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Enterprise Bill
8.40 p.m.
Consideration of amendments on Report resumed.
Clause 254 [Income payments order]:
Lord Hunt of Wirral moved Amendment No. 275:
- Page 183, line 12, leave out from "effect" to end of line 18 and insert "which period may end after the discharge of the bankrupt"
The noble Lord said: My Lords, during the advantage of the dinner break business, I chose to forgo the pleasures of dinner and retired to the Library to consider what the noble Lord, Lord McIntosh of Haringey, had said about personal bankruptcies. In dealing with a previous amendment he said that one
had to take into account not only employment and level of debt but also a range of other factors when considering the impact of this legislation.I looked up what was referred to as "the level of debt". I find myself with some serious concerns about the way that debt is accumulating in the United Kingdom. I discovered that, thanks to the Bank of England, data have now been produced to show that British households are on course for record-breaking debts of £800 billion, making them the most indebted in Europe. It may well be that lower interest rates have caused an increase in borrowing and, on average, those with mortgages now have total loans of nearly £63,000 each. I am much more concerned that on average individuals have £1,500 outstanding on credit and store cards and £3,000 on other loans.
I found a quotation in the Daily Telegraph of 5th October by Cesar Molinas, an economist at Merrill Lynch. He said:
- "This borrowing is a peculiar feature of the modern British economy and I suppose America too. British households are by far the most indebted in Euorope".
The Minister will recall when we debated these issues previously that I said that one concern is that millions of people are now running up unsustainable debts.
In the Telegraph there was also a quotation from Miranda Haines of the Citizens' Advice Bureau about debt. She stated:
- "It is growing all the time. We have seen a million new cases of people with debt problems in the last year, and that is up by half on five years ago".
That is the background behind the concerns which have been expressed on all sides of the House about the bankruptcy provisions. Income payments orders are intended to ensure that bankrupts make an affordable contribution towards their debt from their income for up to three years. I believe—and many others share this belief—that there should be no limit on the length of time for which an income payments order or agreement may last. Surely, the court, or the trustee with the agreement of the bankrupt is best placed to consider, on a case-by-case basis, the appropriate period, whether lesser or greater than three years. I should have thought that that was particularly pertinent to cases in which a debtor is considered culpable for the bankruptcy and has sufficient ongoing income to make a more significant contribution to the bankruptcy fund.
Equally, the amendments provide that the courts should also be empowered to link income payments with culpability when considering an application for a bankruptcy restrictions order.
The Minister said that he would not accept the previous amendments that we tabled. I agreed to consider the position further in the light of the comments that he made. I hope that he might now accept these amendments which would go some way to ensuring that income payments orders are made more effective. I beg to move.
8.45 p.m.
Lord Hodgson of Astley Abbotts: My Lords, I intervene briefly in support of my noble friend. One must be very careful in seeking the balance. The Minister has referred to the balance. I accept the stricture that we must find the right balance. Bankrupts can recover, post-discharge, quite quickly. If they are able, post-discharge, to gain a great deal of assets—build up their assets—there is no reason why creditors should not obtain some redress from that. It is their misfortune that has provided the platform on which the bankrupt has started again.
Therefore, when my noble friend raises these points about income payment orders and the timescale, it is important that there should be, preferably, no limit, but certainly not a three-year limit. So that for those who are able, like a Phoenix out of the ashes, to rise and do well, there should be an opportunity for those disadvantaged creditors of the first bankruptcy to recover some of their losses. Therefore, I very much support the point that my noble friend has been making.
Lord McIntosh of Haringey: My Lords, I was very interested to learn of the dinner-time researches of the noble Lord, Lord Hunt. While I was in the Chamber, he was clearly gainfully occupied. However, I have one or two figures to give to him on the subject. The figures come from the Centre for Economic and Business Research. Indeed, they are quoted in the research report which he cited in support of Amendment No. 266.
The research carried out by the Centre for Economic and Business Research highlights the large differential in levels of borrowing in the United States and the United Kingdom. There are a number of statistics that show that consumers are coping well with debt levels in the United Kingdom. Work carried out by the CEBR on behalf of the Internet bank Egg, which was referred to in their research, shows that the debt to wealth ratio of average households has decreased from 17.8 per cent in 1992 to 14.9 per cent now. Furthermore, interest payments as a share of income are now 6.8 per cent as opposed to 11.1 per cent at their peak, average household income has almost doubled since 1988 and now the average household assets total £220,000 compared to average debts of £32,000.
According to the Halifax, in March 1990, 41 per cent of a first time buyer's gross earnings went on mortgage payments. The figure is now 15 per cent.
The Credit Card Research Group, whose work we also looked at in preparing a response to the Centre for Economic and Business Research, in April 2002 said:
- "Debt in the UK appears to be sustainable in the short term. Banks have been careful to avoid repeating the mistakes of the late 1980s and consumers are now much more savvy in seeking out the best deals. These factors have combined with a favourable economic climate to ensure that debt levels have, at the broadest level, remained manageable".
- "the growing dominance of debit cards suggests that cardholders are still, in the main, behaving sensibly and borrowing only what they can afford to repay".
Nothing is permanent and all kinds of things can happen to the economy. But the conclusion I draw from the research on which the noble Lord, Lord Hunt, places such reliance is the opposite to that which he has drawn.
Lord Hunt of Wirral: My Lords, I am most grateful to the Minister for his response. My intention was not to demonstrate that the situation was worse than the research to which he referred states, but to state that the level of debt must cause us concern when we are undergoing such fundamental changes in the law of bankruptcy. I repeat again what citizens advice bureaux state, which I have not heard him challenge:
- "We have seen a million new cases of people with debt problems in the last year, and that is up by half on five years ago".
Lord McIntosh of Haringey: My Lords, I have huge respect for citizens advice bureaux, but they do not undertake research, they analyse the problems of those who come to them—it is good that they do.
Amendments Nos. 275 to 277 are similar to amendments tabled by the Opposition both in Committee here and in the other place. They would provide that an income payments order or agreement were subject to no maximum time limit. It is right that those bankrupts who are able to make contributions from their income towards their debts should be required to do so under the new proposals—as they are under the existing regime. We all agree on that.
Indeed, the introduction of the out-of-court route—that is, income payments agreements—will make that easier to achieve and will lead to increased returns to creditors. However, the three-year maximum recognises that there is a balance to be struck—I can always be teased on that, but it is still true—between the benefits that that will bring to the bankrupt's creditors and the rehabilitation of the individual concerned. To remove the maximum period for income payments orders and agreements would impose a much more stringent regime than is now the case. That would be both unfair and inconsistent with the aim of the proposals.
The proposals in Clauses 254 and 255 provide further comfort to creditors by allowing for the variation of the income payments order or agreement, whether before or after discharge. That will enable any increase in the bankrupt's surplus income, to which the noble Lord, Lord Hodgson of Astley Abbots, referred, after the income payments order or agreement has been entered into to be taken into account.
Amendment No. 278, however, stands in the name of both the Opposition and the Government. It is always a pleasure to see that. It is identical to an amendment tabled in Committee by the noble Lord, Lord Hodgson—for which I pay tribute to him. It ensures that any agreement for variation of an income
payments agreement will be in writing. It has considerable merit because, if such a variation were agreed verbally, it might be open to later dispute. So the amendment appears before us standing in all our names and I thank the noble Lord for highlighting the matter. However, I must oppose Amendments Nos. 275 to 277.
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