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1.50 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Phillip Oppenheim): I congratulate the hon. Member for Burnley (Mr. Pike) on securing this debate on a matter with which he has been closely concerned, as has my hon. Friend the Member for Edmonton (Dr. Twinn), and which has been the subject of much consideration.
In responding to the debate I begin by extending my, and the Government's, sympathies to those who have been affected by the failure of Belling and Company Ltd. and the apparent shortfall in that company's pension fund. I am aware of the distress and anxiety caused by the circumstances of this case.
Occupational pension schemes are established under trust law and it is therefore for the scheme trustees to decide which, if any, legal actions to pursue and to take action on the legal costs likely to be incurred. That is exactly what has occurred in this case.
For the hon. Gentleman's information, Department of Trade and Industry officials have been told by the trustees that, on their solicitor's advice, they have now accepted £577,000 by way of compensation from the Law Society together with their legal costs. They have also recovered £200,000 from the former directors of Belling--£40,000 from Mr. Stewart and in excess £150,000 from Mr. Belling. Inclusive of offers that have been made for settlement, recoveries for the pension fund should total approximately £3.43 million.
I am also pleased to say that the actuary's latest projections are more optimistic than hitherto in that members who were pensioners on 12 February 1993, the date on which Belling went into liquidation, will continue to receive benefits in full. For other members, benefits earned before 31 March 1988 will be able to be provided in full, and guaranteed minimum pension benefits which relate totally to service after 31 March 1988 when the plan was contracted out will also be able to be met in full.
Benefits earned after 31 March 1988 in excess of the guaranteed minimum pensions are not likely to be able to be provided in full. However, I emphasise that the
guaranteed minimum amount will be provided. That category of benefit comes last in line and the uncertainties remaining as to the final position of the pension fund make it difficult to predict how much, over and above the guaranteed minimum, will be paid.
The facts concerning the important issue of directors' disqualification are as follows. On 29 May 1992 two insolvency practitioner partners of KPMG Peat Marwick were appointed joint administrative receivers of Belling and Company. The administrative receivers were appointed by the company's bank, the Midland bank.
The Company Directors Disqualification Act 1986 provides that where a company goes into administrative receivership and voluntary liquidation among other insolvency proceedings the insolvency practitioner concerned has a duty to report to the Secretary of State if it appears that the conduct of any director makes him unfit to take part in the management of a company. In order that the insolvency practitioner can have time to consider all the relevant facts the legislation allows him up to six months to make his report.
In the case of Belling, the joint administrative receivers submitted a report in December 1992 and subsequently the joint voluntary liquidators submitted an interim return on 30 September 1993 as at that time they did not have sufficient information to form an opinion as to the directors' conduct. That report was finally received by the disqualification unit on 29 July 1994.
I can confirm that the administrative receivers, but not the voluntary liquidators, did identify what they considered to be aspects of misconduct on the part of the principal directors, Mr. Belling, Mr. Clifton and Mr. Stewart. Those gentlemen were also directors of Belling Pension Fund Ltd., a trustee of the Belling Company Ltd. retirements benefits plan, and Mr. Belling was also a trustee of the pension fund in his personal capacity.
The reports submitted by the administrative receivers and voluntary liquidators were considered most carefully by the Insolvency Service's disqualification unit. Those reports raised questions about the directors' conduct, but they did not provide sufficient evidence to justify disqualification proceedings being taken against them. Any proceedings would have had to have been commenced within two years, that is, by 28 May 1994.
I emphasise that disqualification orders are made for the protection of the public but they also penalise the directors concerned. The courts therefore require a very high standard of proof before they will make a disqualification order. The Secretary of State must, therefore, decide, on the balance of probabilities and on the basis of the facts of each individual case, whether it is expedient in the public interest to commence disqualification proceedings. It would not be a proper exercise of his discretion to proceed where a sufficient case could not be made out.
In securing the passage of the Insolvency Act and the Company Directors Disqualification Act, the Government gave a statutory form to their commitment to ensure that those who abuse the privilege of limited liability--through wrongful trading--can be made personally liable, or can be prevented from enjoying that privilege for a set period by being disqualified. That power is used extensively and more than 3,000 individuals who have
been disqualified bear witness to that. However, in all cases there was sufficient evidence to show that they should be disqualified, which was not so in this case.
The protection of pensioners is crucial. Since the Maxwell and Belling cases, the Government have secured the passage of the Pensions Act 1995, which should ensure that all pension schemes are properly run in the interests of their members, and that if a fraud such as that perpetrated in the Belling case occurs the scheme will receive compensation. Therefore, the Government have acted on behalf of pensioners as a result of the Maxwell and other cases. Action can be taken against trustees and directors only if they prove to be seriously negligent or fraudulent, which was not possible in the Belling case. It was open to the liquidators or the pensioners to take action if they felt that they had a strong enough case.
