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Mr. Letwin: My hon. Friend raises another point, to which I did not refer earlier as I wished to bring my remarks, which were perhaps overlong, to a conclusion. Does my hon. Friend agree that the amendment makes it by no means clear, even in conjunction with the schedules, that the directors in question will be able to have proper legal representation at the tribunal?

Mr. Leigh: If that is so, I am absolutely horrified. If the Government tell those companies, which will undoubtedly go under in the next 18 months or two years, that they will be brought before the tribunal with no right to legal aid, that is frightening. It is simply not right. I therefore hope that my hon. Friend will press the Government on this matter. Given the complexity of the issue, it is impossible for people to defend themselves.

I think that I have made my point and need not weary the House further. I hope that I have shared with the House my practical experience of dealing with the issue this year, and have convinced some hon. Members of the practical difficulties. I am prepared to accept that the

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Government are being entirely honourable, are rightly concerned about the curse of phoenix companies, and want to do something about it. We have been dealing with the same problem in the Crime and Disorder Bill. However, one cannot identify a social or moral ill in society and simply dispense with hundreds of years of traditional civil liberties and legal remedies. A short cut cannot resolve that issue, because that may cause more injustices and problems in the future. I therefore beg the Government to think again on this issue.

Mr. Denham: A number of important points have been made in this discussion. I recognise the support for action against phoenix directors. Companies that go insolvent with unpaid national insurance debts cost about £150 million a year, of which about £50 million is because of phoenix directors.

The hon. Member for Gainsborough (Mr. Leigh) spoke at some length. His impact on me may have been similar to the impact that he had on the jury in the case to which he referred, although he did not say which side of the case he was on.

I recognise the concerns that have been raised about the European convention on human rights, but we are satisfied that the Bill meets our obligations under that convention.

Mr. Letwin: I apologise to the Minister for intervening so early in his remarks, but he has repeated almost verbatim the words of his noble Friend the Baroness Hollis of Heigham, and has not exposed the logic. Can he now tell us exactly on what basis the Government are satisfied that the Bill is coherent with the European convention?

Mr. Denham: Hon. Members will have to make their judgment on this matter. Clearly, we seek advice on these issues, and Ministers must make a judgment on the right position. It is not unusual for officials to take decisions on behalf of the Secretary of State. The clause provides for cast-iron appeal rights where the onus of proof is on the Secretary of State. I shall return to that important point. As has been recognised, changes were made in the original proposals on those appeal rights, and those are now reflected in the amendments.

I reiterate that there is a further appeal right on whether the debt was originally due from the company. The personal liability notice will now stipulate not only the total unpaid debt and the amount being transferred to the individual concerned, but the proportion of the debt for which the recipient is held liable, to enable him to check the calculations used and show exactly what degree of culpability has been found to fall on him. Another important point is that it has been made explicit in the Bill that the onus of proof in any appeal under the provision falls on the Secretary of State rather than on the appellant.

That is an important point because it has been suggested that matters such as negligence are difficult to prove. That is why it is important to state in the Bill that the onus will be on the Secretary of State to establish that case.

Mr. Leigh: Will the Secretary of State have to prove those matters beyond reasonable doubt? Will the burden

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of proof be the same as in a criminal trial, or will it be on the balance of probabilities, as in a civil trial? I suspect the latter.

5 pm

Mr. Denham: The balance of proof will be on the balance of probability at the tribunal, but it is worth making the point that the measure is a companion to the introduction of the offence of fraudulent evasion.

When the Contributions Agency identifies a director who is hiding behind the shield of limited liability and deliberately withholding the national insurance contributions deducted from his employees' wages, it will be able to choose the better course between transferring the debt and penalty to recover the money from the guilty person's assets, and taking a criminal prosecution, which could send the rogue or accomplices, such as a crooked accountant, to prison for up to seven years. Different alternatives would be available to the agency, depending on the situation it uncovered.

Mr. Letwin: I am grateful to the Minister who, with characteristic courtesy, has given way again. First, his answer to my hon. Friend the Member for Gainsborough (Mr. Leigh), so far as it was a clear answer--in part, it was--was very disturbing, and coherent with what I understand from the amendment.

Secondly, why should we believe that it would ever be the intention of the Secretary of State to use the criminal law to establish a fraud or a similar offence if he had open to him the avenue of establishing before a tribunal--two of its members would not be lawyers, and a lawyer for the defence may not be present--that neglect had occurred on the balance of probability?

Mr. Denham: I heard the points made by the hon. Gentleman in his opening remarks, but I do not accept his case. He claimed that a tribunal was the same as a criminal penalty. If a crime was committed and a prosecution taken, a person could be sent to prison for up to seven years. In serious cases, the appropriate action would be to attempt to ensure that such a serious penalty was imposed under the criminal law. The hon. Gentleman would agree that imprisonment for up to seven years would be a greater penalty than any charge levied as a result of the measures.

On the procedure, I make it clear that people would be able to bring legal representation to the appeal hearings. The Bill does not affect the legal aid provisions, which are properly dealt with elsewhere. We have guaranteed full protection, under an enhanced and suitably qualified and independent appeal system. There are clear precedents for the measures, notably section 61 of the Value Added Tax Act 1994, which places the burden of proof explicitly on commissioners of Customs and Excise when VAT penalties are transferred to directors of companies.

Serious and determined action is required where a director has neglected to carry out duties in respect of national insurance. Directors must understand that there is a clear obligation to deduct and pay over contributions.

Mr. Leigh: The Minister is dealing with the problem of neglect, but I press him further on what he means.

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Are we discussing neglect in the general management of a company or in contributing national insurance contributions? I am sorry to weary the House, but in my experience, there is often extensive correspondence between Customs and Excise and directors concerning back payments of national insurance contributions. Customs and Excise and the Revenue authorities often deliberately decide not to over-press a company for payment, because that would close it down and kill the goose that may lay the golden egg. How would the specialised unit prove neglect, and would neglect relate only to payments or to the general conduct of a company?

Mr. Denham: The matters in the Bill clearly relate to national insurance matters.

Lords amendment agreed to.

Lords amendments Nos. 13 and 14 agreed to.

Clause 13

Appeal to appeal tribunal


Lords amendment: No. 15, in page 7, line 43, leave out ("prescribed circumstances") and insert
("relation to a prescribed decision, or a prescribed determination embodied in or necessary to a decision.
( ) Regulations under subsection (2) above shall not prescribe any decision or determination that relates to the conditions of entitlement to a relevant benefit for which a claim has been validly made or for which no claim is required.")

Mr. Keith Bradley: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Michael J. Martin): With this, it will be convenient to discuss Lords amendments Nos. 16, 85 and 87.

Mr. Bradley: This group of amendments is our response to the Delegated Powers and Deregulation Committee report, which I am pleased to say generally concurred with our view about the necessity for the large number of regulation-making powers in the Bill. However, the Committee made a number of recommendations for changes and we have been able to meet its concerns in all cases.

Lords amendment No. 15 makes clear how the Department intends to use the regulation-making power in clause 13(2) to make certain decisions unappealable.


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