Bankruptcy (Scotland) Bill

HC Deb 17 June 1992 vol 209 cc898-951

Order for Second Reading read.

Madam Speaker

I have selected the amendment in the name of the hon. Member for Glasgow, Garscadden (Mr. Dewar).

3.32 pm

The Secretary of State for Scotland (Mr. Ian Lang)

I beg to move, That the Bill be now read a Second time.

Today's debate may carry with it an air of familiarity for some hon. Members, given that the issue has been debated not once but twice in the Scottish Grand Committee where the principle of the Bill received broad support and, indeed, unopposed approval. Of course, I hope that that approval will be extended in the same spirit of harmony to today's proceedings.

The Bill is an important measure whose purpose is to secure the efficient conduct of sequestrations in Scotland in a manner that provides value for money to the taxpayer while protecting the legitimate interests of debtors and creditors. The need for reform of the Bankruptcy (Scotland) Act 1985 is widely recognised, and the Government's initiative in introducing today's Bill has been widely welcomed throughout Scotland, including by those professional bodies most directly affected by its provisions.

The new dimension injected into the proceedings today is reflected in the motion tabled by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and his colleagues, proposing that the Bill be committed to a Special Standing Committee. That is suddenly the fashionable cry about legislation. The possibility of referral to a Special Standing Committee is, of course, a reform of procedure introduced by a Conservative Government a decade or so ago but unused for about eight years. I have nothing against the proposition in principle. Where some new, broad issue of policy of widespread public interest is at stake on which the special expertise of outside bodies is needed, there may in future be a case for such references. However, that hardly applies in the present case.

It was the 1985 Act which constituted the major policy change, founded as it was on an important Law Commission report. Indeed, during an earlier discussion of the measure the hon. Member for Garscadden said: It was a long overdue and well considered modernisation of law which went back to an Act of the Scottish Parliament of 1621."—[Official Report. Scottish Grand Committee, 4 June 1992; c. 20.] Indeed it was—but it was a technically defective reform, and we are anxious to deal in the Bill with the imbalance that it created between the interests of debtors, creditors and taxpayers.

Mr. Tam Dalyell (Linlithgow)

We may all have thought at the beginning that, as the Secretary of State says, the Bill was not a matter of great public interest, but, as time has gone by. we have all received serious and formidable criticisms. Those who know about such things think that this is a matter of considerable interest. Is this not an ideal occasion, as my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) suggested, to restore the machinery which allows some questioning of experts on the matter before we start?

Mr. Lang

The hon. Gentleman's point of view is shared by his hon. Friends—but not by me. As I have said, the measure has had a wide welcome from the professional bodies most directly affected, including the Institute of Chartered Accountants of Scotland, the Law Society, and the Society of Practitioners of Insolvency.

The question has been raised whether we allowed adequate consultation.

Mrs. Margaret Ewing (Moray)

The Secretary of State has already referred to the concept of harmony in Scotland —and there is certainly a Caledonian consensus that the Bill should be repatriated to enable the experts available in all aspects of the subject to be consulted and to make recommendations. Will the right hon. Gentleman comment, even at this early stage, on the proposal of the Institute of Chartered Accountants of Scotland that fees could be reduced to £800 per case? We need time to deliberate on such proposals, and on the intricacies of the Bill, to ensure that the draftsmanship is correct, and that we do not have to debate an inadequate Act.

Mr. Lang

It is certainly true that some of the practitioners have sharpened their pencils since the publication of the Bill—dramatically so. There are now suggestions that it may be possible to carry out the work covered in the past by the block fee of £2,147 for less than half that sum. I believe that it was Oscar Wilde who said that the prospect of being hanged concentrated the mind wonderfully.

The hon. Member for Moray (Mrs. Ewing) has repeatedly drawn attention to that aspect of the problem, and it must be addressed, in the interests of the taxpayer. There are also the interests of the creditors and the debtors, which are addressed in the Bill.

The hon. Lady has lost me with her reference to repatriation. We do not repatriate Bills in this Parliament; we pass legislation after proper scrutiny. The measure has been scrutinised twice in the Scottish Grand Committee and will go to a Scottish Standing Committee. That is the nearest to a patriotic front that I can offer the hon. Lady.

Mr. Donald Dewar (Glasgow, Garscadden)

Will the Secretary of State say a word or two more about the proposal of the Institute of Chartered Accountants of Scotland which was referred to by the hon. Member for Moray (Mrs. Ewing)? That proposal would dramatically reduce the cost of schedule 2 sequestrations, and, if it were acceptable to the Government, it would in effect rewrite the Bill by removing the essential principle of transferring the work from the private to the public sector. It would be helpful to the House, and a useful preparation for the Committee stage, if the Secretary of State would say whether he is contemplating such a shift, or holding to the general shape of the Bill, which at present excludes insolvency practitioners.

Mr. Lang

Obviously we are interested in the propositions put to us by the institute and we will study them carefully. What the hon. Gentleman has said about transferring the matter from the private to the public sector is an over-simplification, and I will deal with it later in my speech.

I want to deal with the consultation point raised earlier. The Opposition's attitude is underlined by their motion suggesting that we go to a Special Standing Committee. The urgent need to reform the Act is widely recognised; I do not accept that there has been inadequate consultation. The Government proposals have been made after careful monitoring of the operation of the 1985 Act by the Department of Trade and Industry, together with the Scottish courts administration and the accountant in bankruptcy, and the Treasury has taken an interest.

The announcement of the Bill was made in the Queen's Speech on 6 May and it was published on 8 May, at the first opportunity. By 12 May, copies of the Bill had been sent to various interested parties for comment. As Opposition Members have said, comment has flowed in thick and fast, on the whole supporting the principle of what we are doing, although raising aspects of detail that can be dealt with in Committee.

The principle of the Bill has been considered twice in the Grand Committee, on 4 and 7 June, 27 days after publication—rather more than the usual 12 days allowed —and has received unanimous approval. A further nine days elapsed before today's Second Reading, which we could call a special Second Reading; and the earliest date when the Bill can go into Standing Committee will be 30 June, nearly a fortnight from now. All that represents seven and a half weeks for representations and consultations—out of all proportion for a Bill of this size and very much more than some major Bills have been given. So there has been adequate consultation on what is essentially a technical adjustment to an earlier Bill whose mechanisms are not operating efficiently.

Mr. Brian Wilson (Cunninghame, North)

Since the remarkable information has emerged that the Institute of Chartered Accountants of Scotland appears to be prepared to cut its fees by 60 per cent., does the Secretary of State agree that, had the inquiry been made before the Bill, it might have conditioned its nature in another direction? Does not that suggest that consultation was grossly inadequate—indeed, non-existent? Given that that is so and that so much other information has come out since the Bill was published, is not the case justified for looking at the whole issue again?

From what the right hon. Gentleman said in reply to my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), it seems that the whole nature of the Bill might be changed yet again in the course of its passage—if he is seriously considering this offer.

Mr. Lang

We are not contemplating changing the nature of the Bill, which enacts a number of measures unrelated to fees. The fact remains that there have been negotiations in the past with the institute about the amount of the block fee, negotiations which have secured savings amounting roughly to 50 per cent. It will be clear from the figures that I will give the House shortly that the cost of administering sequestration in Scotland has soared dramatically, however, and the Government do not have the necessary powers to control these matters on behalf of the taxpayer. Even though there is still scope for futher negotiation with the practitioners and others over the conduct of sequestration, it is still necessary for the Government to have powers in this area.

Mr. James Wallace (Orkney and Shetland)

Those of us who have just heard the right hon. Gentleman's illustration of what he thinks amounts to consultation will note that almost all of it has happened since publication of the Bill. The right hon. Gentleman will have to admit that, when the Scottish Grand Committee met, the main criticism of the Government concerned the lack of consultation before publication, not least with bodies such as the Institute of Chartered Accountants of Scotland, which was discussing with the accountant in bankruptcy how savings and improvements in the system could be made.

Does the right hon. Gentleman accept that a Special Standing Committee is still the best course of action; but that as the Bill cannot go into Standing Committee until a week on Tuesday at the earliest, it is unlikely to emerge from Standing Committee before the recess, so it would be much more sensible to allow the summer for proper consideration and, if necessary, to withdraw the Bill and present it again in the autumn?

Mr. Lang

No: and, as I have said, there has been a great deal of consultation. The hon. Gentleman will know that policy responsibility was transferred to my Department only in this new Parliament but that there were earlier consultations. The negotiations over the block fee between the institute and others involved are themselves evidence of the degree of consultation.

There are certain flaws in the mechanisms for delivering the sequestration process which have unbalanced matters and they must be rectified. We therefore need the Bill for several areas of sequestration other than simply the level of fees.

Mr. Thomas Graham (Renfrew, West and Inverclyde)

Is the Secretary of State aware that, because of what he calls the consultative process, many organisations are genuinely worried and support the request to set up a Special Standing Committee? Surely that is not too much to ask in view of the situation in Scotland in respect of bankruptcy.

Mr. Lang

I have already answered that general point. I understand that the hon. Member for Renfrew, West and Inverclyde (Mr. Graham) and his colleagues sincerely hold that view. However, the Government have considered the issue carefully and have decided that the Bill does not meet the criteria and the way in which they should be applied for a Special Standing Committee. As I said earlier, the Bill is not a major policy departure; it is not a major Bill in any sense. It corrects certain mechanical failures of an earlier more substantial Bill in respect of which there was no pressure from Opposition Parties for a Special Standing Committee.

Mrs. Ewing

Will the Secretary of State give way?

Mr. Lang

No. I must make a little progress and I will then give way to the hon. Lady. I have already given way to her once or twice.

I am not arguing that the Bill cannot be improved; of course it can. Almost invariably Bills are improved in Committee. I emphasise that my hon. Friends and I approach the Committee in a constructive and flexible frame of mind. We are willing to consider change as the Bill makes progress.

I believe that the representations that we have received to date have identified the key areas in the Bill that hon. Members will wish to consider in detail in Committee. Those include concern about confining the role of interim trustee to the accountant in bankruptcy; access to sequestration by debtors; how a debtor is to finance his petition; and whether the procedures for debtor petitions can be simplifed further while maintaining a proper balance between the interests of debtors and creditors. All those issues can be properly dealt with in Standing Committee.

It may be helpful to the House if I sketch out the background to the Government's proposals. In so doing, I will try to avoid replicating the admirable work of the Parliamentary Under-Secretary of State for Scotland, my hon. Friend the Member for Eastwood (Mr. Stewart), who presented the Government's case to the Scottish Grand Committee.

The Bankruptcy (Scotland) Act 1985, which modernised the law of bankruptcy in Scotland, followed on from a detailed review undertaken by the Scottish Law Commission, as I have already said. The Act has been very successful in ensuring that in every sequestration a trustee is appointed with sufficient powers to see the sequestration through to its conclusion, and that where necessary the fees of that trustee are paid by the public purse. This latter innovation—placing on the Exchequer the responsibility for meeting any shortfall in the fees and outlays incurred by the trustee administering the sequestration—was introduced to ensure that there could be no return to the previous evil of limping sequestrations.

In such cases, the debtor might never be discharged of his obligations and creditors might never receive payment of sums owed to them, the reason being that there were insufficient assets in the debtor's estate to finance the cost of the operation. Similarly, for debtors with few assets, sequestration was not available as a means of reorganising their finances because it was impossible for them to persuade a trustee to take on the work.

In putting forward its reforms, the Scottish Law Commission did not anticipate any substantial call on the Exchequer to finance such sequestrations. In putting forward the 1985 Bill, the Government, I must acknowledge, did not see any reason to challenge this assumption by the commission and accepted the basis on which the proposals were advanced. However, since the 1985 Act was enacted, the position has turned out to be entirely different from that anticipated.

The cost to the taxpayer of financing the administration of individual sequestrations, through payment of the fees and outlays of the private sector insolvency practitioners who undertake the work, has risen from £13,000 in 1986 to £18.5 million in 1991. If the historical trends in the volume and costs of sequestrations were to continue, the costs would rise to some £50 million by 1993–94 and over £80 million by 1994–95. That is clearly an excessive amount of public expenditure and quite clearly does not represent value for money. It is therefore right that the Government should bring forward proposals to deal with the matter effectively, and, as I have said, that has been generally recognised.

The total cost to the Exchequer in any individual year is a consequence of the volume of sequestrations and the fee paid to the practitioners. Since 1986, the number of sequestrations has grown enormously, some fifteenfold, from 560 to 8,584 in 1991–92. On an annual basis, the average rate of growth has been some 74 per cent. The nature of sequestrations has also changed dramatically in the period. Historically, sequestration has always been seen as a tool by which creditors could obtain an equitable distribution of a debtor's assets towards the repayment of the moneys owed to them. In 1986, 75 per cent. of all awards of sequestration were granted on the petition of a qualified creditor. By 1991–92, they constituted only 13 per cent. of the total.

In contrast, there has been an explosion in the number of petitions presented by a trustee under a trust deed. There were nearly 7,500 of those last year, accounting for 87 per cent. of all petitions granted. It is illuminating to examine the growth in the use of trustee petitions over the period since the 1985 Act was enacted. If the House cares to refer to the annual reports of the accountant in bankruptcy, which are to be found in the Library, it will see that the number of such petitions has grown from 31 in 1986–87 to 1,800 by 1989–90 and to 4,340 in 1990–91.

That growth is a reflection of the growing realisation amongst insolvency practitioners, money advice agencies and debtors that the trustee route provided easy access to sequestration—a route which was never envisaged when the 1985 Act was enacted.

For the benefit of those hon. Members who are not familiar with the practice, although by now most will be, the procedure is that a debtor is referred to an insolvency practitioner and is advised to sign a voluntary trust deed appointing that practitioner as trustee and transferring the debtor's estate to him to be realised for the benefit of the creditors. Having established that it is a small assets case, the administration of which will be funded by the Exchequer if the debtor is sequestrated, the trustee immediately petitions for sequestration and for appointment as interim trustee under the 1985 Act to administer the case. In due course, the same practitioner will be appointed permanent trustee and able to claim his fees.

