Enterprise Bill

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Mr. Waterson: I hope that the reason for amendment No. 528 is fairly self-evident. It is another one of our amendments inspired by the professions. If a professional body's recognition is cancelled because of a failure to pay fees due to the Secretary of State, all those whom it licensed to act as insolvency practitioners will automatically cease to be licensed. They could therefore lose their livelihoods through no fault of their own. Although that eventuality will not keep all members of the Committee awake at night, it must be addressed.

As vacation of office is automatic on the loss of an insolvency licence, there is also a theoretical possibility—horror of horrors—that the cancellation of a professional body's recognition could cause several thousand insolvency estates to lose their officeholders overnight. Attempts to resolve the problem could overload both the courts and those hapless remaining insolvency practitioners. With wonderful understatement, the briefing says:

    ''This result is presumably unintended.''

The amendment is designed to avoid it by allowing practitioners licensed by a body that ceases to be recognised because of non-payment of fees to complete their existing cases. Subsection (5)(b) provides protection against unscrupulous practitioners whose conduct would justify the withdrawal of the licences they had been given by the formerly recognised body. I hope that that is reasonably clear.

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New clause 9 is of more immediate importance to our constituents. It is drafted and thoroughly supported by the National Association of Citizens Advice Bureaux. The wording is fairly clear: the hon. Member for North-East Derbyshire touched on it in an earlier speech. It has three basic aims. One is to remove financial exclusion from bankruptcy for people on means-tested benefits and tax credits by exempting them from paying the court and deposit fees. The second is to help people on low incomes pay court and deposit fees by allowing for remission of all or part of those fees and providing for payment by instalments. The third is to reduce the fees paid by couples when they both meet a petition for bankruptcy at the same time. The citizens advice bureau service reminds us that it has seen a staggering 39 per cent. increase in consumer credit debt problems over the past four years. Last year it reckoned that it advised on debt and equivalent problems totalling £1.2 billion, so it knows what it is talking about.

The briefing picks up a point made by the Under-Secretary on Second Reading—that customers can get free advice from the local CAB and that administration orders can be obtained through the county court to deal with multiple debt problems. It states:

    ''Whilst these remedies help many people every year, there are also many people for whom bankruptcy is the most effective way of resolving their debt problem and giving them a fresh start.''

It also makes the point that

    ''the county court Administration Order process is not available if they owe more than £5,000 or do not have a debt which is the subject of a county court judgment.''

It explains why bankruptcy can be suggested as the right option for certain people—mainly those with substantial debts of £10,000 or more when improvement in the near future is unlikely, insufficient surplus income is available to pay off creditors and little or no assets are possessed. In those circumstances, bankruptcy

    ''can mean a fresh start and relief from the stress''.

Let me quote a couple of brief examples. A CAB in east London reported that a client, a local authority tenant who was employed but owed £33,000 in credit debts, was under such stress that she considered committing suicide. She was advised that bankruptcy was the best option as otherwise it would take about 20 years to repay her debts. In the event, the official receiver decided not to make an income payment order and not to sell any of her goods. Things are now looking up for this client.

A CAB in Sussex reported that one of its client's debt problem spiralled out of control when she had to give up work due to health problems. A £5,000 loan grew to more than £18,000 because one creditor refused to suspend interest charges. The stress was making her condition worse, so she decided on the advice of the CAB to go bankrupt.

Remarkably, it is much more expensive for an individual to go bankrupt in England, Wales and Northern Ireland in comparison with Scotland—£370 as opposed to £58. Since none of the Liberal Democrats is present, including the hon. Member for

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Orkney and Shetland (Mr. Carmichael), it is impossible to have that verified immediately. As the briefing points out, for a single person in receipt of jobseeker's allowance, the deposit fee represents nearly five weeks' income. The Under-Secretary may be able to tell us more. A recent legal challenge, R v. Lord Chancellor ex parte Lightfoot, was unsuccessful, but the court obviously wanted to do something because it acknowledged that people might have to face

    ''a lifetime of unrelieved indebtedness''.

NACAB makes it clear that many of its clients are forced to borrow money from their friends and family simply to enable them to pay the fees for going bankrupt. I would hope that because the proposal clearly benefits a section of society for whom bankruptcy can be the answer it will command support from all parts of the Committee. The hon. Member for North-East Derbyshire has already put down a marker on it. As with all our amendments, we are not proud. If the Under-Secretary can improve on it and produce the same result, we are happy to proceed on that basis. However, I hope that the new clause will find favour with the Committee and with the Government.

