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1.55 pm
John Howell (Henley) (Con): I assure the House that I will be as brief as possible so that we can make progress.
I thank the Minister for his exposition of the order, which allayed a number of my fears. However, there is a world of difference between removing the obligation to advertise in newspapers and discouraging insolvency practitioners from advertising in local newspapers. We have to be careful lest the one stray into the other. There is a big push to use the internet. I am a great supporter of the internet, but we must recognise that it has its limitations. A benefit of the age in which we live is that, as the marketing industry knows, we have several different channels for reaching the market. The old ones do not necessarily fall out of use, and are still appropriate in the right circumstances.
We must achieve a balance between, on the one hand, access to information and the protection of creditors and, on the other, the need to reduce red tape and costs. I would differentiate between large companies, which trade widely and for which local newspapers are not particularly relevant, and small and medium-sized businesses, which are the backbone of our industry—they are certainly the mainstay of my constituency—and local newspapers play a major role for them. The notices that appear in those publications are well read, newspapers at that level are accessible—people can pick them up, read them on the train, and fill in time wherever they are—and, most importantly, they are trusted. At the moment, in relation to insolvency, the internet is not always trusted, and there have been a number of cases in my constituency in which companies have gone into liquidation but the liquidators have not been quick enough to stop the internet trading arm continuing to trade, so people have lost their money. They just go into the pool of creditors, even though the normal business has stopped trading.
I am all for reducing red tape. We may not be here specifically to benefit the media, but the points made by my hon. Friend the Member for Ribble Valley (Mr. Evans) are right. We must recognise the state that the local newspaper business is in. It is facing hardship, and we need to ensure that we do not damage it even further. I therefore seek reassurance from the Minister that, if the measure goes through, insolvency practitioners will not actively be discouraged from using newspapers; that newspapers will continue to have the means to convince insolvency practitioners of their value; and that we will monitor the process to ensure that, ultimately, creditors do not lose out.
1.58 pm
Mr. Charles Walker (Broxbourne) (Con):
I am delighted to be able to take part in this debate, because we have uncovered a devilishly cunning plan on the part of the Government. The order has nothing to do with the £600 that will be saved in advertising insolvencies. In the
Minister, we have new Labour’s very own Moriarty, because behind that smooth exterior lies a sharp brain. We are approaching a general election, and Government Members do not want my constituents or their constituents opening the local paper day after day, week after week, seeing companies going to the wall. We know that some companies will go to the wall due to the bad management of their proprietors, but many companies are going to the wall due to the bad management of this Government.
The order is a devilishly cunning plan and it nearly passed this place unnoticed, but thanks to the probing by my hon. Friend the Member for Ribble Valley (Mr. Evans) and some Labour Members, we have uncovered it. The Minister has a chance in a few moments to set our minds at rest. Is he really Moriarty or is he a force for good?
I do not want to try your patience, Mr. Deputy Speaker, but let us not be too po-faced about the £600 that will be returned to creditors. If there are 10 creditors, that will be £60 per creditor, and if there are 100 creditors, £6. The £600 is a red herring.
Gordon Banks: I am sorry to stop the hon. Gentleman in flow, but his breakdown of the £600 does not work in practice, because it depends who is a secured creditor and who is an unsecured creditor. The £600 will go to the secured creditors. It will not end up in the hands of the unsecured creditors.
Mr. Walker: The £600, though, does not make the critical difference, as the hon. Gentleman so eloquently pointed out in his speech. It is the behaviour of the insolvency practitioners that we need to be concerned about—£700 an hour? I am sure some of them charge £800 or £900 an hour. They are a disgrace. They are doing a good business at present, largely thanks to the Government whom the hon. Gentleman supports. However, it would be churlish of me to pursue that, as I have great regard for him. I recognise that he is one of the few Members on the Government Benches who has run a business for a considerable time.
Mr. Binley: This could well turn into a witch hunt—
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. Not so long as I am in the Chair.
Mr. Binley: Your words are most welcome and I am assured, Mr. Deputy Speaker, but I am concerned about the vilification of many good practitioners around the country who do a very good job indeed, particularly at this time, working into the late hours because of the number of insolvencies taking place. I want a little balance in that respect, and I am sure my hon. Friend would agree.
Mr. Walker: I thank my hon. Friend for pointing that out. Let us remember that marriages among insolvency practitioners are being destroyed as they work 15 to 20 hours a day at £700 an hour through the night to deliver a public service both to themselves and to their clients.
