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John Hemming:
I accept much of what the Minister says. Sympathetic though I was to the proposals in the Committee, I think that the Chair would accept that it was my suggestion that, as other members of the Committee—generally Labour Members—were uncomfortable with the proposals, we should be a little bit resistant. We then encountered the power of the Whips, and that is the point at which what the Government are doing is inappropriate. Obviously all these things are valid proceedings, but this one is
inappropriate. It would be far better to have more dialogue with the Committee and look at the evidence. In practice, it would be nice if the Minister told us how much of the money will go to the Government, but he cannot be expected to know the answer, because it would require some work by civil servants. A decision will be taken within three hours of the commencement of this debate, and we shall go one way or the other—but we do not know. That is the wrong way to proceed.
If we want proper evidence-based Government decision making, we must have the evidence during the decision-making process. When there is a deadline, and the whipped process is involved, we have to make a decision without knowing the facts. That is an appalling way of running Government. If there were a Division I would vote against the order on that procedural point. Although we do not have the evidence, the probability is that the substantive argument is reasonable, in that commercial creditors will learn where they can find out whether there is something that they should be worried about. In a recession, I am unhappy with taking money from newspapers and giving it to the Government, but I am most unhappy about the fact that the Government are using the power of the Executive to force a decision through the House, without evidence and against the recommendation of one Select Committee and of the Chair of another.
1.32 pm
Gordon Banks (Ochil and South Perthshire) (Lab): It is good to be able to support many of the comments made by the Regulatory Reform Committee Chairman, my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller). As we have heard, we are not discussing one of those matters of national importance that we often debate in the House these days, but this subject still has a significant degree of interest.
The Government’s recommendations may not have a negative impact on millions of people, but those who do feel their impact will feel a little less comfortable with the whole voluntary liquidation process. We have already heard about the process set out in the order, so I shall not go into great detail about that, other than to say that the need to advertise in the London Gazette would stay, but—the bit that worries me—the need for local advertising would disappear, and be replaced with additional advertising as deemed appropriate in each case.
As we have heard from my hon. Friend the Committee Chairman and my right hon. Friend the Minister, the Committee’s first report of the Session concluded that the order had a narrow focus, with the possibly minor effects that have already been referred to. Given the wider concerns about insolvency, which were discussed in the Committee too, and the growing number of such cases in the current economic downturn, the sector should be subjected to a review, to modernise insolvency legislation, even wider than the one under way. That remains my belief, and the example that my hon. Friend the Member for Ellesmere Port and Neston gave about an insolvency in his constituency shows why the sector needs closer scrutiny.
I do not doubt that the order will deliver minimal financial savings from the insolvent estate—the estimate is £600 per case. We have heard suggestions from Opposition Members about where that money might go. In my experience—to reinforce the comments of the hon.
Member for Birmingham, Yardley (John Hemming)—it is unlikely to get into the hands of the unsecured creditors. Does the order remove a burden from the creditors? Indirectly. It removes a function from the insolvency practitioner, but whether removal of that burden—if we want to call it that—actually puts funds back into the hands of creditors, especially unsecured creditors, can never be measured. Perhaps I am being cynical, but my experience tells me that all too often no funds are available after the costs of the insolvency practitioner have been met. The result is that individuals and businesses who have lost money have little or no return. That is a real concern for me.
There are other ways to deliver returns for creditors, such as maximum caps. As my right hon. Friend the Minister is aware, I tabled a parliamentary question on that matter, to which he courteously replied. There is much more we can do to focus on returning funds to creditors, secured and unsecured, beyond this narrow order.
I understand that there is an obvious need for practitioners to be recompensed, otherwise there will be nobody to do the business, but apart from words said in this place, there seems to be little acknowledgement that the process is meant to benefit creditors. The process is not intended to keep insolvency practitioners in business and generate income for them. Unsecured creditors are the real victims in such cases. Recent reports of fees of £35 million for individual windings-up are mind-boggling, as were the numbers cited by my hon. Friend the Member for Ellesmere Port and Neston about the size of the insolvent estate in his example. The insolvency practitioner involvement that could deliver a £35 million winding-up cost is beyond my comprehension.
