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However, the Minister will not be surprised to hear that our support is not unequivocal. We have reservations about the change the order brings in which would allow Ofcom to award licences to community radio stations in areas that overlap with small commercial stations; in other words, those with a potential audience of fewer than 50,000 adults. We object to this amendment because, in this instance, the commercial station operates on a very local level anyway. These stations will often be not-for-profit, very locally focused and have significant community involvement. To allow another publicly funded community station a licence in this area would simply mean that it would have the potential to upset the fragile economic balance of this station by competing for listeners. We think it is very important to create a regulatory regime which helps rather than hinders the commercial radio sector-particularly in this difficult economic climate, with the additional instability caused by the big switchover from analogue to digital.

In response to the Government's consultation on this matter, RadioCentre quoted the then Secretary of State for Culture Media and Sport, the right honourable Andy Burnham, who, on 2 March 2009, stated:

"We already have established radio stations that provide an excellent service to their community and we want to work pragmatically to ensure not only that community radio can continue to develop but, with one eye on the rest of the media industry, that it does not threaten the development of commercial services"-[Official Report, Commons, 2/3/09; col. 570.]

Can the Minister inform us what effect this change to the Community Radio (Amendment) Order is expected to have on the status of small, locally based commercial stations? Does he not agree that this amendment will have a potentially damaging impact on their survival by allowing small community stations to compete with local commercial stations which are already suffering? Given the supposedly reassuring words above, and the fact that currently local stations are already handing licences back to Ofcom because they cannot make their businesses work, why do the Government think that this is an appropriate change? What other action is being taken to ensure that the development of commercial services is not threatened?

In more general terms, my Lords, can the Minister give us some idea of hopes for the future regarding community stations and the small commercial stations as we move into the digital age? What impact do the Government expect the switchover to have on local radio? Moreover, what is being done actively to ensure that successful local radio stations can survive to become part of a viable local media sector?

Lord Clement-Jones: My Lords, I thank the Minister for his introduction to the order. As he said-and we agree-community radio forms a vital part of the broadcasting landscape. Indeed, as both he and the noble Lord, Lord Luke, said, its growth since 2004 has

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been a great success story, with now more than 200 community stations. We on these Benches share the motives and agree with most of the actions of the Government and with their intent in the order.

The lead-up to the order has not been for want of documentation: there is the Ofcom review of 2007; the interim Digital Britain review; the Myers independent review of the rules governing local content on commercial radio; the final report of Digital Britain; the consultation on amendments to the community radio licensing regime in June; the summary of responses to the consultation and the Government's response of October; and the impact assessment and Explanatory Memorandum to the order. The Government have made their position and their motives clear in the run-up to the order.

We share what the Government have to say, particularly in respect of loosening the regulation on sources of funding, licensing overlap and extension of licence periods. The key thing that the Government have done is to maintain the restrictions on advertising. That is a vital safeguard. We support the general thrust of the amendments, including the retention of those advertising restrictions.

At the same time, we understand the concerns of RadioCentre and others about the impact on small commercial radio stations. Although the impact assessment is welcome as such, it is very thin; it says very little about the impact on smaller radio stations. It states:

"The effect of allowing community radio stations to co-exist with the smallest commercial stations is difficult to quantify. However, it is likely that community radio stations will attract some listeners from local commercial stations. This could affect the value of an advertising slot to a local commercial station".

The request of the commercial industry for impact assessments when new licences are granted to community radio stations is a valid one that the Minister needs to answer. The general impact assessment is not adequate; the impact in a particular area, however, will be crucial. I hope that the Minister will be able to give a favourable response on that.

The issue of funding for local community radio in this context is very important. I can see the Government's motives in wanting to allow single-source funding up to a greater figure-75 per cent, I think-but one of the key sources of funding has been the community radio fund. That started off, rather disappointingly, at £500,000; since then, the spending commitments of that fund have increased massively from something like 14 stations to over 200, as we heard today. If the Government are changing regulations and wishing the community radio industry well, I hope that at the same time they will give some indication that the funding for community radio will be improved. It is all very well to wish community radio well and say what an important part of the broadcasting landscape it is but, without willing some additional resource to it, it will be difficult, particularly in the current climate, for it to sustain itself.

I hope that the Minister will be able to answer those two questions, which are highly pertinent to both the future of small commercial radio stations and the community radio movement itself.

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Lord Faulkner of Worcester: My Lords, I thank both noble Lords for their contributions to this debate and for the general welcome that they have given to the order. There is no disagreement between us on the value of community radio or on the value of the small local commercial stations which feel that they are in competition with it.

