but two days in the Scottish Grand Committee. I made no objection to its referral to that Committee, as that semed an appropriate way to deal with the Bill where there
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was no head-on political collision over a matter of principle. There was no root and branch opposition ; we recognised that there was a problem, to which a solution had to be found. I do not intend to rehearse in great detail the arguments deployed in the Scottish Grand Committee, but the nature of the problem must be described and considered if the present argument about the procedure--the sub-theme to which I referred--is to be understood.The Secretary of State made it clear that the genesis of the debate goes back a long way, to the Scottish Law Commission's report of 1982 and its wide-ranging review of the law on bankruptcy. I do not object to being quoted to the effect that that review was long overdue as I do not think that that greatly affects the subsequent argument--it was long overdue. As the Secretary of State said, the Scots statute of 1621 was then the basis of the law. Whatever respect I have for the work of the 17th-century Scottish Parliament, I am not such a purist as my hon. Friend the Member for Dundee, East (Mr. McAllion) and believe that mistakes may have been made in 1621, especially when we look at the circumstances that prevail today-- [Interruption.] I am glad to say that I did not hear the sedentary interruption by my hon. Friend the Member for Dundee, East.
There was a case for a review, which was designed partly to consider sequestration procedure. As the House knows, sequestration is a way of regulating the affairs of a debtor, protecting both the debtor and the creditor, and attempting to create order in someone's affairs when they are in chaos. One of the odd by-products of the law as instituted in 1985 was that, while it cured one defect, it created a great worry for the Government. The defect that we were trying to cure was the anomaly of a rich debtor--if that is not a contradiction in terms--being able to take advantage of professional help and sequestration law in a way not fully available to a debtor at the bottom of the pecking order. There was a simple and, possibly, human reason for that.
If the sequestration case involved assets--regardless of whether the debts outweighed the assets--they could be used to pay for professional fees, which have a first charge on assets. Therefore, it was possible for such a debtor to engage professional help because the money needed for the fees was protected. Conversely, if the case involved virtually no assets, the insolvency practitioner was unlikely to give of his or her time and trouble with no prospect of reward. The Law Commission properly argued that that state was not right and suggested the principle correctly accepted in the 1985 legislation--that the state should take responsibility for the costs of sequestration in a small assets case that was likely to be barred for the practical reasons that I have described.
In the Scottish Grand Committee, I mentioned the quaint, old-world atmosphere that prevailed in the Law Commission's report of 1982, which assumed that drafting legislation to give the state responsibility for paying fees would probably produce between 120 and 150 new sequestration cases a year and result in a total cost of fees to the public purse of between £6,000 and £7,500.
After 1985 the floodgates opened. There is controversy, and I suspect more controversy to come, about exactly why that happened. In 1985 there were, not between 120 and 150 cases, but 295 sequestrations. By 1991 the number had risen to nearly 8,000. Instead of a top limit of £7,500, the state was paying insolvency practitioners £18.5 million.
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I accept that that is a massive sum. I received one letter from an ingenious and brave insolvency practitioner who suggested that the sum was small when measured against the costs of the poll tax. It did not seem to be an argument likely to soften the heart of the Secretary of State, but I leave it on the Dispatch Box in front of him. No doubt he can consider it. To be serious, it is a large sum. The figures mentioned in the press over the weekend suggested that the projected cost of the entire civil legal aid scheme for the state in 1991-92, at £16.6 million, was considerably less than the fees paid to insolvency practitioners.It is well known to anyone who has followed the debate, even superficially, that we have in the memorandum to the Bill the exciting prospect that the £18.5 million will soon be dwarfed and that in 1993-94 the Government expect to pay £50 million and in 1994-95 £80 million to insolvency practitioners. In fairness, when that was put to the Under- Secretary, he bravely suggested that the figures were merely an extrapolation of a trend. I think that he was inviting us to take the view that the material in the financial memorandum should be disregarded and was worthless. If that was not his intention and we are to take these figures seriously, they are indeed spectacular.
