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Mrs. Browning: I hear what my hon. Friend says. However, he will be aware also that the small business sectorespecially small and medium-sized businesshas been lobbying about the abolition of the floating charge for a long time. The genesis of the process goes back to the days when banks tended to lend not on the basis of a proper evaluation of a business plan presented to them but on the capital assets and collateral of the company concerned. Is it not incumbent upon the banking sector to start to do what it should be doing, which is to give good business advice and a proper evaluation of a business plan, not only when the initial application is made for the loan but in terms of the on-going cash flow and management of the business concerned? I hope that my hon. Friend will agree with me that there is an incumbency on the banking sector to carry out that role in its relationship with the business sector.
Mr. Whittingdale: I agree with my hon. Friend that it is strongly in the interests of banks that they help businesses to stay in business, and to give them whatever support they feel able to give if they run into difficulties. To that extent, I share my hon. Friend's view. I think that banks now are much more careful in their lending practices than perhaps they were some years ago.
I have outlined my concerns. It is not the banks that will suffer, because they will simply adjust their practices. Ultimately, small businesses may suffer if banks are less inclined to adopt flexible practices when making loans and decide to charge more for them. We must seriously address that danger when considering what the Government propose.
The other main concern which has been expressed by a number of those who have examined the Bill's provisions is the extent to which the work load on the courts is likely dramatically to increase. In many instances it is essential, if a business is to have a chance of survival, that action is taken by the administrator quickly to salvage whatever is available. If the courts have to be involved in every case as a result of the change, and that means that letters have to be written to creditors and papers have to be filed with the courts, and a case has to take its place in the queue, there may be nothing left to rescue in the business by the time that those things have been done.
We understand and welcome the main thrust of the Government's intentions to help those setting up in business who may fall into difficulties. However, the Government's proposals for reform do not discriminate between business bankruptcies and personal bankruptcies. While their proposals are well intentioned, it may be that they will prove counter productive.
The wish to remove the stigma of bankruptcy, which has been spoken of by the Secretary of State, and to encourage risk taking is admirable, but at a time when consumer debt is rising sharply, this measure risks sending exactly the wrong message to those who may be reckless and irresponsible borrowers.
The distinction between so-called honest and culpable bankrupts, which has been mentioned by several hon. Members on both sides of the House, will be extremely difficult to draw, as my hon. Friend the Member for South-West Hertfordshire (Mr. Page) made clear. I have no doubt that the vast majority of bankrupts reach their position through personal incompetence or recklessnessin some cases, they will have become bankrupt through no fault of their ownrather than through deliberate malice. However, it should not be forgotten that whatever the causes of their behaviour, they will leave victims who are often not the banks, but friends or family who have acted as lenders of last resort. Creditors are often small businesses that may be unable to survive if they are not paid. Meaningful consequences are needed in respect of bankruptcy, with a minimum period set for it by law.
It is worth bearing in mind what happened in America, as it is the American model to which the Government constantly refer. In the United States, 95 per cent. of bankruptcies are suffered by consumers and are unrelated to any business activities. The relaxation of bankruptcy laws in the United States in the late 1970s led to a fourfold increase in consumer bankruptcies, while the number of business bankruptcies fell. Some people in the United States have even said that bankruptcy is now regarded as an easy way of supporting social welfare, as a consumer can run up large medical bills and then go bankrupt, passing the cost on to the credit or health industry and ultimately to other consumers.
The Bill fails to distinguish between consumer and business bankrupts. In seeking to encourage a small number of risk-taking entrepreneurs, the Government may end up merely encouraging a far bigger number of reckless individuals who run up substantial debts that have nothing to do with enterprise. Those that may end up suffering in the longer term are the businesses that will be left to pick up the bill and the consumers who will suffer restricted access to credit and higher costs.
Although the Bill has been introduced today by the Secretary of State, it is not her creation. It was conceived in the Treasury and has been promoted at every stage by the Chancellor of the Exchequer. We know that raising the UK's productivity is his big idea for Labour's second term. It is an objective that the Government have so far been singularly unsuccessful in achieving. In the five years since the Government launched their productivity
The Government may be correct that strengthening our competition laws will help improve productivity, but it will not put right the damage that has been done to our competitiveness by the relentless increase in tax and burdens on business that has taken place under them. The CBI has calculated that the amount of extra tax paid by business amounts to £29 billion. The British Chambers of Commerce, which the Secretary of State has quoted so approvingly on several occasions, estimates that the cost to business of the extra red tape and regulation under this Government is now more than £15 billion. It is that burden that is eroding our international competitiveness, crippling business and destroying jobs.
This Government do not understand that one cannot regulate one's way to economic success. They seem to think that they can support enterprise simply by introducing a Bill with the word "enterprise" in its title. Sadly, it does very little to tackle the real problems that are affecting business in this country today.
Mr. David Borrow (South Ribble): In welcoming the Bill, I should like to refer back to the Competition Act 1998. It is significant that the 1997 and 2001 Labour Governments both found time in their first year in office to introduce Bills that improve competition policy. That is in stark contrast to the work of the Conservative party during its latter years in office, when despite pressures to introduce improved competition legislation, it put the matter to the bottom of the list and introduced different measures.
I welcome the Government's decision to give up the power to intervene in merger policy; at least, they have more or less given it up. However, I would like some reassurance about their ability to intervene when mergers are considered to be in the national strategic interest. I was interested in the BAe-Marconi merger a few years ago. If similar proposals were to arise in future in relation to mergers of major transnational defence companies, I should like to feel that a Minister was involved.
