Motion to Consider
My Lords, these regulations make necessary changes to primary and secondary legislation as a result of introducing a new process for how a person applies for bankruptcy and changes made to the requirements for reporting on the conduct of directors of insolvent companies.
Currently, when an individual wishes to take the option of making themselves bankrupt, they must complete a paper petition and present it to their local court. From 6 April this year, if we are content with the regulations today, instead of going to court, individuals will be able to apply online via the central government website GOV.UK. We recognise that applying for bankruptcy is a big step and one which should be contemplated only when no other options are appropriate, but the new digital process offers significant advantages. It will be easier and cheaper to access than the current court-based system, and will remove the stigma that some individuals associate with going to court.
Applications for bankruptcy by individuals in financial difficulty will be determined by the Adjudicator—a new post within the Insolvency Service. Once the order has been made, the case will transfer to the Official Receiver in the same way as it does now for administration and, if appropriate, investigation. The process for creditors wishing to make individuals bankrupt will not change, as the courts have an important role where there may be disagreement between parties about amounts owed.
Some people have expressed concern that the new system does not provide for remission of the application fee, which the courts were able to do, or an alternative to online application. Administration costs around fee remissions are disproportionate and any reduction in fees for some applicants would result in higher fees for others. The new system does provide that the application fee—£130, which is a reduction on the old fee of £180 —can be paid in instalments, which will help those on low incomes. People who do not have access to a computer are able to use those in local libraries or can get help from a friend or relative, or a debt advice organisation such as Citizens Advice.
Taking the courts out of the bankruptcy process will deliver cost savings in the form of reduced staff, administration and court time. The impact assessment for these measures was published in 2012 and estimated that the savings would be between £8.1 million and £16.6 million a year, depending on the number of debtor petitions. In fact, the number of people petitioning for their own bankruptcy has steadily declined since 2012, and, based on the figures for 2015, it is now likely that savings will be in the region of £6.3 million rather than the £8.1 million that I mentioned. The benefit to business is not material; the main savings we are seeing are in administration and court costs.
The second matter dealt with in these regulations is the issue of reporting on a director’s conduct. When a company goes into insolvency, the officeholder appointed as liquidator or administrator is required to report to the Secretary of State on the conduct of its directors. Reports that indicate misconduct on the part of a director are investigated by the Insolvency Service and may lead to disqualification proceedings. Currently, officeholders must submit their report within six months of the insolvency. From 6 April that period will be shortened to three months as part of a package of measures in the Small Business, Enterprise and Employment Act 2015 that strengthen the director disqualification regime.
In addition, we are introducing a new process for how officeholders complete and submit their report. In common with the new bankruptcy process, we are replacing the current paper-based forms with a digital system that allows officeholders to complete and submit their report electronically and upload new information as soon as it comes to their attention. If for any reason the online system becomes unable to receive information for more than a week, the Insolvency Service will be required to provide an alternative means for officeholders to submit their reports.
In both cases, therefore, we are adjusting to the digital age.
Removing forms and moving to an online reporting system means that the changes being introduced are deregulatory measures, delivering a net benefit to insolvency practitioners of £3.4 million a year—savings to business that should result in more money being available to creditors. The regulations we are considering today ensure that the relevant references across the statute book are amended in consequence of the changes being introduced. I commend these draft regulations to the Committee.
My Lords, I am grateful to the Minister for her extensive introduction to what is quite a narrow SI. It has a good history. I recall the debates that led up to the changes and also the paperwork that was provided at that time. I think that I recall correctly that this measure was welcomed by the industry when it was proposed. The consultation revealed that those involved were pleased by the direction in which the policy was going. The only significant issue was the pressure to go electronic, which came late in the process and was requested by the industry itself. I understand from my consultations with people from the industry that they are very pleased that the regulations have come out the way they have.
This is a good-news story—possibly so good that there is very little that I want to say about it, except simply to say that it was a game of considerable pleasure to read the very small amendments to the wording that had to be looked at if one was to do justice to the scrutiny that we are supposed to have in this House. Small words were changed that made a difference to the process: an individual has to be “adjudged” bankrupt as opposed to being “made” bankrupt. It was an exercise of great skill that I enjoyed processing.
However—there is always a “however”, is there not?—I of course noticed the change that led to the amendment to the draft statutory instrument that was inserted into the copy that I have. I slightly extend the point; I did not notice it, but I was very pleased to receive it. However, I cannot make sense of it, so could the Minister make clear to me what I am supposed to read into page 5, Schedule 1, paragraph 14(1), line 2? I could read that the first change, which is in the original, is in the earlier corrections and is obviously correct, because it should read:
“Paragraph 9 … to Schedule 6 (freezing orders in respect of property liable to forfeiture)”.
I am not sure about the change of “of” to “to” in the second line, because it seems to me that that paragraph needs to relate to a primary piece of legislation, which presumably is the International Criminal Court Act. If there is not time to be briefed in the short period of time that I am giving the Minister, I would be very happy to receive a Keeling schedule that clearly indicates what we are supposed to read into that.
That is really all that I had to say. I notice that there is no impact statement because of the assertion that there no impact at all on business from this. It says, in fact, that there is no impact on business, charities or voluntary bodies. I find that slightly difficult to believe because, presumably, the impact of insolvency always has a third-party engagement. But I understand the spirit in which this was made—which is, as the Minister said, that this is relatively small in the great scheme of things. It does not come to much, and, as insolvencies reduce, it will get even less. With that, I am happy to support this.
My Lords, I thank the noble Lord for agreeing that this is a good news story. It is always nice to put through this House legislation that helps to move things forward. As he says, we have changed the reference to paragraph 9 “to” the Schedule to the Act to “of” the Schedule to the Act. I understand that this reflects the conventions of writing these kinds of SIs. I am reading a book about Cicero at the moment and I am afraid that this point seems rather arcane, but that is the correct convention, which is why we have made the change.
If Cicero had been involved, I think that the noble Baroness’s speech would have been about 17 times longer. He was not short on words. Quite honestly, I do not look for a response today. If in one of her excellent letters the Minister could write out what it is expected to mean, I would be very happy to receive that.
I would be delighted to do that. These arcane points of parliamentary drafting are an improvement. Actually, I would like to defend Cicero: he was a great orator. I agree that he tended to speak at length, but some of the phrases that he coined are probably still influencing our language and our oratory, even in this House today. The Committee seems happy and I commend the draft regulations.