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8.9 pm

Mr. Gareth R. Thomas (Harrow, West): I am grateful for the opportunity to contribute to the debate. The Bill is being introduced against the backdrop of an extremely positive economic environment. Inflation is at its lowest for a considerable period; interest rates are low and the other great measure of the success of UK enterprises—unemployment—is also at a record low. I am sure that the whole House wants to celebrate that strong economic environment.

Given that backdrop, it is tempting to consider whether we really need the Enterprise Bill. In April 2000, The Economist intelligence unit reported that, judged against about 70 factors, Britain was the second best place to do business among the world's 60 largest economies. However, we still need the Bill. We cannot be satisfied with second best—although that is a good record.

The situation appeared to have improved even more by February, when Erkki Liikanen, the European Union Commissioner, published a report on the implementation of the small firms charter in each EU state. He confirmed that the UK was leading the way for the representation of small businesses. Nevertheless, we should consider what else we can do to foster the vibrancy of enterprise in the UK.

I was minded, in part, to contribute to the debate when I read the Barclays bank survey of new business starts by region for last year. It revealed that Harrow was one of the top 10 UK regions for business start-ups. When my hon. Friend the Under-Secretary replies to the debate, I hope that, apart from responding to the wider points that have been made, she will take the opportunity to join me in congratulating Harrow in Business, an agency funded in part by the excellent Harrow local authority—well led by the Labour party—and by a series of Government funding streams, and the north-west London chamber of commerce. Between them, they provide a range of support for businesses and would-be entrepreneurs in my constituency and those of my hon. Friends the Members for Harrow, East (Mr. McNulty) and for Brent, North (Mr. Gardiner).

We are not only good at entrepreneurship in Harrow: larger businesses have also done well since the sun began to shine, on that wonderful May day in 1997 when Labour finally came to power. Ladbroke, the largest private sector employer in my constituency, has created more than 1,000 additional jobs since 1997.

May I be permitted to give a short advertisement for the enterprising nature of my constituents who work for Ladbroke? They now provide an extremely efficient betting service, of which Members may want to take advantage. Members may want to join sensible football fans and bet—with Ladbroke—on Arsenal winning the double this year. More courageous Members may want to take advantage of that betting service and back Wales to beat England in next year's Six Nations tournament.

Members may want to take a political punt. Having listened to the opening speeches in the debate, Opposition Members will, I am sure, find that the odds have lengthened on the chances of a Conservative victory at the next general election. Small and larger enterprises do well in my constituency.

Despite that generally good picture—in Harrow and nationally—it is right that we introduce further measures to celebrate and cement the effectiveness of the legislative

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environment for entrepreneurs and larger businesses. The various provisions to promote competition, to take tougher action on individuals who might be tempted to operate cartels and to increase opportunities for redress for genuine victims of anticompetitive behaviour, as well as the additional support and rights for consumers, are entirely justified.

As I suggested in my intervention on my right hon. Friend the Secretary of State for Trade and Industry, I strongly support the Bill's provisions on insolvency, but I want to comment on one sector of the business world that may not be affected by those provisions but which should come within the ambit of the insolvency reforms: the 9,000 businesses registered as industrial and provident societies under various Acts between 1965 and 1978.

Unlike the traditional company model, with which all Members will be familiar, businesses registered as industrial and provident societies are either bona fide co-operatives or societies operating for the benefit of the community. Their business is regulated by the Financial Services Authority and they often operate in the same marketplace as companies. They run funeral services, travel services and retail businesses, such as supermarkets. Why then should not the same insolvency provisions that apply to traditional companies also apply to industrial and provident societies?

The problem is that the societies are governed by industrial and provident societies legislation and not by the Companies Acts. That is why discrepancies in the application of insolvency law have developed between companies and industrial and provident societies.

As a result of the Cork report, corporate insolvency law was reformed in 1986 and in 2000. It provides a range of procedures for companies that run into financial difficulties. There is the traditional liquidation, or winding-up, route, which, in effect, brings an end to the life of the company.

The administration order process tends to have a wider purpose—to try to rescue a business or to facilitate a more beneficial winding-up. There are company voluntary arrangements. The administrative receivership process has been mentioned several times.

Furthermore, at the time of the 1985-86 reforms, the encouragement of corporate rescue was backed up by a new regime under the process set up by the Company Directors Disqualification Act 1986. That disqualified directors when it became clear that through their actions in the insolvency of a company they were no longer fit to hold office.

Sadly, industrial and provident societies are wholly excluded from the administration order and company voluntary arrangement processes; nor are their directors subject to disqualification under the 1986 Act. Why? They do not fall within the definition of "company" under the legislation. Unlike building societies and friendly societies, they have not had those rules applied to them, in whole or in part, in separate legislation. The Bill may provide an opportunity to remedy that deficiency.

If the Bill were to make its way through the House without an opportunity arising to amend insolvency provisions for industrial and provident societies, that legal model, which is important for many businesses and for many communities who run businesses, would fall even further behind the company model. I point out, in a non-partisan way, that not only have this Government

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introduced reforms for other business models but previous Governments made sensible reforms of company law. In this Bill, only the abolition of Crown preference benefits industrial and provident societies.

