HC Deb 20 December 1960 vol 632 cc1118-20

5.28 p.m.

Mr. Forbes Hendry (Aberdeenshire, West)

I beg to move, That leave be given to bring in a Bill to amend the law of Scotland so as to empower companies to give security by way of floating charges; and for purposes connected therewith. May I allay any apprehensions that this Bill is an attempt to alter company law. It is not. It is designed purely to amend the law of Scotland. It does not affect the law of England in any way. On the contrary, if imitation is the sincerest form of flattery, the Bill is a compliment to English law, because, in a modest way, it proposes to amend the law of Scotland to make it the same as the law of England.

A strange anomaly of Scots law, dating from medieval times, is that it is impossible to create a security over moveable property except by delivering it up to the lender, or, in other words. pawning it. This may have encouraged prudence in olden days, but it has a most serious affect on the Scottish economy under modern conditions.

In England, on the other hand, and indeed in most other countries, it is possible for a company to create a charge over its stock in trade, moveable machinery, and so on, and at the same time carry on its ordinary business. This has enabled small and progressive businesses to raise loan capital at a crucial time on reasonable terms. This has been most valuable in enabling small and medium-sized businesses to expand. This, unfortunately, has not been the case in Scotland. The Scottish businessman in need of capital who goes to his banker or some other financial house and offers his stock in trade as security will find that these valuable assets cannot be made security. His bank manager shakes his head and says that he is sorry he cannot do anything about it.

This defect in Scots law has been an important factor in causing Scottish industry to lag behind in expansion. It has contributed to Scottish unemployment, lack of prosperity and lower standards of earning of the people in Scotland.

The Institute of Chartered Accountants of Scotland has expressed the view that the inability to create a security over moveables is one of the reasons why Scottish capital is invested in Scotland and is a barrier to economic activity. It and other bodies have cited cases where companies, which would otherwise have been registered in Scotland, have deliberately been registered in England so as to enable them to give such security.

The Industrial and Commercial Finance Corporation Limited, set up in 1945 to provide long-term finance for small and medium-sized businesses, has reported that the failure of Scottish companies to make full use of the facilities it provides is due largely to the inability of Scottish companies to give a security over their moveable assets.

The Scottish Council (Development and Industry) has reported that it has found that these restrictions on the granting of security has been a discouraging factor to American and other potential industrial investors in Scotland.

The Scottish Law Reform Committee, set up some years ago by my right hon. and learned Friend the Lord Advocate, has unanimously recommended legislation along the line I propose. What I propose is that Scottish companies should be enabled to give floating charges over their undertakings and assets in exactly the same way as English companies.

Economically, Scotland is lagging behind England, in many places seriously. It is the duty of every patriotic Scot to do everything he can to bring that state of affairs to an end. In the House of Commons we are accustomed to lamentation and grumbling. Lamentation and grumbling on the part of the Scots will never cure the situation, but action may. The causes are complex. The Bill is not by any means the sole answer, but I submit that it is a modest step in the right direction.

I have been greatly heartened in the preparation of the Bill by the encouragement I have received from both sides of the House. I express my gratitude to those who have helped me with it. Because of that, I ask with confidence for leave to introduce the Bill, as an attempt on the part of Scotland to put her own house in order and do something to help herself.

Question put and agreed to.

Bill ordered to be brought in by Mr. Forbes Hendry, Sir J. Henderson-Stewart, Mr. Lawson, Mr. MacArthur, Mr. John MacLeod, Mr. Millan, Sir D. Robertson, Mr. Stodart, and Sir M. Galpern.