| Previous Section | Index | Home Page |
“The remaining proposals will continue to be taken forward within a subsequent draft Order that is likely to be laid early in 2009.”
We are in mid-March 2009, and it is important that Members and the public understand the Government’s intentions. The Minister has already said that he has plans to introduce more substantive cost-saving measures in due course, but we need to know precisely when. The Government were considering some seven or eight other proposals, and we need to know which will be introduced and when. The advertising market is suffering badly, so the local newspaper industry is unimpressed by this proposal. The Minister’s timing could have been better, and people would accept this measure more readily if they knew that it was part of a wider package rather than something that picked on the local newspaper industry in particular. I hope that the Minister will be able to provide a timetable when he replies to the debate.
The Minister also mentioned the concern about whether the savings will get through to the creditors, and it is important that we have certainty on that point. If the local newspaper industry feels that it is being picked on, the strongest counter-argument would be for the Minister to look the editors of those newspapers in the eye and say, “This is part of a package of measures that will help the wider economy and potentially save many companies from going bust.” It is therefore essential that the money gets through and achieves the outcomes that the Minister promises. He has already made several comments that will reassure many people that the Government are serious about ensuring that the money reaches the intended recipients. Are the Government willing to consider post-legislative review of the success of this measure, in a year or two’s time, to ensure that
it—and the others that the Government have promised—has had the intended impact, and that the money has not been swallowed up by the addition of a couple of extra hours to the insolvency practitioner’s bill? If the Minister can provide some reassurance on that point, the insolvency profession will also know that the Government will remain vigilant on the matter.
The crucial issue is the protection of creditors. The Minister has already pointed out that in roughly one in 50 cases—not a large number, but none the less an important proportion of cases—if a newspaper advertisement is not placed in the local press, some creditors do not know that a creditors’ meeting is taking place. If they do not know, they cannot attend and represent their interests, which may mean that they lose out in the eventual insolvency procedure. They may not get as much money as they might have done if they attended the meeting to ensure that their interests were properly put forward. The Minister pointed out that the order is not intended to stop advertising entirely, but to provide greater freedom and flexibility to the insolvency profession to decide whether to place advertisements in the local press or, in the case of larger companies that do not operate in only one newspaper’s area, in alternative sources of media—perhaps on the web or in the trade press—to ensure that the job of informing creditors is done more effectively.
The Minister also said that the Government will not suggest to insolvency practitioners that, in the right circumstances, they should not continue to advertise in the local press. For many companies, especially small ones that trade locally, advertising in the local press will be the right approach, and if the insolvency profession exercises its discretion intelligently—as I am sure it will—the advertisements will continue to be placed as at present. Will the Minister confirm that the basic duty on the insolvency profession to ensure that creditors are properly informed will not be weakened by this measure? If that fundamental legal duty is not eroded by this measure, it will further underpin his case that this is about greater flexibility and efficiency rather than removing an essential protection for potentially important groups of creditors in the local economy.
We will listen carefully and with great hope to the Minister’s responses on those points before we decide how to respond.
1.7 pm
Andrew Miller (Ellesmere Port and Neston) (Lab): I have listened to both Front Benchers and have heard much common sense, with the exception of the observations that the hon. Member for Weston-super-Mare (John Penrose) made about the newspaper industry. We have to be practical and say that, in these difficult times, we should ensure that creditors are supported. As much as I—like all hon. Members—am a great fan of my local press, I think that supporting creditors should be our focus. I see that the hon. Gentleman agrees with that observation, and I agree with him about the need for post-legislative scrutiny of measures such as this one.
I wish to place on record my thanks to the Clerks and other staff who support my Committee. They have to cope with an extraordinarily varied pattern of work, on many different subjects, to very tight timetables, as established by the Standing Orders of the Committee. I also thank my hon. Friends who serve on the Committee,
on both sides of the House, although—regrettably—no Conservatives take up their positions. If we are to have a constructive dialogue on these important issues, I would welcome the hon. Member for Weston-super-Mare if he were to relinquish his Front Bench role and join us. Perhaps he prefers to remain where he is.