At no time is any attempt made to operate the trust deed in the way it was originally intended—as a voluntary arrangement between the debtor and his creditors which would permit the debtor to reorganise his financial affairs without having to have recourse to the very serious step of being sequestrated. The use of the legal device of the trust deed has had the effect of detracting from the usefulness of voluntary arrangements as a means whereby a debtor can avoid sequestration.

That rapid growth in the volume of sequestrations and the change in the pattern of sequestrations is unique in Scotland. Although there has been growth in the level of bankruptcies in other parts of the United Kingdom in recent years, there has been nothing like the trend which is to be found in Scotland. Nor, when one examines the figures for corporate insolvencies in Scotland, does it show a similar growth pattern to that of sequestrations. The fact is that the level of insolvency in Scotland on a per capita basis has changed from being broadly equivalent to the level in England and Wales in 1987 to some three times that level by 1990. Those are very remarkable figures which cannot be explained in terms of relative economic prosperity or economic performance. Indeed, relative economic performance over the period has, by most criteria, moved in the opposite direction.

The Government recognise that, with the introduction of the 1985 Act. there would inevitably be some reaction in terms of the numbers of individuals being sequestrated. However, the change that we have seen cannot be explained in those terms alone.

Mr. Michael Connarty (Falkirk, East)

The Secretary of State seems to be saying that the real target of the Bill is the people who need to find a way out of debt. The right hon. Gentleman's theme in the past 10 minutes has been in that vein.

Mr. Lang

Absolutely not. As the hon. Gentleman is aware, the Bill makes provision for a debtor to apply for sequestration. That was not the case before. The Bill tries to get the balance back on to an even keel between debtor, creditor and the taxpayers' interest.

Mrs. Ewing

rose—

Mr. Wallace

rose—

Mrs. Maria Fyfe (Glasgow, Maryhill)

rose—

Mr. Lang

I have given way to the hon. Members for Moray and for Orkney and Shetland (Mr. Wallace) several times, so I shall give way to the hon. Member for Glasgow, Maryhill (Mrs. Fyfe).

Mrs. Fyfe

If the Secretary of State is saying that the level of sequestrations in Scotland is three times that in England on a per capita basis, and that that has nothing to do with the state of the Scottish economy, what exactly is going on? If the law in England and Wales is different from that which was passed in Scotland in 1985, is not that all the more reason for taking care and for taking time for proper consultation the second time round?

Mr. Lang

As I have said, the relative economic performance of the different parts of the United Kingdom has been moving in the opposite direction. The hon. Member for Maryhill will be aware that unemployment in Scotland is now lower than it is elsewhere in the United Kingdom, for the first time since records began. The increase in the number of company liquidations in Scotland has been small by British standards. Between 1991 and 1992, the increase was 5.7 per cent. in Scotland, compared with 31.9 per cent. in Great Britain as a whole. That demonstrates the contrast between the trend in personal sequestrations and the performance of the economy.

Mr. Dalyell

In answer to my hon. Friend the Member for Falkirk, East (Mr. Connarty), the Secretary of State gave a decisive "Absolutely not", but on the issue of small asset sequestrations, which my hon. Friend raised by implication, why does the right hon. Gentleman believe that many of us have been contacted by welfare rights organisations saying that small asset sequestrations are likely to be more frequent under the coming legislation and will hurt the most vulnerable, as my hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) said? Why should they all be so worried?

Mr. Lang

I do not believe that that will be the case. The hon. Gentleman will be aware—indeed, I touched on it earlier—that before the 1985 Act there were particular difficulties with small asset sequestrations. The 1985 Act has considerably eased the position but has created a new procedure whereby debtors with small asset cases can go straight to an insolvency practitioner who can be appointed as an interim trustee and subsequently as a permanent trustee. The practitioner can pick up a fee of £2,147 for wrapping up the case. That has led to a dramatic surge of applications, which must reflect a change in the attitude to debt and a recognition of the opportunity that the procedure provides for a relatively easy way out of problems.

Mr. Wallace

In all fairness, the Under-Secretary of State for Scotland, the hon. Member for Eastwood (Mr. Stewart), said in the Scottish Grand Committee that the effect of the Bill should not be to deny anyone access to sequestration other than those denied it at present. So clearly no saving should be made by reducing the number of people applying for sequestration. If it is not economic circumstances, what is the reason for the increase? Of that number, what proportion were people in self-employment?

Mr. Lang

I cannot give the hon. Gentleman the latter figure, but it may be possible to identify it; if so, my hon. Friend the Under-Secretary will give it to the hon. Gentleman either later today or in Committee. On the initial point, it is not the Government's intention to make access to sequestration more difficult. As I said, the Bill contains a provision which allows debtors direct access. My hon. Friend the Under-Secretary said that in the Grand Committee, too. The Bill also provides for the streamlining of procedures, simplification of the handling of cases, and a reduction in the fee level. It is universally recognised that that level is far too high.

Mrs. Ewing

rose—

Mr. Lang

I give way to the hon. Lady, but it will have to be for the last time.

Mrs. Ewing

Does the Secretary of State recognise that the proposals in the Bill make the process of seeking sequestration more complex? Indeed, the process may create more bureaucracy and further costs. That was identified by an individual who works in welfare rights serving the Dumfries and Galloway region. Does the Secretary of State appreciate that the proposals in the Bill mean that someone would have to approach first a welfare officer or someone in a citizens advice bureau and then a solicitor to seek legal aid? The person would then have to proceed to creditors for a protected trust deed and then seek a sheriff's ruling.

All that makes the procedure much more complex. We argue that there must be consultation because we want to ensure access and simplicity, reduce costs, and make the Bill effective. Those aspects cannot be picked up in an ordinary Standing Committee but could be included in a redrafted Bill if we had a Special Standing Committee.

Mr. Lang

I do not accept the hon. Lady's analysis. The Government would not have introduced the Bill in its present form if we had thought what she suggested. The hon. Lady makes the mechanisms that have to be pursued by a debtor sound more difficult than they are. It is clearly desirable that a debtor should have access to independent advice. Indeed, we have gone out of our way to increase the funding of money advice centres and other such organisations to enable and encourage them to give such advice.

No one should be urged too strongly to rush to sequestration. The House will recognise that where it is possible to avoid sequestration—for example, by a protected trust deed or some other way—it might be a desirable outcome. To make it too easy and too direct would be to undermine the interests of the taxpayer, the creditor and the debtor. We are seeking to establish a proper balance and to simplify procedures within it, as far as that can be done.

The hon. Member for Moray makes a point which may well have validity. There will be an opportunity to argue that in Standing Committee when we reach the clauses concerned with procedures.

Mr. Dewar

I am sorry to butt in and to labour the point, but it is in the interests of the House that we understand the Government's position. Is it the Secretary of State's contention that, after the machinery is in operation, he expects the case load—the number of people going through sequestration procedures—to remain as it is or to drop? If he expects it to drop, are we to deduce that people who ought to be able to follow that course will be prevented from doing so? Or is he positing, as the Under-Secretary suggested—to be fair, he was quoting creditors—that insolvency practitioners are putting people through sequestration procedures because it is in their financial interests to do so but, by implication, there is no public or individual interest in following that course?

Mr. Lang

I think that the hon. Gentleman has reached that conclusion. He referred in the Scottish Grand Committee to a "gravy train" and other hon. Members have suggested the same. I hesitate to give a forecast on the number of debtors who will seek sequestration. Given the Government's collective record on such forecasts since 1985, it might be unwise to do so. I advance the theory that the Bill is broadly neutral in that sense and seeks to achieve a better balance between debtor and creditor and, by streamlining procedures and reducing fee levels, to reduce Government costs substantially.

I earnestly hope that the Bill will avoid the dramatic escalation of such applications in recent years, with their frightening implications for public expenditure.

Mr. John Home Robertson (East Lothian)

Will the right hon. Gentleman give way?

Mr. Lang

No; I must make some progress. I shall give way to the hon. Gentleman later.

What is very clear is that the trend is causing considerable alarm amongst creditors, who view with great concern the growing pattern of sequestrations in Scotland. They have expressed the fear that the present law could work against the public interest by providing an incentive for the marketing of sequestration as a solution to debt problems, since on the face of it the debtor has little to lose and the practitioner has a considerable amount to gain if a debtor is sequestrated.

I fully accept that the majority of debtors enter into sequestration only after receiving careful advice from money advice centres and others and from the insolvency practitioner who handles their case. Nevertheless, the loss of faith amongst creditors in the sequestration process must be a matter of concern to the House.

Sequestration and the laws of bankruptcy have always been rightly seen as underpinning the operation of the credit market. Parliament has sought to maintain a balance between the interests of debtors and creditors. There is a real danger that we have inadvertently created a situation which has lost that sense of balance and which works against the interests of creditors as well as taxpayers. There is no doubt that the present law can give rise to a potential conflict of interest on the part of the insolvency practitioner. It certainly causes confusion as to whether the practitioner is acting in the interests of the debtor or in the interests of the creditor. Prior to the signing of the trust deed, the practitioner offering advice is acting for the debtor, but by law he must act in the interest of creditors once a trust deed is signed or sequestration is awarded. The present arrangements blur that important distinction.

Under the present regime, an insolvency practitioner is entitled to be reimbursed with his fees and outlays from the Exchequer, where there are insufficient assets in the debtor's estate to finance the sequestration. In some 80 per cent. of all sequestrations in 1991–92—in some 6,800 cases —there were no assets in the debtor's estate which could be realised for the benefit of the creditors. Yet, despite that, the insolvency practitioner is entitled to receive a block fee of £2,147 from the Exchequer for administering the sequestration. The House has every right to question whether such a payment represents value for money to the taxpayer. I do not believe that it does.

Moreover, under those arrangements the Government's powers to secure an improvement in the cost to the taxpayer are severely limited. While the 1985 Act gives responsibility to the accountant in bankruptcy to determine the level of remuneration to be paid to a trustee in a sequestration, he is required in exercising his discretion to take account only of the work which has been reasonably undertaken by the trustee—having regard to the value of the debtor's estate—and to the extent of the trustee's responsibilities in administering the debtor's estate. In so far as a trustee can demonstrate that he has conformed to the requirements of the 1985 Act in administering the sequestration, the accountant in bankruptcy has little alternative but to pay the fee charged. The Act certainly does not provide for the accountant in bankruptcy to take account of the interests of the taxpayer, who, after all, is being required to meet the bill, in setting the level of remuneration.

I acknowledge that the problem was recognised by both the accountant in bankruptcy and by the insolvency profession itself. As a result. and in an effort to reduce the demand on the public purse, the Institute of Chartered Accountants of Scotland and the accountant in bankruptcy entered into a voluntary agreement, as I said earlier, to allow the introduction of a block fee agreement, which covers the vast majority of sequestrations. Most cases are now dealt with under this new regime.

The accountant estimates that by this means the cost to the Exchequer has been reduced by some 50 per cent. of what it would otherwise have been if insolvency practitioners had continued to charge on the basis envisaged in the 1985 Act. However welcome this improvement, it is not a basis on which to continue the regime into the future. The Government believe that the reforms being introduced by the Bill are essential if we are adequately to protect the taxpayers' interests and secure value for money.

Sir Nicholas Fairbairn (Perth and Kinross)

I hope that my right hon. Friend will say something about the interests of the creditor. The creditor's interest is to be paid in full. Insolvency, sequestration and bankruptcy frustrate his proper right.

Mr. Lang

As I said earlier, once the trust deed has been signed, the law requires that the interests of the creditors are paramount. My hon. and learned Friend is absolutely right. It is a matter of balance. I have referred to creditors on a number of occasions, but I am glad to underline that we must achieve a balance. After all, the creditor is probably the most innocent party of all those involved in such sad affairs.

I stress that it is not the Government's intention to secure value for money by denying debtor's access to sequestration—quite the reverse. As I have said, for the first time, debtors will be able to petition for their own sequestration if the Bill is enacted. Instead, we will secure better value for money through simplifying the procedures which apply to sequestrations where there are few assets, and by tighter control over the fees paid to the insolvency practitioners.

The Bill itself is principally an enabling measure and ensures that the administrative responsibility for sequestrations is brought alongside the financial responsibility, which, as I have explained, is already borne by the public sector.

Mr. Dalyell

The right hon. Gentleman says that he wants tighter control over the fees paid to sequestrators. How will he bring that about? We know from our constituency work that it will be very difficult.

Mr. Lang

We are taking powers in clause 8, as the hon. Gentleman will discover if he serves on the Committee. Such powers do not exist now and, without them, the public interest is not protected adequately, as the past seven years' experience has shown.

The Bill places the responsibility for the conduct of sequestrations on the accountant in bankruptcy, who is a public official appointed by the Secretary of State. The accountant will have the responsibility for ensuring that an efficient, cost-effective sequestration service is operated in Scotland in a manner that not only meets the needs of debtors and creditors, but protects the interests of the taxpayer. To that extent, the accountant's role would be analogous to that of the insolvency service in England and Wales and in Northern Ireland.

It would take me a long time to go through all the clauses, but the general outline of most of them is familiar to the House. However, 1 shall touch on some of the concerns raised in earlier debates. I can best do that by referring to some of the more important clauses.

Clause 1 enables the accountant in bankruptcy either to employ his own staff to undertake his duties or to employ agents to carry out the work on his behalf. As my hon. Friend the Under-Secretary of State has already explained in previous discussions, such agents could be insolvency practitioners who had contracted with the accountant in bankruptcy to provide a sequestration service in particular parts of the country. By a combination of the use of his own staff and of insolvency practitioners, the Government are in no doubt that the accountant in bankruptcy will be able to provide an efficient service across the country—I know that the hon. Member for Orkney and Shetland was concerned about that. Therefore, the risk of the process being centralised in Edinburgh which the hon. Gentleman and a number of other hon. Members feared can be avoided.

