Insolvency Bill [Lords] (Hansard, 18 July 1985)

§ Mr. Millan
Many deposit creditors are caught out because they have responded to advertisements in reputable newspapers or journals, and are under the mistaken impression that anything advertised in a reputable newspaper is bound to be genuine and that there is no risk. Unfortunately, that is not always true. many companies involved in this business which have a record of going bankrupt and starting again advertise in reputable newspapers.
Secondly, if we had such protection, some trade creditors would be much more careful about extending credit to the companies with which we are trying to deal. They would recognise the additional danger that those companies were trading on depositors' money which, in the event of the company going bankrupt, would not be available to them. Another advantage in such a provision is that it would impose an additional disability on some of the companies which operate in that way now. The new clause will benefit everyone, including trade creditors arid deposit creditors.

§ Mr. Fletcher
In Committee, I said that I would give serious thought to the problem of consumer creditors arid pre-payments; and this I have done. We found Committee that the well-intentioned proposals by hon. Members on the creation of preferential and even pre-preferential status for such creditors and the imposition of special regulations on traders were impracticable. My hon. Friend the Member for Oxford, East (Mr. Norris) referred to the Channel 4 file, which I saw the other day. It was not any larger than some of the files on this matter that we have seen in the Department I make it clear that we are aware of the size of the problem. The difficulty, as with many aspects of this subject, is how to deal with it.
My hon. Friend said something about a small measure of protection, but the measures of protection that I have considered are by no means small. They seem to be rather complex and require some kind of trust fund, or a system such as that suggested by the hon. Member for Dagenham (Mr. Gould) in his new clause. However, it would appear that neither system would be foolproof. The very persons and types of business men and companies that we are most anxious to catch in this respect are the ones most likely to escape from any of the suggestions that I have heard before and that I have heard again today.
I say that with regret because I should very much like to find a system that would be effective in curtailing this problem. Obviously, as my hon. Friend the Member for Oxford, East said, the measures already in the Bill will be helpful. Hon. Members will know that the Insolvency Law Review Committee considered the problems, and in particular the proposal that statutory arrangements should be made to require companies that hold consumers' prepayments and trust accounts. The review committee concluded that such creditors should not receive preferential treatment and that the trust account proposal is impracticable. That is the view that the Government still hold.
The House may know that pre-payment was the subject of a discussion paper published by the Director General of Fair Trading in October 1984. Although he disagreed with 579 both the Cork Committee and the Government about the giving of some preferential status to pre-payment creditors, he concluded that the best prospects for the protection of consumers without involving a complicated and far from foolproof system, lies with voluntary schemes designed to cover particular problem areas. I and, I am sure, other hon. Members will be interested in the outcome of the Office of Fair Trading's discussions on this subject. However, I am afraid that I cannot accept the new clauses, partly because I do not believe that they would have the effect for which they hope.

§ Mr. Hanley
In paragraph 1075 of the report on Insolvency Law and Practice, the review committee says: Accordingly, we do not propose any amendment in principle of the existing law in this field, but we consider that the new Insolvency Act should contain general provisions, applicable to companies and individuals alike".

§ Mr. Fletcher
That comment does not differ from my view. The Bill will allow opportunities for consumer creditors to be better placed in a liquidation than at present as well as providing for trade creditors. I have not seen any proposals for preferential or pre-preferential treatment that I consider workable.

§ Mr. Norris
Earlier, the hon. Member for Dagenham (Mr. Gould) rejected the idea of a preference arrangement for deposit creditors because that muddied the waters more than it cleared them, which is a fair thing to say. In Committee, I was encouraged by the undertaking given by my hon. Friend the Minister to look again at this matter. I am sure that he appreciates that this is of great concern to a great many people. We should try to address ourselves to these issues. I readily admit that the wording suggested to me by those who have been kind enough to advise me may be less than perfect, and that the amendment standing in the name of the hon. Member for Dagenham may be equally imperfect. However, I am saddened that my hon. Friend should reject the notion that anything can be done by a detailed critique of my amendment.

§ Mr. Gould
Does the hon. Gentleman share my disappointment that the Minister appears to recognise that there is a problem which needs a solution, does not find that our suggestions meet the bill, but produces no suggestions of his own?

§ Mr. Norris
It is possibly more appropriate that that comment comes from the hon. Gentleman than from me. I shall have to live beyond this night with the consequences of telling my hon. Friend the Minister how disappointed I am with his efforts. He told me that the large fat file which I shall shortly send him will accompany many large fat files which he already has. My hon. Friend will continue to receive such files and to have to respond on television, the radio and elsewhere to the outrage expressed by ordinary people who recognise this genuine problem, and who ask why, if he accepts that a problem exists and something can be done about it, he does not do something about it.
Even at this late stage, I hope that my hon. Friend will bear in mind the significance of this small provision in the 200-clause Bill to many people. However, I recognise the potential imperfection in my new clause, and I beg to seek leave to withdraw the motion.