The Government's decision to give up the power directly to intervene in merger policy means that they are giving up the power to establish national champions. That is good in terms of economic theory and competition policy, but it prompts this question: if the UK's competition policy is synchronised with that of its EU partners, should not those countries also operate a competition policy that precludes them from supporting national champions? It is also important, especially given the Prime Minister's recent visit to the United States and his discussions with the President, to ask whether the bastion of the free market, the US, will also give up a
The introduction of criminal law in respect of cartels is welcome. It is crucial that penalties for cartels be commensurate with the severity of the deed that is done. We have too often assumed that cartels are a minor issue and commit only small misdemeanours that do not matter. However, the crime in question is theft either from the consumer or other businesses and should be treated as such, so strong penalties should exist and I welcome those provisions.
In broadly welcoming the provisions on insolvency, I wish to make a number of points. The issue of the Crown giving up its preferential creditor status is crucial not only to many employees in companies that currently lose out because the Crown takes the first cut of any resources that are left in insolvency, but to many other small businesses that are dependent as creditors on the business that is going into bankruptcy. If the Crown had not been a preferential creditor, some failed companies in my constituency might have received enough from businesses that went into liquidation to enable them to survive, instead of finding that the scale of the loss incurred was just enough to push them over into bankruptcy. Serious issues are involved, so I welcome very much the proposed removal of Crown preferential status.
A number of bankruptcy issues have been raised by citizens advice bureaux in a briefing circulated to many hon. Members. They relate in particular to the problems of poor debtors who cannot use existing law on bankruptcy because of the fees that are involved in initiating bankruptcy proceedings. I know of cases that have been reported by citizens advice bureaux in Lancashire in which people with large debts who are on very low incomes are unable to move towards clearing their debts and sorting out their lives. They do not even have the necessary £250 to sort out their affairs through the bankruptcy arrangements, whereas people who are better off can use that procedure to get things sorted out.
There is also an issue relating to married or unmarried couples who have joint debts. They would need a minimum of £500 to sort matters out and, for many couples in that situation who are poor and have no prospect of paying off their debts, the bankruptcy option is one that should be considered. I should be grateful if my right hon. Friend the Secretary of State reconsidered the fees involved, when the Bill goes into Committee.
Another issue that has been raised concerns people whose period of bankruptcy has run out. Under these proposals, that could happen more quickly for someone who is regarded as an "innocent" bankrupt. Such people often have great difficulty in getting access to banking facilities, and I would like my right hon. Friend to consider whether there are ways of ensuring that people get their lives back into some sort of order once a bankruptcy period has run out, by being able to access banking facilities so that they can get wages paid into a bank account, take on a mortgage, or whatever.
In too many cases, the fact that people have been bankrupt remains on a credit reference agency's files for up to six years, so that, even if their bankruptcy order has run out, they are still shown as having been bankrupt, so
I want to concentrate on consumer protection, and the proposed power under the Bill to give the Office of Fair Trading a supervisory role over trade organisations' codes of practice. There is a real problem in this area. There will be few hon. Members who have not heard their constituents say, "I thought I was covered, because this trade association's logo is on this letter, and it said it would look after me if things went wrong." Things have gone wrong, and the trade association has not been there to help.
A constituent of mine came to see me recently with a very tragic case. With a bit of luck, we might be able to resolve it, but it serves to illustrate some of the problems that can occur. My constituent, Mr. Norburn, from New Longton, purchased a piece of land a few years ago and wanted to build a house on it. He looked around for a builder, and was obviously keen to ensure that the builder was registered with the National House Building Council so that he would be covered if anything went wrong. He employed a firm called Foys (Builders) Ltd., which was based in Preston, to build the property. It had all the necessary NHBC certificates.
The house was not built correctly; there were things wrong with it. My constituent went to the NHBC to register a complaint and to see whether it could sort things out. Shortly after that, the builder started legal proceedings for non-payment of the remaining part of its bill. The NHBC decided that it could not continue to be involved while legal action was outstanding because the action was against one of its members. Eventually, the case went to court, and my constituent was awarded £155,000 to cover the cost of putting the house right and the legal costs. The builder promptly went into liquidation.
The NHBC has since said that, according to the fine print of its certificate, its liability is limited to 10 per cent. if the house has not been completed. Because it had not intervened when my constituent approached it when the house was not being completed properly, and because the builder then went to court, this loophole means that my constituent is probably the best part of £150,000 out of pocket. He is very dissatisfied with the way in which the NHBC has dealt with his case.
We may yet be able to resolve that case, but it illustrates the importance of the OFT being involved in a supervisory role with trade organisations that have similar schemes. Such schemes will, occasionally, go wrong, but having the OFT actively involved will be crucial in ensuring that people have more faith in them, and that they are better regulated. I have some concerns, however, about whether sufficient resources will be made available under the Bill for the OFT to carry out such duties properly. It will need resources and time to do that kind of job, and I will be interested to hear whether my right hon. Friend can give me some assurance that sufficient resources will be made available.
Stop now orders will be extended under the Bill to areas that were not included in the Competition Act 1998. That is welcome, but, as one or two colleagues mentioned earlier, there is concern that this will not be sufficient and that the provisions will not cover the whole range of rogue traders who operate in this area. I would like the Standing
I note that the citizens advice bureaux are also concerned about the differences between trading standards offices. My right hon. Friend the Secretary of State mentioned this in her speech, and has given assurances that resources are being made available to improve the quality of trading standards offices, and to ensure a more level playing field. This, too, will need to be discussed in Committee.