Draft Deregulation Act 2015, the Small Business, Enterprise and Employment Act 2015 and the Insolvency (amendment) Act (Northern Ireland) 2016 (Consequential Amendments and Transitional Provisions) Regulations 2017

Steve Barclay Excerpts

Tuesday 7th March 2017 General Committees

[The Lord Commissioner of Her Majesty's Treasury (Stephen Barclay)]

I beg to move,

That the Committee has considered the draft Deregulation Act 2015, the Small Business, Enterprise and Employment Act 2015 and the Insolvency (Amendment) Act (Northern Ireland) 2016 (Consequential Amendments and Transitional Provisions) Regulations 2017.

It is a pleasure to serve under your chairmanship, Mr Pritchard.

In 2015, the Government introduced a series of reforms to modernise and streamline the insolvency process. The regulations will amend the relevant special insolvency procedures for financial sector firms to take account of those reforms. The Deregulation Act 2015 separated out the authorisation of insolvency practitioners for personal and corporate insolvency to reduce the cost of training for applicants who wish to specialise. The Small Business, Enterprise and Employment Act 2015 introduced a series of changes to streamline the insolvency process, including allowing liquidators to exercise powers without court permissions and extending the maximum term for an administration. The Insolvency (Amendment) Act (Northern Ireland) 2016 made similar reforms to the insolvency legislation in Northern Ireland.

The purpose of the reforms was to reduce unnecessary regulation and therefore cost, to improve public confidence in insolvency legislation and to make the legislation clearer. The Government carried out extensive consultations before introducing the reforms to the insolvency regime, and there was broad support from the industry.

The regulations will make consequential amendments to the existing modified insolvency regimes for the financial sector. Modified insolvency regimes for the financial sector exist because general insolvency procedure is not always suitable for failed financial institutions. Such regimes apply general insolvency law with modifications designed to address the special nature of some financial institutions. For example, a bespoke bank insolvency procedure tackles the impact of insolvency on financial stability.

The special insolvency procedures for the financial sector are built on general insolvency law, so they now need to be amended to reflect the reforms. The regulations are therefore important to ensure that the benefits of the reforms to general insolvency law are extended to the financial sector. They will also ensure that the modified insolvency regimes for the financial sector are compatible with general insolvency law, thus reducing legal uncertainty. The proposal of the consequential amendments follows discussions with the regulatory authorities and the banking liaison panel.

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[Stephen Barclay]

I am grateful to the hon. Member for Sefton Central for his broad support for the regulations, which essentially focus on tidying up measures relating to the financial services sector. He referred to Philip Green. The focus of the regulations is to target not the retail sector as a whole, but the financial sector specifically.

The hon. Gentleman raised a number of points. In the absence of the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Stourbridge, I will answer them as best I can. First, he referred to section 17 of the Deregulation Act 2015 and the difference between bankruptcy and corporate insolvency. He asked whether those who are trained to act on one will understand the other. The key point is that we intend that there will be a general paper, and that people can specialise within that. We are separating out the authorisations to allow insolvency practitioners to specialise in one or the other, but there will still be an initial general paper covering both.

I am happy to write to the hon. Gentleman to provide clarification and further detail on his points about fraudulent or wrongful activity and the extension to financial services. The key point to make to the Committee is that we have had a much wider debate on the changes that are being made to insolvency, and I do not want to revisit that wider debate today. We are here to debate the specific impact on financial stability and how we amend the legislation to fit with those wider reforms.

The hon. Gentleman asked about the impact on staff and the extent to which we ring-fence for insolvency procedures. He mentioned the Comet case specifically, which I know caused numerous concerns. The reforms are intended to benefit creditors by removing red tape. Therefore, as far as insolvency procedures are concerned, staff are often creditors and will benefit from the reforms. I hope that that reassures him that where instances like Comet arise in future, there will be some benefits from this exercise.

I am grateful to the Committee for its consideration—

[Bill Esterson]

The Minister kindly offered to write to me on one matter. Perhaps when he does, he could flesh out some of the other points a little more. In particular, can he give details of how staff will benefit, rather than the more general point that he just made? I appreciate that he is probably not in a position to tell me that in detail now, so perhaps that will be an opportunity to address the point more fully.

[Stephen Barclay]

I am happy to provide the hon. Gentleman with a much fuller example, and I commit to writing to him on that basis.

Subject to there being no further comments from Members, I am very grateful to the Committee for its consideration of the regulations today and for the points that have been made. In summary, the regulations make consequential amendments to the special insolvency procedures for financial sector firms to take account of the reforms that we have discussed. I ask the Committee to support the changes.

Question put and agreed to.