Jo Swinson
Main Page: Jo Swinson (Liberal Democrat - East Dunbartonshire)Department Debates - View all Jo Swinson's debates with the Department for Education
(9 years, 5 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
It is a great pleasure to serve under your chairmanship, Ms Dorries. I congratulate the hon. Member for Great Grimsby (Austin Mitchell) on securing the debate. I recall, as he mentioned, that we debated this subject in November 2013. The fact that he has returned to it for discussion today is testament to his tenacity and willingness to pursue the matter raised by his constituent, Mr Elliott, who he feels passionately has suffered a real injustice.
In our discussion almost 18 months ago, I set out that I shared and had some sympathy with many of the concerns raised. A wide range of people have expressed concerns about some aspects of insolvency regulation, which is why we have taken steps to make changes. I set out, which remains the case today, that I did not have powers to intervene in this case. Of course, the changes we are making will not be retrospective, but I hope to be able to set out the package of reforms that we have been able and continue to bring forward to strengthen the insolvency regime, which together are a bold step forward. I hope that the hon. Gentleman will be reassured by that.
I appreciate that that does not help in this specific case, which is covered by the systems that applied at the time. I know that the conflict of interest issues have been considered by the court, who dismissed that application. The ICAEW reviewed the complaint and concluded that there were no such issues. The Insolvency Service then considered the ICAEW’s handling of the complaint and did not find fault, so in terms of the different routes available in this specific circumstance, it was hard to see how the redress the hon. Gentleman ultimately seeks would be possible. However, in terms of the wider regime going forward, we are determined to improve the situation for companies that might find themselves in similar situations.
I appreciate that that will be frustrating, not least for the hon. Gentleman’s constituent, but he has been able to set out his concerns about the case and the behaviour of the different organisations involved in handling it powerfully. If I may give my view, which is perhaps different from that given by those organisations, I think it is absolutely the place of parliamentarians to represent their constituents’ views, raise issues of concern and put those firmly on the record in Parliament when they believe that an injustice has been done. I do not think it is for other organisations, frankly, to tell MPs whether this is an issue that they should or should not pursue on their constituents’ behalf.
On that note, although we are from different parties, I would like to recognise that the hon. Gentleman has a reputation for being a great defender of his constituents, with ever-forthright comments about whatever issue of the day he is concerned about. Although this may not be his last contribution in this House—I hope it is not—it may well be one of the last, and Parliament will certainly be losing a character when he steps down from his constituency in a short while.
I will turn to what we are specifically doing to strengthen insolvency regulation shortly, but first, let me say that we have an open mind on whether to take further steps. The ethics code requires administrators to satisfy themselves that the board is happy with the appointment and to consider any threats to their independence. We are reviewing that in conjunction with the regulators and seeing whether it is sufficiently robust, so that is one area in which there could be further movement, depending on the outcome.
Will the Minister tell us what is happening about the Tomlinson report, which is a review of a series of very similar cases to this one, but concerning RBS? That demands action, too.
Great minds think alike, because that was going to be my very next point. In 2014, the Financial Conduct Authority announced that it had appointed firms to conduct an independent skilled persons report to examine RBS’s treatment of business customers in financial difficulty and consider the allegations that were set out in the report by Lawrence Tomlinson, which were about poor practice that he had evidence of. Once the FCA skilled persons report has been published, which we expect to happen this summer, we will carefully consider whether any issues need to be taken into account in terms of insolvency legislation—including the regulation of insolvency practitioners—that have not been addressed by the reforms in progress. It may be that those issues are already addressed by our package of reforms, but if further issues are raised, we will keep an open mind about taking further steps.
I turn to measures that we are already taking on strengthening insolvency practitioner regulation. The Small Business, Enterprise and Employment Bill, which is currently before the House, contains measures to strengthen the regulatory regime for insolvency practitioners. The introduction of regulatory objectives will make sure that insolvency regulators have a framework within which to carry out their activities. That is intended to make sure that a consistent approach is applied and to give a reference point for discussions between regulators, insolvency practitioners and the Insolvency Service. The objectives set out in the Bill will ensure that the regulators have a system of regulating insolvency practitioners that gives fair treatment and consistent outcomes for people affected by their acts or omissions.
Regulators will have to encourage an independent and competitive insolvency profession, whose members deliver high-quality services at a fair and reasonable cost, with transparency and integrity. They must seek to maximise returns to creditors and be prompt in making those returns, and the public interest must be protected and promoted during the insolvency process.
