I beg to move,
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.
The House regularly debates the need for regulatory reform and the need to reduce unnecessary red tape. Part of the backdrop to those discussions is the responsibility of all of us to ensure that rules that may have been cast a long time ago have not become outdated or been overtaken by the way in which people lead their lives, trade and do business, or obtain information.
It is incumbent on Government to take that responsibility seriously. Regulation is a legitimate part of the modern world—we live in a world with rules—but we do not want business, or creditors when insolvency is involved, to be burdened with rules when they no longer serve the purpose for which they were designed, or when it may be possible to do the job in a better way and, perhaps, at a lower cost. The order that we propose would give further help to creditors by reducing the bureaucratic burdens and costs imposed by one of the current elements of our insolvency arrangements.
I acknowledge that insolvency can be a complicated business, and that having to deal with a failing business is stressful enough, particularly during the current economic difficulties. I therefore feel that it is incumbent on us to do as much as we can to make the system simple and streamlined, bearing in mind the duty that we owe creditors in such circumstances. The order is part of that streamlining process.
Let me explain what the change means in practice. When a company finds itself unable to pay its debts, a liquidator is appointed to find and distribute the company’s assets. That can be done through compulsory liquidation, members’ liquidation or creditors’ voluntary liquidation. I shall not go into the details of the differences between those types of liquidation, but this order deals with voluntary liquidations.
Before the Minister gives us the background, can he explain succinctly why he does not believe that the judgment of the Regulatory Reform Committee is correct? Why is he second-guessing the judgment of a Committee that was set up by the House specifically to deal with circumstances of this kind?
If the hon. Gentleman will exercise just a little patience, I shall come to that in a couple of minutes.
In the case of a voluntary liquidation, a meeting of the company’s creditors must be called under sections 95 and 98 of the Insolvency Act 1986. Notice of the time and venue of the meeting must be sent directly to all known creditors, advertised in the London Gazette and, at least once, in two local newspapers that are circulated in the areas where the company has its principal place of business. The Government propose to remove the obligation to advertise in two local newspapers. That means that it will be up to liquidators, under section 95, or the company, under section 98, to decide whether advertising is needed, and, if it is, to choose the most appropriate method. I stress that it will still be open to liquidators and companies to use local newspapers if they consider that to be the most appropriate mechanism in the circumstances.
I am always happy to give way to the hon. Gentleman.
The Minister is always immensely kind to me. I am most grateful to him. As he will know, insolvency notices provide a sizeable part of the income of many of our local newspapers—he will see the irony in the fact that those newspapers are the subject of the topical debate to follow. Indeed, the Government have expressed considerable concern about the solvency of the local press. Has the Minister taken that into account? I hope to speak in the topical debate, but I would like to hear his answer to that question.
I am sure that it is more in order for me to concern myself with this debate, rather than the next one, in which I will not be seeking to speak, but I will say that we want to ensure that the advertising in terms of the insolvency process is the most effective. That is our concern and why we have proposed the order.
The hon. Member for Christchurch (Mr. Chope) asked why I disagreed with the Committee’s verdict. The Delegated Powers and Regulatory Reform Committee in another place was satisfied with the order; it gave it the thumbs-up, to use the colloquial phrase. The House of Commons Committee also stated that all the preconditions in the Legislative and Regulatory Reform Act 2006 and the Standing Order tests had been met, but it expressed several reservations and stated that, in its view, the order should not be approved. Those reservations are set out in the report, and I am sure that my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller), the Committee Chairman, will explain them, but, in brief, the Committee felt the order was too “narrow in its focus” and that its effects would be “minor”. It felt it may be unlikely to result in further dividends for creditors and would not provide them with enough protection.
We have two main reasons for wanting to introduce this order. First, it has the potential to save business and creditors money, by reducing costs. Each advert costs an estimated £300 a time, and since there is a requirement to place two adverts, that cost is obviously doubled. That £600 charge may not be a life-or-death sum in each individual case, but when one adds up the sums involved throughout the process, it can increase the costs of insolvency. For creditors who have already lost money, it is important to ensure that their money is spent usefully during an insolvency process, so that as much as possible can be returned to them at the end of that process. The savings from the proposals, together with parallel changes that we propose to the insolvency rules, will combine to mean estimated savings of some £17 million a year. This is not a “narrow” measure.
I am pleased to hear that the Minister is concerned about the cost of insolvency practitioners. Is he therefore saying this proposed change is consistent with a narrative that will put pressure on insolvency practitioners to charge less? I have been appalled by the amount of money that has been absorbed by insolvency practitioners in some cases, and I am just seeking an assurance, without going into details that take us beyond today’s debate, that other measures will be introduced to make sure insolvency practitioners do not take a disproportionately large amount of the funds when they are disbursing to creditors.
There are rules governing charges, which I will come on to, but certainly the motivation behind the order is to increase the pot of money that is available to creditors. As I was saying before the hon. Gentleman intervened, the savings from the proposals, together with parallel changes that we propose in the insolvency rules, will mean estimated savings of £17 million per year. That is part of a wider package of proposals to streamline the process.