I will not go over the points that the noble Lord, Lord Luke, covered when he effectively endorsed what is in the order and which I covered in my speech. However, I will attempt to address the questions that he asked, particularly about the proposal to allow community radio in areas of 50,000 or fewer where a commercial station is already in existence. This is indeed in contradiction to one of the majority views in the consultation. The proposals set out in the draft order have been made following significant discussions with the commercial radio sector, and it was a recommendation of the former chief executive of GMG Radio that this change should be made. The advertising and sponsorship restrictions that will apply to all the community radio stations with audience potential of up to 150,000, including the newer stations that will come in with this order, will, we believe, provide the protection for the commercial stations that the noble Lord is seeking and to which the noble Lord, Lord Clement-Jones, also referred.

I will return to the question of the impact assessment in a moment. The noble Lord, Lord Luke, asked about the future of community radio after the digital switchover. The intention is that the digital radio upgrade programme will retain a proportion of FM to help what one might call the ultra-local stations to stay in existence and continue to provide community radio. In practice, we believe that the vacated spectrum will allow for a greater number of community radio stations in future, particularly in areas where stations have been limited by a lack of spectrum.

5.15 pm

The noble Lord, Lord Clement-Jones, referred to the funding of community radio through the community radio fund. He raises a good point. The availability of funding is committed until 2010-11. Decisions beyond 2011 have still to be taken but the Government have been working closely with Ofcom and the community radio sector to ensure that we make the best use of the funding that is available by promoting best practice and employing fund raisers. In addition, the Minister for Creative Industries has met representatives of the community radio sector to discuss the future of the community radio fund. He has agreed to write to other government departments to highlight the benefits of community radio in delivering wider government objectives and to seek a financial contribution from them to the fund.

On the impact assessment, we accept that there is little evidence which qualifies the impact of community radio on small commercial stations. However, we are not aware of any commercial station that has closed as a result of the licensing of a community station. Ofcom is required to consider the impact of a community radio station on a commercial station before a community licence can be granted. I understand that Ofcom's

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watch on this will be maintained and, if there is an impact on commercial radio stations, Ofcom will intervene and act on it.

I hope that I have answered the questions raised by both noble Lords in this brief debate. If I have missed anything I shall, of course, write to them.

Motion agreed.

Legislative Reform (Insolvency) (Miscellaneous Provisions) Order 2009

Legislative Reform (Insolvency) (Miscellaneous Provisions) Order 2009
First Report Regulatory Reform Committee

Considered in Grand Committee

5.17 pm

Moved By Lord Davies of Abersoch

The Minister for Trade and Investment (Lord Davies of Abersoch): My Lords, I am being shadowed for the day by a graduate intern, Angela Wynne. I am not sure whether she should be shadowing me or the noble Lord, Lord Hunt. This is an attempt to get her name into Hansard.

I shall start by putting the proposals in this legislative reform order into the context of what we are trying to do as a Government and as a department. We have been working determinedly over the past year to provide real help for businesses, including advice, access to finance and tax relief, to support them through the downturn and to safeguard jobs. The reforms today give certainty to the business climate by simplifying an essential part of business law so that businesses can take risks and concentrate on what they do best-creating wealth and jobs. That is why we are reforming the UK insolvency regime, so that it reflects modern business practices and strikes the right balance between the respective interests of debtors and creditors.

The order makes amendments to the Insolvency Act 1986 and forms part of a package of measures being taken to modernise the insolvency legislation. Changes to the regime for publicising insolvency events were implemented in April of this year and some of those changes were facilitated by an earlier legislative reform order. This next phase of amendments, along with parallel changes being made to the insolvency rules 1986, will substantially change the law. These changes will be implemented next April and thereafter a consolidation of the insolvency rules will be undertaken to make the legislation easier to use. That is planned for April 2011. My officials have worked very closely with insolvency stakeholders as we have developed these proposals, and I am very grateful for the valuable contributions that those stakeholders have made.

The purpose of the order is to reduce the cost of administering insolvency cases and thereby increase the amount of money that can be returned to the creditors. It will do this by amending the Insolvency Act 1986 to enable new and more efficient ways of carrying out certain actions within insolvency procedures and to remove requirements to carry out unnecessary

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actions. The provisions in this order will operate alongside changes to the Insolvency Rules 1986, which are also being modernised. The changes will come into effect at the same time as this order.