It will come as no surprise to the House that the Government are fully committed to market-testing the delivery of the sequestration service in accordance with the principles that we have established. We shall look closely at the detailed implementation of the Bill to ensure that wherever possible, the private sector has the opportunity to undertake the work where that can be done in a cost-effective manner. I say that in response to the undertone of anxiety which I detected from earlier debates in the Scottish Grand Committee that too much might be concentrated in the hands of the state. At present, the advice agency, which directs the debtor to an insolvency practitioner, determines who shall act in a sequestration in most cases. Neither the creditor nor the taxpayer, who is paying for the process, has a say in the matter. The chosen practitioner is in a monopoly position. Provided that he maintains a good relationship with the advice agency in handling its clients, he can be confident of a steady stream of work. In future, the accountant in bankruptcy will be in a position to introduce a much stronger dose of competition into the process. By tendering out the provision of the service to insolvency practitioners, he can ensure that value for money and quality of service are secured. The best and most efficient and effective practitioners are likely to gain from that process.

Mr. Wallace

One of the important issues that arose in the Scottish Grand Committee was the fact that, at present, a debtor who went to an insolvency practitioner could be advised that there was no need for sequestration. Do the Government intend to allow the accountant in bankruptcy or those acting on his behalf to tender similar advice, or does the Bill mean that, by the time someone goes to the accountant in bankruptcy, the threshold has been crossed?

Mr. Lang

The accountant in bankruptcy does not have the role of tendering advice; indeed, he has no right to do so. That is why the money advice centres, citizens advice bureaux and access to a solicitor with legal aid are important parts of the overall package.

Clause 2 provides for the appointment of the accountant in bankruptcy as interim trustee in all sequestrations. I am conscious that the concentration of the responsibility for acting as interim trustee in the hands of the accountant in bankruptcy has caused concern in a number of quarters. It has been suggested that the accountant would not be able to deal with trading businesses—the hon. Member for Falkirk, East (Mr. Connarty) raised that issue in the Scottish Grand Committee—or other cases where creditors require a trustee to be put in place at the earliest possible opportunity. I understand that fear.

The Bill gives the accountant in bankruptcy precisely the same power as is currently available to an insolvency practitioner to protect a debtor's estate. He may also be appointed quickly to ensure that those assets are not dissipated. In practice, however, the particular requirements of a trading business would probably justify the accountant in bankruptcy employing an insolvency practitioner as his agent to undertake the administration of the sequestration. The Bill enables the accountant to do that.

Nevertheless, as my hon. Friend has said, the Government are sympathetic to the argument that the private sector should be allowed to undertake the work directly as interim trustee where there is no likelihood of any call being made on public funds to finance the sequestration. We are actively considering specific amendments to the Bill which would enable such an arrangement to operate. I realise that that aspect of the matter concerned several hon. Members earlier in our discussions.

On the basis of a proposal, originally put forward by the Scottish Insolvency Practitioners Joint Liaison Committee, whom the Government have consulted extensively on the Bill, those arrangements would allow a creditor or debtor to nominate an insolvency practitioner in cases where there are sufficient assets to finance the cost of the sequestration. Provided that we can be satisfied that such an arrangement is workable and will not give rise either to limping sequestrations or a future demand on public funds, we would be prepared to consider amendments to the Bill in Committee to deal with that matter.

The enactment of the Bill will improve the handling of sequestrations for the benefit of debtors, creditors and taxpayers. It builds on the experience of operating the 1985 Act and rectifies the flaws that can be clearly perceived in its administrative arrangements. I recognise the legitimate concerns that have been expressed about the effect of several provisions. I hope that I have given sufficient assurance that the Government will approach the Bill's Committee stage constructively. We are prepared to listen carefully to reasoned arguments. I have no doubt that the Bill will emerge strengthened from that process, and I commend it to the House.

4.13 pm

Mr. Donald Dewar (Glasgow, Garscadden)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House declines to give a Second Reading to the Bankruptcy (Scotland) Bill because of the inadequate opportunity for consultation between the Government and interested bodies in Scotland on the contents of the measure. I must confess that Scottish politics are full of unexpected pleasures. The House will not be surprised to hear that no one's heart missed a beat at the news in the Queen's Speech that the law on bankruptcy in Scotland was to be adjusted. However, the Bill has turned out to be interesting. It is full of unlikely facts, bizarre circumstances and at least a hint of a reversal in normal political roles.

I enjoyed watching the Under-Secretary of State, the hon. Member for Eastwood (Mr. Stewart), who seemed to have been brought from the substitutes' bench as a late replacement for the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) to introduce the Bill. He clearly enjoyed the prospect less and less the more he read about it. It is not a fit fate for such an enthusiastic member of the No Turning Back group to find himself presiding over such a snappy little nationalisation measure. If that is part of the striving for a better character in Scotland that we are promised by the Government, I welcome it.

Today's event is unusual: the debate is about the merits of the matter. The House is being invited to give a Second Reading to the Bill, but there is a sub-theme—the question why the Bill is being debated here at all. As the Secretary of State factually reported, the Bill was discussed for not one but two days in the Scottish Grand Committee. I made no objection to its referral to that Committee, as that semed an appropriate way to deal with the Bill where there was no head-on political collision over a matter of principle. There was no root and branch opposition; we recognised that there was a problem, to which a solution had to be found. I do not intend to rehearse in great detail the arguments deployed in the Scottish Grand Committee, but the nature of the problem must be described and considered if the present argument about the procedure —the sub-theme to which I referred—is to be understood.

The Secretary of State made it clear that the genesis of the debate goes back a long way, to the Scottish Law Commission's report of 1982 and its wide-ranging review of the law on bankruptcy. I do not object to being quoted to the effect that that review was long overdue as I do not think that that greatly affects the subsequent argument —it was long overdue. As the Secretary of State said, the Scots statute of 1621 was then the basis of the law. Whatever respect I have for the work of the 17th-century Scottish Parliament, I am not such a purist as my hon. Friend the Member for Dundee, East (Mr. McAllion) and believe that mistakes may have been made in 1621, especially when we look at the circumstances that prevail today—[Interruption.] I am glad to say that I did not hear the sedentary interruption by my hon. Friend the Member for Dundee, East.

There was a case for a review, which was designed partly to consider sequestration procedure. As the House knows, sequestration is a way of regulating the affairs of a debtor, protecting both the debtor and the creditor, and attempting to create order in someone's affairs when they are in chaos. One of the odd by-products of the law as instituted in 1985 was that, while it cured one defect, it created a great worry for the Government. The defect that we were trying to cure was the anomaly of a rich debtor —if that is not a contradiction in terms—being able to take advantage of professional help and sequestration law in a way not fully available to a debtor at the bottom of the pecking order. There was a simple and, possibly, human reason for that.

If the sequestration case involved assets—regardless of whether the debts outweighed the assets—they could be used to pay for professional fees, which have a first charge on assets. Therefore, it was possible for such a debtor to engage professional help because the money needed for the fees was protected. Conversely, if the case involved virtually no assets, the insolvency practitioner was unlikely to give of his or her time and trouble with no prospect of reward. The Law Commission properly argued that that state was not right and suggested the principle correctly accepted in the 1985 legislation—that the state should take responsibility for the costs of sequestration in a small assets case that was likely to be barred for the practical reasons that I have described.

In the Scottish Grand Committee, I mentioned the quaint, old-world atmosphere that prevailed in the Law Commission's report of 1982, which assumed that drafting legislation to give the state responsibility for paying fees would probably produce between 120 and 150 new sequestration cases a year and result in a total cost of fees to the public purse of between £6,000 and £7,500.

After 1985 the floodgates opened. There is controversy, and I suspect more controversy to come, about exactly why that happened. In 1985 there were, not between 120 and 150 cases, but 295 sequestrations. By 1991 the number had risen to nearly 8,000. Instead of a top limit of £7,500, the state was paying insolvency practitioners £18.5 million.

I accept that that is a massive sum. I received one letter from an ingenious and brave insolvency practitioner who suggested that the sum was small when measured against the costs of the poll tax. It did not seem to be an argument likely to soften the heart of the Secretary of State, but I leave it on the Dispatch Box in front of him. No doubt he can consider it. To be serious, it is a large sum. The figures mentioned in the press over the weekend suggested that the projected cost of the entire civil legal aid scheme for the state in 1991–92, at £16.6 million, was considerably less than the fees paid to insolvency practitioners.

It is well known to anyone who has followed the debate, even superficially, that we have in the memorandum to the Bill the exciting prospect that the £18.5 million will soon be dwarfed and that in 1993–94 the Government expect to pay £50 million and in 1994–95 £80 million to insolvency practitioners. In fairness, when that was put to the Under-Secretary, he bravely suggested that the figures were merely an extrapolation of a trend. I think that he was inviting us to take the view that the material in the financial memorandum should be disregarded and was worthless. If that was not his intention and we are to take these figures seriously, they are indeed spectacular.

The Institute of Chartered Accountants of Scotland, perhaps rather meanly, pointed out that, on the present fee pattern, by the middle of this decade there would be 40,000 sequestrations a year in Scotland. That does not suggest that the Scottish Office is wholly convinced of the imminence of economic recovery, but there we are.

I accept that the situation cannot be shrugged off. Obviously, the Scottish Office is unhappy. If it is not unhappy, we can bet our bottom dollar that the Treasury is. If I may mix metaphors, I suspect that Ministers smelt, if not a rat, at least a gravy train, as the Minister remarked. and one that should be derailed.

I do not know entirely what Ministers' real thoughts on the matter are. During these exchanges we have tried to get to the bottom of them. The Under-Secretary of State was careful to say that he was not accusing insolvency practitioners of any sort of improper practice; he was only reflecting the views of creditors that they were pushing people into sequestration to make financial gain. It was a case of "some people say". In my experience, when that argument is used, there is at least some sort of endorsement by implication from he who spreadeth the rumour. In any event, we shall have to probe that later.

It is clear that insolvency practitioners—there are about 220 of them in Scotland and in recent years they have, indeed, been a happy band of brothers—have done extremely well. They are mostly accountants. The figures have been extracted by the hon. Member for Moray (Mrs. Ewing) through parliamentary questions that are well known to those of us who attended the Scottish Grand Committee debate. They reveal that those in the premier league have done extremely well. In 1991 one firm, not a great international firm but a home-grown example of entrepreneurial skill, took £3.427 million in fees from the state.

Mr. John McAllion (Dundee, East)

Name it.

Mr. Dewar

Pannell Kerr and Foster is the name, as I am invited to give it. It was followed by Ernst and Young with £2.2 million and Cork Gully with £1.9 million. The names are public knowledge as a result of answers from Ministers. That is the background to the problem. It is because the Opposition recognised that there was a problem that we were happy to look at the solution to see whether some way forward could be found on the basis that, with one or two exceptions such as the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, debates on law reform Bills in this Parliament tend to be productive, and there was no reason to think that this Bill would be an exception.

Unfortunately, the going has become rather hard and I must confess that I am unhappy about the Government's approach. There is no doubt at all that the chosen solution, although the Minister does not like it, was, as I said earlier, a matter of nationalisation; what I described in the Scottish Grand Committee as a good old-fashioned dose of the same. The work is being moved from the private to the public sector. In all cases, the interim trustee in sequestration, unless it is decided to employ a private sector professional as his agent, will be the accountant in bankruptcy.

Mr. Wallace

I am sure that the hon. Gentleman was as bemused as I was to hear the Secretary of State's justification that there would be competition in the tendering of the services to be provided by the accountant. If the legal aid bill seems to be getting out of hand, does the hon. Gentleman see some future in, as it were, nationalising the legal profession, and having an official legal aid solicitor who would ask for tenders from different private solicitors throughout the country for the handling of legal aid? Is not the important point that an element of delectus personae has been lost?

Mr. Dewar

Yes, that is undoubtedly so. That element of delectus personae has, by definition, been lost, causing particular irritation in non-schedule 2 cases among the accountancy profession. Delectus personae might also be an issue in schedule 2 cases, but I have not pushed that because, given the general picture, there is a case for allowing the accountant in bankruptcy to undertake the work. But before that happens, we need substantial assurances about the way in which the new system will be organised and operated and whether it will allow people, not necessarily to have the professional adviser of their choice, but any professional adviser at all. That is the key to the argument and to the unhappiness of a large number of the welfare organisations which have made representations to us.

The Under-Secretary made it clear when he introduced the Bill that his favoured solution was that the accountant should be banished from the scene and allowed to return only under sufferance as the agent of the accountant in bankruptcy, and that civil servants should rule in his stead. His analysis was clearly that this was an area where the market had not worked as it should and where the profit motive had worked too well. As a result, he was prepared to advocate to the House—all credit to him because it cannot have been easy—that the work be taken away from the private sector and given to the accountant in bankruptcy, and that, as a concomitant of that, we should contemplate the appointment of 85 new civil servants in 1993–94 and 120 in 1994–95 to undertake the additional work load. That is what we are being asked to contemplate and that is what the hon. Gentleman is personally recommending.

The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart)

In a number of respects, that is not precisely what I said, but I will come back to that later if I am successful in catching your eye, Mr. Deputy Speaker. So that the House is clear, will the hon. Gentleman confirm that I did say, as my right hon. Friend confirmed in his opening remarks, that we were sympathetic to the amendments that had been put forward on non-schedule 2 cases?

Mr. Dewar

Absolutely. It came as no surprise to the Opposition that the Government were prepared to make concessions on that. I understand the arguments for that and I am happy to leave the matter to the Committee stage when we can examine it in some detail. I want to return to other aspects of the accountants' case, but I must push on. Having described the problem and the Minister's favoured solution, I come to why we believe that it is right that the Bill's next stage should be in a Special Standing Committee.

The House will know that a Special Standing Committee has up to four sessions which allow Committee members to take direct evidence from interested bodies and parties as though they were a Select Committee. I believe that I was the first to suggest such an arrangement: my suggestion can be found in column 20 of the Hansard report of the Scottish Grand Committee debate that took place on 4 June.

