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Mr. Alistair Carmichael (Orkney and Shetland): I am grateful for the opportunity to contribute to this debate. I am particularly grateful to have caught your eye, Mr. Deputy Speaker, as when I look around the Chamber at those who are present and have sought to speak, it seems that I will probably be the only Scottish Member to contribute. That is rather surprising; indeed, it is regrettable, given that all bar 13 of the 269 clauses of the Billnot to mention the scheduleswill apply to Scotland and have a profound effect on Scottish business and insolvency law. However, it appears that the only contribution to the debate from 56 Scottish Labour MPs will be the very brief intervention made by the hon. Member for Glasgow, Cathcart (Mr. Harris) during the speech of my hon. Friend the Member for Twickenham (Dr. Cable).
I am afraid that I cannot speak with any great enthusiasm for the parliamentary love-in that we have heard hon. Members join today with regard to the merits of competition. I represent a part of the country where people view with some scepticism the notion that competition will be the panacea for all our business and enterprise illsa point that I want to illustrate with one example. Recently, I met the director general of Oftel, who spoke at great length about the merits of competition with regard to the expansion of broadband access. I asked him what contribution competition would make to the £12 million project to lay a fibre-optic cable from mainland Scotland to Shetland. It is fair to say that the silence was deafening. There are some aspects of our enterprise development, particularly in remote areas, for which competition does not have all the answers. That is certainly true regarding the conduct of the Office of Fair Trading.
My experience of the OFT to date has been one of disappointment, and that view is widely shared in my constituency. It has examined once, if not twice, petrol pricing, a matter which was also raised by the hon. Member for Stoke-on-Trent, North (Ms Walley). That is a live issue in my constituency, where we pay at least 15p a litre more for our petrol and diesel than people pay on the mainland. Obviously, a small element of that will be attributable to transportation costs, but I do not believe that that amounts to 15p a litre. The OFT examined the issue, and came to the conclusion that it could see nothing wrong with the way in which the market was operating.
Since I was elected, I have had further experience of the OFT, when Esso decided to withdraw its business cards from businesses operating in my constituency. Under that system businesses were given the opportunity
Like other hon. Members, I am happy to give a broad welcome to the Bill in general. I have received briefings in recent days from bodies as diverse as the Law Society of Scotland and the Consumers Association, all of which have been broadly supportive. Any measure that can command support from organisations as diverse as those must have some significant benefit. I would, however, like to draw to hon. Members' attention a number of aspects of the Bill that cause me some concern, and which I hope will be given full consideration in Committee.
The first of those aspects relates to the creation of a cartel offence. The hon. Member for South Cambridgeshire (Mr. Lansley) raised most of the points that I wanted to make on this issue and I do not wish to rehearse them, but I associate myself with the reservations that he expressed. My particular concern on this matter, however, is one that I raised at a number of stages during the course of the Proceeds of Crime Bill, on whose Standing Committee I served recently.
The creation of a cartel offence of this sort, and the way in which it relates to the civil sanctions stemming from the Competition Act 1998, is a further instance of the blurring of the division between civil and criminal proceedings. It would greatly improve this part of the Bill if some guidance were to be giveneither through a guidance note or in the Bill itselfon the circumstances in which evidence will be used in criminal proceedings, and those in which it will be used in civil proceedings. That is particularly the case as the OFT is to be the investigating but not the prosecuting authority in such cases.
While I am on the subject of prosecuting authorities, I hope that the Secretary of State's earlier reference to the Serious Fraud Office being the prosecuting authority relates only to England and Wales, and that prosecutions in Scotland will continue to be brought by the procurator fiscal and the Crown Office. I am not too narrow and nationalistic in these matters; I am quite happy to import the best of English criminal procedure into Scotland, but I am afraid it would be stretching that definition to include in it the Serious Fraud Office.
I have some concern about the definition of the offences that require proof of dishonesty. As a former criminal prosecutor and criminal defence solicitor, I can envisage problems stemming from a provision that requires proof of dishonesty beyond reasonable doubt. I understand why politically that may be desirable, but it may make it difficult to obtain successful prosecutions in the criminal courts. I suggest to the Minister that another form of words, such as "knowingly or recklessly" or "with culpable recklessness", would be preferable and would be more in line with procedures for similar offences.