The consultation on this order elicited some 16 written responses, most of which were favourable. As one would expect, the bodies that raised objections included the Newspaper Society and the Association of Business Recovery Professionals, but the latter withdrew its objection when it realised that professionals would be given the flexibility to make judgments about the most suitable method of advertising given the nature of the business being put into liquidation. We understood that.
There is no issue of substance between the Committee and the Government on the need to save money and I shall illustrate that shortly by citing some figures from a real case in my constituency. I have discussed the case with lawyers who are experts in insolvency, and they are horrified by the figures involved.
The text of what became paragraph 3 of the final report was put on the record in my Chairman’s draft report:
“In light of widespread concerns about existing insolvency procedure, including the fees structure, and given the potential volume of changes anticipated from the Insolvency Service”—
taking into account the effect of the current economic situation—
“we are surprised at the narrow focus of the draft Order.”
With hindsight, it was regrettable that there was not greater clarity in the communication between Officers of the House and the Department on the broader strategic approach that is envisaged. I am led to believe that a miscellaneous provisions order for insolvency legislative reform is likely to appear in early April, according to information received by my Clerks this morning. Perhaps that answers one of the questions that the hon. Member for Weston-super-Mare quite reasonably posed. With hindsight, it is a pity that we did not have a clearer picture.
We asked for a legal opinion on whether we could be assured that the money saved by the proposal would end up in the hands of creditors. The answer that we received was, “Not necessarily.” That is why it is very important that the House takes note of the Minister’s words in my earlier exchange with him. The Minister expects the money to end up in the hands of creditors and there can be no reason why an insolvency practitioner should hold on to the money rather than pass it on to the creditors.
Mr. Binley: The hon. Gentleman raises a very important concern. I understand that the whole reason for doing that is to ensure that the money ends up in the hands of the creditors. Every small business man would support that, because they are the ones who get caught out and hurt by such cases. Will the hon. Gentleman explain where his fears might lie? I am perfectly happy to take the Minister’s advice that he is confident, but I want to be aware of the fears that the hon. Gentleman might have so that I can monitor the situation.
Andrew Miller:
My fears come from the reality of current practice. As the Minister explained, fees can be subject to legal challenge. We now have an unambiguous statement on the record from a Minister of the Crown
that makes it clear that if subsequent proceedings challenged whether advertising savings were not passed on to the creditor, it would be wrong for the practitioner to do that. If my right hon. Friend the Minister disagrees with that interpretation, I would welcome an intervention from him. As he does not want to intervene, I think we now have absolute clarity on his meaning. I do not think that there is any dispute around the House.
I took particular interest in this order because it coincided with my dealing with a specific case. It is not fair to name the individual concerned, because he is a constituent who, despite his best efforts, has unfortunately been bankrupted. The action came, as it quite often does with small businesses, from HMRC. The sum involved was £5,249.52. The final costs—the amount that he was required to pay in full—were £34,293.81. I cannot find any legitimate basis for some of the fees listed. Trustees’ future remuneration cost £2,500, legal fees were estimated at £5,000 and trustees’ remuneration was estimated at £7,659. That seems an absurd set of fees for dealing with something that could have been knocked out on the back of a fag packet in five minutes.
The Committee and I want to be sure that in dealing with the order, which genuinely makes a welcome saving, we do not lose sight of the bigger picture. When we introduce the miscellaneous provisions order and all the rule changes that my right hon. Friend the Minister rightly wants to introduce, we need to get to grips with some of these stupid things. They are stupid. There can be no basis for the emergence of figures such as those in my example.