The Institute of Chartered Accountants of Scotland, perhaps rather meanly, pointed out that, on the present fee pattern, by the middle of this decade there would be 40,000 sequestrations a year in Scotland. That does not suggest that the Scottish Office is wholly convinced of the imminence of economic recovery, but there we are. I accept that the situation cannot be shrugged off. Obviously, the Scottish Office is unhappy. If it is not unhappy, we can bet our bottom dollar that the Treasury is. If I may mix metaphors, I suspect that Ministers smelt, if not a rat, at least a gravy train, as the Minister remarked, and one that should be derailed.
I do not know entirely what Ministers' real thoughts on the matter are. During these exchanges we have tried to get to the bottom of them. The Under-Secretary of State was careful to say that he was not accusing insolvency practitioners of any sort of improper practice ; he was only reflecting the views of creditors that they were pushing people into sequestration to make financial gain. It was a case of "some people say". In my experience, when that argument is used, there is at least some sort of endorsement by implication from he who spreadeth the rumour. In any event, we shall have to probe that later.
It is clear that insolvency practitioners--there are about 220 of them in Scotland and in recent years they have, indeed, been a happy band of brothers--have done extremely well. They are mostly accountants. The figures have been extracted by the hon. Member for Moray (Mrs. Ewing) through parliamentary questions that are well known to those of us who attended the Scottish Grand Committee debate. They reveal that those in the premier league have done extremely well. In 1991 one firm, not a great international firm but a home-grown example of entrepreneurial skill, took £3.427 million in fees from the state.
Mr. John McAllion (Dundee, East) : Name it.
Mr. Dewar : Pannell Kerr and Foster is the name, as I am invited to give it. It was followed by Ernst and Young with £2.2 million and Cork Gully with £1.9 million. The names are public knowledge as a result of answers from Ministers. That is the background to the problem.
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It is because the Opposition recognised that there was a problem that we were happy to look at the solution to see whether some way forward could be found on the basis that, with one or two exceptions such as the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, debates on law reform Bills in this Parliament tend to be productive, and there was no reason to think that this Bill would be an exception.Unfortunately, the going has become rather hard and I must confess that I am unhappy about the Government's approach. There is no doubt at all that the chosen solution, although the Minister does not like it, was, as I said earlier, a matter of nationalisation ; what I described in the Scottish Grand Committee as a good old-fashioned dose of the same. The work is being moved from the private to the public sector. In all cases, the interim trustee in sequestration, unless it is decided to employ a private sector professional as his agent, will be the accountant in bankruptcy.
Mr. Wallace : I am sure that the hon. Gentleman was as bemused as I was to hear the Secretary of State's justification that there would be competition in the tendering of the services to be provided by the accountant. If the legal aid bill seems to be getting out of hand, does the hon. Gentleman see some future in, as it were, nationalising the legal profession, and having an official legal aid solicitor who would ask for tenders from different private solicitors throughout the country for the handling of legal aid ? Is not the important point that an element of delectus personae has been lost ?
Mr. Dewar : Yes, that is undoubtedly so. That element of delectus personae has, by definition, been lost, causing particular irritation in non-schedule 2 cases among the accountancy profession. Delectus personae might also be an issue in schedule 2 cases, but I have not pushed that because, given the general picture, there is a case for allowing the accountant in bankruptcy to undertake the work. But before that happens, we need substantial assurances about the way in which the new system will be organised and operated and whether it will allow people, not necessarily to have the professional adviser of their choice, but any professional adviser at all. That is the key to the argument and to the unhappiness of a large number of the welfare organisations which have made representations to us. The Under-Secretary made it clear when he introduced the Bill that his favoured solution was that the accountant should be banished from the scene and allowed to return only under sufferance as the agent of the accountant in bankruptcy, and that civil servants should rule in his stead. His analysis was clearly that this was an area where the market had not worked as it should and where the profit motive had worked too well. As a result, he was prepared to advocate to the House--all credit to him because it cannot have been easy--that the work be taken away from the private sector and given to the accountant in bankruptcy, and that, as a concomitant of that, we should contemplate the appointment of 85 new civil servants in 1993-94 and 120 in 1994-95 to undertake the additional work load. That is what we are being asked to contemplate and that is what the hon. Gentleman is personally recommending.