I have never had an awful lot of confidence that an insolvency, voluntary or not, would generate much payback for my business. Many businesses the length and breadth of the UK will have similar feelings.
The order retains the burden to send notices to all creditors and to update the insolvent company’s website. I argue, as I did in Committee, that the removal of the need for local advertising is detrimental to small businesses and individuals securing information relating to the insolvency.
We have heard from my right hon. Friend that the “burden” of the requirement to advertise locally only involves doing so in the local newspaper serving the area where the head office of the business is situated. I fully understand and accept that, but the House must grasp the fact that most insolvencies in the UK are not the size of Woolworths; they are local, and local papers provide a necessary flow of information to potential local creditors.
As no other changes were proposed in the order, I found it peculiar that we were faced with it in the first place, and it is intriguing that we are now debating it on the Floor of the House. There have been representations about the revenue for local newspapers from advertising costs. I support the Newspaper Society’s representations about that loss of revenue, but I could not argue solely on that basis that I was not content with the order.
The order will remove the flow of information. It does not deliver more information, and that is what is needed. If I went to businesses in my constituency, or to
people in the sector of which I have experience, and asked them if they knew about “the Gazette”, they would obviously think that I was talking about some local paper. Most of them would have no comprehension of what the London Gazette is.
Information needs to be more available, not less, and I do not think that that will be the result of the order. In a submission, we were asked to have faith in the accounting records of the businesses that are in trouble, and to rely on those accounting records to provide a full list of creditors. I question whether that is realistic. Businesses in trouble do not make record-keeping a priority. Staff are paid off, and jobs are merged. There is not enough time to do jobs fully. Short cuts are taken and there is often inappropriate behaviour. I urge the Department to grasp what goes on in such situations on the ground.
The expectation that directors will co-operate with insolvency practitioners is fine; that is what we should expect. However, there are different levels of co-operation. Many directors also have limited knowledge of the operating processes of their companies. That applies particularly to basic housekeeping functions, such as the upkeep of sales and purchase ledgers. Those functions are vital in determining who a creditor is. Directors do not provide us with all the answers, and I say that having been a director for more than 20 years.
I am unconvinced that the savings of more than £3 million will be delivered. I am uneasy about whether, in 80 per cent. of cases, no additional advertising would be required—but that is what will have to happen if we are to achieve those savings. We heard from the Minister about £17 million of savings more generally; those are in what is coming the Committee’s way. However, this order relates to savings of £3 million. I can understand that in 80 per cent. of cases—the percentage of cases that will have to be affected if we are to generate the £3 million-plus of savings—those concerned would not get the additional advertising, but I am yet to be convinced that they do not merit it.
To my mind, the order does not do anything to improve our insolvency practices, or to justify creditors’ belief and hope that insolvency practices will deliver something for them. I share the Committee’s view that it would be appropriate to review those processes fully. I am sure that if the order had been part of a Bill that improved those processes and therefore improved the return to creditors, particularly unsecured creditors, members of the Committee would have supported it wholeheartedly. However, as a stand-alone order, it leaves me a bit baffled.
The fact that the insolvency sector is growing is a sign of our times, sadly. The fact that costs in the sector seem to be escalating should worry us all. I urge the Government to address some of the major concerns regarding costs, rather than focusing on the minutiae dealt with in the order.
1.42 pm
Mr. Nigel Evans (Ribble Valley) (Con):
May I first declare an interest? I own a small newsagent’s in Swansea. I thought that I would cover myself just in case I said something in favour of local papers in this debate—or in the next one, for that matter. I should like to pass on apologies from my hon. Friend the Member for Christchurch (Mr. Chope), who intervened on the Minister
for Employment Relations and Postal Affairs at the beginning of the debate. He is chairing a Committee and sadly, cannot be here, but I am sure that he will read Hansard diligently tomorrow to see the answer to his question.