The main reason for my suggestion. and, I think, for the widespread support that it has gained from my colleagues and from other parties, is the fact that the Bill involves many complex and technical matters. There have been major protests about what are seen as unintended consequences of the legislation. It has been suggested that Ministers have a hidden agenda, and there is a suspicion that many people who require help, and who may benefit from the sequestration procedure, will be effectively excluded by some of the barriers built into the Bill.

Such views have been expressed not only by accountants and lawyers—who might be thought to have a vested interest—but by welfare organisations of almost every kind. It is fair to say that there is scepticism everywhere; even, I suspect, among the Ministers who are handling the Bill.

My second reason for believing that the Bill should be dealt with by a special Standing Committee is the number of complaints that have been made about the lack of consultation. I do not intend to illustrate that by means of lengthy and copious quotations; however, I do not think that the Minister would deny that a single message has emerged from almost all the representations that have been sent to hon. Members.

Let me mention my own constituency first. Obviously, I am interested in what has been said of the Drumchapel law centre, and in the views of the Tackling Debt group, which is based in the Castlemilk law centre and represents a wide consortium of interests. Similar opinions have been expressed by the Scottish Consumer Council, a statutory body funded by the Government; by Citizens Advice Scotland, which has a uniquely wide experience of practical counselling on debt; by the Institute of Chartered Accountants of Scotland, and by the Law Society of Scotland, which was caught completely on the hop by the Bill's appearance.

I could, if I wished, underline the message that has emerged from those organisations with many quotations. They were astonished when the Bill, fully formed and finalised in every detail, appeared in print at the Vote Office: they had had no knowledge of it, and had not been consulted about its contents. That is unsatisfactory, to say the least. Surely the discontent that has resulted is a strong reason for establishing a Special Standing Committee, allowing interested groups to argue their case and enabling the Committee to examine that case.

There are, in my view, two broad areas of concern. I shall describe them in shorthand, as it were. First, there is the welfare point about exclusion, to which I have already referred. It is said, for example, that the accountant in bankruptcy can be brought in only by means of a petition to the court, and that the costs of that petition are immediately covered in the block fee paid to the insolvency practitioner. It is argued that, if the insolvency practitioner is removed from the scene, in many cases the debtor may have to bear the costs, or they may have to come from the assets of the sequestration; debtors may not be able to afford that.

Such consequences may substantially reduce the number of people who can use the proposed procedures. That is an important reservation: if justified, it suggests that those who most need counselling and the help afforded by sequestration to order their affairs will be denied such assistance. Admittedly, in his closing speech on the second day of the Scottish Grand Committee, the Minister—the hon. Member for Eastwood—made it clear that that was not the Government's intention. He said that any savings would come from the streamlining of procedures and the cutting of moneys to be paid in fees to insolvency practitioners.

Nevertheless, despite that statement—which came a little late in our proceedings—there are many lingering fears, which are widely shared. I remind the Minister of a point to which I referred before—the written answer by the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, West, in which he said: It is clear that the major factor influencing the number of sequestrations in Scotland is the easier access by individuals to the sequestration process … The Government are actively considering the need for changes to the present legislation."—[Official Report, 16 March 1992; Vol. 205, c. 821.] Indeed they were.

I am sure that the hon. Member for Edinburgh, West, who is here today, will understand that the implication of the statement that the number of sequestrations is the major factor at the root of the problem is that the number of sequestrations must be cut. I shall read with care what has been said today by the Secretary of State for Scotland. However, everything that he said reinforces rather than removes that particular doubt, which is almost universally shared. Those organisations that have made it clear that they have such fears should be given the chance to make a direct contribution to the proceedings of a Special Standing Committee.

I wish also to refer to a matter that is of particular interest to accountants. They have made many points—for example, about delectus personae, a point to which the hon. Member for Orkney and Shetland (Mr. Wallace) referred. Advice should be available over a wide area. I know that the Minister is seized of that point. One also has to consider whether the accountant in bankruptcy is the most appropriate way to preserve creditors' assets in non-scheduled cases. These matters could be dealt with in a Special Standing Committee.

Full consideration should be given to the fundamental nature of the recommendations made by the Institute of Chartered Accountants of Scotland in the letter that some of us received today. The institute challenges the whole basis of the Bill. The Bill would remove the power, except under licence, for accountants to be interim trustees in sequestration. It gives that power to the accountant in bankruptcy.

The Institute of Chartered Accountants of Scotland says that that is unnecessary and that it can still be dealt with by the private sector at a very reduced cost. It suggests that there should be a simplified procedure under which fees could be cut to about £800 in cases where assets amount to less than £2,000 and debts to less than £20,000 and that in addition the outlays would amount to £200. The institute reckons that the sum of £18.5 million in 1991 could be cut to £10.5 million. That would mean rewriting the Bill. The Government have to tell us whether they are prepared to consider such a solution.

We pressed the Secretary of State on the issue. He did not appear to rule it out when he said that it would have to be closely considered. If a fundamental point of that kind is to be made, I cannot think of a better place for it to be argued than a Special Standing Committee. The profession should be given the opportunity to put its case and to answer questions. In that event, the arguments would not be transferred and inevitably distorted to some extent by means of a third party—a Minister. In view of the important amendments that we are asked to contemplate, there should be direct access to the parliamentary process. I hope that, at the end of the debate, the Minister will say that the Government are prepared to contemplate this proposition. If so, it would amount almost to a wrecking amendment, so fundamentally would it change the Bill.

No Special Standing Committee has ever considered Scottish legislation, although this specific machinery has been used seven or eight times for the consideration of English legislation. I genuinely believe that this would be an appropriate Bill for that machinery. It raises non-contentious issues in a narrow political sense, but contentious legal issues with economic and social consequences for individuals who are already disadvantaged, and I believe that many hon. Members will want to probe those issues. I cannot remember a technical Bill causing so much interest from Scottish bodies with expertise to offer.

It is only common sense to use the new procedure, and I deeply regret the fact that the Secretary of State has adopted such an obdurate attitude. I hope that in the couple of hours available to him he will consider some of the speeches that he has made in the past few weeks about the government of Scotland and how Westminster handles Scottish affairs. We have been told that there will be a new sensitivity and a tireless search for improvements within the structures of Westminster. The Secretary of State said that there is certainly room for reform. We are now presenting him with a modest opportunity to prove that and to show a touch of imagination, but we find a brick wall—a dogged refusal to act.

It is easy for the Secretary of State to smile, but he does not know what is in his own best interests. The way in which he has handled the matter undermines his credibility and respect for his protestations that he is, to some extent, a reformed character. It is a pity, and if our proposal is not adopted, we may end up with a Bill that is not as good as it should be, certainly not as well considered as it should be, and we shall have legislation which will leave many well informed and relevant bodies in Scotland feeling that they have been short-changed and not involved as they should have been.

I shall not advise my right hon. and hon. Friends to vote against Second Reading, because there is still a great deal of work to be done and I do not object to our having the opportunity to discuss the problems. However, I shall certainly advise them to vote for the motion to consider the Bill in a Special Standing Committee. I also urge the Government, even now, to think again about their attitude.

4.41 pm

Mr. Bill Walker (Tayside, North)

There is no doubt in the minds of those in Scotland who are interested in the issue that the Bankruptcy (Scotland) Act 1985 had to be amended. That is the general view expressed in the correspondence that all hon. Members have received.

The hon. Member for Glasgow, Garscadden (Mr. Dewar) made an interesting and informative speech, but he overstated the case. He and I know that, whenever we discuss legislation in Committee, we are showered with correspondence from interested parties. To suggest that there is something new in what is happening with the Bill implies that he has forgotten all the hours that we have spent in Committee. I have with me all the correspondence that I have received since we first had sight of the Bill. I hold it up for the House because it is important. It is about one third of what I always receive on other Scottish Bills, and equally important legal Bills.

Let me make it clear that I, too, want the Bill to be amended, but that will not surprise anyone, because there is frequently cross-party agreement among Back Benchers in Committee when we discuss Scottish legislation, and we often get the Government to change Bills. What is interesting on this occasion is that the Government said at the outset that they wanted to adopt a flexible and responsive position. I cannot say in all honesty that that has always been the case in Committee.

Mr. Wilson

Does the hon.Gentleman agree that, if the Government were to accept the proposition that insolvency practitioners should cut fees by 60 per cent. but otherwise continue much as before, it would be a fundamental change to the Bill? If so, would it not have been a good idea to find out about that before the Bill was introduced rather than at this stage?

Mr. Walker

The hon. Gentleman will also agree that one finds changes of such magnitude among those with vested interests—that has certainly been true for all the other Bills that I have considered in Committee—once the Bill has been printed. Once they begin to realise what may be changed in the playing fields to which they have grown accustomed—whoever they are—they start to examine the small print after the Bill has been printed and start to make proposals. That is not novel or different.

It is interesting that, in trying to find a balance between the interests of the debtors, creditors and taxpayers, so much emphasis has properly been placed on those who find themselves in debt and cannot see a way out. One issue has worried me for a long time, and hon. Members will probably concur. In our constituencies, we meet individuals who have allowed themselves to be locked into a situation, and only after they are locked in do they begin to realise what it means. To such individuals, sequestration may appear to be an easy way to resolve their difficulties at any given time and the only way to put one's affairs in some order. However, one should not enter into it lightly without having thought it through properly.

Let us consider the case of a young man who has his whole life ahead of him. Perhaps he has written off a car or something similar and finds that he is insolvent. Under the Act, he may be advised that the easiest course open to him is sequestration. He may have an income which, although not vast, may increase. He may hope to get married, as most people do, and obtain credit to buy a house or get a mortgage and to obtain credit to furnish it. That is the natural thing to do, but if he has entered into the system under the 1985 Act, taken the advice given to him and become sequestrated, he will find to his horror that, although he has a regular income, he will not be able to obtain credit because he is barred. That could have a damaging impact at an important time in his life.

The income and potential income of an applicant should always be considered, not only because it is in the interests of the creditors-and it is-but because it is probably in the best interests of the young person who has opportunities ahead of him. That is why the Bill needs to be amended.

We must get the balance right and accept the need for reform. The hon. Member for Garscadden referred to the view set out by the Institute of Chartered Accountants of Scotland in its letter which said: What is at issue is the cost of cases funded by the public. The fact that that is the institute's position does not surprise me, given the amount of money that goes to its members. So we must accept that the institute, too, has suggested revised proposals. What it offers is interesting, but before we comment on its proposals, we shall want to examine them in detail. We can best do that by examining them in Committee as soon as possible.

I hope that in Committee we shall also take the opportunity to look after the interests not only of taxpayers—important though those are—but of creditors. Under the 1985 Act, sequestration is an automatic process. If formal preconditions are met, the court must make an order, and the merits of each individual case are irrelevant. Neither the sheriff nor the creditors can stop the process on the ground that sequestration is not appropriate. I have cited one instance in which I believe sequestration may not be appropriate, and there will be others.

That defect is compounded by the lack of advance warning given to creditors. Most will learn of the sequestration only after it has been awarded, and that is unsatisfactory. I hope that we shall be able to amend the Bill to allow creditors to argue that an award should not be made, and to require the court to refuse an award if it is believed that the debtor can repay his or her debts over a reasonable period. That is in the best interests of the debtor as well as of the creditor, because it does not do to find oneself debarred.

I hope that in Committee we can introduce and discuss amendments about a simple and cost-effective way of requiring a court to establish a debtor's free income and, if appropriate, to require him to pay that over for distribution to the creditors. I should have thought that it was our duty to all three parties—especially to the taxpayer—to examine that idea carefully, because the allure of sequestration for many is its practical effect on their income at the time of the award.

In theory, section 32 permits the sheriff, on the application of the permanent trustee, to make an order for contribution from income. In practice, the section is ignored; thus the debtor's income remains untouched. There are probably two reasons why the section is not used.

First, creditors have no way of triggering use of the section. It appears to be a matter entirely within the discretion of the permanent trustee. Even if creditors could trigger the section, any contribution from income would be swallowed up in repaying the state expenditure paid to the insolvency practitioner. Secondly, insolvency practitioners, as permanent trustees, are unlikely to trigger the section of their own volition, because it would make sequestration less palatable for debtors, which in turn would have an impact on practitioners' earnings, because fewer people would use sequestration.

I make no apology for saying that I believe that there are forces afoot in Scotland that have not been giving the best possible advice to individuals. I realise that there are those who will suggest that that is a heartless view, but I have always felt that one must examine carefully the direction of the route along which we are pointing people, especially young people. If we are sending them into a cul-de-sac—that is what sequestration is—we must be certain that that is in their best long-term and short-term interests.

The Bill gives us a rare opportunity to consider again in depth how we can balance the interests of creditors, debtors and the taxpayer—there is no doubt that there is now an imbalance. I make no apologies for my hope that during our debates we shall elicit assurances from the Government. I stress the fact that we have no wish for the Bill to prevent those unfortunate enough to find themselves in great financial difficulty from taking a course that will assist them to get their affairs into some sort of order and allow them to begin what one would hope would be a return to a normal financial position, in which expenditure and income are in some sort of balance.

We have a duty and a responsibility to the taxpayer to make certain that what we put into statute does not encourage people, under the private enterprise guise of opportunism, to make a lot of money at the taxpayer's expense. Sequestration makes money out of other people's misery, and anyone who thinks that it is other than a miserable process cannot have spent much time with people forced into it.

In Committee we should not necessarily spend our time examining what the vested interests tell us, but having received many representations—as we do on every Bill—we should discuss, in a non-partisan way, constructive thoughts and ideas on how to bring the whole business of debt, credit and all that they mean into balance. That would benefit the majority of people in Scotland, most of whom are the taxpayers, who pick up the tab.