There are seven proposals in all. They are: to allow insolvency office-holders to convene meetings as part of their conduct of insolvency cases other than by attendance at a specific venue; to make communication between insolvency office-holders and creditors more flexible, such as by allowing the use of websites; to make it explicit that electronic communication is permitted within insolvency procedures; to remove the requirement for certain documents to be sworn by affidavits and replaced with less burdensome requirements for such documents to be verified by a statement of truth; to remove a statutory requirement on voluntary liquidators to summon annual meetings for the purpose of laying an account of their actions over the preceding years-instead, the liquidators will be required to send out progress reports; to remove the need for certain documents in individual voluntary arrangements to be filed at court; and, finally, to simplify the procedures relating to realisation of certain assets in bankruptcy and liquidation.

Perhaps the most far-reaching of these seven proposals are those designed to enable the use of electronic communication and websites as a means for communicating information within insolvency cases. We have put in place safeguards to protect the interests of those who cannot or prefer not to use this form of communication. We know from responses to the consultation that this change will be very widely welcomed.

We estimate that the savings across the whole body of insolvency cases from the seven proposals for change to the Insolvency Act 1986 in this draft order, and to the Insolvency Rules 1986, will be more than £30 million a year.

The Delegated Powers and Regulatory Reform Committee of this House is satisfied that the order in its present form meets the tests in the Legislative and Regulatory Reform Act 2006 and is appropriate to proceed as a legislative reform order. The Regulatory Reform Committee in another place has also recommended that it be approved, and the Government intend to bring it forward for approval there early in the New Year.

This order will bring real benefits to those unfortunate enough to be owed money by failed businesses. We must do all we can to ensure that the insolvency processes are administered as efficiently as they can be to help those creditors recover as much as possible of what they are owed. The proposals in this order will help to achieve that. I commend this order to the Committee.

Lord Hunt of Wirral: My Lords, I first declare my interests, in particular as a partner in the national commercial law firm Beachcroft LLP, and the other interests set out in the Register.

The order forms part of a long-running project designed to modernise and streamline various administrative aspects of formal insolvencies under the Insolvency Act 1986. The subject matter of this order was the subject of an Insolvency Service consultation

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which commenced in September 2007. The measures we have before us today were to have been implemented somewhat earlier than now but, despite the delays, they are to be welcomed.

We are all grateful to the Minister and his shadow, whom I welcome to the club of shadows, for setting out so clearly the seven different areas ranging from remote attendance at creditors' meetings to allowing insolvency practitioners to distribute information creditors by sending a link to a website. Other measures, as the Minister explained, dispense with the requirement to hold annual meetings, which reflects the practice for administrations following the changes to that procedure introduced by the Enterprise Act 2002. Further, the order removes the anomaly in the insolvency rules that required many documents to be verified by affidavit rather than by a statement of truth, which has been standard practice by the civil courts for many years.

The day-to-day business of insolvency practice is much more than administrators or liquidators serving businesses and recovering assets. Insolvency practice is probably one of the most heavily regulated sectors in the UK, and insolvency practitioners, all of whom are licensed, must comply with a host of professional, regulatory and statutory requirements in the day-to-day conduct of their duties. While these requirements are intended to safeguard the interests of creditors and other stakeholders in formal insolvency, and indeed to a large extent they do, they impose considerable compliance and time costs on insolvency practitioners. In most instances, these costs must be borne by the creditors of insolvent companies every time an insolvency practitioner is required to hold a physical meeting or to post information to hundreds, sometimes thousands of creditors. This ultimately comes at a cost to the creditors themselves. We therefore expect that in most insolvencies there may well be material cost savings, once the provisions relating to modernising and streamlining communications with creditors are in place from 6 April next year.

I particularly welcome the provision dispensing with the compulsory requirement to hold annual meetings in members' and creditors' voluntary windings-up. The original aim of those meetings was of course to enable creditors to question insolvency practitioners directly about the progress of liquidations. The reality, however, is that most such creditors' meetings, some of which I have attended, are sparsely attended. It is not uncommon, and I have known this, for no creditors to be present at all. The expense of organising such meetings can often be a material one, particularly in smaller insolvencies.

Alongside the possible practical benefits of these provisions, some of which I have just tried to outline, it is pleasing to see that on this occasion they are in line with the original intention of the legislative reforms introduced by the Enterprise Act 2002. The insolvency provisions of that Act, while principally dealing with the administration process, had the aim of streamlining the insolvency process, reducing the cost and increasing returns to creditors, once we-I had the honour to serve on that Committee-had persuaded the Government to drop some of the unrealistic timetables that they originally proposed.