I am also concerned about the powers of investigation that are to be given to the Office of Fair Trading. I flag up a particular concern about clause 184, which provides powers that could be quite intrusive and may not be compatible with the right to privacy under article 8 of the European convention on human rights. It would be sensible to have a procedure similar to what in Scotland we call commission and diligence, whereby application can be made to the court for the release of information by an investigated party before an order goes through that proper protection may be given to the rights of the individual in respect of that procedure.
With regard to the powers of the Office of Fair Trading, will the Minister explain to me why, under clause 185, warrants relating to the criminal investigation are to be obtained only from the High Court of Justiciary? That is bizarre. As far as I am aware, warrants for every other criminal offence in Scots law can be obtained from a sheriff. It is possible to obtain a warrant to investigate the circumstances of a murder from a sheriff, but for some reason a warrant relating to the operation of a cartel must come from the High Court of Justiciary. All other legislation on criminal procedure in recent years has extended the jurisdiction of the sheriff court, and I do not see why this Bill should be any different.
As for the insolvency provisions in part 10, I am not convinced that there is a great deal wrong with receivership as it operates north of the border. I am concerned that the significant differences in the way in which receivership and administration operate have not been reflected in the Bill. I am particularly worried that, unlike in England, administration orders in Scotland are not granted by Scottish courts on first application. The Bill envisages a three-month period for administration, and I suggest to the Minister that that is an unrealistic expectation. If the administration involved the disposal of heritable property, which poses a conveyancing problem of no great complexity, that might eat up the three-month period after the initial application granted by the creditors. It would require the administrator to go back to the court, and if for any reason it was necessary to do that on a number of occasions, it is quite conceivable that the proceeds and assets of the state would be significantly diminished, because of the cost of the lawyers' fees and the court proceedings, without the issue being properly resolved. I suggest that a longer initial period would be useful. The extra expense involved would defeat the Government's aim of streamlining the procedure.
I am happy to give the Bill a warm welcome in respect of several points, particularly the abolition of Crown preference, which has been welcomed by Members on both sides of the House. I hope that that signals a general shift by the Government in relation to Crown preference. With those few caveats, I am happy to support the Bill.
The Bill's enormous scope leads me to support the claims of other Members that the time allocated for its consideration in Committee is simply not adequate. The Government spent two years consulting on it, so why can they afford to allocate only five weeks in Committee? That makes no sense.
The Government clearly regard the Bill as a gateway to improving enterprise culture in this country, rather than as a means to improving insolvency, consumer and competition laws. The Secretary of State has said:
On insolvency provisions relating to individuals, I have serious reservations about the proposal to reduce the period of bankruptcy to a maximum of 12 months. Presumably, some bankrupts, if not most, will be released within the first three to four months of bankruptcy. Not only will unfair discrepancies in release times arise throughout the country, but given that more than half of all current bankruptcies involve consumer credit, rather than business debt, it seems highly unlikely that the provisions will make any difference to improving enterprise. Instead, as other hon. Members have said, they may enhance careless risk-taking and excess credit.
The Government have missed the point. What bankrupts need most is the ability to clear the slate after the set period, and to make a fresh start. Shortening the period of bankruptcy is not the key; what is needed is the ability to declare a bankruptcy spent after a set period. As matters stand, bankrupts will still not get a loan because their record will remain for the rest of their life. It is also worth noting that one of the great successes of the Insolvency Act 1986 was the institution of individual voluntary arrangements. Time and again, IVAs have saved people from bankruptcy and saved creditors from losing their money.
Years of repayment under IVAs will become increasingly unattractive. Instead, why should one not simply go bust for a few months? The maximum 12-month period will apply to those who have failed through no fault of their own. I am still not sure what those provisionsthey have been mentioned by other hon. Membersmean. Will the person who makes an illegal but small preference or transaction at an undervalue be at fault, while the sole trader who squanders millions through weak cash controls will not? To my mind, the whole approach reeks of future court cases and human rights claims.