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The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart) : In a number of respects, that is not precisely what I sai but I will come back to that later if I am successful in catching your eye, Mr. Deputy Speaker. So that the House is clear, will the hon. Gentleman confirm that I did say, as my right hon. Friend confirmed in his opening remarks, that we were sympathetic to the amendments that had been put forward on non-schedule 2 cases?
Mr. Dewar : Absolutely. It came as no surprise to the Opposition that the Government were prepared to make concessions on that. I understand the arguments for that and I am happy to leave the matter to the Committee stage when we can examine it in some detail. I want to return to other aspects of the accountants' case, but I must push on. Having described the problem and the Minister's favoured solution, I come to why we believe that it is right that the Bill's next stage should be in a Special Standing Committee.
The House will know that a Special Standing Committee has up to four sessions which allow Committee members to take direct evidence from interested bodies and parties as though they were a Select Committee. I believe that I was the first to suggest such an arrangement : my suggestion can be found in column 20 of the Hansard report of the Scottish Grand Committee debate that took place on 4 June.
The main reason for my suggestion, and, I think, for the widespread support that it has gained from my colleagues and from other parties, is the fact that the Bill involves many complex and technical matters. There have been major protests about what are seen as unintended consequences of the legislation. It has been suggested that Ministers have a hidden agenda, and there is a suspicion that many people who require help, and who may benefit from the sequestration procedure, will be effectively excluded by some of the barriers built into the Bill.
Such views have been expressed not only by accountants and lawyers--who might be thought to have a vested interest--but by welfare organisations of almost every kind. It is fair to say that there is scepticism everywhere ; even, I suspect, among the Ministers who are handling the Bill.
My second reason for believing that the Bill should be dealt with by a special Standing Committee is the number of complaints that have been made about the lack of consultation. I do not intend to illustrate that by means of lengthy and copious quotations ; however, I do not think that the Minister would deny that a single message has emerged from almost all the representations that have been sent to hon. Members.
Let me mention my own constituency first. Obviously, I am interested in what has been said of the Drumchapel law centre, and in the views of the Tackling Debt group, which is based in the Castlemilk law centre and represents a wide consortium of interests. Similar opinions have been expressed by the Scottish Consumer Council, a statutory body funded by the Government ; by Citizens Advice Scotland, which has a uniquely wide experience of practical counselling on debt ; by the Institute of Chartered Accountants of Scotland, and by the Law Society of Scotland, which was caught completely on the hop by the Bill's appearance.
I could, if I wished, underline the message that has emerged from those organisations with many quotations.
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They were astonished when the Bill, fully formed and finalised in every detail, appeared in print at the Vote Office : they had had no knowledge of it, and had not been consulted about its contents. That is unsatisfactory, to say the least. Surely the discontent that has resulted is a strong reason for establishing a Special Standing Committee, allowing interested groups to argue their case and enabling the Committee to examine that case.There are, in my view, two broad areas of concern. I shall describe them in shorthand, as it were. First, there is the welfare point about exclusion, to which I have already referred. It is said, for example, that the accountant in bankruptcy can be brought in only by means of a petition to the court, and that the costs of that petition are immediately covered in the block fee paid to the insolvency practitioner. It is argued that, if the insolvency practitioner is removed from the scene, in many cases the debtor may have to bear the costs, or they may have to come from the assets of the sequestration ; debtors may not be able to afford that.
Such consequences may substantially reduce the number of people who can use the proposed procedures. That is an important reservation : if justified, it suggests that those who most need counselling and the help afforded by sequestration to order their affairs will be denied such assistance. Admittedly, in his closing speech on the second day of the Scottish Grand Committee, the Minister--the hon. Member for Eastwood--made it clear that that was not the Government's intention. He said that any savings would come from the streamlining of procedures and the cutting of moneys to be paid in fees to insolvency practitioners.
