Scotland Act 1998 (Insolvency Functions) Order 2017

Lord Bruce of Bennachie Excerpts

Wednesday 29th November 2017 Grand Committee

[Lord McAvoy (Lab)]

My Lords, I thank the Minister for his explanation of the order, the first of many instruments to be debated today. I put on record my pleasure at operating under the chairmanship of the noble Lord, Lord Rogan. It is the first time I have operated under his chairmanship, and I hope he is kind and pleasant with me.

As we have heard, the order relates to corporate insolvency rules in Scotland and the complexities that arise due to winding up being a mixed area of competence. The Minister will no doubt have in mind the fact that the future may hold many more discussions about mixed areas of competence as we move forward with our exit out of the European Union. Fortunately, today’s order is intended to make an existing process simpler and has received general support. I place on record our support for it.

As the Minister explained, the order would confer mutual functions on Scottish Ministers and a Minister of the Crown so that both have the power to bring forward winding-up rules and regulations for Scotland in relation to companies, incorporated friendly societies and limited liability partnerships. We accept the arguments that this will alleviate an otherwise complex assessment of which matters are reserved in this specific area and assist in the modernisation of these rules as regards Scotland by ensuring the provisions are held in one single order rather than split across multiple instruments. We are content to support the order.

As I understand it, the provisions are made with an assurance that a Minister of the Crown will be able to exercise these functions only with the agreement of a member of the Scottish Government. I may be a doubting Thomas, but I am sure that occasionally a dispute may arise in the future and a challenge to the agreement. Has a procedure been envisaged for what happens if a conflict arises and the relevant Ministers find themselves in disagreement over the use of these powers? I am sure that we are all alert to the dangers not of disagreements, but of complex arrangements being misused and misquoted in Scotland as a tactic against the Westminster Parliament. Will the Minister answer that point?

[Lord Bruce of Bennachie (LD)]

May I clarify that the intention is that either the Minister of the Crown or a Scottish Minister may act, but they have to agree with each other? If so, what will be the process by which they consult? There may be circumstances where the action has to be fairly urgent. Clearly, one does not want to use a consultation process which causes delay. Does one simply have to notify the other or do they have to give consent formally either way?

[Lord Foulkes of Cumnock (Lab)]

My Lords, I share the delight of my noble friend on the Front Bench that the noble Lord, Lord Rogan, is presiding over our proceedings today. The last time that I mentioned the Chair in a Grand Committee I was told that I was not supposed to do that, but I am delighted that I did. I agree completely with the question raised by my noble friend on the Front Bench and amplified by the Liberal Democrats.

I will make a few more points. First, I am increasingly worried about the number of important matters that are being dealt with through statutory instruments. This one is perhaps okay. In fact, I think it is, as my noble friend on the Front Bench said, and he is supporting it. I go along with that. However, I suspect that as we move into the new year, we will get hundreds if not thousands more statutory instruments, many in areas that might more properly be dealt with by primary legislation. It is very important that we on this side of the House—and indeed all sides—keep an eye on the Government to make sure that some important matters which should more properly be dealt with by primary legislation on the Floor of the House are not slipped through on statutory instruments, particularly in Grand Committee.

I welcome the Minister to the Front Bench—I should have done so right at the very start. I have not had the opportunity to appear opposite him before. I know of his work in the European Parliament, which he carried out with distinction. No doubt, like me, he would have preferred that European Parliament to go on and on into the foreseeable future, which it may well do, if my noble friends the Liberal Democrats have their way. I am right behind them on that.

However, I am worried about one aspect of this order in relation to limited liability partnerships. The Minister understandably mentioned nothing about the controversy of limited liability partnerships, particularly in relation to Scotland. He will know that there has been a lot of publicity and concern expressed about the way in which limited liability partnerships are being used for tax evasion, tax avoidance and money laundering. These limited liability partnerships can be set up quickly and cheaply. I think they cost £35. As a result, corporation tax and capital gains tax are being avoided by people who set up these limited liability partnerships. Very often, there is no need for the partnership to be in writing; it can just be a verbal agreement between people, which is very unsatisfactory. There has been great controversy, not just in Scotland but in other places too. A lot of controversy has arisen in Jersey in relation to them. More recently, the suggestion that people with self-employed status could be treated as employees by a limited liability partnership has caused some genuine concern.

I know that this is not directly covered by the winding-up procedures. However, as my noble friend rightly pinpointed, there could be a difference of opinion between Holyrood and Whitehall about whether a limited liability partnership should be wound up. It may be that Westminster, in its wisdom, will want such a partnership to be wound up because it had been involved in some kind of activities and it would be more appropriate for it to be wound up, but Holyrood might not. In that case, I endorse the questions asked by my noble friends in relation to this. I hope the Minister will amplify in his answer what might happen specifically in relation to limited liability partnerships.