I also have serious concerns about companies. The Government seem to be arguing that the procedure will in some way prove unfair to unsecured creditors, but at the moment there is transparency. A quick search on the Companies House register can reveal whether a floating charge is in place. In terms of the credit that they give and the size of the order, companies need to be careful when entering into contracts with their customers' suppliers. That is simply common sense. For larger loans, deals will be done with the creditor who has a floating charge, in terms of the preference that will be received in the case of insolvency.
The main point relates to the cost of receivership compared with that of administration. Receivership is relatively cheap and quick, but administration is very court intensive, slow and expensive. If any hon. Member does not believe me, I suggest that they ask the Secretary
The Bill will involve more administrations, thus more costs and therefore less money will go to creditors. The key to realising value to creditors in the vast majority of insolvencies where creditors' voluntary arrangements are not possible lies directly with the speed at which the company's underlying business can be sold. Every hour of delay will lower the value of the goodwill and therefore the return to creditors.
We currently have a major problem in this country in getting banks to lend to start-ups and smaller companies, and the Bill will make the situation worse. If banks lend to small companies without significant assets cover on which they can take a secured, fixed charge, they will do so at higher interest rates and the use of personal guarantees will certainly increase. I can only speculate on whether that has anything to do with the Government's proposals to reduce bankruptcy periods, but I am sure that those proposals will not help competition, productivity or enterprise; they will act against them.
I turn now to the competition provisions, many of which will improve the current situation, particularly the decisions to take referrals away from the Secretary of State and to create an independent OFT board, which, as other hon. Members have said, will represent a dramatic improvement. Likewise, the scrapping of the public interest test in favour of the substantial lessening of the competition test will be of great benefit, backed up by a fair de minimis set of provisions that keeps small businesses out of the loop altogether. That makes perfectly good sense.
However, problems have been identified for those companies affected, such as uncertainty and the additional costs involved in what the hon. Member for Twickenham (Dr. Cable) recognised would be a more judicial system. Concerns have also been expressed about the new enforcement powers and, more importantly, how they will be used. As the director general of the Confederation of British Industry put it:
All that is part of the existing enterprise culture, so I hope that hon. Members will forgive me if I seem to be a little bit cautious, but they should please keep in mind those examples as I consider one or two other provisions.
In October 2001, the OFT agreed to a Consumers Association referral involving a super-complaint against the dentistry profession. The outcome was interesting. The OFT said that it would undertake a full investigation, which is expected to be completed by the end of the year. The question is this: should it not be required to complete the investigation after a certain period? Indeed, many questions arise, which I think should be raised in Committee.
Similar concerns arise in relation to proposals for actions against individuals. While acknowledging that some other countries provide for criminal liability regarding cartel arrangements, businesses note that it is rarely enforced, and that the more active enforcement in this country will put UK companies at a competitive disadvantage in Europe.
Others have commented, relevantly, that criminalisation should be delayed until we have reviewed the Competition Act 1998. Concern has been expressed about how criminal liabilityin terms of culpabilitywill work. One of my own main concerns is this: it simply cannot be presumed that criminal sanctions are an effective way of remedying the problem when juries in criminal courts may have to decide beyond reasonable doubt on complex questions of civil competition law when considering a cartel offence. Incidentally, the same applies to insider-trading legislationas can be seen in section 151 of the Companies Act 1989, which the Government now want to get rid of, and in clause 246 of the Bill, which deals with the new civil bankruptcy restrictions orders that will protect the public from dishonest people.
Getting the Bill right will involve balancing the interests of consumers and those of businesses, and ensuring that timely, due and fair process is achieved for all concerned. I do not believe that that balance currently exists in the Bill. Over-regulation will cause companies to leave the marketplace, which will mean less choice for consumers and higher prices.
That leads me to the question of whether the Bill will meet the Government's objective of strong competition, productivity and increased enterprise. According to the DTI website, the Bill's aim is, among other things, to make markets
The Government are entirely wrong to believe that they can make markets work, although they can regulate them. The only thing that will make markets work is Governments' staying away from them as much as possible. What makes markets workwhat increases productivity, competition and enterprise in small and large businessesis freeing labour markets, reducing regulation and lowering corporate taxes.