The Minister says there are estimated savings of £17 million per year. I thought it was £3.6 million.
The £17 million figure is the savings from both the order we have proposed, which has been considered by the Committee, and the parallel changes to the insolvency rules, which are dealt with in a separate order under the negative resolution procedure. The reason we have to do it this way lies in the origins of the insolvency legislation. There will be estimated savings of £17 million a year from the changes.
That is only part of a much wider package of proposals to streamline and modernise the insolvency rules and other relevant provisions—part of which, I should inform the House, will include a further legislative reform order—which should save a total of about £40 million per year. Huge sums may not be involved in each individual case, but over the piece the savings gained for the insolvency process are certainly worth having. We believe the costs of introducing the order are minimal, and there is no reason why we should not introduce the changes.
The Committee expressed concern about the money going to liquidators rather than to creditors, but protection against that is already built into the legislation. The terms governing the liquidator’s remuneration will be fixed by the creditors and the creditors can apply to the court if they consider the amount of the liquidator’s remuneration to be excessive. Any liquidator taking remuneration that was not justified could find themselves subject to the scrutiny of the courts. I understand that the Committee—this is reflected in its report—was concerned that the savings would not be passed on, so let me make it clear to the House that I want them to be passed on. There is absolutely no reason why what we propose today, and what we propose in the other connected changes to come, should increase fees charged by insolvency practitioners. This is not about increasing fees; it is about avoiding unnecessary expenditure.
Insolvency fees may be managed through the creditors’ committee, but does my right hon. Friend the Minister agree that it is often very difficult to get creditors to serve on those committees and therefore to provide the adequate scrutiny?
That may be the case, but, as I said, the fees will be governed by the courts. I stress that the proposal in the order is not about increasing fees for liquidators, but increasing the pot of money that is available to creditors.
I am very encouraged by the tone of the Minister’s comments, but is he aware that some of the insolvency practitioners at the higher level of management charge more than £700 an hour for their time? That means that the £600 saving he cited is negated in about 55 minutes when certain practitioners are employed. Can he therefore assure us that, as well as discussing the measure today, he will consider whether we have adequate protection against the charging of such enormously high costs in circumstances when, by definition, the companies involved do not have much money?
The fees can be high, but I put this point to the hon. Gentleman: given our concern about fees, it would be an odd judgment for us not to approve changes that would free resources for creditors.
I paid particular attention to my right hon. Friend the Minister’s last statement about his expectations. For the avoidance of doubt, I want to be clear that he is saying that he, as a Minister of the Crown, expects this saving to be passed on to creditors and not to be held by insolvency practitioners.
I am very happy to repeat that. There is no reason why anything we are proposing in the order before the House, and the Committee’s report on it, should increase fees for practitioners. On the wider subject, I should inform the House that changes that are intended to come into force next year as part of the wider process of change in the insolvency rules will increase the transparency and accountability of insolvency practitioners.
This is not just about cost; it is about ensuring that where money has to be spent, that is done in the most effective way. The requirement to use local newspapers goes back to the beginning of the last century and the business practices at that time, when it was more likely that a company would be dealing with customers from its immediate local area. That is sometimes still the case in today’s business world, but it sometimes is not, and trading patterns are more widespread than they once were.
What assessment has the Minister made of the relationship between small businesses involved in insolvency and those that he is discussing, which trade over a wider area? What evidence is there to support the statement that he has just made?
The point about the order is that it gives both the companies involved and the insolvency practitioners the flexibility to choose the best medium for reaching the people whom they wish to reach. Obviously, in the age of digital communication and wider trade patterns, the local paper may not always be the best way of reaching creditors. For example, where a business that was trading all over the country goes bust and we are seeking to identify unidentified creditors, how confident can we be that an advert in the local people is the best way to achieve that, given that all the customers may have been from hundreds of miles away? We are talking about a flexibility that simply reflects that reality.
May I offer another suggestion? A lot of local papers are on the internet, so advertising via the local newspaper means that people who trade with these businesses miles away can still access that sort of information.
That is a perfectly valid point. I stress that nothing in the order prevents an insolvency practitioner from using the local paper—and its website—if they think that that is the best route by which to reach people. We are changing the requirement in legislation that they must place such adverts in the local press in every case, regardless of the trading patterns involved. That flexibility makes sense; it makes sense to be less prescriptive and to take into account the greater variety of media that are available today compared with when the rules were first instituted about a century ago. In about 98 per cent. of cases the advertising does not result in an unidentified creditor coming forward, so it is perhaps worth asking ourselves whether there is a more effective way to operate. That is what we have done in this order. It is about giving people the flexibility to choose the most appropriate media available and to use whatever sums are spent on that in the most effective way to try to identify unknown creditors; as I say, that may be done through a variety of media. There is also a misconception that the advertisements are about a wider public aim of bringing information about the liquidation into the public domain—that is not the case. Their purpose is to reach unknown creditors—that is the purpose set down in the legislation. The adverts are also not intended as general public announcements.
