House of Commons Hansard Debates for 15 Jul 1997 (pt 36)

Mr. John Burnett (Torridge and West Devon): There was an Adjournment debate on an analogous matter last Thursday, when the right hon. Member for Maidstone and The Weald (Miss Widdecombe) raised similar points. I suggested then that there should be a system analogous to that available to the public against lawyers for taxation of insolvency practitioners' bills and fees. The Financial Secretary said that she would look into that. Perhaps the hon. Member for Great Grimsby (Mr. Mitchell) will bear that in mind, and perhaps the Minister would consider a system whereby the taxation of the fees of insolvency practitioners would be available to the public, particularly creditors.

Mr. Mitchell: There should be some system of appeal so that people can contest the fees.

I hope that the Labour Government will look afresh at this matter. We are committed by our manifesto to encouraging a culture of rescue so that firms may keep operating rather than being looted and pillaged by insolvency practitioners. Why can we not have in this country something like chapter 11 in the United States, whereby a firm has 90 days in which to reorganise? Why can we not introduce a requirement that no creditor shall appoint any receiver immediately, and that companies shall have 28 days in which to secure additional resources?

Why can we not ban the accountancy firms that compile reports on companies from also taking on the insolvency work? Why cannot all plc receivers be forced to publish meaningful information about their affairs, such as the number of cases they have handled, and their fees? Why can we not require banks to publish the number of companies that they have placed in receivership? That might act as a deterrent and ensure that they think about those issues.

The Government are committed to many of those changes and to a more sympathetic approach. I hope that they will look at the real solution to the problem of insolvency: an effective independent regulator to represent the public interest. We are providing independent regulation in the financial sector, but that will be ineffective unless regulation is extended to accountancy, audit and insolvency where the need is greater. Only a regulator such as the Securities and Exchange Commission in the United States can call people to account, establish an appeals process and ensure that the operation is run in the interests not of the insolvency industry and its practitioners but of the public and the wider community.

10.51 pm

Mr. Keith Vaz (Leicester, East): I warmly congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing the debate and on raising this important issue. I re-emphasise the points that he made about the liquidation of BCCI. BCCI closed six years ago on 5 July, and my hon. Friend mentioned the huge fees that the liquidators, Deloitte and Touche, accumulated. I am certain that that liquidation merits a full investigation by the Department of Trade and Industry--

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even the charming Mr. Desmond Flynn cannot equal the massed ranks of a firm such as Deloitte and Touche. I hope that something can be done.

We recently met the Minister to discuss the issue, and he was very sympathetic to our cause. He is one of the most dynamic and effective Ministers in the new Government. If anyone can do something about the actions of Deloitte and Touche in the liquidation of BCCI, he can. I urge the Minister to hold an inquiry, and I shall write to the Chairman of the Trade and Industry Select Committee asking him to do the same. I hope that the Minister will have some positive news tonight about that matter.

10.53 pm

The Minister for Competition and Consumer Affairs (Mr. Nigel Griffiths): I congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing this debate on a matter that is of great interest to many within and outside the House. My hon. Friend is well known for his commitment to effective regulation in the accountancy and insolvency professions. Therefore, I listened to his speech very carefully

Insolvency is, by its nature, a situation in which there are many losers. Thankfully, relatively few individuals and companies will experience it. In 1995-96, 18,000 companies went into some form of insolvency procedure compared with a total of more than 1 million live companies. It is recognised that most failure is honest: people have tried their best, but the business has not worked for any number of reasons, such as changes in the market or in economic circumstances and other misfortunes that befall entrepreneurs across the spectrum. So the losers deserve, and have, our sympathy. They are the suppliers and other creditors--and the employees, many of whom have given years of loyal service. We must not forget the entrepreneurs and their families.

Joseph Chamberlain said in 1883 that the job of insolvency procedures is to

"protect the salvage and diminish the risk of wreck."

Those words are as true today as they were when first said. The job of official receivers and of insolvency practitioners is to do just that, often in the most complex of circumstances such as the liquidation of BCCI. Insolvency is an area in which the highest standards of competence must be married to the highest levels of probity.

In the 1980s, before the Insolvency Act 1986, insolvency was an unregulated profession. Anybody could become a trustee or liquidator. There were abuses by a minority, often people with no qualifications. In the 1990s, the situation has changed. We have an Act that means that practitioners may be authorised by recognised professional bodies. Those bodies are recognised by the Secretary of State, and they include the principal accountancy bodies such as the Insolvency Practitioners Association and the Law Societies of England, of Wales and of Scotland.

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Recognition is on the basis that those bodies have rules to ensure that practitioners have appropriate educational qualifications and experience, and also that they remain fit and proper. The bodies are responsible for the regulation of the practitioners they authorise. The Secretary of State has a residual licensing function, and about 1,830 practitioners are currently authorised.

The regulatory process has developed considerably since its introduction 10 years ago--the Bass case resulted in tangible improvements--but there is no room for complacency. The professional bodies are well aware that the insolvency profession is the subject of continued scrutiny, and my Department will maintain the pressure for the highest standards both within the professional bodies and among the practitioners they regulate.

It is my view that, if self-regulation works, can be seen to work and works in the public interest, it is fine. Clearly, there are other ways of doing things. In the United States of America and in Canada, for example, the Government play a more direct and greater role in the regulation of insolvency practice, but such systems have their flaws. At the same time, self-regulation is a privilege, and if it is to continue it must be earned.

Recent headlines about the Maxwell case have caused widespread concern,--a concern that I share. I was pleased that the president of the SPI welcomed Mr. Justice Ferris's view that the remuneration of insolvency practitioners should

"reward value and not indemnify cost".

I hope that all practitioners will heed the judge's words and their president's endorsement of them.