Mr. Deputy Speaker, you look incredibly bored by this speech, so with that in mind, I shall sit down.
2.3 pm
Mr. McFadden: The hon. Member for Weston-super-Mare (John Penrose) asked me some questions about savings and other changes that we are introducing, and asked me to put those in context. I propose to do that.
We intend to introduce a further legislative reform order which, like the one that we are discussing, will make parallel changes in the insolvency rules. Together those proposals will contain more about information and how it is supplied. They will cover meetings to do with creditors, reporting by office holders, clarity and accountability on remuneration and so on. So the order is part of a wider programme of change.
John Penrose: Before the Minister moves on from that point, can he indicate whether the timetable mentioned to the Chairman of the Select Committee for the order to be introduced during April is realistic, or whether he expects the process to take longer, and if so, how much longer?
Mr. McFadden: I am tempted to use that tremendously flexible parliamentary word, “soon” in respect of the introduction of the order. We hope to introduce it within the April-May timetable.
The hon. Gentleman said that he wanted to be clear—it is a perfectly fair request—that although we would be less prescriptive about the method of trying to contact unidentified creditors, the duty would still exist. I refer him to paragraph 3(b) of the order, which states that
“the liquidator—
(a) shall summon a meeting of creditors . . . not later than the 28th day after the day on which he formed”
(b) shall send notices . . . by post to the creditors”
shall advertise—I shall return to our friend the Gazette—
“in such other manner as he thinks fit”
“furnish creditors free of charge with such information concerning the affairs of the company as they may reasonably require”.
So there are still important duties to try to identify creditors.
My hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) spoke about the costs and fees involved, and a number of other hon. Members also referred to those. As I said in my opening remarks, there is recourse to the court on these charges, and we are bringing in measures to achieve greater transparency and accountability, which the House will have a chance to discuss, through the methods that I outlined.
I want to respond to my hon. Friend’s point about steamrollering, which was also the subject of the speech from the hon. Member for Birmingham, Yardley (John Hemming). That is not at all what we are doing. As my hon. Friend said, the Committee had some sympathy with the substance of our proposals, but questioned their scope and effect. Other options were open to the Committee, which they did not take. Following the Committee’s consideration, it is perfectly proper to allow the House, as we are doing, to have a full debate and to ask the House to approve the order.
I must pick up on a point made several times both before and, more worryingly, after my intervention that the only beneficiary would be the Government. As I
said, HMRC stopped being a preferential creditor some years ago. In the hierarchy of creditors, there are, first, the expenses connected with the liquidation, which we are trying to reduce through the order. Then there are the preferential creditors. In practice, the employees are high on the list, and rightly so. I agree with my hon. Friend the Member for Chorley (Mr. Hoyle) about that. Next in the hierarchy are banks, followed by unsecured creditors. It is not the case that HMRC stands first in line to benefit from the changes that we are proposing.
John Hemming: The point that I made about the banks is that some of the banks are, in effect, nationalised, so if they get the money, they are, in effect, the Government.
Mr. McFadden: I want to be fair to the hon. Gentleman, but I am not quite sure that that is what he was driving at. I do not think he mentioned the banks. He was talking about HMRC.
My hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) expressed concern about what he saw as the local bit disappearing. Let me gently disagree with him. The local bit does not disappear through these changes. They allow flexibility and choice, according to the particular circumstances of the case. It is still open to liquidators to advertise in a local newspaper if they think that is the best way to identify unidentified creditors.
The hon. Member for Henley (John Howell) asked me for a reassurance that there would be no act of discouragement. Of course there will not be an act of discouragement. All we are doing in the order is trying to take account of the effect of those adverts—as I said, only in one in 50 cases do they identify an unidentified creditor—and of the changes in the patterns of trade and communication since the rules were first established in the early part of the last century.
Mr. Binley: It is sometimes appropriate to issue guidance notes on matters of this kind. If the creditors were likely to be very local, could there be guidance to the effect that it might be useful to insert adverts in local newspapers?
Mr. McFadden: I am sure that in its dialogue with insolvency practitioners, the Insolvency Service will make it clear that if people still think that that is the most appropriate course, they should take it.
I fear that we are slightly mixing up two debates. There is a perfectly legitimate discussion to be had about local newspapers, of which I am a great fan; there is another discussion about the best method of trying to identify unidentified creditors in the insolvency process and trying to give insolvency practitioners and the companies themselves the flexibility to choose the best method.