People have also asked about companies that might wish to conceal their insolvency from their creditors and whether our changes might enable them to do so. We think that that is very unlikely, because notice of the liquidation must be given to creditors personally; as we have heard about online publications, I should say that it is also placed in the London Gazette, which is available online. Companies are also under a legal obligation to maintain accounting records from which it should be possible to compile a list of creditors. They are required to provide that list for the purposes of the liquidation and to surrender the accounting records to the liquidator—a failure to comply with those requirements is a criminal offence. Liquidators must report to the Secretary of State on the conduct of the directors, and failure to comply with those requirements can lead to disqualification. So it would be both wrong and unwise of a director to conceal a creditor from the liquidator.
As I say, this is about using the most appropriate form of communication for the particular circumstances. Companies or liquidators can still choose to advertise in a local newspaper if they feel that that is appropriate. Some people have argued—this was reflected in the Committee’s report—that this is perhaps too minor a measure and that it is not worth introducing.
I am the longest-serving member of the Regulatory Reform Committee and its predecessors in the House. I was one of those who thought this was a trivial measure. I suspect that had the Minister and his civil servants spelt out, in the documentation that came before the Committee when we considered the measure, the much larger sum that can be saved with other measures that are coming along, we would not be discussing this matter this afternoon.
I do not propose to go over all the exchanges between officials on this matter. I believe that dialogue did take place, and my concern is to ensure that the savings identified in this order, taken in the context of the wider changes to insolvency rules that we propose, are made. I believe that these savings will make a difference to creditors, who are already having to cope with the losses that they face from insolvent businesses.
The order will give liquidators and companies greater freedom to target their advertising as effectively as possible, either through local newspapers or elsewhere. It is incumbent on us, particularly during an economic downturn, to do what we can to help business. Given the comments that have been made about the charges and the fixed costs involved in this process, it is incumbent on us to try to increase the pot that is available to creditors. That is the motivation behind the order, and for that reason I commend it to the House. I hope that the House will side with those proposals today.
It is always a pleasure to follow the Minister, who took such pains to be careful and reasonable in his exposition of the Government’s position and took time to try to anticipate many of the questions that will be raised in this debate.
It is vital that any modern economy such as Britain’s has an efficient and effectively functioning insolvency process, if only because at a time of pretty much unparalleled economic problems—this is one of the worst recessions for a generation or perhaps more—everybody involved in business needs to know that the insolvency process works as quickly, efficiently and effectively as possible and does not soak up in fees as many of the available assets in an insolvency as it might. It is to everyone’s advantage that as many as possible of a failing company’s assets find their way to its creditors, rather than being taken up in fees. I mean no disrespect to insolvency practitioners—I am sure that they are all stout and wonderful men and women, who are doing their work terribly carefully. None the less, it is clearly macro-economically to everyone’s advantage to ensure that as much money as possible reaches the creditors of a company that is going bust.
As I believe everybody here understands, when a company goes under there is not just the tragedy of the lost jobs and the destroyed hopes of its workers; the huge danger is the knock-on effect of the company’s suppliers being dragged down too. Any money that can be spared to pay creditors at a higher rate of pennies in the pound has to be to Britain’s overall economic advantage.
Taking the temperature of the interventions made, I would say that there is a great deal of sympathy on both sides of the House for the principles behind this measure. There are some specific questions and details on which I shall press the Minister for further answers—I am sure that such matters will dictate how Members react at the end of this debate in deciding how to vote.
The Minister has admitted that this is a relatively small step down an important road. This measure produces some £3.6 million worth of benefits, although it is part of a larger package that is worth roughly £17 million. Given the total number of likely insolvencies this year, that is a relatively tiny drop in the large ocean of Britain’s economy, but the best should not be the enemy of the good. Put another way, it is better to have half a loaf than none. If we can take a small step as a start on an important journey, we should do so.
The Minister said that other measures are in the pipeline, which might stem from a process that began in July 2005 as a larger scale project to consolidate and modernise the insolvency rules introduced in 1986. Paragraph 9 of annexe C to the regulatory impact assessment, which I am sure every Member here has read assiduously, states:
“It was originally intended that all the remaining proposals would be taken forward by means of one draft Order. However, in order to meet Ministerial priorities”—
I would be interested to learn what those priorities were—
“the advertising changes…will proceed within a separate draft Order”—
which is this one. It continues:
“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.
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.
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.
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.
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.
I should point out to the hon. Gentleman that HMRC has not been a preferential creditor since 2003.
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.
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?
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—
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.
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.
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.
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?”
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?
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?
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.
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.
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?
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.
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.
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.
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.
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.
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.
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.
This could well turn into a witch hunt—
Order. Not so long as I am in the Chair.
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.
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.
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.
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?
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
(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.
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.
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.
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?
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.
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.
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.
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”
they “think fit.”
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.
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.
Question put and agreed to.
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.