Nevertheless, despite that statement--which came a little late in our proceedings--there are many lingering fears, which are widely shared. I remind the Minister of a point to which I referred before the written answer by the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, West, in which he said :
"It is clear that the major factor influencing the number of sequestrations in Scotland is the easier access by individuals to the sequestration process The Government are actively considering the need for changes to the present legislation."--[ Official Report, 16 March 1992 ; Vol. 205, c. 821. ]
Indeed they were.
I am sure that the hon. Member for Edinburgh, West, who is here today, will understand that the implication of the statement that the number of sequestrations is the major factor at the root of the problem is that the number of sequestrations must be cut. I shall read with care what has been said today by the Secretary of State for Scotland. However, everything that he said reinforces rather than removes that particular doubt, which is almost universally shared. Those organisations that have made it clear that they have such fears should be given the chance to make a direct contribution to the proceedings of a Special Standing Committee.
I wish also to refer to a matter that is of particular interest to accountants. They have made many points--for example, about delectus personae, a point to which the hon. Member for Orkney and Shetland (Mr. Wallace) referred. Advice should be available over a wide area. I know that the Minister is seized of that point. One also has to consider whether the accountant in bankruptcy is the most appropriate way to preserve creditors' assets in non-scheduled cases. These matters could be dealt with in a Special Standing Committee.
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Full consideration should be given to the fundamental nature of the recommendations made by the Institute of Chartered Accountants of Scotland in the letter that some of us received today. The institute challenges the whole basis of the Bill. The Bill would remove the power, except under licence, for accountants to be interim trustees in sequestration. It gives that power to the accountant in bankruptcy.The Institute of Chartered Accountants of Scotland says that that is unnecessary and that it can still be dealt with by the private sector at a very reduced cost. It suggests that there should be a simplified procedure under which fees could be cut to about £800 in cases where assets amount to less than £2,000 and debts to less than £20,000 and that in addition the outlays would amount to £200. The institute reckons that the sum of £18.5 million in 1991 could be cut to £10.5 million. That would mean rewriting the Bill. The Government have to tell us whether they are prepared to consider such a solution.
We pressed the Secretary of State on the issue. He did not appear to rule it out when he said that it would have to be closely considered. If a fundamental point of that kind is to be made, I cannot think of a better place for it to be argued than a Special Standing Committee. The profession should be given the opportunity to put its case and to answer questions. In that event, the arguments would not be transferred and inevitably distorted to some extent by means of a third party--a Minister. In view of the important amendments that we are asked to contemplate, there should be direct access to the parliamentary process. I hope that, at the end of the debate, the Minister will say that the Government are prepared to contemplate this proposition. If so, it would amount almost to a wrecking amendment, so fundamentally would it change the Bill. No Special Standing Committee has ever considered Scottish legislation, although this specific machinery has been used seven or eight times for the consideration of English legislation. I genuinely believe that this would be an appropriate Bill for that machinery. It raises non-contentious issues in a narrow political sense, but contentious legal issues with economic and social consequences for individuals who are already disadvantaged, and I believe that many hon. Members will want to probe those issues. I cannot remember a technical Bill causing so much interest from Scottish bodies with expertise to offer.
It is only common sense to use the new procedure, and I deeply regret the fact that the Secretary of State has adopted such an obdurate attitude. I hope that in the couple of hours available to him he will consider some of the speeches that he has made in the past few weeks about the government of Scotland and how Westminster handles Scottish affairs. We have been told that there will be a new sensitivity and a tireless search for improvements within the structures of Westminster. The Secretary of State said that there is certainly room for reform. We are now presenting him with a modest opportunity to prove that and to show a touch of imagination, but we find a brick wall--a dogged refusal to act.