I have said before in Committee that we often forget—at least, people who adopt the bleeding heart approach often forget—that in the end all debts have to be paid. Debts do not vanish; they are paid, either by the consumer who takes the services and goods after the debt has been incurred and not paid, or by somebody else. The shopkeeper in the high street has to adjust his prices, and providers of services have to adjust their prices to include an element for bad debt. That is how debts are paid for. The cost of administering the legal aspect of sequestration, where that is required, is picked up by the taxpayer. There is no such thing as a debt that is written off. Debts have to be paid for. The question is whether we get the balance right.

When we examine that question in Committee, I hope that it will not be a case of one side simply trying to reduce the taxpayer's input—although we have a proper duty to the taxpayer to do that. We must also ensure that we do not lock people into a situation in which they do not get the best advice and cannot see an alternative escape route.

I have found some of the correspondence that I have received from the welfare bodies disturbing. They seem to think that the only route is sequestration. I have read that correspondence carefully; I will not take up the time of the House by quoting it, but I have it all with me. I was disturbed at the absence of balance. I do not doubt the integrity of welfare workers, but if they want to proffer the best advice, they have a duty to ensure that it is the best.

I question some of that advice because of what I have discovered in my constituency. The hon. Members for Garscadden and for Linlithgow (Mr. Dalyell) rightly said that we should go by our constituency experience. It conditions our views on these issues. It is always heartrending to learn about people in these ghastly circumstances, which have arisen because of a failure of control.

Does my right hon. Friend the Secretary of State have any information about the way in which debt is apportioned in Scotland? How much of it, for instance, is arrears of rent? Perhaps we should investigate how rents are collected by local authorities. Perhaps the old system of weekly collection was better and enabled people to keep up with their payments because they budgeted on a weekly basis. That is how people on these estates live.

When I was a boy, Lawson's of Dundee went around the streets of Dundee picking up people's weekly payments. That form of debt collection was geared to suit the budgets of people who lived by budgeting from week to week. Removing that system introduced instability—[Laughter.] I do not find this a laughing matter. People who live comfortably, as we all do, frequently forget the problems of those who have to budget from week to week, as many of our constituents do. I do not mean to be frivolous when I say that we are not debating an abstract issue: it is real for those involved in it. That is why I welcome the chance to speak in this debate.

I hope that the Opposition will recognise that the Government have clearly intimated that they are prepared to accept amendments and to consider changes to the Bill. We must approach it constructively, avoiding the sort of nonsense that we witnessed during the first sitting of the Scottish Grand Committee. We must approach the Bill with concern for our constituents and others; we must not play silly political games.

5.3 pm

Mr. John McAllion (Dundee, East)

I will not follow the comments of the hon. Member for Tayside, North (Mr. Walker). He warned us against the bleeding heart approach. No one would ever accuse him of such an approach to those with debt problems in Scotland. On the contrary, he has been one of the supporters of Government policies that have forced people into poverty and debt in Scotland for many years now. It was sanctimonious of him to make the sort of sickening speech that he has just delivered.

Mr. Bill Walker

rose—

Mr. McAllion

I will not give way to the hon. Gentleman, who spoke for far too long anyway.

Originally, the Opposition did not intend to oppose the Bill. We intended to let it proceed without dividing on Second Reading and to consider its principle in the Scottish Grand Committee. Yet here we are today after two sittings of that Committee and more than four hours of debate in it, facing another three and a half hours of debate this afternoon on a three-line Whip and on a motion which will divide the House—on a measure initially thought to be non-controversial. Something went badly wrong somewhere in the handling of the Bill.

Perhaps the answer to what went wrong can be found in the Opposition motions drawing attention to the lack of consultation by the Government before they introduced the Bill and requiring the Government to concede the idea of a Special Standing Committee. Such a Committee would allow those in Scotland who know about debt problems to come and advise us on further progress of the Bill. The experts entertain a great many anxieties about the effect that it will have on people trapped in debt.

Complaints about the lack of consultation have come from almost everyone concerned with handling debt problems in Scotland. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, complaints have come from citizens advice bureaux, money advice projects, the care in the community Scottish working group, professional bodies involved in insolvency and sequestration—and even from Conservative Back Benchers. The hon. Member for Kincardine and Deeside (Mr. Kynoch) was one of the first in the Scottish Grand Committee to complain about the Government's lack of consultation with the professionals involved in sequestration.

The Secretary of State for Scotland recognised early in his speech that there was a perception of a lack of consultation. Of course, some complaints emanated from quarters that one would expect to complain about a Bill of this kind. I remind the House that we were told at first that this was a Bill that would end the public scandal of fat cat accountants ripping off the public purse. I have with me a copy of the front page of the Daily Record of 4 June, fortuitously timed to coincide with the first sitting of the Scottish Grand Committee. The headline that day was, "Making millions out of misery".

The story went on to describe why there was all-party support for the measure. Labour Members told the Daily Record that one firm was raking in more than £3 million a year in fees under the present arrangements. Neither the firm in question nor the Labour Members were mentioned by name in the article, although it would seem from what my hon. Friend the Member for Garscadden said today that he was one of the Members in question.

We were told in the story that the Scottish National party slammed the system as a gravy train. This being a Government Bill, it was to be expected that Government supporters would support it—although, in the wake of the Danish Maastricht referendum result, we should take nothing for granted when it comes to Government Back Benchers these days. The story did not mention the Liberal Democrats—they are never mentioned in the Daily Record, so we should not be surprised at that.

The Daily Record was in no doubt about who the real villains of the piece were: The men in grey suits are cashing in on a Government scheme to privatise the bankruptcy business. And their bumper fees—nearly £20 million … a year—are passed on to the … taxpayer. I do not know where the Daily Record got the idea that this is a Government scheme to privatise the bankruptcy business. This Bill will achieve the exact opposite. Perhaps, like everyone else, the paper suffered from a lack of consultation. The Murdoch press got it right; it labelled the measure a Tory nationalisation Bill. Perhaps the Murdoch press was the only body to be consulted about the Bill before it was introduced to the House.

Nevertheless, given the public scandal outlined by the Daily Record and given the alleged cross-party support for ending that scandal by means of the Bill, it might be expected that the Bill would receive a fair wind on Second Reading and would not receive any opposition except, perhaps, from the fat cat accountants whose firms are allegedly feathering their nests to the tune of £3 million a year in some cases. However, that is not what has happened. Complaints have been pouring in from many sources and from almost everyone involved in handling debt problems in Scotland.

There have been complaints about lack of consultation to which reference has been made during our debate. The Bill has been banged together by Scottish Office civil servants and Ministers working together in splendid isolation. They have talked to no one about the Bill. They have sought no advice and they have consulted no one. They have simply tried to slip the Bill quietly through the House in the hope that the Opposition were looking in the other direction.

Fortunately, the Government have not been able to get away with that strategy. Progress on the Bill was delayed in the Scottish Grand Committee, and the Committee was forced to meet a second time. My hon. Friends have tabled a motion which has allowed us to debate the matter today. In that sense, time has been bought and people with legitimate concerns will be able to lobby hon. Members on their misgivings about the impact of the Bill on people affected by debt in Scotland.

Groups like Tackling Debt in Castlemilk, to which reference has already been made, have warned in letters that they have sent to most hon. Members that consumers and debtors will be denied access to bankruptcy procedures if the Bill is passed without amendment. They believe that as it stands, the Bill will mean that debtors cannot get out of difficulties in some cases. They also believe that debtors will have to find legal fees to petition the court for their own sequestration and that bankruptcy procedures will no longer be available to debtors who have little or no assets. Those are the views of groups much closer to the reality of handling debt problems than any hon. Member. We should pay attention to those views in the way suggested by the Opposition motion.

The Scottish Consumer Council has described itself as having a particular responsibility for disadvantaged and inarticulate consumers. It has pointed out that the right of debtors to petition for their own sequestration will require legal knowledge and the payment of legal fees, both of which requirements tend to render the new right as nothing other than a paper right, something which cannot be put into effect in the real world. Debtors may be entitled to that right, but in practical terms, they will not have access to it.

The Minister will try to persude us that we can deal with those problems in Committee. In the Scottish Grand Committee, the hon. and learned Member for Fife, North-East (Mr. Campbell) pressed the Minister on whether the Government would be willing to consider circumstances in which there will he no financial bar to persons … getting advice"— and the right to institute legal proceedings at public expense. The Minister simply replied: we shall consider those matters in detail in the Standing Committee."—[Official Report, Scottish Grand Committee, 8 June 1992; c. 57-8.]

Mr. Allan Stewart

I actually said that I assured the Committee that straitened financial circumstances will not be a barrier to sequestration.

Mr. McAllion

The Minister actually said: I reassure him that the Government's purpose is that straitened financial circumstances will not be a barrier to sequestration."—[Official Report, Scottish Grand Committee, 8 June 1992; c. 58.] If the Minister had listened to the argument as I tried to develop it, he would understand that I was arguing that the Government's purpose is to cut public expenditure on bankruptcy. If they are successful in that, the by-product will be that people will not be able to have access to legal advice because of straitened financial circumstances.

Mr. Stewart

I have great respect for the hon. Gentleman, but I am surprised that after all this time he does not appear to have read my speech. I stated clearly: The savings and expenditure on sequestrations will be achieved through tighter control over the fees paid to insolvency practitioners and through the introduction of simpler procedures in small asset cases."—[Official Report, Scottish Grand Committee, 8 June 1992; c. 56.] My right hon. Friend the Secretary of State repeated that point when he opened the debate.

Mr. McAllion

I listened carefully to the Minister and the Secretary of State, and I have read the Minister's speech. I will deal with their claims later because I do not believe that they can deliver the kind of protection promised in the Bill. That will not matter once the Bill has passed through the House, because nothing can then be done to retrieve the situation.

I have been dealing with Tory Governments in the House for five years. I have learnt not to trust Tory Governments and especially not to trust the Parliamentary Under-Secretary of State for Scotland, the hon. Member for Eastwood (Mr. Stewart) when they make commitments about political issues. The Minister's policies are completely opposed to the best interests of the people I represent in the House.

Mr. Allan Stewart

rose—

Mr. McAllion

If the Minister is about to ask me to recount an instance when he misled the House and the people of Scotland, I will do that right now: the poll tax. The Minister was one of the most vociferous supporters of the poll tax throughout the last Parliament. However, he then stood on his head and said that he no longer supported it. He said that he supported the new council tax because the poll tax had been the disaster that we said it was going to be throughout the last Parliament when—

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

Order. The hon. Gentleman should withdraw the word "misled".

Mr. McAllion

The Minister certainly gave an impression about something that was not true. Whether he deliberately misled the House, he painted a picture that could not be delivered in the real world outside the fantasy world in this place.

The trouble with dealing with issues in Standing Committee, even in respect of a Scottish Standing Committee when there must be no fewer than 16 hon. Members from Scottish constituencies on the Committee, is that there will be a Government majority in the Committee as a result of the addition of English Members to the Committee or by keeping Opposition Members off it. In other words, the minority party in Scotland—the Conservative party—will be able to create an artificial majority on a Standing Committee dealing with a Bill on matters that relate exclisively to Scotland.

I do not doubt the Minister for a moment when he says that he will consider just about anything in Committee. I am sure that he might even consider the possibility of establishing a socialist republic in Scotland, but that does not mean that he will concede it in the Standing Committee. He will consider any of our suggestions in Committee, but he will use the Government's inbuilt majority not to give concessions to the Opposition. That has always been my experience of Standing Committees under the Tory Government. They listen, but they never hear what is said. They have no intention of honouring the commitments they give in Second Reading debates.

At the heart of the Bill is the Government's determination to cut public spending on bankruptcy procedures. The Secretary of State described how the costs are spiralling out of control. He said that the costs were £20 million last year; that they would be £50 million in 1993–94 and £80 million in 1994–95. He even identified the source of those spiralling costs as he did in the Scottish Grand Committee. He said that the source was the changing rate or pattern of sequestrations since the introduction of the Bankruptcy (Scotland) Act 1985.

Initially sequestrations were seen as a means whereby debtors' assets could be realised and the proceeds divided fairly between the creditors, the 1985 Act changed all that according to the Secretary of State. In 1986–87, 75 per cent. of the total of 437 sequestrations were creditor driven and came before the courts because the creditors asked for that to happen, in 1991–92, 87 per cent. of 8,500 sequestrations arose through the procedure which allowed debtors to appoint insolvency practitioners as trustees to petition the courts on their behalf.

In those cases, the funding came directly from the public purse. Millions of pounds of public money will be saved only if debtors are denied access to bankruptcy procedures that are currently available to them. If those debtors have to be guaranteed continuing access to bankruptcy procedures under a different form, it is difficult to see how the savings in public expenditure can be achieved.

If the Minister argues that, in an average sequestration, 89 per cent. of the cost of the work arises from what he describes as junior administrative grades and that that work can be handled more efficiently and more cost-effectively in the public sector than in the private sector, that argument delights me. Of course, the Minister himself is one of the great apostles of free enterprise, and he does not really believe that argument.

The Secretary of State said that the Government are taking the process back into the public sector so that they can then use market testing to put it back into the private sector. Their case is that they can make savings by putting the process into the public sector and make even more savings by putting it back into the private sector. That makes nonsense of the Government's arguments in support of the measure.

The Minister knows that, if cash is to be saved, access to bankruptcy procedures must be limited to people with debt problems. That is why I continue to oppose the measure and why I shall support the motion. There must be a Special Standing Committee. The majority of hon. Members who vote tonight will not have read the 1985 Act and will not know what issues are involved in the Bill. They will simply vote on party lines on issues that they know nothing about.

This is an important measure, which will have a real effect on real people in Scotland. For their sake, it is absolutely essential that every Scottish Member fully understands exactly what is involved in the change that will be brought about by the Bill. None of us is an expert in the matter, although some hon. Members have legal backgrounds. The real experts are in Scottish communities, working for money-advice projects, citizens advice bureaux, legal firms, accountants and so on. We need to hear from them what the implications of the measure are. Therefore, it is absolutely essential that there is a Special Standing Committee. If the Government are not prepared to concede that, it is because they are not prepared to have their Bill exposed to expert scrutiny. That is all the more reason why the Government have no right to proceed with the Bill.

