Mr. Barnes: Given the hon. Gentleman's line of argument about people finding it easier to go bankrupt and the considerable worries about that, why does he support new clause 9, which seems quite an admirable provision, but which would make it easier for people to go bankrupt?
Mr. Hendry: We are trying to make the system fairer rather than easier. The students who will be most affected will be those from less well-off backgrounds. If we consider the level of indebtedness of people leaving university, we see that those from middle class and more wealthy families have the lowest indebtedness. That is not surprising, because their parents are better able to support them.
The people whom we are doing our best to encourage to go to university will end up having to borrow more. They will become more indebted and will be pushed into bankruptcy. We all accept that, for many people, there is a stigma attached to bankruptcy, but it will be directly related to income levels. The people most at risk will not be the crooks, but those from lower-income backgrounds who simply cannot afford to pay their bills.
My hon. Friend the Member for Cities of London and Westminster and I can see that my remarks have had a tremendous effect on both our colleagues, but he will be able to read later how complimentary I have been about the important points that he made. He spoke about the motivation of people who go into business. He said that they do so because they have a
Column Number: 652great idea and that it is only later that they discover that 400,000 other people have had the same great idea and it does not work quite so well after all. [Interruption.] I now feel less alone and isolated than I did just a few moments ago. People go into business because they have an idea for a better widget or something else that they believe will make them money. Very few people go into business because they want to go bust or defraud people; they are the minority and they make hard cases.
My hon. Friend the Member for Cities of London and Westminster spoke about optimistic young businesses, but we should recognise that the issue does not concern only them. Sometimes, because of a change of circumstance in the market, circumstances go against people who have run businesses for decades and they end up in the situation that was described so well by the hon. Member for Wolverhampton, North-East.
In the county of East Sussex, where my hon. Friend the Member for Eastbourne and I come from, there is a major business problem with care homes. People may have run care homes for years and met every standard going, but they are now closing at a horrendous rate, because their costs are rising faster than their income the whole time. People face major capital costs to keep up with the new legislation being imposed on them.
Mr. Purchase: Does the hon. Gentleman agree that it is more honourable and fairer to creditors that those care homes close in good time, before their debts overwhelm them?
Mr. Hendry: I was coming to exactly that point. The overwhelming majority of people will consider their situation and say, ''We know where this is going and that in a couple of years we won't be able to continue, so we'll look for a way out.'' For many, selling their business for housing will be an attractive option, in that it will give them a huge amount of capital. Others, however, will say, ''I can run this business for a few more years and still sell it for housing in the end and therefore still get the capital. If someone else loses out in the process, I don't care.'' We should have no truck whatever with those unscrupulous people, but we should not doubt that some will go down that route.
The people who are affected by those bankruptcies will be the small, local suppliers who provide food and cleaning services. Those well-meaning and otherwise thoroughly successful businesses will then be pushed towards the edge of bankruptcy themselves. My concern is that those who are affected most will not be rich people, who can afford to engage the best solicitors and pick up the pieces, but vulnerable people, at the margins. That is why we must be deeply concerned and cautious about the way the Minister is taking us.
Miss Johnson: I rebut the hon. Member for Cities of London and Westminster's strong and obvious suggestion that personal responsibility is in some way undermined—consciously or unconsciously—by the Bill. The Government believe strongly in individuals taking responsibility for their own affairs.
Column Number: 653The Bill's provisions do nothing but strengthen that important link.
I welcome the recent conversion—while we are talking about Catholicism—of the hon. Member for Wealden (Mr. Hendry), and indeed maybe his colleagues, to the cause of financial exclusion. This Government have done much to tackle financial exclusion, which the previous Government for 18 years did nothing but exacerbate.
Mr. Hendry: If the Under-Secretary looks in the Members' Register she will find that I have been a trustee of the Big Issue for about a decade. I was chairman of the all-party group on homelessness. It is scarcely a recent conversion.
Miss Johnson: I accept the hon. Gentleman's point, but there are wider issues in addition to homelessness here. His party has shown little interest in financial exclusion over many decades, except to exacerbate it.
While I am being difficult with Opposition Members, I remind them that we no longer have interest rates at 15 per cent. Many of their remarks would be relevant if interest rates and inflation were spiralling out of control, but the UK has stability, built by the Chancellor of the Exchequer and the Government's economic policies. We now have record low interest rates and inflation.
Mr. Field: I initially put on record that the stability in this country has been built up by business men. The Government have not hindered it as much as many might have feared. Even with the absolute interest rate of 4 per cent, real interest rates remain fairly high. They have an important bearing on debts built up by the very people to whom my hon. Friend the Member for Wealden referred.
Miss Johnson rose—
The Chairman: Order. Before the Under-Secretary speaks, I hope that we will not re-fight the recent general election throughout the course of this clause.