It is easy for the Secretary of State to smile, but he does not know what is in his own best interests. The way in which he has handled the matter undermines his credibility and respect for his protestations that he is, to some extent, a reformed character. It is a pity, and if our proposal is not adopted, we may end up with a Bill that is not as good as
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it should be, certainly not as well considered as it should be, and we shall have legislation which will leave many well informed and relevant bodies in Scotland feeling that they have been short-changed and not involved as they should have been.I shall not advise my right hon. and hon. Friends to vote against Second Reading, because there is still a great deal of work to be done and I do not object to our having the opportunity to discuss the problems. However, I shall certainly advise them to vote for the motion to consider the Bill in a Special Standing Committee. I also urge the Government, even now, to think again about their attitude. 4.41 pm
Mr. Bill Walker (Tayside, North) : There is no doubt in the minds of those in Scotland who are interested in the issue that the Bankruptcy (Scotland) Act 1985 had to be amended. That is the general view expressed in the correspondence that all hon. Members have received.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) made an interesting and informative speech, but he overstated the case. He and I know that, whenever we discuss legislation in Committee, we are showered with correspondence from interested parties. To suggest that there is something new in what is happening with the Bill implies that he has forgotten all the hours that we have spent in Committee. I have with me all the correspondence that I have received since we first had sight of the Bill. I hold it up for the House because it is important. It is about one third of what I always receive on other Scottish Bills, and equally important legal Bills.
Let me make it clear that I, too, want the Bill to be amended, but that will not surprise anyone, because there is frequently cross-party agreement among Back Benchers in Committee when we discuss Scottish legislation, and we often get the Government to change Bills. What is interesting on this occasion is that the Government said at the outset that they wanted to adopt a flexible and responsive position. I cannot say in all honesty that that has always been the case in Committee.
Mr. Wilson : Does the hon.Gentleman agree that, if the Government were to accept the proposition that insolvency practitioners should cut fees by 60 per cent. but otherwise continue much as before, it would be a fundamental change to the Bill? If so, would it not have been a good idea to find out about that before the Bill was introduced rather than at this stage?
Mr. Walker : The hon. Gentleman will also agree that one finds changes of such magnitude among those with vested interests--that has certainly been true for all the other Bills that I have considered in Committee--once the Bill has been printed. Once they begin to realise what may be changed in the playing fields to which they have grown accustomed-- whoever they are--they start to examine the small print after the Bill has been printed and start to make proposals. That is not novel or different.
It is interesting that, in trying to find a balance between the interests of the debtors, creditors and taxpayers, so much emphasis has properly been placed on those who find themselves in debt and cannot see a way out. One issue has worried me for a long time, and hon. Members will
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probably concur. In our constituencies, we meet individuals who have allowed themselves to be locked into a situation, and only after they are locked in do they begin to realise what it means. To such individuals, sequestration may appear to be an easy way to resolve their difficulties at any given time and the only way to put one's affairs in some order. However, one should not enter into it lightly without having thought it through properly.Let us consider the case of a young man who has his whole life ahead of him. Perhaps he has written off a car or something similar and finds that he is insolvent. Under the Act, he may be advised that the easiest course open to him is sequestration. He may have an income which, although not vast, may increase. He may hope to get married, as most people do, and obtain credit to buy a house or get a mortgage and to obtain credit to furnish it. That is the natural thing to do, but if he has entered into the system under the 1985 Act, taken the advice given to him and become sequestrated, he will find to his horror that, although he has a regular income, he will not be able to obtain credit because he is barred. That could have a damaging impact at an important time in his life.
The income and potential income of an applicant should always be considered, not only because it is in the interests of the creditors--and it is--but because it is probably in the best interests of the young person who has opportunities ahead of him. That is why the Bill needs to be amended.
We must get the balance right and accept the need for reform. The hon. Member for Garscadden referred to the view set out by the Institute of Chartered Accountants of Scotland in its letter which said :
"What is at issue is the cost of cases funded by the public." The fact that that is the institute's position does not surprise me, given the amount of money that goes to its members. So we must accept that the institute, too, has suggested revised proposals. What it offers is interesting, but before we comment on its proposals, we shall want to examine them in detail. We can best do that by examining them in Committee as soon as possible.
I hope that in Committee we shall also take the opportunity to look after the interests not only of taxpayers--important though those are--but of creditors. Under the 1985 Act, sequestration is an automatic process. If formal preconditions are met, the court must make an order, and the merits of each individual case are irrelevant. Neither the sheriff nor the creditors can stop the process on the ground that sequestration is not appropriate. I have cited one instance in which I believe sequestration may not be appropriate, and there will be others.
