Enterprise Bill

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Mr. Waterson: I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 248 ordered to stand part of the Bill.

Clause 249

Income payments agreement

Mr. Waterson: I beg to move amendment No. 556, in page 173, line 36, leave out 'or'.

The Chairman: With this it will be convenient to take the following amendments: No. 435, in page 173, line 38, after 'specified', insert 'part or'.

No. 557, in page 173, line 39, at end add ',

(c) both (a) and (b)'.

No. 434, in page 174, leave out lines 9 to 13 and insert—

    '(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: We can dispense with these amendments fairly briskly. Amendments Nos. 556, 557 and 435 are technical amendments, which would introduce more flexibility and cover a situation in which a bankrupt had both earned and unearned income.

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Amendment No. 434 echoes our debate on the previous clause, but relates to the duration of the income payments agreement. I simply reiterate what the CBI and others have said: there is no clear reason for the limitation, and it would make more sense to leave the issue to the discretion of the courts, which will quickly establish their practice in the matter while retaining the power to deal more rigorously with exceptional cases. This has nothing to do with entrepreneurialism or enterprise; it is driven by the rule that where a debtor can pay, he should pay. However, given that some of the arguments relating to amendment No. 434 are similar to those that the Under-Secretary contemptuously dismissed in relation to the previous clause, I have little hope that she will accept the amendment.

Miss Johnson: I am sorry; I am trying to dismiss suggestions gently.

Amendment No. 556 provides for a situation in which a bankrupt can make payments to his trustee under an income payments agreement both by himself and from a third party at the same time. It is difficult to envisage such a situation arising. Payments are generally made by third parties, such as employers, for example, because a bankrupt has failed, for whatever reason, to make the payments himself, and the trustee goes directly to the employer with an attachment of earnings order to enforce payment. The proposals provide that where an IPA is breached by the

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bankrupt, the trustee may, under subsection (3), apply to the court for a variation for direct payment by a third party.

By removing the word ''or'', as the amendment would, an income payments agreement could provide only for both a bankrupt and a third party to make payments. Individual payment by one or the other would not be possible. I am sure that that is not what was intended. It certainly does not seem necessary or appropriate.

Amendment No. 435 would ensure that the same terms are used in referring to the contributions from a bankrupt's income made under an income payments agreement, irrespective of whether they are made direct by the bankrupt or from a third party, such as the bankrupt's employer. Although that might seem sensible at first sight, it would be wrong. Clause 249 introduces new section 310A into the Insolvency Act 1986 relating to income payments agreements. Subsection (1)(a) states that an IPA might provide for a proportion or part of the bankrupt's income to be paid to the trustee or official receiver, whereas subsection (1)(b) provides only that a proportion of the money due to the bankrupt by way of income should be paid to the trustee or official receiver by a third party. The amendment would do away with that distinction.

The reason for the distinction is that paragraph (a) deals with the whole of the bankrupt's income, from whatever source, and allows the bankrupt to agree to designate either a proportion of his income or specific part of it, whereas paragraph (b) deals only with money due to the bankrupt from a third party—for example, salary from employment. In that instance, it is sufficient for the agreement to specify a proportion of it.

I find it difficult to imagine the situation covered by amendment No. 557, which provides for a situation in which a bankrupt can make payments under an IPA both by himself and from a third party. The amendment is unnecessary because, generally, payments are made by third parties, as I said before.

On amendment No. 434, it is right that those bankrupts who are able to make contributions from their income should still be required to do so. I entirely agree with the hon. Member for Eastbourne on that, but setting a three-year limit to the duration of the new income payments agreements reflects both the current and proposed treatment of income payments orders—both the IPA and IPO arrangements. It recognises that there should be a balance between the benefits that that will bring to the bankrupt's creditors and the rehabilitation of the individual concerned.

It is also hard to see why anyone who entered an IPA would want to bind themselves for a longer period than could be made under an IPO. That could waste a large amount of court time, which is what IPAs seek to avoid. For those reasons, I invite the hon. Member for Eastbourne to withdraw the amendment. Before I do so, I should like to tackle a further issue that he raised. The term ''income'' covers all forms of income, whether earned or unearned.

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Mr. Waterson: I am grateful for that nugget in an otherwise rather dispiriting response from the Under-Secretary. We have achieved something by establishing what income includes, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 249 ordered to stand part of the Bill.

Clauses 250 and 251 ordered to stand part of the Bill.

Clause 252

Individual voluntary arrangement

Question proposed, That the clause stand part of the Bill.

Mr. Waterson: I hope that this clause stand part debate will be short, but I have no control over such matters. I am sure that the Under-Secretary will cite the figures—I do not have them to hand, but I remember seeing them—that tell us that there are a relatively small number of individual voluntary arrangements compared with the overall picture of insolvency.

Miss Johnson: There are 7,000, I believe.

Mr. Waterson: I recall that the numbers have gone down slightly in recent years, but IVAs obviously have carved a niche for themselves in our system. Many people, especially professionals, will strive for an IVA rather than formally enter insolvency proceedings, for the obvious reason that they may be able to continue to practise as, for example, solicitors. People have used IVAs on a fairly widespread basis over several years. In terms of saving court time and professional fees, I am sure that we would all encourage a relatively informal solution whereby a debtor sat down with his creditors and hammered out an agreement on how he would repay them over a period, in whole or in part.

All the commentators seem to agree—which is a blessing—that IVAs will become significantly less popular because of the Bill. To put it broadly, if someone can go in and out of bankruptcy in a year or possibly much less time, what is the attraction of an IVA? It might be interesting to discuss under a later clause whether IVAs would still be any attraction when professions were involved. The Under-Secretary may be able to help me in an intervention.

We are clearly changing the position somewhat for Members of Parliament and others such as justices of the peace, although I read only two days ago in the paper that they are no longer supposed to call themselves that. If not in this debate, I hope that later we can clear up what the attitude of professional bodies such as the Law Society will be. Perhaps they will take a similar view and say that if someone goes into insolvency he will not suffer the risk of being unable to practise his profession unless a bankruptcy restrictions order applies to him. In any event, it is clear that IVAs have fulfilled a purpose in the treatment of people in this country with financial difficulties. However, they do not always achieve what they are supposed to.

In the context of the clause and how the Under-Secretary might reconsider it, I want to raise an issue

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on behalf of my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond). He asked me to mention a case in which two of his constituents were put to some trouble and cost when one of the other leaseholders went in for an IVA, which was ran by an insolvency practitioner based at the other end of the country. Many of my hon. Friend's constituents' difficulties were caused—at least indirectly—by the fact that the gentleman in the IVA had failed to declare what amounted to beneficial ownership of his flat in the block. It was difficult to pin down who was speaking on his behalf, but it became apparent in the course of the IVA that the man had not fully declared his assets and, in particular, his beneficial ownership of the flat.

The problems generated by that failure provoked correspondence between my hon. Friend and the chief executive—the inspector general and agency chief executive, to give him his full title—of the Insolvency Service. The inspector general confirmed that, although the person nominated to run the IVA must be a licensed insolvency practitioner, he must take only reasonable steps to satisfy himself about the debtor's true position as to assets and liabilities, and ensure that it does not differ in any material respect from that represented to the creditors.

We do not believe that IVAs always work splendidly. I have provided just one example of an IVA that was undermined by the very informality of the IVA procedure. What role does the Under-Secretary predict for IVAs? Will they become a thing of the past, and if so, will that be a good thing?

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