Crime and Courts Bill [HL]

Lord Beecham Excerpts

Tuesday 4th December 2012 Lords Chamber

Moved by

[Lord Beecham]

109A: Clause 21, page 18, line 26, at end insert—
“75B Minimum size of charging order
The Secretary of State shall by regulation prescribe the minimum amount above which a charging order may be granted in respect of a judgment debt, which shall be laid before, and approved by a resolution of, each House of Parliament.”

[Lord Beecham]

My Lords, this amendment relates to yet another matter affecting very often the poorest in our society and certainly those facing acute financial difficulties. Some time ago, the Government launched a consultation about the financial threshold below which charging orders on property would not be available to enforce debts. The previous Government made some legislative provision potentially allowing for this and they consulted on the matter. The intention was to legislate subsequently but the consultation ended in February 2010, which did not leave that Government very much time.

A month later, the Office of Fair Trading issued a guidance document on irresponsible lending and recommended that creditors should make it clear to borrowers at the time of entering into any loan agreement that there was a possibility of a charging order being made against their property. I am afraid that subsequently nothing happened about that. Time went by and the Government then launched their own consultation, having indicated in the coalition agreement that there would be a threshold of £25,000 below which enforcement action could not take the form of a charging order against property. That was in the coalition agreement but it would appear that, as a result of the consultation, the industry persuaded the Government that this was insufficient. Consequently, the policy is now apparently that the threshold will be only £1,000. We are talking here not about mortgages but about unsecured debts. Therefore, with only £1,000 owing, it would be open to a creditor to seek a charging order, which could lead to the loss of a home and, for that matter, to a great deal of anxiety and stress for the debtor.

In the debate in Committee, the noble Baroness, Lady Northover, did not really give an answer as to why the Government had changed their position from that outlined in the coalition agreement, which seemed a perfectly sensible provision. She made some reference to the fact that an alternative might be worse, inasmuch as creditors might go for bankruptcy proceedings, although of course a creditor has that possibility in any event. The protection of the family home must surely be a major consideration, particularly where there are children, as there very often will be in these cases.

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[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, as explained by the noble Lord, Lord Beecham, this amendment raises the issue of charging orders. Noble Lords will be aware from the debate in Committee that the power to prescribe the minimum amount above which a charging order may be made already exists in Section 94 of the Tribunals, Courts and Enforcement Act 2007. It makes provision for the Lord Chancellor to make regulations that a charging order may not be made to secure a sum of money below a certain amount. It remains the Government’s intention not to exercise this power. There are several reasons for that.

The Government are committed to providing the right level of protection to genuinely vulnerable debtors. However, we must not do that at the expense of the effectiveness of the civil justice system. We have a duty to ensure that creditors have reliable methods available to them to enforce their debts and charging orders are a legitimate and proportionate option for them to pursue. It is essential to remember that a charging order does not compel a debtor to sell their property. That can be achieved only through an order for sale. Most creditors never apply for orders for sale; only 0.5% of the creditors who have applied for a charging order go on to place an application for an order for sale. Nevertheless, the Government have ensured that there are effective safeguards in place for debtors who are subject to such an order.

In November this year, following a public consultation on this subject, we laid before Parliament draft regulations which set a £1,000 financial threshold for orders for sale relating to Consumer Credit Act cases. These regulations are subject to the affirmative procedure so there will be a separate opportunity for your Lordships’ House to consider those. Responses to the Ministry of Justice consultation on solving disputes in the county court in 2010 indicated that £1,000 was the most appropriate threshold. Respondents to the consultation felt that a higher threshold would risk pushing creditors to seek more draconian methods of recovering their money, such as bankruptcy proceedings, which would expose debtors to a significantly increased likelihood of losing their homes, an outcome that none of us would wish to see.

We must also remember that orders for sale are subject to judicial discretion. The court must take into account all the circumstances of the case before deciding whether to make an order. That provides essential protection against disproportionate action. The consultation showed that a high financial threshold for the making of an order for sale would restrict judges’ discretion in individual cases—for example where a debtor has all their assets tied up in property including investment properties or stocks and yet owes a number of small debts to multiple creditors. It may be equitable to grant an order for sale to release some of that capital.