5.21 pm

Mr. Phil Gallie (Ayr)

It absolutely amazes me that Opposition Members feel that the Bill should go to yet another Committee, particularly as they say that they agree with its contents. Perhaps that is simply a means of inducing an argument. To date, we have had two Scottish Grand Committee sittings; today we are having the Second Reading debate, and the Bill will then be committed to a Standing Committee. At that point we will go into the detail of the Bill.

There has been a massive escalation in costs, from £13,000 five years ago to £18.5 million today. Surely there is something wrong. Surely we need to act swiftly. If we look to the future, we see escalating costs. I do not know what Opposition Members think, but money wasted on administration—that is what much of the money represents—could be better spent in my constituency. I look to the Government to do that as swiftly as possible, and I look to Opposition Members to back them.

Mrs. Ewing

The hon. Gentleman may not be aware of the background of the legislation, but, several years ago, there were cries and calls from Opposition parties for an investigation into the matter, which could have saved £12 million to £15 million. If the Government had acted more expeditiously, that money could have been saved and spent on better prospects. The legislation does not take account of all elements of bankruptcy law. It is almost a misnomer of a Bill, as bankruptcy is mentioned only in the title. We have not examined the regulations or other aspects to ensure that we have an effective system of sequestration in Scotland, enabling access at reasonable cost.

Mr. Gallie

I thank the hon. Lady for her intervention. The Bill addresses real problems. The Government have examined it in detail, and many items in the Bill will assist better administration in future. The matter is urgent and I certainly support the Government.

I deplore the attitude of Opposition Members who complain about lack of time to debate the issues. The Scottish Grand Committee lost 45 minutes on absolute nonsense and protests about issues that have nothing to do with the Bill. The hon. Member for Dundee, East (Mr. McAllion) said that my hon. Friend the Member for Tayside, North (Mr. Walker) took 22 minutes to debate the issues in the Bill, yet the hon. Gentleman was involved in wasting those 45 minutes in Committee. I ask right hon. and hon. Members to bear that point in mind.

There is much talk about consultation with other quarters. The hon. Member for Glasgow, Garscadden (Mr. Dewar) listed several contacts. He talked about the Institute of Chartered Accountants of Scotland, local accountants, Drumchapel law centre, citizens advice bureaux and money advice centres. He omitted the Scottish Consumer Council. That organisation took account of creditors. I am surprised that the hon. Gentleman omitted it. Perhaps he would like to comment on that. [HON. MEMBERS: "Why?"] Because three parties are interested in the Bill. There are the creditors, who are important; the accountants, who certainly have an interest and have operated in such matters in recent years, and, most important, the individuals and companies which are in deep trouble. In Committee, creditors were ignored by Opposition Members.

Mr. Dewar

At the great danger of extending the hon. Gentleman's speech, may I ask him to comment on the views of the Scottish Consumer Council? The hon. Gentleman will remember that it said: We support the Bill's primary purpose. It went on to say: We are extremely doubtful that individual debtors will feel competent to petition the court without any form of assistance. The council went on to say that the system was wrong and gave three specific, fundamental ways in which it should be changed and which the Government are resisting. The council said: We are very disappointed that there has been no prior consultation. The Scottish Consumer Council has great sympathy with my point of view.

Mr. Gallie

I have taken much time to examine all the consultations in detail. Further, I have met representatives. [Laughter.] Perhaps it is hilarious to the hon. Member for Garscadden that Conservative Members take time to talk to those bodies. I have taken time to talk to the Scottish Consumer Council. I have also taken time to talk to accountants and advisory bodies. I recognise the points that they have raised and I am prepared to take them on board. I am quite sure that the Government have also taken them on board. The place to consider them in detail is in Committee.

Mr. Wilson

We must get to the bottom of this. The hon. Gentleman prayed in aid the Scottish Consumer Council and said that it was concerned about creditors. I am sure that it is—we all are—and that is perfectly right. However, in addition to what my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, the Scottish Consumer Council said: Our concern is to ensure that the benefits to consumer debtors introduced with the 1985 Act are not lost in the process of this Bill. Does the hon. Gentleman share that concern?

Mr. Gallie

Of course I share that concern. I have borne it very much in mind. The Bill provides protection. 1 do not necessarily agree with every issue that has been raised. Conflicting views have been put forward. I acknowledge that. I will make my judgment, and no doubt other hon. Members will also do so.

I return to the Bill. The Bankruptcy (Scotland) Act 1985 was designed to help people who had reached a state of personal and financial crisis. I wish to concentrate on low assets cases. From 1985 onwards, the Act provided a great deal of protection for debtors from debt collectors, sheriff officers and institutions. It took constant pressure off them. As I said in the Scottish Grand Committee, it was a caring Act. For many people there seemed to be no way out. The 1985 Act gave them some light at the end of the tunnel.

However, sequestration is all too often taken up as an easy option, as I said in the Grand Committee. I was told that I was insensitive in doing so. Perhaps the tears trickle down the cheeks of Opposition Members when they look at things in realistic terms. But my heart goes out to the many small businesses and self-employed people who have extended credit terms in good faith. One of the consequences of too easy recourse to sequestration is bankruptcy and loss of jobs for others. We must take that on board. There is a snowball effect. We seek protection for individuals. We need protection all round.

As my hon. Friend the Member for Tayside, North said, all too often people are pushed into bankruptcy without giving due consideration to what it means for the future. Once they have signed on the line with an insolvency practitioner, there is no way back. There is no pause for reflection. There is no chance of changing their mind. People often do not realise that bankruptcy means that for them credit will not be an option for the next 15 years. That can be important to young people who want to set up home. It can be important to people at large. We must bear that in mind. I suggest that, as we have done in other legislation, we could inject some form of cooling-off period into the Bill. I ask my hon. Friend the Under-Secretary to consider that.

What of the private insolvency practitioners? They have come in for some stick today. In many cases, these people do an excellent job. In most cases they certainly treat in a sympathetic manner the issues and the people with whom they are dealing. But others have a business approach. The current legislation offers practitioners easy access to considerable rewards. In the Scottish Grand Committee I was delighted to hear my hon. Friend the Minister say that he would examine that point.

The fact that a practitioner can pick up £2,300 to clear a debt of £750 is a bad deal for everyone—for the individual and certainly for the taxpayer. The accountancy profession recognises that there is a need for change. It has suggested that an element of self-regulation is possible. I believe that the industry is capable of achieving that and that it is sufficiently responsible to do so. However, there must be a major change in the fee structure.

Opposition Members have made comments about nationalising insolvency practice. The hon. Member for Garscadden seems to have been converted on the way to the polling booth to the benefits of privatisation. I welcomed his comments about nationalisation of the bankruptcy procedure. But I also welcomed the words of my right hon. Friend the Secretary of State, who suggested that the private practitioners had a part to play. That is an important point and I await further developments with interest.

The hon. Member for Garscadden referred briefly to non-payers of the community charge. It is unacceptable to me that scroungers, the deliberate non-payers of the community charge who have incurred debts of £750, can look to the insolvency procedure for a way out at the expense of the taxpayer. I ask my hon. Friend the Under-Secretary to consider that point.

At the beginning of my speech, I made the observation that much of the cash currently spent on the insolvency procedure was being wasted on administration and unnecessary involvement without practical achievement. Much of that money would be welcome in my constituency. I take this opportunity to underline that if some saving can be made on administration costs in whatever way—I do not take a dogmatic approach in the argument between privatisation and nationalisation—I would like that money, all of which comes out of the same budget, to be pushed into improving the infrastructure in Ayrshire and especially into upgrading the A70 to trunk road status.

The Bill seeks to simplify the present system. It will inject a pause for reflection. It will save wasted resource. I look forward to its early implementation.

5.37 pm

Mr. James Wallace (Orkney and Shetland)

In the Scottish Grand Committee, the hon. Member for Ayr (Mr. Gallie) spoke with exemplary brevity because of time pressure. This evening, for the first time in a Scottish debate on the Floor of the House, we have had an opportunity to hear him speak at greater length. It is clear to Opposition Members that his speeches share many of the distinctive features that we have come to associate with those of the hon. Member for Tayside, North (Mr. Walker).

Both hon. Gentlemen made reference to the appalling position of those who get into debt. It is widely agreed on both sides of the House that those faced with the pressures and anxiety of debt are in an appalling position. However, one is entitled to ask under which Government and what philosophy and attitude were so many people pushed into acquiring more and more material possessions? Which Government made credit all the easier to obtain? Now many people suffer the consequences, which affect not only them but their families.

As I did in the Grand Committee, I immediately declare an interest. I am a parliamentary adviser to the Institute of Chartered Accountants of Scotland. As has already been said, the institute has written a letter to the Minister of State, Lord Fraser, stating how it sees the way forward and making suggestions.

Many of us who heard the Secretary of State try to give some semblance of having consulted on the Bill noted that almost all the consultation took place after the Bill was published. I support the case for a Special Standing Committee for several reasons which I shall give in a moment. However, I wish to say at the outset that if there was ever an argument for a Scottish Parliament to deal with Scottish affairs, the way in which the Bill has been dealt with is it.

There have been two sessions in the Scottish Grand Committee and today's debate. Those hon. Members who support the idea of a Scottish Parliament have never believed that we should adopt Westminster procedures lock, stock and barrel. The procedures in this place are so archaic and hostile to the proper consideration of technical measures such as the Bill, that one would hope that with an opportunity to start afresh, one could do it properly. We advocate pre-legislative committees, which could examine such issues and consider the views of accountants and of the many other organisations which have written to us to explain their worries about this legislation.

The hon. Member for Dundee, East (Mr. McAllion), talking about how the Bill was drawn up and launched on an unsuspecting public and profession, caused me to wonder whether the Government involved anyone with practical experience of insolvency proceedings in the drafting of the Bill. I must confess that, for three or four years, I tutored in conveyancing at Edinburgh university, without having carried out a practical conveyance. There are obvious drawbacks to that, as we arc now realising.

So much could be done to improve this legislation with input from people with first-hand, practical experience. We could achieve the Government's objective. It is accepted on both sides of the House that there should be a means for people who get into debt to have access to the courts, to undergo the sequestration process—that process takes a long time—and to start anew. Creditors' interests should be properly looked after, as should the interests of the state and the taxpayer, by ensuring value for money. Those objectives are widely shared.

The present opportunity for comment makes us realise what could have been done at an earlier stage if the Government had consulted. The Bill should go to a Special Standing Committee, which would allow the Government to respond properly to the proposals by the Institute of Chartered Accountants of Scotland. The Secretary of State said that they would be considered with interest, but it is of fundamental importance for the House to know the Government's response before we deal with the Bill, line by line and clause by clause.

The question of debtors' access to sequestration procedures has been mentioned. I accept what the Under-Secretary of State said in Committee, in response to my hon. and learned Friend the Member for Fife, North-East (Mr. Campbell), and what the Secretary of State said today about it not being the Government's intention, in proceeding with the legislation, to put up barriers that do not exist. However, whatever their intention, many organisations that have written to us are justifiably concerned that there are such barriers.

In the Scottish Grand Committee, the Minister referred to advice by way of representation. A letter, which I and no doubt all my colleagues have received, from Drumchapel law centre encloses a further Briefing Note on the Bill on behalf of the "Tackling Debt Group", which referred to the fact that the group had expressed concern about Advice By Way of Representation", because there is necessity of a means test—with no scope for taking debts into account". which might make some people ineligible and, that "limited circumstances" are "presently available" for clients incapable of self-representation through eg language difficulty.

Whatever the intention behind the Bill, there is concern about other procedures—not necessarily those outlined in the Bill—for example, the legal aid regulations, and concern that the position is not as the Government intend. We have also received representations from Money Advice Scotland, which pointed out: The concurrence of a creditor in any small assets petition is extremely unlikely and which believes that some of the procedures and requirements in the legislation might also put up barriers. I accept that that might not be intended, but it might well be a consequence of the Bill.

We must properly examine the Institute of Chartered Accountants' proposals and analyse some of the serious worries expressed by people who have to deal with debtors daily, and who feel that the Bill will block a route which is now open to them, or at least put a high barrier in their way. There is no challenge to the objectives of the legislation and there would not be the sort of partisan approach that might colour a Special Standing Committee considering a more contentious piece of legislation.

I must refer to the proposals submitted by the Institute of Chartered Accountants of Scotland to the noble and learned Lord Fraser, for example in relation to cases where there are assets—non-schedule 2 cases. We heard a welcome repetition of the assurance given to me and to the hon. Member for Kincardine and Deeside (Mr. Kynoch) in the Scottish Grand Committee, that the Government would undoubtedly reconsider the matter.

The institute also suggests that there should be a switch in onus. Rather than the debtor having to acquire the consent of two thirds of the creditors, one third should have to object to prevent protected trust deed status, as sequestration might thus be avoided, which would further reduce any call on the public purse.

I understand that, in about 80 per cent. of all cases, there arc no assets. The summary administration procedure is a welcome feature of the Bill, and it has been estimated that it might cost a fee of about £800 plus outlays. which is a considerable saving on the amounts being discussed. We need some inkling of the Government's response to that proposal, because it totally shifts the background against which the Bill is being discussed.

As another practical means to save money, it has been suggested that the accountant in bankruptcy should merely audit a sample of cases. There should be proper discussion of whether that would offer an adequate safeguard, where public money is involved. The institute also discusses what it describes as "small asset" procedure—cases where assets are not sizeable but where a business is involved and the work will thus not be straightforward, rather than cases of consumer debt. It is suggested that the interim trustee would act, the present block fee of £2,000 would apply, and it would be up to the trustee to submit to the accountant in bankruptcy that that was the proper way to proceed. The accountant could countermand that if he thought that the case should proceed by way of summary administration.