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5.30 pm

I pay tribute to the skill of the Enterprise Bill team at that time. They understood the problems and we were able to reach reasonable agreement over the progress of that legislation. Although it has taken some time for the proposals we are discussing today to reach implementation stage, the changes are entirely consistent with the aims of the Enterprise Act. It is pleasing to see in these proposals some recognition of the high administrative burdens on insolvency.

I commend the Minister and his colleagues for recognising in this case that the lifting of a regulatory burden can be in the best interests of those whom the former rules were designed to protect. Many aspects of these provisions give a higher degree of discretion to insolvency practitioners, who, as experienced professionals, are accustomed to making decisions designed to facilitate optimal recoveries for creditors. I acknowledge also their valuable work on turnaround and preventing insolvency in the first place. I welcome the Minister's commendation of the way in which insolvency practitioners have responded in seeking to increase the efficiency of the process. I pay particular tribute to R3, the trade body which represents 97 per cent of all licensed insolvency practitioners; much of its advice has been extremely valuable. I applaud any change which gives insolvency practitioners greater discretion to do their jobs, rather than being constrained by increasingly burdensome and outdated rules. We look forward to many more proposals designed to streamline the insolvency process and, ultimately, increase returns to creditors.

A criticism one often hears of the insolvency regime is how poor the returns to unsecured creditors usually are. Although returns to creditors are largely a function of the deficit between how much creditors are owed and the assets of the company, any measures to reduce administrative time and costs in insolvency should be welcomed. In some cases, they should at least provide better returns to creditors and, by doing so, help to enhance the standing of the insolvency regime in England and Wales. There is much further work to be done in order to improve and modernise the insolvency regime and we look forward to further proposals to achieve these ends being introduced as soon as possible. Although these provisions are long overdue, they are welcomed as a step in the right direction.

Lord Newby: My Lords, I apologise on behalf of my noble friend Lord Razzall, who is unable to be present today. However, it gives me an opportunity to dip my toe into the deep pool of insolvency legislation, although I am not sure whether I shall be taking it out at the end of the debate or taking the plunge.

I have a couple of comments on issues coming from another part of the legislative woodwork, if you like. It is commendable that the order brings the rules up to date with how people want to do the business, which is not a situation in which we find ourselves in every last respect. For example, we recently debated bank note regulations under the Banking Act which make provision for the Bank of England to contact a bank by post, and they explain what sending a letter by first-class post is deemed to mean in terms of the number of days it takes to get there. It is much more sensible to

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recognise the reality that, in this day and age, no one does any business by post if they can get away with it because they want to move more quickly. This order will allow them to do that.

It is also very sensible to allow remote attendance at meetings. It will be very interesting to see how that works in practice. Speaking to people with whom I work in a professional capacity, I have found a significant reluctance to get involved in video conferencing, even when the facilities are available, and even though it often saves time and money. I suspect that in the case we are discussing it might be more regularly used but it would be a welcome development in terms of efficiency, the environment and reducing carbon footprints. One is always telling companies to use these facilities more, not least because it enables them to reduce their carbon footprint rather than dashing around unnecessarily.

I have a general question about remote attendance at meetings and the use of websites. How far do these provisions reflect the situation under the Companies Act in terms of the way in which companies are allowed to communicate with their shareholders and the extent to which remote access to meetings is legally allowable under the Companies Act 2006? It seems to me that we are looking at these provisions in respect of insolvency but they might have wider applicability. I say this in part because I am a minority shareholder in a small unquoted company and I have just had all the documentation from it on its AGM and its accounts by e-mail, which makes absolute sense. It had no intention of sending that to me in the post, but I wondered whether, technically, it was allowed to do that, or whether there is still a legal requirement for hard copies to be provided. I suspect not, but I would welcome reassurance from the Minister on that point.

I always enjoy looking at the cost-benefit figures. I would love to see the detailed workings that have

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produced them as in a case such as this it is virtually impossible to know what the savings are. However, I am sure that the basic orders of magnitude are right in that the costs must be significantly outweighed by the benefits of doing all this. With that very much at the forefront of my mind, I am very happy to support the order.

Lord Davies of Abersoch: I thank noble Lords for their comments. This is my first insolvency discussion since I have taken up this role. This draft order will undoubtedly bring insolvency procedures into the 21st century. The LRO process is sound, brings huge benefits and requires considerable consultation. However, we are going to have to find a way to speed up the modernisation of the procedures involved at the AGMs of big, small and medium-sized corporations, and I have asked officials about this. This will have a fundamental impact and is long overdue. We will have to amend the insolvency rules considerably, and we cannot take too long over that. The question is, how do we consult but at the same time move speedily? I shall send all the details and the breakdown of the cost-benefit to the noble Lord, Lord Newby.

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