With the new order for sale regulations in place, creditors have the assurance that they can recover what is owed to them while debtors are not in danger of disproportionate enforcement action. The Government believe that these regulations are proportionate and an effective approach to achieving the necessary delicate balance between creditors and debtors. They therefore do not plan to introduce a financial limit on charging orders. In the light of that explanation I hope that the noble Lord will be prepared to withdraw his amendment.

[Lord Beecham]

My Lords, that is a very disappointing response, which echoes the response given by the noble Baroness, Lady Northover, in Committee in July. Neither she nor the noble Lord have explained why the coalition agreement, which is very explicit in terms of laying down a £25,000 threshold for an order for sale, which of course follows on from a charging order, has been abandoned. The noble Baroness said:

“In terms of the coalition's commitment to a threshold for orders for sale at £25,000, evidence in the consultation did not support a £25,000 limit”.—[Official Report, 2/7/12; col. 542.]

But we do not know—at least I do not know—what that evidence was and from where it was derived. It was presumably from the creditors. I cannot imagine that there would be significant evidence from those who owed money or those who advise those who entered into consumer credit arrangements who were in difficulties suggesting that £25,000 was too high a limit.

Furthermore, at the last count, the Government were at least contemplating a £1,000 limit. That is much too low in my submission but even that has been abandoned without any explanation. The Government are falling over backwards to help creditors in this position—many of them are not the most desirable organisations operating in the financial services world—at the expense of the worry and disturbance that can be caused to borrowers and their families and ultimately to the taxpayer, because in so far as these orders are enforced, homelessness and all the other social consequences will follow which will be a burden for the taxpayer.

It is extremely disappointing that the Government have caved in to pressure from the industry at the expense, I repeat, of very vulnerable people and the taxpayer at large. But as it is clear that the Government are not disposed to make any move consistent with their original policy, I feel obliged to beg leave to withdraw the amendment.

Amendment 109A withdrawn.

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[The Earl of Listowel]

I rise to speak briefly because I am moved by what my noble friend has just said. No doubt the Minister will want to reassure her as far as possible, but of course we recognise that people will owe money and that that money needs to be reclaimed, if that is possible. I would appreciate some information about how these bailiffs are recruited and how they are trained. These are matters that my noble friend raised. In particular, what happens when there are children in the home? What responsibilities do these practitioners have in terms of families? What if the mother is pregnant or has a child aged under 12 months? Perhaps these are details that will be worked out further down the line, but I would certainly appreciate any information that the Minister can provide. I imagine the Minister has had opportunities to meet with the charities which serve these families and I would be interested to hear what discussions have been had in that regard.

I share the concerns of my noble friend Lady Meacher. She helpfully highlighted the impact of various factors, including the welfare cuts which will take place next year. I was speaking to the chief executive of Action for Children last week and, if I remember correctly what she said, she described a mother she had met who had been obliged to move out of central London because of the housing benefit cuts but wanted to keep her daughter in the school she was used to. So she travelled into London each day to take her daughter to school but then had to spend the rest of the day on the streets in London, with her young infant child, because she could not afford to make the journey home and then back out again.

There are real challenges to families in the current climate and I would appreciate all the reassurance and information that the Minister can provide so that, whatever is done here, any risk to families is minimised.

[Lord Beecham]

My Lords, this topic has a long history. It is five years since the Tribunals, Courts and Enforcement Act 2007 envisaged a code which would cover the powers of bailiffs, the fees they could charge and the processes they would be allowed to undertake. Part 3 of that Act contained the notion of a system of independent regulation—a phrase which we hear in another context at the present time. Subsequently, nothing much has happened. It is fair to say that the present Government, in January of this year, introduced some national standards, on a voluntary basis, to be adopted by local authorities and those working for them, presumably in connection with council tax and matters of that kind. However, beyond that, there has been very little.

When this House debated an amendment in my name in July, we were told by the Minister—again, the noble Baroness, Lady Northover—that, as we had already understood, the consultation period on the Government’s proposals in respect of Part 3 of the Act had ended on 14 May and we would receive the Government’s response by the autumn. I asked a subsequent Parliamentary Question in the autumn and was told that there would be a response in the autumn. Autumn is indeed a season of mists and mellow fruitfulness but we have, on the face of it, more mist than fruitfulness when it comes to an outcome of the Government’s deliberations. The Minister indicated that the response would be coming soon but we are now out of autumn and into winter—as the temperature in this Chamber clearly affirms—and we do not yet see the Government’s direction of travel. Having regard to the disappointment that I voiced over the last issue, I am not over-confident that we will get a resolution that will meet the requirements of the case.