The focus of the debate is tight; I will try to make my contribution as exciting as I can, but the subject is a bit turgid, to say the least. However, clearly the issue has an impact on a number of people, because the requirement to place two advertisements in local papers has probably been about for a long time. I see that the London Gazette was first published in 1665; the hon. Member for Chorley (Mr. Hoyle) probably remembers reading the first edition when he was a child, but perhaps not. Things have moved on just a little since 1665.
I was reflecting only today on where we are now, compared to where we were when I first became a Member of Parliament. It is not so long ago that I had my first mobile phone. It was the weight of a brick, and the reception was so poor that, at times, it was as useful as a brick. I then got my first computer, so I threw away the typewriter and the Tipp-Ex, which was all rather exciting. Then the internet came along. We can all remember the days when we would try to download the first page of a document on a dial-up. We could go and bake a cake, or do something else, while that page was downloading. Now, we are talking about 100 megabytes a second. So times have moved on, and newspapers are moving along with them. A lot of the newspapers that we are talking about are online, but we are not quite at the stage at which many of them will be able to survive the recession. Things are pretty tight for them.
I suppose that the big question is whether we are talking about retaining an obligation on liquidators to advertise in two local newspapers as a means of preserving local newspapers. That is clearly not why the obligation was created in the first place. The aim was to get the information out to the creditors, and clearly in 1665 advertising in two local papers, and using the London Gazette, was the way to do that. I do not know how many people read the London Gazette these days. I suspect that it is not a lot. I suspect that more people read it online than buy copies of it. I would not even know where to buy a copy of it. Speaking as a former newsagent, I do not think that we ever sold a copy. I do not think that we even stocked it. I certainly do not remember any of my customers coming in and saying, “Have you got the London Gazette?”
Mr. Hoyle: Is there any truth in the rumour that the hon. Gentleman sold the first copy of the London Gazette back in Swansea? He would remember that day well, wouldn’t he?
Mr. Evans: Touché! It is 15 all. What I am trying to say is that I can understand what is behind the thrust towards the regulatory reform in question.
On the subject of creditors, I was interested to hear a number of the exchanges about the little person—the small to medium-sized enterprise that finds that when another firm falls through, it is likely to be the body that loses the money. As my hon. Friend the Member for Weston-super-Mare (John Penrose) said earlier, there is a knock-on effect. Clearly, if a firm falls through, it could take other firms down with it. I am sure that that happens more than regularly.
The important thing is that we get the information out to creditors, but we also need to look at the whole issue of creditors to make sure that it is not the small to medium-sized enterprise—the small person, the one-man band, the small partnership—that loses out every time. The SME should get its fair share. If other people get 10p in the pound, why does the SME get nothing? We need to look at the issue again, and now is the appropriate time to do so, what with the recession and 85 small businesses falling through every day. That is a phenomenal number. It means that there are a lot of firms going out of business, and a lot of creditors who will need the information about those firms falling through, so that they can put in their claims.
I was surprised to hear about insolvency practices charging £700 an hour. If they do, or if the amount is anywhere near that, we need to look into the matter. We should worry about not the £600 that goes to two local newspapers, but the thousands of pounds that go to insolvency practitioners. That is clearly the business to be in. If we cannot be in banking and pay ourselves huge bonuses, we should be insolvency practitioners. There must be a little list of these top jobs. I am shocked to hear that that is what insolvency practitioners charge. Clearly, if they charge that sort of money, it means that the money is not getting through to the right people, which is those in the SME sector, who are spending a lot of cash in the meantime.
