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Miss Melanie Johnson: May I make it clear that we have already debated and accepted amendments Nos. 134 and 137, which remove the Secretary of State's right to be paid in priority to any preferential claims lodged in insolvency proceedings by former employees, which is what these amendments also seek to achieve?
Mr. Waterson: I am looking at the response from the hon. Lady's fellow Minister in Committee, and he seemed not to accept those amendments, and to insist that the Secretary of State should be able to step into a former employee's shoes.
Miss Johnson: Perhaps I can clarify this. Amendment No. 137 was taken on Thursday, and amendment No. 134 was in an earlier group. Both amendments have the same effect as amendments Nos. 83 and 84. We said that we would reconsider the issues, so I therefore believe that these amendments are no longer necessary.
Mr. Waterson: I am grateful to the Minister for that response. I shall immediately turn, on a sixpence, and express my pleasure and surprise in equal measure that the Government have accepted the argument. They were certainly fighting a doughty rearguard action on it in Committee, although I exempt the hon. Lady from any blame for that. It is extremely good news that, yet again, common sense has prevailed. I can only put that down to the detailed and energetic scrutiny that the official Opposition have applied to the Bill. It would, therefore, be quite churlish of me not to seek leave to withdraw the amendments
Amendment made: No. 98, in page 172, leave out lines 32 to 34.[Mr. Pearson.]
'(a) in the case of an individual whose bankruptcy arises from the closure of a business or trade established or operated by that individual, one year beginning with the date on which the bankruptcy commences; and
(b) in cases not falling within subsection 1(a):
(i) where a certificate for the summary administration of the bankrupt's estate has been issued and is not revoked before the bankrupt's discharge, two years beginning with the date on which the bankruptcy commences; and
(ii) in any other case, three years beginning with the date on which the bankruptcy commences'.
'or ought to have known'.
'(6) An incomes payment order must specify the period during which it is to have effect which period may end after the discharge of the bankrupt.'.
'(5) An income payments agreement must specify the period during which it is to have effect which period may end after the discharge of the bankrupt.'.
Mr. Waterson: No doubt the Minister will intervene if any of these amendments have already been accepted by the Government, although I somehow doubt that that is the case. I shall speak mainly to amendments Nos. 85 and 86. Government Amendment No. 371 and our amendment No. 87 are basically identical, which seems to suggest another acceptance by the Government of our ideas.
We are told that the reasoning behind the Bill is to encourage a culture of entrepreneurial activity and risk taking. The difficulty with that is that, whatever the result might be in the corporate sector, all the changes in the rules would have to apply in equal measure to personal, consumer-type bankruptcies. If, however, we could apply a longer period of time to the duration of individual bankruptcieswith all the consequences that would followand single out the very sector that the Government are trying to help, that is, corporate bankruptcies, presumably we should be doing everyone a service.
We are not necessarily suggesting that these amendments represent the best provisions that can be achieved. It is certainly open to the parliamentary draftsmen to come up with something better. The model that the Consumer Credit Association has put forward, which we are happy to adopt, contains proposals that
making a false or misleading statement would be an offence;
creditors have a right to challenge the debtor's statement. Most would be able to do so on the basis of information in their own customer databases;
if so challenged, the debtor must produce evidence that he was in business. Even those who have not kept formal accounts should be able to do so, by producing, for example, an appointment book or purchase receipts or tax return."
I want to ask the Minister two or three specific questions, given that, for these purposes, we accept the Government's basic premise, which is that the aim of these far-reaching changes in insolvency law is to encourage entrepreneurs to go out, start a business and take the risk of it failing through no fault of their own.
Is the Minister prepared to accept the amendments as they stand, or to return with amendments of her own? Will she at least indicate her view on the principle? If not, will she consider returning with proposals if, as we predict, there is an explosion in the number of consumers,
In Committee, it was argued that there was no solid or practical way of distinguishing between business and consumer debtors. In consultation with the consumer credit industry, we have come up with what we consider to be a reasonably watertight solution, but we need to know not just the Minister's problems with the drafting of the amendment but whether she has any problem with the principle.
Amendment No. 86 also returns to an argument we had in Committee, but it too is extremely important. The aim is to ensure that the official receiver conducts a proper investigation in the case of each bankrupt. Without that there would be a real risk of, in effect, rubber-stamping of bankruptciesfirst because the period involved could be much shorter even than 12 months, and secondly because we can expect an explosion in the number of cases to be considered.
I do not want to go into too much detail, but I think that the Government are still in denial over important points of principle. We raised three of them in Committee. First, should stigma be attached to personal bankruptcy? Secondly, what would the effects in the real world be? Would we end up with a rogues' charter? Thirdly, would resources be available to deal with those effects? We feel that the best way of testing what the Government are really trying to do is to offer them a straightforward, practical way of distinguishing between business and consumer debtors.
We have received representations from MBNA Europe Bank Ltd, which represents more than 13 per cent. of the UK credit card market and has more than £6 billion in outstanding loans. It is very concerned about the experience of the United States, and how it would apply here. It says
We heard all the arguments in Committee about the likely effect not only on the industry but on borrowers. We discussed whether it would be more difficult for people to borrow money, and whetheras happened in the United Stateswe would see the emergence of a predatory part of the lending industry, preying on people
Borrowers who entered higher education prior to 1998 will be able to escape repayments by making themselves bankrupt . . . credit manager of Cornwall County Council, which processes student loan applications, claims students will have nothing to lose by going bankrupt because few are homeowners.
'I am concerned the student loans system would become so open to abuse it becomes impossible and this would herald a return to the grant system which would be administered by us in local government,' he said."