BANKRUPTCY (AMENDMENT) BILL [Lords]. (Hansard, 20 April 1926)

§ Mr. A. M. SAMUEL (Secretary, Overseas Trade Department)
I beg to move, "That the Bill be now read a Second time."
It is of a non-contentious nature. Hon. Members will remember that after the collapse of the post-War boom there was a large number of fraudulent bankruptcies, particularly in the wool and textile trades, which have brought about losses of between£3,000,000 and£4,000,000 to textile firms owing to shat I might call long firm swindles. The Association of British Chambers of Commerce approached, and J accompanied a deputation to the President of the Board of Trade. He was very sympathetic. In March, 1924, I introduced a private Bill to deal with the Bankruptcy Act of 1914 by Amendment. After some time, the right hon. Gentleman, who was then President of the Board of Trade, said, if I would withdraw my Bill then before the House, he would give a departmental inquiry, which would look into the whole working of the 1914 Bankruptcy Act with a view to stopping dishonest persons from robbing their neighbours by their long firm swindles. A Committee was appointed, and I had the pleasure of sitting on it. Mr. H. Spencer, of Bradford, who was then in the House, and the Chairman of the London Chamber of Commerce also served on the Committee as did the hon. Member for Finsbury (Mr. Gillett). The Committee sent in a Report in January, 1925. It was unanimous, and this Bill has been drafted giving effect to all the recommendations of the Report, with the exception of that dealing with compulsory discharge, which has not been adopted. I will not trespass on the patience of the House by going through Clause by Clause of this technical Bill. It is meant to stop dishonest people robbing honest people: it will not touch the honest little man at all; but will merely check those persons who have ridden rough-shod over the law.

§ Sir HENRY SLESSER
I only intervene in this Debate because there is one question raised in this Bill which is of such considerable importance that I think 1173 the hon. Member who has moved the Second Reading should know of the point and give it his careful consideration before it reaches the Committee stage. This Bill is, of course, in part a fruit of the Labour Government. The Committee which reported on this Bill was appointed by my right hon. Friend the Member for Seaham (Me. S. Webb). I am not criticising the Bill as a whole, but there is one very important change in the Bill which the House should fully understand, and that is the change in Clause 7 which enforces upon traders, subject to a certain qualification, the obligation of keeping very complete accounts. Those accounts are described in the Bill as being sufficient to exhibit or display transactions, the financial position of the trade or business, including a book or books containing entries from day to day in sufficient detail of all cash received and cash paid, and where the trade or business has involved dealings in goods, statements of annual stoektakings.
The hon. Member said this Bill did not in any way touch the small men. It will be quite evident to the House that, although this charge is not to come into operation for two years, even then to impoce, without a qualification—and there is a qualification with which I will deal in a moment—on every small trader, every small shopkeeper, every smallholder the obligation to keep full books and accounts with the resulting liability that if, unfortunately, he became bankrupt and those accounts were not sufficient he might be guilty of a criminal offence, it is a very serious matter indeed. I want to be perfectly frank with the House. There is a protection for the small man, but that protection, in my submission, is entirely unsatisfactory, because there is put upon every trader, however small, however humble, the obligation to produce full accounts, anal many of them are almost unable to write. When I was acting as a Civil Liability Commissioner. I had hundreds of shopkeepers before me who could scarcely write and never kept accounts, but bought their goods for so much and sold them for so much and kept the balance in an old cigar box. it is protection of an unsatisfactory kind, in my opinion. It is that if a person becomes bankrupt and the unsecured liabilities do not exceed£500, then the obligation to keep accounts is 1174 not applied. That means that when the man goes into business he does not know whether he has a duty to keep accounts or not. It is only after a failure, and the amount of the failure is ascertained, that his criminal liability is taken away. It is an elementary proposition of criminal law, as I understand, that no man shall be liable criminally unless the act is a criminal act at the time he performs it. It is most vicious legislation to have retrospective liability.
There is one more protection. If this trader proves in the circumstances in which he trades that the omission was honest or excusable, he is not liable. But what does that mean? Here is a small man who does not keep accounts, and who is required by the Bill to keep full and complete accounts, however small the business. A coffee-stall keeper or other small trader does not do it, and perhaps cannot do it. Then comes this liability. He fails, and then he commits a criminal act. It may be that he can say the omission was honest and excusable. But what a risk he runs! What I wish to ask the hon. Member is whether between now and the Committee stage, while, I think we all agree that the substantial traders should be compelled to keep proper books of accounts, this Clause cannot be reconsidered, and businesses of a certain type specifically exempted from the Clause, so as not, to be dependent on subsequent liabilities or upon whether somebody thinks, on a subsequent occasion, it was honest. I only mention this matter on Second Beading because it is really substantial. At present only the few thousand persons who actually become bankrupt are liable if they do not keep accounts. but this is going to impose an obligation upon a million people or so—in fact, every trader in the country. I ask the Minister, therefore, to consider this before the Committee stage, and see whether this Clause—although I agree that in its present form it is the recommendation of the Committee—is not misconceived, and whether specifically certain people could not be compelled to keep accounts, and certain humble people be exempted from that obligation.