We are considering one narrow issue—businesses falling through—but as I recall, when I applied for an off-licence for my shop, we too had an obligation to advertise in local papers. I suspect that the same is true for planning applications. Does the order mean that the Government are considering all those instances, too? If they say that in one narrow area—in cases in which businesses fall through—it is unnecessary to advertise in two local newspapers, and that obligation is to go, I suspect that every Department will consider the issue, because the order will be a precedent. If the Minister is saying that trading has changed, I agree, but if the obligations are to disappear for one section of people, clearly the same will happen somewhere else, too.
That brings me on to newspapers, which are going through a tough time. Many of them face annihilation: circulation figures are going down and, at the same time, advertising revenues are disappearing. All that the measure will do is make the situation worse. Some of the businesses that might go bust that would normally have an obligation to advertise are newspapers themselves—at least the London Gazette will get an advertisement out of the measure—so they will not be around to take such advertisements.
We need to look at the usefulness of local newspapers. I said that many of them are available online, but some failed when they were making money to invest in their online services. I suspect that many of them wish that they had done so, as many newspapers, whether national, regional or local, are going online and spreading their advertising on the internet. I think that that is great, because people who have moved away from their local area can find out what is going on there and, indeed, read the classifieds. Newspapers need time, however, to make that investment, so if we vote on the issue, I would delay or defer the measure for five years, so that local papers have an opportunity to reform and to make the investments necessary to ensure that they are up to date.
In 20 years’ time, many youngsters may not buy papers at all, as they will get everything online. With the iPhone, the BlackBerry and mobile wi-fi, they can download stuff, so the big question will be whether we will need to buy hard copies of newspapers. We like to do so, as it is a traditional thing for us—I love to buy newspapers and make marks on them—but will the youngsters of tomorrow feel the same?
Gordon Banks: Does the hon. Gentleman agree that many small businesses in the UK still do not have internet access because they do not think that they need it? They might be right, because they know their businesses better than we do. The benefits of internet access are limited for a small one-man plumbing operation, whose business is gathered by word of mouth.
Mr. Evans: A one-man band such as a plumber is a good example, because they tend to work from early in the morning until late at night. The last thing that they want to do is sit in front of a computer when they get home—they want to have their tea and go to bed, because they are tired. I accept that we have to be careful in our assumptions. We are not imposing an obligation on the liquidators to put anything on the internet—they can do so additionally if they think it appropriate. We are therefore talking about the London Gazette: it was founded in 1665, and it will still be here in 2365, the way that we are going.
Mr. Binley: Will my hon. Friend tell us whether he has any shares in the London Gazette, because it sounds as if he does not have much of an interest in the paper?
Mr. Evans: This is the best advertising that the London Gazette has had since 1665. I suspect that sales will soar tomorrow, as people go out and get a copy to see what it looks like. The publication is available online, the Minister told us, which is reassuring, but the thrust of my argument is, first, how do we get the information to the creditors and, secondly, can we make sure that creditors lower down the food chain will receive the money?
The savings will not go to the Government, because the Minister said that it will go to primary creditors, whoever they are. However, the people lower down the food chain, whom the hon. Member for Chorley was talking about, are the ones we really care about. If the £600 saving goes to small and medium-sized enterprises, I would support that, but there is a big question mark about whether that is the case. I hope, however, that in making these changes we will not push local papers closer to the brink of collapse. If this is the start, I am sure that there will be other regulatory reforms in future that will remove the obligation to place advertisements in local papers, which will further cripple the papers that we all cherish in our local areas.
Michael Fabricant (Lichfield) (Con): Does my hon. Friend not think that, apart from the fact that there is a delicious irony in the Leader of the House choosing to hold this debate immediately before a debate on the future of local newspapers, it is a particularly difficult time for newspapers, with the cost of newsprint at an all-time high? Sadly, given the number of insolvencies, papers are almost completely dependent on such advertisements to support their classified sections.
Mr. Evans: I hear what my hon. Friend has to say, and I completely agree with him. It is rather absurd, and what is even more absurd is the fact that this debate will run longer than the debate about the future of local newspapers. That is rather sad; we could have merged the debates.
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