That defect is compounded by the lack of advance warning given to creditors. Most will learn of the sequestration only after it has been awarded, and that is unsatisfactory. I hope that we shall be able to amend the Bill to allow creditors to argue that an award should not be made, and to require the court to refuse an award if it is believed that the debtor can repay his or her debts over a reasonable period. That is in the best interests of the debtor as well as of the creditor, because it does not do to find oneself debarred.
I hope that in Committee we can introduce and discuss amendments about a simple and cost-effective way of requiring a court to establish a debtor's free income and, if appropriate, to require him to pay that over for distribution to the creditors. I should have thought that it was our duty to all three parties--especially to the
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taxpayer--to examine that idea carefully, because the allure of sequestration for many is its practical effect on their income at the time of the award.In theory, section 32 permits the sheriff, on the application of the permanent trustee, to make an order for contribution from income. In practice, the section is ignored ; thus the debtor's income remains untouched. There are probably two reasons why the section is not used.
First, creditors have no way of triggering use of the section. It appears to be a matter entirely within the discretion of the permanent trustee. Even if creditors could trigger the section, any contribution from income would be swallowed up in repaying the state expenditure paid to the insolvency practitioner. Secondly, insolvency practitioners, as permanent trustees, are unlikely to trigger the section of their own volition, because it would make sequestration less palatable for debtors, which in turn would have an impact on practitioners' earnings, because fewer people would use sequestration.
I make no apology for saying that I believe that there are forces afoot in Scotland that have not been giving the best possible advice to individuals. I realise that there are those who will suggest that that is a heartless view, but I have always felt that one must examine carefully the direction of the route along which we are pointing people, especially young people. If we are sending them into a cul-de-sac--that is what sequestration is--we must be certain that that is in their best long-term and short-term interests. The Bill gives us a rare opportunity to consider again in depth how we can balance the interests of creditors, debtors and the taxpayer-- there is no doubt that there is now an imbalance. I make no apologies for my hope that during our debates we shall elicit assurances from the Government. I stress the fact that we have no wish for the Bill to prevent those unfortunate enough to find themselves in great financial difficulty from taking a course that will assist them to get their affairs into some sort of order and allow them to begin what one would hope would be a return to a normal financial position, in which expenditure and income are in some sort of balance.
We have a duty and a responsibility to the taxpayer to make certain that what we put into statute does not encourage people, under the private enterprise guise of opportunism, to make a lot of money at the taxpayer's expense. Sequestration makes money out of other people's misery, and anyone who thinks that it is other than a miserable process cannot have spent much time with people forced into it.
In Committee we should not necessarily spend our time examining what the vested interests tell us, but having received many representations--as we do on every Bill--we should discuss, in a non-partisan way, constructive thoughts and ideas on how to bring the whole business of debt, credit and all that they mean into balance. That would benefit the majority of people in Scotland, most of whom are the taxpayers, who pick up the tab.
I have said before in Committee that we often forget--at least, people who adopt the bleeding heart approach often forget--that in the end all debts have to be paid. Debts do not vanish ; they are paid, either by the consumer who takes the services and goods after the debt has been incurred and not paid, or by somebody else. The shopkeeper in the high street has to adjust his prices, and providers of services have to adjust their prices to include
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an element for bad debt. That is how debts are paid for. The cost of administering the legal aspect of sequestration, where that is required, is picked up by the taxpayer. There is no such thing as a debt that is written off. Debts have to be paid for. The question is whether we get the balance right.When we examine that question in Committee, I hope that it will not be a case of one side simply trying to reduce the taxpayer's input--although we have a proper duty to the taxpayer to do that. We must also ensure that we do not lock people into a situation in which they do not get the best advice and cannot see an alternative escape route.
I have found some of the correspondence that I have received from the welfare bodies disturbing. They seem to think that the only route is sequestration. I have read that correspondence carefully ; I will not take up the time of the House by quoting it, but I have it all with me. I was disturbed at the absence of balance. I do not doubt the integrity of welfare workers, but if they want to proffer the best advice, they have a duty to ensure that it is the best. I question some of that advice because of what I have discovered in my constituency. The hon. Members for Garscadden and for Linlithgow (Mr. Dalyell) rightly said that we should go by our constituency experience. It conditions our views on these issues. It is always heartrending to learn about people in these ghastly circumstances, which have arisen because of a failure of control.
