STATEMENT BY SECRETARY OF STATE WITH RESPECT TO THE EXERCISE OF HIS POWERS IN RELATION TO A COMPANY IN LIQUIDATION, ETC. (Hansard, 30 October 1975)

§ Mr. Clinton Davis
I beg to move, That the clause be read a Second time.
In Committee my hon. Friend the Member for Farnworth (Mr. Roper) moved a new clause requiring the Secretary of State to report to Parliament within six months of an insurance company going into liquidation or of the Board's incurring expenditure under its powers in Clauses 15 and 16. The report was designed to cover the circumstances in which the company had become a company in liquidation or in financial difficulties and the Secretary of State's discharge of his functions under the Insurance Companies Act in relation to the failed company.
I expressed doubts about the practicability of my hon. Friend's proposal in certain respects. I thought that a public report on the matters which would have to be specified could prejudice court proceedings which related to the personnel of the failed company or to the failed company itself. I thought also that a report of the scope which was contemplated could produce duplication and confusion with other statutory reports or investigations—for example, investigations being undertaken by the Official Receiver on which he would have to report to the court under Section 236 of the Companies Act 1948.
I undertook to my hon. Friend that I would examine the position afresh. This new clause endeavours to meet the point made by my hon. Friend and by other members of the Committee and at the same time to take into account the essential caveat I entered in that debate.
The main difference between the clause and my hon. Friend's proposition as drafted relates to the scope of the report. My draft confines the Secretary of State's duty to laying before Parliament a statement with respect to the exercise of his powers under the Insurance Companies Act 1974". That relates to the failed company in question. This will avoid the Secretary of State having to assume a responsibility to make a report relating to matters on which he will not necessarily be in a position to express a definitive and authoritative view—matters affecting his judgment. Clearly, it is this area which could lead to prejudicial matter being imported into court proceedings or which might conflict with the other statutory 1806 processes to which have referred. The risk of prejudice with the new clause is much less than that which could have arisen with the old proposition.
The grounds on which the Secretary of State may exercise his powers of intervention include misconduct of a criminal nature by the company or by its officers; and publication of the fact that the Secretary of State had exercised his powers on these grounds could clearly be inimical to the interests of somebody who was having to stand trial in relation to such matters.
On the other hand, the clause places on the Secretary of State an obligation which the Standing Committee obviously felt he should assume—I think that it is a reasonable obligation—that, when an insurance company fails, Parliament should within a few months receive a factual account of the use that the Secretary of State has made in respect of the company of the extensive powers with which Parliament has provided him.
I shall not at this stage analyse the subsections of the clause. I hope that what I have said has indicated that we have tried to meet the principle that the Standing Committee was anxous to underline, and that the House will find my proposals acceptable.

§ Mr. Tim Renton
Fortunately, with this new clause we do not have any of the drafting or interpretative problems that we had with new Clause 2. Nor do we have any of the arithmetical problems which then arose. The only reference in this clause to a figure is the requirement that the statement should be made by the Secretary of State within a period of six months, subject to certain qualifications.
I think I speak on behalf of all of my hon. Friends when I say that we welcome the inclusion of the new clause in the Bill. In the light of the very extensive powers given to the Secretary of State by the Insurance Companies Act 1974, it is right that when a company has failed and when, sadly, the Secretary of State has had to exercise those powers, he should lay before Parliament a statement as set out in the clause.
The difficulty which was envisaged in Committee was that a situation could arise in which an insurance company got 1807 into difficulties or was getting into difficulties but was then rescued and carried on trading without call on the industry levy. Some members of the Committee felt that if the statement to be made by the Secretary of State had to include a report of such situations this would undermine confidence in the continuing insurance company which had been through a bad patch but which had been rescued and was carrying on trading. This danger is avoided in the drafting of the new clause, and we are pleased to see it in the Bill.

§ Mr. Roper
The new clause fulfils an assurance the Minister gave in Committee following a debate on a new clause put down by my hon. Friend the Member for Edmonton (Mr. Graham) and myself. I welcome the fact that the Government have gone a long way to meet us.
The argument for such a report is that any failure in the insurance industry indicates either a weakness in the insurance legislation, which is designed to prevent failures, or a weakness in the enforcement of the legislation. The new clause uses the word "statement" rather than the word "report" which was in the original new clause moved in Committee. I assume the two words are synonymous, but I would like an assurance that there is no distinction between them and perhaps the Minister would also say whether the word "statement" was chosen for any particular reason.
We realised in Committee that there might be a problem in publishing a report when criminal proceedings were pending because of the possibility of prejudicing them. Subsection (4) has been introduced in order to preclude that possibility. But will it be the intention of the Secretary of State, once proceedings have been completed, to make a further report including the information he would otherwise have laid before the House?

§ Mr. Clinton Davis
The use of the word "statement" in the new clause will enable the House to be informed in a number of ways with which my hon. Friend will be familiar. I hope that he will not think that there is anything sinister about the way in which the report will be made to the House. The essential feature is that the House will be informed.
1808 When any criminal proceedings have been concluded, I am sure that the Secretary of State will feel obliged to provide the House with a statement of steps taken which, in fairness to the defendant, he would have been debarred from making earlier.