That would reverse what is likely to happen under the Government's proposals, when the first step in what might well be a more than usually complicated procedure would be to apply to the accountant in bankruptcy who, recognising that the case would be more than run-of-the-mill procedure, would use the powers given to him under the Bill to farm it out to a practitioner at a fee. That would involve an important loss of time and unnecessary duplication of effort. If the insolvency practitioner acts as the interim trustee—subject to the accountant in bankruptcy saying that that was not appropriate and that the case should proceed to summary administration—the safeguards would still exist, but some of the other qualities of the present system could remain.

It is worth considering whether the debt threshold of £750 might be increased. A figure of £1,500 has been mentioned. That might need to be increased by order to keep pace with inflation. The summary administration also puts a limit on liabilities, which must be less than £20,000. If the process is triggered off by a lack or a negligible amount of assets, the size of the liabilities hardly matters.

However, it would be a matter of public interest if someone had managed to build up liabilities of £100,000 or £200,000 on the basis of assets of, for examle, £2,000. In such a case, something would have gone very wrong and that would require further investigation. I do not believe that we need to stick to a figure of below £20,000. I have outlined some practical proposals, which could lead to a reduction in costs and achieve one of the objectives upon which all hon. Members are agreed.

I listened to what the Secretary of State said about maintaining the local network, which is important. Since the debate in the Scottish Grand Committee, I have received further correspondence from the citizens advice bureau in Shetland, which has just been established. It emphasises the importance of quick and ready access to an insolvency practitioner. Most of those serving the Shetlands come from Aberdeen and they manage to provide a quick response because of the good connections between the two. One firm of insolvency practitioners has already been mentioned in the debate and, in all fairness, I should add that the citizens advice bureau in Shetland has no complaints whatsoever about the quality of its service.

It is assumed that, if someone approaches an insolvency practitioner, a sequestration will automatically follow. I made the point in the Scottish Grand Committee that when the insolvency practitioner is given the opportunity to analyse a person's situation, assets and liabilities, a course of action, other than sequestration, may well be counselled. In response to my intervention, the Secretary of State confirmed that other such courses would not be possible under the Bill. Once one approaches the accountant in bankruptcy, that is that. In the past, one depended on seeking advice from bodies such as citizens advice bureaux or other advisers on money. In many parts of the country, the citizens advice bureaux and other money counselling services are not readily available. That is a serious gap. Under the Bill, the Government may push people into sequestration who might not otherwise choose that option.

It is important not to overlook the personal dimension. The letter that I received from the Shetland's citizens advice bureau states: Here the personal relationship between the debtor and his trustee is invaluable, hence why we always recommend insolvency practitioners who regularly visit the island. This relationship provides a source of security and benefit for all concerned, debtor, trustee and creditor. I doubt that it will exist when the work is taken over by a government department, the public already see these as impersonal. We are considering people who are in dire straits, with very serious personal problems. We cannot put a monetary value on a personal relationship such as the Shetland citizens advice bureau described, but I fear that it might be lost.

Mr. Wilson

Does the hon. Gentleman agree that the statistics, which give the breakdown by court area, support his case? Last year, in Lerwick sheriff court, there were 16 sequestrations. That hardly suggests a rush for the "easy option" as has been suggested by some Conservative Members.

Mr. Wallace

The hon. Gentleman has the advantage of having a copy of the detailed breakdown, but the point is well made.

Mr. Gallie

rose—

Mr. Wallace

I shall not give way, as I want to conclude.

Sufficient arguments were made in the debate in the Scottish Grand Committee and have been made in this debate to suggest that the matter needs proper re-examination. As I told the Secretary of State, it is unlikely, given the timing of next week's meeting of the Select Committee on Selection and the fact that the Standing Committee—or better still a Special Standing Committee—will be unable to sit until 30 June at the earliest, that the Bill will finish its Committee stage before the recess. Therefore, the Government should turn "homeward and think again".

5.54 pm

Mr. Michael Connarty (Falkirk, East)

I do not intend to rehearse the arguments that I made at some length in the Scottish Grand Committee. I shall confine my remarks to the motion.

I admit to being a sceptic by persuasion, but I was drawn into suspending my normal suspicion by the Government's offers—unlike my hon. Friend the Member for Dundee, East (Mr. McAllion), who may have more experience of the Government. The Parliamentary Under-Secretary of State for Scotland, the hon. Member for Eastwood (Mr. Stewart), offered conciliation and even co-operation, which was very impressive. There was even a search for an understanding of the plight of persons forced into bankruptcy rather than a scurry by the Government to take back moneys from the private sector.

I was particularly impressed by the nods and smiles of the Parliamentary Under-Secretary of State for Scotland, the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton), when the arguments for such understanding were made. I now realise that he and his hon. Friend were squaddies, or, rather, non-commissioned officers, on the loose and that the sergeant major was on another exercise. He has now returned. The Government's normal dismissive approach to Scottish matters has been reasserted by their refusal to set up a Special Standing Committee, which we thought would be forthcoming.

The House must ask what great concession the Government made. Was it that they would provide finances for something in Scotland or that they would concede the power to make decisions on the Bill to the majority of Scottish Members? The great concession that they nodded at and hinted at, but which they would not dare promise, was that they would listen to those in Scotland who were concerned about the Bill. I know that most Scots do not believe that. My hon. Friend the Member for Dundee, East stressed the fact that they, and I, would have been wrong to believe it. Given the Government's breach of faith—the fact that a Special Standing Committee will not be established and will not hear evidence—Labour Members were forced to ensure that this debate took place.

Why will the Government not listen? Are they afraid of what they might have heard from those who would have presented evidence to a Special Standing Committee? I had hoped to hear from the accountants rather than from the hon. Member for Orkney and Shetland (Mr. Wallace), who nevertheless did a splendid job on their behalf. I would have liked the accountants to explain how they discovered the sudden economies that allowed them to offer a cheaper deal.

I must tell the hon. Member for Ayr (Mr. Gallie) that the moneys to which he referred went, not into administration, but into profits. As the hon. Member for Moray (Mrs. Ewing) pointed out, on a time-and-line basis, each case could have been dealt with for £500 when the standing charge was £2,140. The argument about the fees charged was not about administration but about profit.

I would be interested to hear the views of someone who can calculate, unlike the civil servants who put together the financial memorandum for the Bankruptcy (Scotland) Act 1985 and for the Bill. I would like to know how many cases one would reasonably expect to deal with between 1993 and 1995, given the present economic environment and the free and easy credit regime initiated by the Government.

Mr. Gallie

The hon. Gentleman has referred to civil servants' belief that, without the Bill, costs would escalate. May I draw his attention to the intervention of the hon. Member for Cunninghame, North (Mr. Wilson), who pointed out that relatively few cases had passed through Lerwick sheriff court? Surely that gives substance to the estimates made by civil servants.

Mr. Connarty

It probably says a great deal about frugality and the way in which people run their affairs in Lerwick rather than the Government's economic policies.

I would have been interested in the accountants' view of how many cases could be processed, if the estimate contained in the financial memorandum of a cut of between 75 and 80 per cent. in expenditure had been realised. The memorandum states: It is estimated that some 75-80 per cent. of the projected expenditure required to operate the present arrangements can be saved as a consequence of implementing the Bill. I do not see how that can happen unless far fewer cases go through than at present, not to mention the estimates of the number of cases in the future.

Accountants may have been tempted to give the view on the relative scale of their largesse of £18.5 million compared with other well-known transfers of profit-making enterprises to the private sector, such as British Telecom, British Gas and the electricity and water undertakings to name but a few. I am sure that those accountants do not consider their largesse to be very grand compared with the £95-a-second profits of BT.

I hoped to have heard from the debtors, possibly through those to whom they turn when in despair. I have heard many disturbing comments today about debtors taking on credit which they cannot afford and not being frugal enough.

For example, a client of a money adviser—a 19-year-old pregnant girl living in bed-and-breakfast accommodation—had lost her job and was no longer living at home, having fallen out with her parents. Where did she accrue most of her debt? She had bank loans of £1,200, £1,100 and £1,000. Amost 60 per cent. of her debts were made up of bank loans. That has little to do with trade; it has more to do with how people who obviously do not have sufficient income to repay the debt are pushed, egged and encouraged into debt by what should he responsible institutions. That better shows the meaning of a "debtor" than those who take on debts which they do not intend to repay.

Mr. Gale

Will the hon. Gentleman give way?

Mr. Connarty

No. We have all heard enough from the hon. Member for Ayr for the moment.

I should like to have heard about the paralysis of debt and poverty. I have heard much about that in talking to people who deal with the problem. It makes petitioning on a personal basis terrifying for many people who are in the depths of poverty and debt. It is terrifying to many and a barrier to most. We need clear amendments to the legal aid rules to assure everyone that, when people wish to present a petition, they do not find themselves facing further financial barriers. We have heard assurances from the Government on that, but I want the Secretary of State to show that my hon. Friend the Member for Dundee, East (Mr. McAllion) was wrong to be sceptical, and that he will produce a solution to that problem faced by many people.

I wanted to hear more about the process through which people go. There is much talk about people being rushed into bankruptcy to get out of debt easily. Someone who deals with that matter advises me that the present procedure is extremely thorough. When a client asks such an organisation for help, his financial situation is studied closely. His income is maximised by checking on his entitlement to rebates, and creditors are contacted to explain the clients' position and requesting them to freeze interest payments accruing on accounts. Much work goes into trying to stop people entering the bankruptcy procedure. I have no evidence that people rush into it, as Conservative Members have been hinting.

The Government's approach suggests that bankruptcy is an option—but only after a long process. I wanted to hear about that process and to see some sensitivity toward it in the Bill. I also wanted to hear about the beneficial actions of the permanent trustees to ensure that those arc not denied to people. According to my reading, they are certainly beneficial. I accept and have stressed that it is an expensive process. Indeed, I used the word "greed" when I spoke in the Scottish Grand Committee. That may have been too strong a term, but if costs can be cut by 50 or 60 per cent. in a couple of weeks, super-normal profits were being made and there might have been an element of greed.

Creditor pressure could be stopped, not only on the debtor but on his family, because it is distressing, frightening and crippling. The trustee could stop the recalibration of power meters, when people pay so much per unit for their power that they can never get out of debt, tackle their futures and put their lives in order. People with social fund repayments to make could have those repayments stopped to allow them a breather to try to sort themselves out. That is what credit, bankruptcy and sequestration were all about and that is what the Government said that they were about in 1985. We must ensure that those measures are still available to alleviate those pressures, even though people may not have the same automatic right to go to a permanent trustee.

It is important that the Bill should respond to people's fears. If we create more fear, we shall do an injustice to the people of Scotland. The fears of the organisations that represent debtors must be taken on board. Most of them have been mentioned before, but I shall mention some again. The charge for lodging a petition must be dealt with. Would the accountant in bankruptcy deal with problem creditors? Would he give the protection which the permanent trustee gives? Would the limited assets or summary procedure be introduced, as the Government say? Would not it be so complicated that people would have to go to another agency for help? I should have liked to have heard people speak about those problems, and that is why a Special Standing Committee was so important.

I wanted to hear from organisations that supported the prime purpose of the Bill. Some have been mentioned, but I refer particularly to the Scottish Consumer Council, which, although it supported the Bill, had serious reservations about it. It said: We are extremely doubtful that individual debtors will feel competent to petition the court without any form of assistance 2026; it would be difficult for a debtor to present a petition in the correct form.

It went on to make sensible suggestions about simple forms of petition and said that the technicalities of the reference to protected trust deeds should be deleted so that the debtor could petition without a qualified creditor moving against him. There should then be an agreement that no costs would be incurred in the courts in the sequestration process. It is important that we hear from those people but the Government have denied us that opportunity.

We need to undertake a process of discussion and education, rather than just replying to people's questions and amending the Bill in a minor way. We need to enter a process of construction and, hopefully, reconstruction of the 1985 Act, not just to answer those simple questions but to give Scotland a legal process that will allow people to free themselves from the crippling spiral of debt. A Special Standing Committee would have given us that opportunity, which is why we are debating the matter tonight. Are the Government really saying that civil servants or Ministers alone can work out the results of legal procedures? The effects of the 1985 Act show that that is an untenable argument and it is unlikely that, if done alone, it will be done properly.

Are the Government also saying—it would appear that they are—that they accept that only Opposition Members will act as ciphers for the concerns, questions and suggestions of the socially sensitive organisations in Scotland? Again, that is what they appear to be saying in denying the setting up of a Special Standing Committee.

It is important that we get around the table in a dialogue with the people who are trying to put submissions to us—accountants, consumers' organisations and debt counselling organisations—and work out a strategy sensibly and thoroughly. The present method may place us in a more defensive and protagonist position because of the Government's decision on the Special Standing Committee. I invite the Secretary of State and his junior Ministers to review their position and to help the Opposition to achieve what we thought was promised in the Scottish Grand Committee—the optimum result for debtors and creditors in Scotland.

6.7 pm

Mrs. Margaret Ewing (Moray)

The Secretary of State spoke of the widespread harmony for a change in the bankruptcy law in Scotland. Speeches from the two sides of the House have shown that there is harmony on that general principle. However, I wish to look at the underpinning issues because, if we are to talk about harmony, we should seek to achieve changes to the law that would have the full support of the community in Scotland. It is clear from the representations that have been made prior to the debate in the Scottish Grand Committee and since then that that harmony does not exist in Scotland.

The Secretary of State also said that the legislation was being introduced as a result of the monitoring of the workings of the 1985 bankruptcy legislation. That is a slightly ingenuous interpretation to put on the Bill because the workings of the 1985 Act were not constantly monitored. The Department of Trade and Industry instituted not monitoring but evaluation processes in 1990, subsequent to questions that I asked in the House. So there was not consistent monitoring of the workings of that Act until that stage. That should be clearly recorded in our deliberations.