Miss Johnson: I shall endeavour not to, Mr. Conway. I accept that business is a key generator of prosperity in the UK. That philosophy underpins much of the Bill. But the hon. Gentleman's remarks are undermined by the fact that were economic stability due exclusively to business and nothing to do with Government policy, what happened in the 1990s would be inexplicable. The hon. Gentleman has no account of that, except the one I gave of the difference in economic policy pursued by this and the previous Government.
I have been through many of the questions on the US. I do not think the hon. Member for Eastbourne was listening carefully to what I said, because he reiterated his earlier remarks without taking any account of the fact that I drew on experiences elsewhere of bankruptcy; I did not focus on the US. The US is moving in our direction rather than us moving in its. The hon. Gentleman has failed to take that point on board.
Mr. Waterson: What about Hong Kong?
Miss Johnson: I do not need to address Hong Kong, about which the hon. Gentleman quoted a statistic.
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Mr. Waterson: What about Scotland, then?
Miss Johnson: I do not understand why the hon. Gentleman feels I need to respond to the question of regimes different from our own.
Mr. Waterson: As the Under-Secretary has provoked me into intervening, there may be something to be learned from the results of other countries liberalising their bankruptcy laws along lines—to avoid another unnecessary argument—not dissimilar to those suggested in the Bill. If she is not happy looking at it in America, which is only a £200 plane fare away, why not look at Scotland?
Miss Johnson: We looked widely at experiences elsewhere. We are specifically not adopting various aspects of the US regime, for exactly the reasons that the hon. Gentleman suggested. We are keeping the good parts of our provisions. The US is moving more towards us than we are moving towards it. The strengths of the UK systems and the strengths of recent developments are reflected in the Bill.
While I am on the strengths of the system, it is worthwhile quoting the Prince's Trust. In a statement to officials on 26 March it said:
The House has strong connections with the trust and so hon. Members will know that it has strongly supported young entrepreneurs who have found it difficult to get funding for their business proposals through traditional means. Many of them have built very successful businesses out of the support that the trust has given them. It is pleasing to have the trust's welcome for the Bill.
I turn now to the question of the difference. Some hon. Members have failed to take any account of schedule 20 in their understanding of the distinction between those who are reckless and those who are not. It lists the grounds for making an order. I will not test the Committee's patience by reading out the relevant paragraphs (a) to (m), but they include such grounds as
These are all very relevant considerations. They are not an exhaustive set of reasons but they illustrate the circumstances under which we think recklessness is likely to be shown and to require a BRO.
I can only re-emphasise that bankruptcy is not an easy option. It is bound to remain the last resort. The hon. Member for Wealden suggested that people would somehow declare themselves bankrupt. Bankruptcy involves a court process. People cannot simply decide to be bankrupt one day because they feel like it. It is wrong to think that it is an easy passage.
Column Number: 655Some of the stigma that existed in the past will remain even though some of those people should not be stigmatised in that way in the future. Bankrupts who can will have to make contributions from their income. They will still be required to do so under these provisions. Indeed, there will be a strengthening of the income payments order regime to ensure that those payments are made.
There will be a register of BROs, which will help to improve the already sophisticated information kept by credit reference agencies. The distinction between culpable and non-culpable bankrupts should help to produce more informed lending decisions about whether to provide credit. At present, there is little difference.
The hon. Member for Cities of London and Westminster spoke about shades of grey and the issue was picked up by the hon. Member for Wealden. In some cases, it will be easy to distinguish reckless from non-reckless behaviour; schedule 20 enables the courts to do so. Sometimes a strong case will be made that circumstances beyond one's control contribute to a bankruptcy. One reason why people end up with mortgage arrears—the subject greatly exercised Opposition Members in their discussion of the clause—is a breakdown of relationships. It accounts for about a third of arrears. For more than one in five, reduced income is the key factor and for nearly one in five it is unemployment. Almost 10 per cent. of arrears are attributable to ill health.
We would all accept that those examples have nothing to do with culpability, but, in some middling cases, there will be shades of grey. That is why it is for the courts to decide and why we should not constrain their ability to take decisions on the merits of each case. Many members of the Committee have legal backgrounds and know full well that the particular circumstances presented to a court are crucial for taking decisions on the level of culpability.
Although the Bill does not deal with the issue of loan sharks, a major review—the first for 30 years—of consumer credit legislation is currently taking place. We aim to tackle rogue traders through the Bill and through stop now orders, and we aim to tackle loan sharks through the review of consumer credit and measures consequent upon it. That is how we shall deal with loan sharks and those charging vulnerable consumers exorbitant rates of interest.
|©Parliamentary copyright 2002||Prepared 14 May 2002|