6.45 pm

Mr. Barnes: Clay Cross is at the forefront of my contributions and our debates and I have received representations from the Clay Cross citizens advice bureau on this matter. As the hon. Member for Eastbourne pointed out, although court fees can be waived for various people, such as those on income support, a problem arises with the deposit that must be placed for the administration of the bankruptcy. The bureau has brought to my attention a particular case involving a couple whose indebtedness is dealt with in both their names, so that the fees are double those for others on deposit. The bureau's letter states:

    ''We have dealt with the case of a couple with three children living in rented property. They have no assets but owe nearly £35,000 in consumer debts including County Court Judgements. Both the couple are long-term sick and although bankruptcy would not be an easy step, it would go a long way to relieve them of considerable stress.''

I grant that going bankrupt should not be an easy move, allowing people to opt for it in many circumstances, but when organisations such as citizens advice bureaux judge that it might be an avenue for people in such circumstances to help them to regulate their arrangements in the long run, we should take that seriously. We should consider the problem of the costs involved, with which the amendment attempts to deal. It is a crazy situation if somebody needs to go bankrupt and the judgment is made that they should do so, but they cannot afford to. We should remove the potential for that.

Miss Johnson: Amendment No. 528 would ensure that insolvency practitioners can continue to act in cases where they have been appointed to act, even where recognition of their authorising body by the Secretary of State is revoked due to non-payment of the fee payable by that body under subsection (1) of the new section 415A. It includes a caveat that where an individual insolvency practitioner is regarded by the court as unfit to act this shall not apply.

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There is specific provision for such situations in present legislation, but this amendment would deal with them differently and in a bureaucratic way. The current situation, set out in section 391 of the Insolvency Act 1986, is that where recognition is revoked by the Secretary of State when a body fails to meet the criteria set out in that section, an order may specify that members of that body are treated as authorised for a specified period after the revocation takes effect. The amendment deals with this differently and in a way that appears to involve the courts in some areas.

I am grateful to the hon. Member for Eastbourne for highlighting the issue. It is right that we consider the implications for individual insolvency practitioners where recognition of their professional body is revoked through non-payment of the fee. Therefore, I would like to consider the matter further and, if necessary, table a suitable amendment on Report. In the light of that, I hope that the hon. Member for Eastbourne will withdraw the amendment in due course.

The new clause seeks to provide for the exemption or remission of all or part of the fees in cases of hardship, for reduction on joint petitions and for payment of fees by instalments after a bankruptcy order has been made. It would apply to all fees payable to the Secretary of State, not only those on entering bankruptcy. On applying for bankruptcy, a debtor must currently pay £370 to the court. That is made up of a court fee of £120 and a £250 deposit, which is passed to the Insolvency Service and used to defray, in part, the costs of administering the case.

I assure my hon. Friend the Member for North-East Derbyshire that there is recognition for hardship cases through special provisions for debtors in receipt of benefits and those who can otherwise show undue hardship. In particular, such debtors can seek a waiver or reduction of the £120 court fee.

Mr. Barnes: The problem is that that still leaves the £250, which is not dealt with by the waiver provisions.

Miss Johnson: I understand that. Clearly, the new clause goes further and reduces or waives all fees in hardship cases, but that is not justified. It would mean that all the costs of case administration would have to be met from other sources. It would not be fair on creditors in other cases to require them to cover those costs, and we do not believe that general taxation should pay for people to enter bankruptcy when they may have taken on debts irresponsibly.

I would like to stress that the courts have found that a person's entry into bankruptcy is not a right, and should be considered very much a last resort. That relates to R v. Lord Chancellor ex parte Lightfoot, to which the hon. Member for Eastbourne referred.

Bankruptcy is not the only method of dealing with debts, but before I move on to the others, I should mention Scotland. The difference between England and Wales and Scotland represents different legal systems, and the fact that the Insolvency Service's administration fees reflect the full cost recovery in

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England and Wales. That is not the case in Scotland, where there is subsidy by the taxpayer.

Many routes other than bankruptcy are available for debtors. Several of them do not require a deposit, which meets my hon. Friend the Member for North-East Derbyshire's point. Individuals with small debts can and do apply to the county court for county court administration orders, which allow a person in financial difficulty to pay off an affordable sum each month. There is no need to make an initial payment to the court, as administration costs will be deducted from payments for the duration of the order. To qualify, the person must have two or more outstanding debts and at least one outstanding High Court or county court judgment, and the total debts must be less than £5,000. About 8,000 such orders are made each year.

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