The Committee did not oppose the substance of the Government’s proposal; in fact, we did quite the opposite. We were concerned that the documents before us did not inspire confidence that there was determination to drive the process forward and to ensure that people such as my constituent do not face figures that are out of kilter with any measure of reality. I hope that, on the basis of the assurance that my right hon. Friend the Minister gave to the hon. Member for Montgomeryshire (Mr. Öpik) and me, we will be able to make progress and ensure that when the full picture emerges—including the draft order that we are due to see, I am told, “in early April”—it is much more transparent and helps hon. Members giving help and guidance to their constituents to feel confident that fee structures are based on fair and reasonable practices. I hope that they will be able to be confident that insolvency is fair to the people who have often worked extremely hard but whose businesses have failed for reasons beyond their control—brought to an end by something further up the food chain—and to their creditors, and that it is not focused on the financial interests of the professionals charged with managing the process of insolvency.
The Committee also wants my right hon. Friend to assure us that although we disagree on the order, the Department will make no attempt—I do not mean this pejoratively—to steamroller the Committee into a line of thinking. The Minister’s assurance on the procedures and practices that were given when the rules were established should also be maintained. We could have used our nuclear option and sought to veto the order. The Minister would have been honour bound to accept our veto, but we do not want to get into that sort of game. We want to ensure that the processes that evolve from the Committee’s work enable us constructively to progress
the legislative reform process. I hope that the Minister will give the Committee the assurances that it seeks in that regard as well.
1.20 pm
John Hemming (Birmingham, Yardley) (LD): The House may be aware of my interest in procedural issues. I am a bit of a glutton for punishment and am attending this debate wearing two hats—one as my party’s temporary Front-Bench spokesman on these matters, and the second as a member of the Regulatory Reform Committee. I also happen to sit on the Modernisation Committee: interestingly, that Committee does not meet any more, so we are obviously modern now.
I am also an enthusiastic member of the Procedure Committee, which means that I turn up to its sittings as well. The House may not be surprised, therefore, to hear that my concerns about how this matter is being handled are procedural, and are about the process by which the Government are driving through a proposal against the recommendation of the Regulatory Reform Committee, and against the concerns expressed in writing by the Chair of the Business and Enterprise Committee.
People outside Parliament argue that politics is broken, while a group of parliamentarians are concerned about Parliament’ ability to represent citizens being constrained, citizen, and about the fact that the Executive control Parliament. The order before us may be relatively minor, with £3.6 million being taken away from the newspapers and probably given to the Government—I shall say more about that later—but the real question is why the Government have seen fit to use a whipped process to go against two Select Committees of the House.
Governments are supposed to work by explanation and by giving information about the decisions that they take. Although it seems clear that this decision was taken outside Parliament, the Government are using the whipped process to make even the Chair of the Regulatory Reform Committee go against his Committee’s recommendation.
My hon. Friend the Member for Cambridge (David Howarth) has what he calls his “dustbin” theory of decision making—that is, that a dustbin is taken round and everyone chucks a bit in—but what we should really be looking for is evidence-based decision making. It is wrong for the Government to go against the recommendations of the Regulatory Reform Committee and of the Chair of the Business and Enterprise Committee because that decision is not based on evidence.
When an insolvency occurs, the business involved normally ends up insolvent, although sometimes it will end up solvent. Not all creditors are the same: there are priority creditors, such as Her Majesty’s Revenue and Customs; there are secured creditors, which generally are the banks or the Government, and finally there are the unsecured, smaller creditors. As it is found out what the assets are—perhaps someone will have managed to sell off a going concern—people will go through all those creditors, ending up with a sum of money at the end of the process.
If we reduce the costs of the process by saying that the newspapers will not be paid £3.6 million a year, the result will be that, in different insolvencies, that money
will go to different people. The likelihood is that it will go to HMRC—the Government—or to the banks. Mainly it will go to the Government, so the effect of the cost of insolvency going down by about £600 will be that the smaller creditors about whom we are all concerned are unlikely to receive much in the way of additional funds from most insolvencies, although they will get some.
That is not necessarily the big issue, but we do not know for sure, because we have not been given the evidence that we need to make this decision. Instead, the Government have decided to use their power, as the Executive controlling the legislature, to force the change through.