Another measure could have been relevant in this case, had the provisions been in place at the time; I am referring to the power to allow the Secretary of State to apply to the court for a direct sanctions order against an insolvency practitioner, when that is in the public interest. The sanctions could be a range of measures, including revoking authorisation and a financial contribution to creditors. I said when we previously discussed this issue that there was literally no power for Ministers to intervene, but the new regulation addresses that. We anticipate that, because this is a strong power, it would be used sparingly. It would need to be used when there was clear public interest and evidence of serious breaches of law or standards by insolvency practitioners, and when swift action was necessary. None the less, that gap, where previously there was no power, is being filled and there will be a power. Combined with other measures in the Bill, that should hopefully address the perception that the current disciplinary procedures for insolvency practitioners are not always effective in delivering fair and prompt outcomes for those affected.
The sanction powers and the regulatory objectives will hopefully make sure that we have a clear, transparent system that can hold people who do not deliver to account. Those changes, along with work that the Insolvency Service is doing with both the profession and the regulators to enhance the regime, should improve trust and confidence without the need for further intervention. However, if that set of measures is not sufficient and there is still a lack of trust and confidence in the system, we have the back-stop power in the Bill to establish a single insolvency regulator. That is if we do not see the anticipated improvement and confidence in the regime.
Many people express surprise that there are eight different regulators that authorise insolvency practitioners. I confess that before becoming the Minister responsible for insolvency, I was not aware of that. I had heard of some of the bodies, but was not fully aware of the degree of complexity. I well understand the view that that diversity does not necessarily help matters. I can see the potential benefits, including choice, but that fragmented regulatory landscape can lead to problems of inconsistency and complexity.
We were working, even before introducing the powers in the Bill, to deliver more consistency. A common sanctions framework has been agreed and a single gateway for complaints set up. That should ensure that, whichever body regulates a particular practitioner, the complaints process and the outcomes will be consistent across the profession.
I will turn briefly to the improvements made in relation to pre-packs, which have been a concern of many hon. Members. The Government commissioned Teresa Graham to conduct an independent review in 2013, and her recommendations were published in June 2014. The report concluded that pre-packs were an important and valuable part of the insolvency landscape— indeed, I think it was intended and hoped that a pre-pack would be the solution in this case, even though there was not a successful outcome—but that there was a lack of transparency and confidence, particularly where a sale was to a connected party.
The review recommended a voluntary package of reforms, which my officials have been working with stakeholders to implement. The reforms include setting up a pool of experienced business people to scrutinise a planned pre-pack sale to a connected party and a strengthened professional standard for pre-packs, which will require more information on the valuation and marketing of businesses to be provided to creditors. We are working to put that in place. The review also recommended that we should take a back-stop power for use if the voluntary reforms were not successful, and we have done that in the Bill. Those reforms are in place, and we hope that they will be successful, but if not, we have additional powers in the Bill. Sometimes additional powers can also act as an incentive for all those involved to ensure that the voluntary regime delivers the outcomes needed.
There has been significant concern about the fees that insolvency practitioners charge. Earlier this month, I announced new legislation affecting how IPs charge fees. In the future, they will be required to give clear information on their fees and expenses before asking creditors to approve them. Where fees are based on time costs, creditors will need to agree an estimate of the likely fees. If the insolvency practitioner’s fee then exceeds the approved limit, they will need to seek further approval before being able to draw any additional amounts. Basically, the estimate acts as a cap on fees. Those measures deal with the concerns that many creditors had about a blank cheque in effect being written for the administrators, and have been welcomed by the profession and creditor bodies.
I have mentioned some of the other things that are already being taken forward, such as the review of the ethics code and the new complaints gateway, which will bring some consistency to the issue. People are becoming more aware of the complaints gateway. Last year, nearly 1,000 complaints were dealt with via that single complaints gateway. That is a sign that there is a degree of success from the changes that we are making.
I hope that the hon. Member for Great Grimsby will recognise that the Government have listened and continue to listen to the comments that he and others make about the problems in parts of the insolvency regime, which generally is very highly regarded. We need to remember that we have one of the best regimes in the world. Our insolvency profession is highly skilled and undertakes difficult work in challenging circumstances, saving many businesses and thousands of jobs each year. However, we must always strive to improve it. That is why we are undertaking these reforms. They will mean that in the coming months we will have an improved insolvency regime, including a better regulatory regime that will inspire greater confidence that insolvency practitioners and their regulators are working in a way that strikes the right balance between parties affected by insolvency. I hope that cases such as the one—