§ Mr. GILLETT
As a member of the Committee appointed by the last Government to consider this subject, I naturally support the Bill now before the House, 1175 because it practically carries out the recommendations of the Committee. As a matter of fact, I believe only one recommendation of the Committee has not been introduced in this Bill, and that deals with the question of the discharge of bankrupts. I understand that the reason why this recommendation has not been carried out is simply because of the question whether the expense involved in seeing that every bankrupt is actually discharged would really be worth the money involved. That was a question before our Committee at the time, but we thought, in the circumstances, it would be worth the additional cost involved.
11.0 P.M.
I must say one word in connection with the remarks made upon Clause 7 by my hon. and learned Friend. I think that possibly he has exaggerated the difficulties to a small extent. The point that he raised was certainly before the Committee. What we wanted to guard against was the frauds committed deliberately by men in cases where, especially in Yorkshire, they deliberately defrauded the manufacturers. One of their ways of doing it was by leaving no books behind, so that it was impossible to ascertain the destination of goods which had been ordered and then sold again before they were paid for. The bankrupts took very good care to have no hooks that would give the information. The Clause is an attempt to compel people in that position to have books, so that. the destination of goods may be traced.
Then, of course, we had to guard against the hardship upon the small business man. We felt that it was quite impossible to take the turnover of a business as the standard, because we were dealing with cases where there were no books whatever. My hon. and learned Friend referred to the man who ran a small coffee shop. The Committee felt that the sum of£500 would have secured the position of these shops. The House must remember that as soon as a man gets anywhere near the Income Tax limit, he is compelled, in order to satisfy the Income Tax Commissioners, to produce books and accounts in order to show what his business is bringing in. Therefore, you have to deal only with the small shop that would in 1176 no way be thought by the Income Tax Commissioners to be liable to pay Income Tax. I agree in hoping that the Minister will consider whether£500 should be the limit. My own opinion is that it is only a question whether the£500 should be raised to£1,000 in order to be absolutely certain that the small shopkeeper will not have a hardship inflicted on him. But I do not think that the danger to the very small shopkeeper is such as my hon. and learned Friend suggested. It is difficult to know how we can get hold of the men who are abusing the present position and at the same time not inflict a hardship on the small shopkeeper. I think the Committee which considered the question were very fortunate in securing the services of so able a chairman as Mr. E. W. Hansell, who certainly led us with great ability. I entirely support the general principles of the Bill.

§ Sir P. CUNLIFFE-LISTER
The speech to which we hare just listened shows how very carefully the Committee considered the questions with which they were confronted, and they tried to safeguard the real interests of the people who ought to be safeguarded. We have paid particular attention to the drafting of this Measure, and we feel that it will really provide a very considerable safeguard to the people who are ignorant of keeping accounts. The unsecured liability must be over£500, and in any case the prosecution can be made only on the order of the Court. I can assure the House that. the points raised will receive careful consideration. They seem to me to deal with exactly the kind of thing that ought to be thrashed out in Committee. and the Government will therefore give them the most careful consideration they can. I would like, in conclusion, to join with the hon. Member for Finsbury (Mr. Gillett) in paying a tribate to the excellent work of the Chairman of the Committee. Mr. Hansell.

§ Mr. BUCHANAN
I do not wish to delay the passage of this Bill, and I understand that my party have come to an arrangement on the matter, but my first intention was to oppose the Second Reading and carry that opposition to a Division. I agree with the hon. Member for South-East Leeds (Sir H. Slesser), and I take a serious view in regard to this Clause. I cannot accept the view of the hon. Member for Finsbury (Mr. 1177 Gillett). It is quite common in my own constituency for people to accept Income Tax assessments, although they have kept no books at all, because the Income Tax authorities strike a figure by some means or another, and it is found that people who do business of a much greater value than merely£500 keep no books at all. My own view is that this Bill is open to serious criticisms from the smaller people, and I hope that in Committee the President of the Board of Trade will at least consider doubling the amount from£500 to£1,000.