What effect does advertising in local newspapers have? That is an important question. We know that there is an effect, and that one person in 50 who finds out that he or she is a creditor of a firm involved in insolvency does so by that means. Such people may or may not get some money out of the process, but it can be argued that the information could be better communicated by the use of alternative advertising techniques, such as notices placed on the internet or in the London Gazette .
The Government’s case is that, if people in business know that there is a place online to which they can go to find out where there are insolvencies, it is likely that they will not get caught out by an insolvency that they do not know about. On the Committee, I was relatively sympathetic to that approach, but we have not been given the evidence on which to make the decision. That is why I believe that the Government are going about the matter in the wrong way, from a procedural point of view.
This may be connected to the targets for removing administrative burdens from the civil service. It is a good idea to do that, and there is no question but that this order ticks that box, we do not have the key information that we need to make to decision. People are to be told that the only place where they can find out about administrations and insolvencies is the London Gazette website, but it is hard to predict what proportion of the 2 per cent. of unsecured creditors who find out about an insolvency that affects them because it has been advertised in the newspaper would fail to find out about it if the information were no longer available from that source.
My feeling is that people who have been in business for some time will learn relatively quickly how to go about getting the money that they are owed, and that is why I was sympathetic to the proposal. However, it is important to realise that we do not have the figures to allow us to analyse the different types of insolvency, or to determine where the £3.6 million saving would go.
There will be very few circumstances in which the money will go to the insolvency practitioner, although that is obviously possible. Given that this is a £600-per-transaction arrangement, one would expect that in many transactions only the secured creditors—the banks and HMRC, and thus mainly the Government—would get the money. At a time when local newspapers are suffering financially from the loss of advertising, we are going to take £3.6 million away from them and give an indeterminate but substantial amount to the Government.
Mr. McFadden: I should point out to the hon. Gentleman that HMRC has not been a preferential creditor since 2003.
John Hemming: I accept what the Minister says, and I am very pleased to say that I have not been involved in an insolvency for some years. However, my point that there are priority and non-priority creditors remains important.
Mr. Lindsay Hoyle (Chorley) (Lab): The hon. Gentleman has mentioned priority creditors. Does he believe that some creditors should have priority, or does he agree with me that the priority should lie with employees owed money in the form of redundancy payments or wages?
John Hemming: I agree that there is a need to review the priorities. This area of law is very complex, and one point made by the Committee is that we are looking only at a teeny-weeny bit of it here. My concern is that we do not have the evidence that we need about who would be affected by the proposal. It is most likely that the Government will be the substantial beneficiary, but we do not know.
The full power of the Whips is being used in respect of this order, and that is why I support the proposals from the hon. Member for Nottingham, North (Mr. Allen). He believes that Select Committees should be elected, because that would weaken substantially the sanctions that could be taken in situations like this against recalcitrant Select Committee members or Chairs. The reality of the power of the Executive to control the legislature is that if we do not get a balanced legislature through electoral reform, civil servants will continue to persuade Ministers on the basis of targets, and Ministers will continue to exert their ministerial power, through the Whips, to force decisions on this Chamber without evidence.
I have not talked to my colleagues about pressing for a Division on this matter. If there were to be a Division, I would vote against the motion, but I would do so on the procedural point. We are going about things in the wrong way. The power of the Government is being used—
Mr. McFadden: On a procedural point, the hon. Gentleman heard my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) say that the Committee has a stronger power, which is to recommend that the measure be vetoed. Members of the Committee are in the Chamber, so they can correct me if I am wrong, but my understanding is that the Committee did not use that power because its concerns were not about the substance of what we were trying to do. In those circumstances, bringing the order to the House is not to railroad the House. If there are concerns, a perfectly proper response is to have a debate about them. I have tried to respond to the concerns of the Committee today. That is not railroading or steamrollering; it is perfectly in line with the proper procedures of the House.
| Next Section | Index | Home Page |