I now come to the point about the narrowness of the order. We might be in danger of putting too much weight on this process. Legislative reform orders are for a specific purpose; there are specific criteria. As one who picked up the baton of the Bill that gave rise to legislative reform orders halfway through its passage through the House, I can say that there are very tight controls on what they can contain. It has been said that the order is not ambitious enough and that there should
be a much more wide-ranging reform of the Insolvency Service. That might be a legitimate point, but if we went down the road of totally recasting insolvency law, we would not do that through a legislative reform order; in fact, if we tried to, I suspect that the House would object and say that it was a proper matter for primary legislation.
If we are dissatisfied with insolvency in general and we feel that insolvency law needs wider reform, that should be a subject for primary legislation. If we rejected the proposals in the legislative reform order because we were dissatisfied with the insolvency regime more widely, that would show a somewhat odd logic. Our judgment of the legislative reform order and the Committee’s report on it should be based on the merits of the order itself and on whether the change is worth making. My contention is that it is.
I have debated with the hon. Member for Ribble Valley (Mr. Evans) a number of times, and we often hear about that newsagent in Swansea; it is a regular feature of his contributions.
Mr. McFadden: I am sure that the newsagent benefits greatly from the number of times it is mentioned here, and good luck to the hon. Gentleman. He said that the order leaves us only with the London Gazette, and that the people of Swansea and Ribble Valley probably do not read that every day. He is right about that, but wrong in saying that our changes would leave us only with the London Gazette.
Andrew Miller: I have just been reflecting on my right hon. Friend’s earlier comments; I apologise for going back a paragraph in his notes. He was talking about the narrow nature of the order and he has acknowledged that there will be another order. The hon. Member for Weston-super-Mare (John Penrose) made a perfectly reasonable point in asking why there could not have been a single order. If there had been, we would have had a clearer picture of the Government’s strategy. I do not think that there is any difference across the House or between the Committee and the Government on the issue, but we would have had a clearer picture and been able to see what was in the Minister’s mind.
Mr. McFadden: My hon. Friend may have heard the phrase “real help now”. It is precisely because we are in favour of real help now that we wanted to make the changes on advertising and bring them in as quickly as possible. Other changes are on a slightly slower timetable, but they will come in due course.
I return to my previous remarks. The hon. Member for Ribble Valley said that the order would leave us only with the London Gazette, which is a bit obscure for his constituents. I understand what he said, but let me make two points. The order does not leave us only with the London Gazette; it is open to the insolvency practitioner or the company involved to advertise
“in such other manner as”
Gordon Banks: Is the Minister not concerned that insolvency practitioners will develop their own process of best practice, which, over time, will negate the need even for the consideration of local advertising? The practitioners might follow their own practices that had evolved over the years.
Mr. McFadden: The practitioners have a duty to try to identify the unidentified creditors. The point of the order is to give them flexibility and choice on how they try to do that.
It is important to be serious for a moment. I am not arguing that the London Gazette sells as well as the daily or local papers, but it plays an important role. It is used by credit reference agencies, financial institutions, Her Majesty’s Revenue and Customs, trade suppliers and so on. It is intended not to be in the living rooms of every citizen every night, but to act as a central record to which people from anywhere in the country can go to find out information about these matters. It plays a valuable role.
The hon. Member for Broxbourne (Mr. Walker) accused me of having a cunning plan, although I was not sure about what the nature of it was. Let me assure him and the House that my and the Government’s only intention with the order is to get a better deal for creditors and for the small businesses, about which we have heard, that are often at the sharp end of insolvencies.
The change is worth having; it would be a mistake for hon. Members to oppose good measures because they wanted other, wider measures that would not even be appropriate for legislative reform orders. Let us play on the pitch that we are on: legislative reform orders are appropriate for making particular changes. It would not be a good service to small businesses, which we care about, if we turned down a change that could benefit them; those other concerns should be dealt with in another way.
In conclusion, we often hear calls to reduce red tape and regulation, and they are repeated often in the House. However, there is little point in our calling for reductions in regulations and red tape in general and then opposing those reductions in the particular, when they are brought before the House. This measure is a benefit worth having. On that note, I ask the House to disagree with the Regulatory Reform Committee’s report and approve the order.
That this House disagrees with the Regulatory Reform Committee in its recommendation that the draft Legislative Reform (Insolvency) (Advertising Requirements) Order 2009 should not be approved.
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