In Committee, I cited a number of instances of what can only be described as appalling behaviour by bailiffs; I am referring to private bailiffs as opposed to the enforcement officers employed directly by the courts. I can update your Lordships’ House with a few more cases. One case involved a company which had a distress warrant and threatened that the defendant would go to prison. In another case, the same company was issued with a distress warrant and the defendant tried to make an arrangement to pay. The defendant received texts, notices through their door and, on one occasion, the bailiff banged on the door. The defendant and her partner were out and two children aged 6 to 8 and a 14-16 year-old were at home. They explained that their parents were out and the bailiff threatened these children that they would take all their possessions and toys and that their mother would go to prison if the monies were not paid.

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[Lord Bach]

My Lords, in bringing up the rear, as it were, on this point, I will be very brief. I was the junior Minister with some responsibility for the Supreme Court while the building was being refurbished and finished. It was exciting to see noble and learned Lords in their hard hats going around the building as it was being refurbished. It has developed into an extraordinarily effective court which is a great credit to all those involved in it and is now a natural part of our constitutional settlement. I was also a Minister when the Supreme Court was actually opened. That, too, was an exciting time. I have a lasting interest in how the Supreme Court functions. I strongly support the amendment moved by the noble Lord, Lord Pannick, as it seems to me to go to an issue of independence. The independence of that court is of supreme importance, if I may use the expression. It is very important that the general public and the world outside understand that that court is at the very top of the British judicial system and is independent of the Executive in every way. That is why I support the amendment.

[Lord Beecham]

My Lords, I rise briefly to place on record the full support of the Opposition for this amendment. I hope that the Government will accept its spirit, if not the precise wording, today. It seems to set the final stone in the arch, as it were, of the construction of the Supreme Court. It clearly makes sense and I endorse entirely the observations of noble and learned Lords, the noble Lord, Lord Pannick, and my noble friend Lord Bach.

[Lord Ahmad of Wimbledon]

My Lords, I am minded of the fact that during the dinner break one of my noble friends remarked how cold the House had become given that we are in the winter months. I hope that some of my words may warm the temperature spiritually if not physically. Before I deal with the substance of what has been laid in front of us, I assure the House that Her Majesty’s Government fully and utterly respect the independence of the judiciary, and that there is no question of our duty to uphold that independence.

As the noble Lord, Lord Pannick, has alluded to, and as many noble Lords will recall, this House considered what are now Sections 48 to 50 of the Constitutional Reform Act 2005. Then, as now, the concern was how the court’s independence might be maintained following the Appellate Committee of the House of Lords transition into the UK Supreme Court. Several noble Lords have already made strong arguments as regards the current situation. I am not here to revisit arguments that have been raised historically. However, the Government retain a fundamental concern with regard to accountability and proper lines of accountability which need to be established so that the elected Government are responsible for the proper fiscal and managerial operation of the court.

The noble Lord, Lord Pannick, my noble and learned friend Lord Mayhew and the noble and learned Lord, Lord Goldsmith, who was the Attorney-General, made very specific points about the challenges faced by the Lord Chancellor in appointing the chief executive, and the fact that a chief executive appointed by the Lord Chancellor has two masters in effect—one judicial and the other ministerial—and, as was argued, this breaches the principle of the separation of the Executive and the judiciary.

As I have said, the Government will listen to the arguments and have an open mind on the issue. As the noble Lord, Lord Pannick, alluded to, we are indeed engaging with the Supreme Court in order to consider the impact of this arrangement and of the amendment as tabled, and to resolve any concerns it may have about its independence and how this might best be preserved. However, it is our considered view that this constitutional change should not be rushed and that the Government and the Supreme Court should continue to discuss and consider together how any reform may be taken forward.

Reference has been made to Third Reading. I cannot at this time give an absolute concrete assurance from the Despatch Box, which I am sure noble Lords will appreciate, as to whether we will have concluded our consultation with the president of the Supreme Court, but these discussions are of course ongoing.

In lieu of these comments, I hope that the noble Lord, Lord Pannick, will be content to withdraw Amendment 112A on the understanding that this is a live issue which is being looked at, and which has been raised directly with the president of the court.