Does my right hon. Friend the Secretary of State have any information about the way in which debt is apportioned in Scotland? How much of it, for instance, is arrears of rent? Perhaps we should investigate how rents are collected by local authorities. Perhaps the old system of weekly collection was better and enabled people to keep up with their payments because they budgeted on a weekly basis. That is how people on these estates live.
When I was a boy, Lawson's of Dundee went around the streets of Dundee picking up people's weekly payments. That form of debt collection was geared to suit the budgets of people who lived by budgeting from week to week. Removing that system introduced instability-- [Laughter.] I do not find this a laughing matter. People who live comfortably, as we all do, frequently forget the problems of those who have to budget from week to week, as many of our constituents do. I do not mean to be frivolous when I say that we are not debating an abstract issue : it is real for those involved in it. That is why I welcome the chance to speak in this debate. I hope that the Opposition will recognise that the Government have clearly intimated that they are prepared to accept amendments and to consider changes to the Bill. We must approach it constructively, avoiding the sort of nonsense that we witnessed during the first sitting of the Scottish Grand Committee. We must approach the Bill with concern for our constituents and others ; we must not play silly political games.
5.3 pm
Mr. John McAllion (Dundee, East) : I will not follow the comments of the hon. Member for Tayside, North (Mr. Walker). He warned us against the bleeding heart approach. No one would ever accuse him of such an approach to those with debt problems in Scotland. On the contrary, he has been one of the supporters of Government policies that have forced people into poverty
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and debt in Scotland for many years now. It was sanctimonious of him to make the sort of sickening speech that he has just delivered. Mr. Bill Walker rose--Mr. McAllion : I will not give way to the hon. Gentleman, who spoke for far too long anyway.
Originally, the Opposition did not intend to oppose the Bill. We intended to let it proceed without dividing on Second Reading and to consider its principle in the Scottish Grand Committee. Yet here we are today after two sittings of that Committee and more than four hours of debate in it, facing another three and a half hours of debate this afternoon on a three-line Whip and on a motion which will divide the House--on a measure initially thought to be
non-controversial. Something went badly wrong somewhere in the handling of the Bill.
Perhaps the answer to what went wrong can be found in the Opposition motions drawing attention to the lack of consultation by the Government before they introduced the Bill and requiring the Government to concede the idea of a Special Standing Committee. Such a Committee would allow those in Scotland who know about debt problems to come and advise us on further progress of the Bill. The experts entertain a great many anxieties about the effect that it will have on people trapped in debt.
Complaints about the lack of consultation have come from almost everyone concerned with handling debt problems in Scotland. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, complaints have come from citizens advice bureaux, money advice projects, the care in the community Scottish working group, professional bodies involved in insolvency and sequestration--and even from Conservative Back Benchers. The hon. Member for Kincardine and Deeside (Mr. Kynoch) was one of the first in the Scottish Grand Committee to complain about the Government's lack of consultation with the professionals involved in sequestration.
The Secretary of State for Scotland recognised early in his speech that there was a perception of a lack of consultation. Of course, some complaints emanated from quarters that one would expect to complain about a Bill of this kind. I remind the House that we were told at first that this was a Bill that would end the public scandal of fat cat accountants ripping off the public purse. I have with me a copy of the front page of the Daily Record of 4 June, fortuitously timed to coincide with the first sitting of the Scottish Grand Committee. The headline that day was, "Making millions out of misery".
The story went on to describe why there was all-party support for the measure. Labour Members told the Daily Record that one firm was raking in more than £3 million a year in fees under the present arrangements. Neither the firm in question nor the Labour Members were mentioned by name in the article, although it would seem from what my hon. Friend the Member for Garscadden said today that he was one of the Members in question.