I point out to my hon. Friend the Minister that the insolvency regime for those societies could be amended either by including them in the Bill or, as she knows, by making provision in the private Member's Bill making its way through the House. I seek an assurance from my hon. Friend that she and her officials will continue to have discussions across Government about how we can prevent the legal model of industrial and provident societies—a small but important part of the business world—falling further behind the company model. If we are serious about competition, we should ensure that all legal forms are modern and up to date and have the appropriate structure.

I congratulate my colleagues in the Department of Trade and Industry on an extremely sensible Bill, and I note the warm welcome that it has received. I hope that we can address the issue that I have raised in Committee or at a later stage.

8.22 pm

Mrs. Angela Browning (Tiverton and Honiton): I shall deal mainly with the part of the Bill that deals with insolvency, but before I do so I want to express my support for the comments made by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley). He said that simply badging a Bill with the word "enterprise" does not necessarily produce an entrepreneurial culture. There is merit in many of the contributions that have identified the fact that, since 1997, the UK has dropped in the world competitiveness league, and that the burden of taxation and red tape, particularly on small and medium-sized businesses, has stifled the entrepreneurial culture that we cherish so much and which the Bill seeks to promote.

On insolvency, the second chance philosophy is something to which I can subscribe. Before I came into the House 10 years ago, I ran my own business for 10 years. For some time, I dealt with an American company that was in chapter 11, and although one had to be very careful about making sure that the invoices went out on time and got paid on time, month by month, just as a safeguard, the arrangement seemed to work very well and eventually the company came out the other side. I am signed up to the idea that there are ways of rescuing and maintaining companies to ensure that, ultimately, they survive and do not cause the damage to creditors, customers and consumers that the Bill seeks to avoid. I support that part of the Bill, but I am concerned about insolvency practitioners and liquidators and their activities.

The Minister will be aware—this is touched on in the regulatory impact assessment that accompanies the Bill—that small, medium-sized and, I think, large companies, have for some time been concerned about the way in which assets are disposed of and the lack of accountability of those responsible. They are particularly concerned about those responsible for winding up a company and those who are personally involved in disposing of assets on behalf of an individual or a company.

I notice that the regulatory impact assessment contains a lot of detail about individual voluntary arrangements. There is a breakdown in a detailed table at section 518 which shows the value of receipts, the nominee fee and

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the supervisor fee. We have heard tonight that many people avail themselves of individual voluntary arrangements because their personal and domestic finances are in trouble, but I am more concerned about the corporate sector, and particularly those small and medium-sized businesses that have assets to dispose of and where there is concern, not only about the proportion of the fee taken by those who wind up the business but about the way in which they go about their business and the lack of accountability. There are many well documented cases in which, despite the substantial sums involved, creditors received only a page of documentation giving them details about how the wind-up of a business was carried out.

Only on Saturday morning, I was visited in my surgery by a lady who had run a small textiles business in my constituency. I suspect that this case is typical of small and large companies throughout the country, because many textiles businesses have folded in recent years, not least because of relocation to other countries where labour costs are much lower. My constituent seemed to me a very good business woman who had tried desperately to maintain jobs for her staff, which was small but very important in a small town, and done her best to get new orders to keep the company going. What she found most distressing about the proceedings was the fact that although she leased her factory, she owned the capital equipment in it, and that was left for a very long time before it was disposed of. It included the sort of equipment that one would expect to find in a textiles factory, such as cutting tables, which are valuable assets, yet it was all disposed of locally for £500.

That is not best practice, and such behaviour is not acceptable. It is not good for the owner of the business; it is not good for the creditors and it is not good for the company's employees. I hesitate to call for more regulation, but I am disappointed that the Minister has not seen fit to include in the insolvency provisions statutory requirements on transparency and simplicity for insolvency practitioners and liquidators. They are key to insolvency practices. How those people go about their work and how long they take to do something is critical, and there is no mention of that in the Bill. They should be called to account because they have a duty of care to all the interested parties.

Even at this stage, when the Bill has been printed, I should like the Minister to consider very carefully improving the part on insolvency. Clearly, if a business had assets that could be disposed of in a timely manner, at a rate that was more advantageous to creditors, that would be to the greater good. I accept that the philosophy is that something is worth only what the market will pay for it at a given time, but some businesses have specialised plant, and it takes somebody with knowledge of the sector to realise the best price for it. It seems to me that my constituent, whose case is not untypical, has not been well served by those who were given the responsibility of winding up her business.

I suspect that the Minister will tell me that my next topic has more to do with the Companies Acts than with the Bill, but I consider it pertinent to the issue of directors. I refer, of course, to companies with limited company status. Concern persists about phoenix companies—companies that disappear and rise again, often with the second company having acquired some of the assets of the original one and with the same people involved.

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I know that the Companies Acts tried to disqualify directors who engage in such practice, but it appears to be continuing.

The matter is not unrelated to the Bill, although it may be other legislation that has to be amended. The hon. Member for Waveney (Mr. Blizzard) touched on the subject when he gave a constituency example of the way in which directors can behave, and continue to do so, perhaps by using holding companies to asset strip before moving on. They leave behind a trail of damage and loss to the work force and others. I am sorry that the hon. Member for Coventry, North-West (Mr. Robinson) was not present to hear his hon. Friend, as I suspect he might have been able to say something useful about running companies in such a fashion. Even if such issues cannot be covered in the Bill, they are pertinent to the general subject with which it deals. I hope that the Minister will take them on board as unfinished business connected with the Companies Acts.

That is all I had to say. I shall now sit down, in case I am put on the Committee.

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