The real villains of this piece, Mr. Deacon and Mr. Fuller, have been appropriately dealt with and the efforts of the trustees in recovering money for the pension
fund have brought about a significant improvement in the financial position. I do not see what further action my Department could take at the moment to improve the position of the pensioners on whose behalf the hon. Member for Burnley and my hon. Friend the Member for Edmonton have argued so eloquently in the House and at meetings in the Department.
It seems that the effects on the Belling pensioners will not be as severe as was first thought and that they will all receive, at the very least, the minimum guaranteed amount, and, in most cases, an amount in excess of that. I take this opportunity to wish the trustees well in their efforts to restore the fund to as near a solvent position as possible.
It being two minutes to Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
1. Mr. Waterson:
To ask the President of the Board of Trade what representations he has received on a statutory right of interest on late payment of commercial debt. [36065]
9. Dr. Spink:
To ask the President of the Board of Trade what representations he has received on a statutory right of interest on late payment of commercial debt. [36075]
The Minister for Small Business, Industry and Energy (Mr. Richard Page):
I announced to the House on 11 January 1996 that I was seeking representations to inform a review of the case for introducing a statutory right to interest. More than 100 submissions were received. The resulting analysis has been placed in the Library.
Mr. Waterson:
Is my hon. Friend aware that many small businesses in my constituency are concerned about late payments by large companies and other organisations? When I talk to local business organisations, such as the chamber of commerce, the industrial association and the business association, there are mixed views on whether a statutory right of interest is appropriate. What is the Government's policy on that?
Mr. Page:
Few hon. Members have more experience than I of the issue of late payment to small firms, and I know how important it is to them. I understand the confusion about a statutory right to interest, but no magic bullet or cure will automatically result. Some facts must be appreciated. Companies, both large and small, can charge interest for late payment. However, any company that will not pay must still be taken to court and go through the due processes. A statutory right to interest is not the easy solution.
Dr. Spink:
I echo the concerns of my hon. Friend the Member for Eastbourne (Mr. Waterson). Does my hon. Friend the Minister agree that there are dangers in a statutory right of interest, especially for small and medium-sized enterprises? Have the Government done research to discover the views of SMEs?
Mr. Page:
The submission that has been laid in the Library shows that eight out of nine of the small firms organisations that have made representations came out against a statutory right to interest. The one that supported it is, I understand, the smallest of those organisations. I have not taken that as the be-all and end-all. Various surveys have been carried out, such as those by the Institute of Directors, on the moneys owed by and to small businesses, and by the university of Bradford. Both concluded that small businesses receive more credit than they give. An effective pointer emerges from that: small
Mr. Dalyell:
If the Minister does not have much experience, the Deputy Prime Minister does. What is the Deputy Prime Minister's advice?
Mr. Page:
My right hon. Friend the Deputy Prime Minister's advice was quite simple. He said that, when a company could not pay because of cash flow difficulties, it should contact the creditors, reach an arrangement and thereby enable the company to get over its difficulties rather than walking away and not paying.
Mrs. Roche:
The House should not be surprised by the Minister's complacency, given that the Government pay their own bills late and have a Deputy Prime Minister who boasts about stringing along his creditors. In fact, that right hon. Gentleman is actually blaming small firms for under-performing and the recession. What does the Minister say about the survey conducted by the Forum of Private Business, which found that 95 per cent. of firms supported the Labour party's proposals for a statutory right of interest? What about the findings of the surveys conducted by Lloyds bank and Business Pages? Given the Government's small majority, the Minister should heed the fact that a quarter of his Back Benchers support the Labour party's policy for a statutory right to interest on late payment.
Mr. Page:
The hon. Lady asked three questions. As soon as I was appointed as Minister with responsibility for small firms, I asked for a review of the Government's policy on payment. Although that showed that we had a good record, my right hon. Friend the Prime Minister decided that that policy should be further monitored and toughened. That is exactly what will happen. The results will be out in the autumn. I thank the hon. Lady for her support of that particular campaign.
I admire the hon. Lady's loyalty in supporting the Leader of the Opposition's policy on statutory right of interest. That policy was made on the hoof before the results of the consultation were known, and simply shows that Labour wants to tell business what to do, whereas we want to consult business.
Sir John Cope:
Is my hon. Friend aware that I have always opposed a statutory right to interest, as suggested in the question, because I believe that it would be a danger to a large number of small businesses and not be much help to many others? I am, however, a strong supporter of the proposals in his document on tackling late payment. They include a recommendation for a statement of payment practice in the directors' report. I realise that the consultation period is still running, but it represents the way to improve matters.
Mr. Page:
My right hon. Friend is very experienced concerning the small firms sector. We are endeavouring to change the culture. We have required companies to state their payment policy in their annual reports. We are consulting now on the point made by my right hon. Friend about companies publishing their payment practice in their reports. The Government are leading by example by getting every Department to sign up to the prompt
Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.
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