We were told in the story that the Scottish National party slammed the system as a gravy train. This being a Government Bill, it was to be expected that Government supporters would support it--although, in the wake of the Danish Maastricht referendum result, we should take nothing for granted when it comes to Government Back
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Benchers these days. The story did not mention the Liberal Democrats--they are never mentioned in the Daily Record , so we should not be surprised at that.The Daily Record was in no doubt about who the real villains of the piece were :
"The men in grey suits are cashing in on a Government scheme to privatise the bankruptcy business. And their bumper fees--nearly £20 million a year--are passed on to the taxpayer."
I do not know where the Daily Record got the idea that this is a Government scheme to privatise the bankruptcy business. This Bill will achieve the exact opposite. Perhaps, like everyone else, the paper suffered from a lack of consultation. The Murdoch press got it right ; it labelled the measure a Tory nationalisation Bill. Perhaps the Murdoch press was the only body to be consulted about the Bill before it was introduced to the House.
Nevertheless, given the public scandal outlined by the Daily Record and given the alleged cross-party support for ending that scandal by means of the Bill, it might be expected that the Bill would receive a fair wind on Second Reading and would not receive any opposition except, perhaps, from the fat cat accountants whose firms are allegedly feathering their nests to the tune of £3 million a year in some cases. However, that is not what has happened. Complaints have been pouring in from many sources and from almost everyone involved in handling debt problems in Scotland.
There have been complaints about lack of consultation to which reference has been made during our debate. The Bill has been banged together by Scottish Office civil servants and Ministers working together in splendid isolation. They have talked to no one about the Bill. They have sought no advice and they have consulted no one. They have simply tried to slip the Bill quietly through the House in the hope that the Opposition were looking in the other direction. Fortunately, the Government have not been able to get away with that strategy. Progress on the Bill was delayed in the Scottish Grand Committee, and the Committee was forced to meet a second time. My hon. Friends have tabled a motion which has allowed us to debate the matter today. In that sense, time has been bought and people with legitimate concerns will be able to lobby hon. Members on their misgivings about the impact of the Bill on people affected by debt in Scotland.
Groups like Tackling Debt in Castlemilk, to which reference has already been made, have warned in letters that they have sent to most hon. Members that consumers and debtors will be denied access to bankruptcy procedures if the Bill is passed without amendment. They believe that as it stands, the Bill will mean that debtors cannot get out of difficulties in some cases. They also believe that debtors will have to find legal fees to petition the court for their own sequestration and that bankruptcy procedures will no longer be available to debtors who have little or no assets. Those are the views of groups much closer to the reality of handling debt problems than any hon. Member. We should pay attention to those views in the way suggested by the Opposition motion.
The Scottish Consumer Council has described itself as having a particular responsibility for disadvantaged and inarticulate consumers. It has pointed out that the right of debtors to petition for their own sequestration will require legal knowledge and the payment of legal fees, both of which requirements tend to render the new right as
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nothing other than a paper right, something which cannot be put into effect in the real world. Debtors may be entitled to that right, but in practical terms, they will not have access to it.The Minister will try to persude us that we can deal with those problems in Committee. In the Scottish Grand Committee, the hon. and learned Member for Fife, North-East (Mr. Campbell) pressed the Minister on whether the Government would be willing
"to consider circumstances in which there will be no financial bar to persons getting advice"--
and the right to institute legal proceedings at public expense. The Minister simply replied :
"we shall consider those matters in detail in the Standing Committee."-- [ Official Report, Scottish Grand Committee, 8 June 1992 ; c. 57-8.]
Mr. Allan Stewart : I actually said that I assured the Committee "that straitened financial circumstances will not be a barrier to sequestration."
Mr. McAllion : The Minister actually said :
"I reassure him that the Government's purpose is that straitened financial circumstances will not be a barrier to sequestration."--[ Official Report, Scottish Grand Committee, 8 June 1992 ; c. 58.] If the Minister had listened to the argument as I tried to develop it, he would understand that I was arguing that the Government's purpose is to cut public expenditure on bankruptcy. If they are successful in that, the by-product will be that people will not be able to have access to legal advice because of straitened financial circumstances.
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