We all welcomed the issue of access which was dealt with in the 1985 Act and we want that issue to be retained in this legislation. But if we are to move forward, we should ensure that the changes that we make are effective and will work on behalf of all the people of Scotland.

There is no confidence north of the border that the Bill will resolve the problem of excessive cost, which is the essential trigger mechanism that has set this legislation in train. The Bill is, in effect, nationalisation, although the Minister hates to use that word. Alternative ways of saving money have been offered to him. In the Scottish Grand Committee, I suggested taking a time-and-line attitude similar to that of the legal aid provision of advice and assistance. He appeared to reject that idea, saying that the legislation had to be on the statute book before he could consider such issues. I find his attitude difficult to understand, as the Institute of Chartered Accountants of Scotland has made alternative proposals. Is the Minister saying that the legislation has to be on the statute book before the institute's suggestions can be implemented or even considered?

Mr. Allan Stewart

I was saying that the present agreement between the institute and the accountant in bankruptcy is voluntary. The Bill gives the Secretary of State powers relating to the setting of fees so that he is in a much stronger position than at present.

Mrs. Ewing

The powers do not need to be contained in legislation such as the Bill but could be introduced via other mechanisms available to the Secretary of State, such as statutory instruments, to provide elements to assist him in altering the present position.

Mr. Stewart

I can assure the hon. Lady that such changes would require primary legislation.

Mrs. Ewing

I am grateful to the Minister for clarifying that. As he knows, I am not a legal expert and I am trying to get to grips with the issue as I have many worries about the legislation.

Is the Minister prepared to take a serious look at the representations that have been made by a variety of organisations to ensure that the primary legislation provides a framework that can be used to develop bankruptcy law and address the problems at the heart of the matter? That case is being put to him firmly by Opposition Members, and I ask him to consider it seriously.

Primary legislation can be amended in future, but we should ensure that any primary legislation that we place on the statute book does not have to be amended time and again to resolve problems that could have been avoided in the first instance.

Mr. Stewart

The short answer to the hon. Lady's question is yes.

Mrs. Ewing

I find that interesting, as the Minister seems to be saying that, if the Government are to take account of the proposals, a large number of Government amendments will be tabled in any Standing Committee that is established to consider the Bill.

Consultation is important because, as a Parliament, we have not addressed the causes of bankruptcy. Hon. Members mentioned the increase in credit. In an article in the business section of The Scotsman yesterday, Gordon Milne expressed his concern at the rise in consumer credit. We should consider the self-employed. It was suggested that the Minister might supply statistics on how many sequestration cases there have been involving the self-employed and small businesses. Such issues have not been addressed, despite requests for investigations into the causes of bankruptcy.

We need an objective appraisal of the costs of sequestration. What skills and expertise are needed? How much time needs to be spent on different cases? We should consider those questions before taking a major step forward.

In an earlier intervention, I mentioned Mark Berman, the only practitioner in debt advice in the Dumfries and Galloway region. I said that some aspects of the Bill would make it much more complicated, at least initially, for people to start sequestration procedures. Other hon. Members have mentioned the fears of individuals—some of which are physical fears. People obviously have mental and emotional worries, but they are also anxious about physical aspects related to warrant sales, with the knock on the door and all that that implies. Technical amendments contained in the Bill could be introduced immediately, while allowing consultation to take place.

Some of the proposals in schedule 1 are designed to close loopholes that exist in current legislation. Paragraph 16 of schedule 1 amends section 54 of the Bankruptcy (Scotland) Act 1985, which failed to protect the rights of secured creditors such as banks and building societies by preserving their security after the debtor obtained a discharge from bankruptcy at the end of a three-year period. Section 54 needs to be amended quickly, as debtors who are continuing to pay mortgages and rent are threatened by the possibility of eviction under the provisions of the 1985 Act. That is an horrendous position in which to place people who are honestly trying their best to continue payments, despite severe difficulties.

Surely it is not beyond even this Government to consider the possibility of twin-track legislation in Scotland to introduce the Bill's positive proposals, and implement them simply and quickly, while taking the opportunity to look at bankruptcy law in general and ensure that the legislation is effective. If the Government are taking stock, they must bear in mind the Bill's fundamental proposals.

The Scottish National party will support the proposal to set up a Special Standing Committee to consult all the organisations in Scotland involved in bankruptcy. Surely the Minister must have been impressed by the fact that organisations as diverse as the Institute of Chartered Accountants in Scotland, the Law Society of Scotland, the Castlemilk law centre and the Drumchapel debt centre—organisations from different spectrums of society—are as one in asking for further consultations.

A letter from Mark Berman in Dumfries and Galloway states: There appears to have been a total lack of consultation on this important issue. In February of this year, Money Advice Scotland held a seminar on bankruptcy, at which the keynote speaker was the Accountant in Bankruptcy. At no point did he indicate that such radical changes were imminent. It is now June and we are talking about radical changes. He continued: At no point was Money Advice Scotland, Citizens Advice Scotland, The Scottish Federation of Independent Advice Centres, or the Institute of Trading Standards consulted. These are groups that deal with a large number of the 'no asset' sequestrations. There was no need for the secrecy, as all groups could have, and probably would have, been able to make suggestions that would have improved the system without the destruction of a process which has, to this point, shown itself relatively successful. That organisation works at the sharp end dealing with debtors' problems. It knows better than any hon. Member what it is like to deal with a person who walks through the door with problems on which its representatives have to offer advice. It is on behalf of such people that we make our plea for a consultation process.

It has already been said in today's debate that the time scale involving the Second Reading, the meeting of the Selection Committee and the establishment of a Standing Committee means that there is no opportunity for the Bill to finish its passage through the House of Commons before the summer recess. I have already drafted many amendments and, if I am chosen to serve on the Standing Committee, I shall move them and fight the Bill line by line. I am sure that many hon. Members will do the same.

Why are we Scottish Members not using the weeks before the summer recess to meet organisations to try to ensure the harmony of which the Secretary of State spoke? There is a Caledonian consensus that we need time to consider the issue. If we want harmony, we should ensure that the voice of those working in the sphere of bankruptcy are heard as the legislation makes its progress.

6.19 pm

Mr. Malcolm Chisholm (Edinburgh, Leith)

I am interested in the Bill from the point of view of low-income debtors. I have been influenced by the strongly expressed views of people in the Leith constituency who advise them.

Many such debtors have been dragged unavoidably into the use of expensive credit for everyday living expenses. Some of their debts might be called state sanctioned debts because they pay the price of Government policies, such as the poll tax, social fund repayments and enforced rent increases. Even more fundamentally, it is the Government's failed economic policy that underlies the debt spiral, with still rising unemployment and continuing high interest rates. That, rather than the too easy access to sequestration emphasised by the Secretary of State, explains the rising tide of bankruptcy.

Those in my constituency who give advice and have come to me with their concerns make three points. First, they ask why they, the experts, have not been consulted on the Bill and why it has suddenly appeared from nowhere. I suggest that it is because the Government are not interested in what happens to low-income debtors. Secondly, they tell me that the Bankruptcy (Scotland) Act 1985 is one piece of legislation that works quite well. Indeed, I cannot think of any other legislation in the past 13 years of which that could be said. They tell me that it provides an escape route for low-income debtors. Thirdly, they believe that the purpose of the Bill is to make it more difficult for people to be declared bankrupt and that that is the hidden agenda of the Bill.

Before this debate, there was some evidence for that in the answer that the Under-Secretary of State, the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton), gave on 16 March about there being too easy access to sequestration. In the Scottish Grand Committee the Under-Secretary of State, the hon. Member for Eastwood (Mr. Stewart), suggested the same when he said that the 1985 Act was designed for trading concerns and that too many people were using it for the wrong purpose. Finally, today the cat was let out of the bag by the Secretary of State. The first 10 minutes of his speech were all to the effect that far too many people were using the sequestration procedures. Therefore, the open agenda of the Bill is to cut down on the number of people who gain access to sequestration.

There are three particular concerns. The first is to do with money, the second with accessibility and the third with counselling. Clause 6 provides that money must be paid by someone seeking sequestration through a petition in court. Clause 8 talks of fees being paid to the accountant in bankruptcy. Some of that has been explained in terms of legal aid for poor people. We are told that legal aid will be available, but there is nothing in the Bill about that. Before 1985, legal aid was not available to people seeking sequestration. Even if legal aid is made available, there will be delays, many law firms will not take legal aid work and many people will be excluded from it.

On accessibility, I am sure that everybody in Scotland would like to pay a visit to Leith where the accountant in bankruptcy is based. It is impossible for people in financial difficulties to pay such a visit. In effect, we have a system of bankruptcy by post. How can people have access to good local advisers if everything is centralised in one place?

The Bill says nothing about counselling; yet I am told by the debt advisers that insolvency practitioners give good advice to people in difficulties. That is not mentioned in the Bill. Its purpose is betrayed by that because, clearly, it is not concerned with the welfare of low-income debtors.

We are told that the Bill has been introduced because of the expense of the present legislation. Lots of dodgy figures are floating about. It is suggested that, in 1994, 30,000 or 40,000 people will be seeking sequestration—perhaps that is the Government's comment on their own economic policies. One of those who spoke to me told me that on those projections the whole of Scotland would be bankrupt by the year 2010. That may be another fitting comment on the Government's economic policies, should they still be ruling Scotland then, which they will not.

Moreover, if the Government want to reduce the expenditure, there are other ways of doing so, such as by reducing the sequestration period from three to two or one year, by abolishing the block fee or by taking the accountants' offer to slash lees. If the Bill were about saving money, those measures could be adopted. The hidden agenda is the desire to cut numbers. Public expenditure savings will, of course, he made through reducing the numbers of those who have access to the sequestration procedure.

I appeal to my hon. Friends not to be seduced by the nationalisation argument. Nationalisation does not mean anything that is run by a Government official. I support nationalisation more than any other hon. Member—I hope that I am not insulting anybody present—although I would not necessarily use the word "nationalisation". I support nationalisation only if it helps working people and those who would like to be working people if the Government gave them the chance. The Bill does not help those people, which is why I shall vote against it tonight.

6.26 pm

Mr. Brian Wilson (Cunninghame, North)

I shall concentrate initially on two issues. I do not know whether it is possible to have two nubs of the matter, but if it is, these are the key issues.

The first issue has not been sufficiently covered today. The letter from the Institute of Chartered Accountants of Scotland has been addressed to only a select group of Members, but it is fundamental to our consideration of the Bill. If the Minister is about to tell us, as the Secretary of State seemed to tell us earlier, that serious consideration is being given to accepting the ICAS proposition, the whole basis of the Bill is transformed. Indeed, much of its substance would be removed.

ICAS, having seen the Government's proposals and, presumably, recognised the seriousness of the Government's intent, is in effect saying, "Okay, the game's up. We'll do a cheap deal, guy." It is proposing in certain circumstances, and in cases with no assets, which are the great majority, to offer a deal of £800 plus the necessary outlays which, typically, it puts at £200 per sequestration. I am in no position to assess whether that is a better or worse deal for the public purse than setting up a separate department, as the Government propose. If the Government agree that the ICAS deal solves most of the problem and they are willing to enter into a deal with ICAS whereby the fees are remeasured at that level, it is nonsense to proceed with a Bill whose central thrust is to set up a different procedure that would lie in abeyance for cases with no assets. The Minister shakes his head, but if he can explain to me how acceptance of the ICAS offer, if it can be called that, is not in conflict with the procedures on which virtually all our discussions in the Scottish Grand Committee and most of tonight's debate have been predicated, I shall be interested to hear from him.

The second issue has already been raised in an intervention by my hon. Friend the Member for Falkirk, East (Mr. Connarty). As several hon. Members have rightly pointed out, the drift of the Secretary of State's remarks seemed to be that the Bill was all about a numbers game; that the numbers have got out of hand. The corollary of that is that if the problem is to be resolved it must be through a cut in numbers.

In the Scottish Grand Committee, the Under-Secretary, in his reply, referred to the concern that the changes proposed in the Bill might result in debtors being denied access to sequestration; in other words, the numbers argument. He said: I assure the Committee that the Government have no such intention. The savings in expenditure on sequestration will be achieved through tighter control over the fees paid to insolvency practitioners and through the introduction of simple procedures in small asset cases."—[Official Report, Scottish Grand Committee, 8 June 1992; c. 56.] In other words, numbers have nothing to do with it. Numbers can go up. If that is what the force of social circumstances demands, so be it. But, according to that statement, all the savings will be made through cutting the level of costs per case, not attacking the number of cases.

That is obviously at odds with what was said by the Secretary of State and Conservative Members where clearly the populist line being taken is that there are far too many cases and a bit of discipline would be a great social advance because so many people are taking the easy option.

A written answer to the hon. Member for Moray (Mrs. Ewing) seems to point in the same direction. In reply to one of her questions, the Under-Secretary of State said: It is clear that the major factor influencing the number of sequestrations in Scotland is the easier access by individuals to the sequestration process following the introduction of the 1985 Act."—[Official Report, 16 March 1992; Vol. 205, c. 821.] If that is the source of the problem, one does not have to be unduly suspicious to believe that the Government's measure to deal with it will be to reduce access and thereby reduce the number of sequestrations.

It is the Opposition's case, and, in fairness, probably that of the more enlightened Conservative Members, that all the talk of easy options and people rushing into sequestration is nonsense. It is not true; it is a false picture. I agree, as I think will my hon. Friends, that creditors' interests must be protected. We are in favour of protecting creditors' interests and that should be built into the Bill. In addition, people must be protected from themselves. The idea of them being pushed into sequestration or encouraged into sequestration, either as an allegedly easy option or in order further to swell the proceeds for the insolvency practitioners, is outrageous. If that is happening, it should be stopped. I am sure that there is no difference between hon. Members on that. But from what has been said tonight, there is a great difference between us on the prevalence of that practice. Certainly that charge cannot be levelled without some evidence being adduced.

Mr. Gallie

I have had constituents who have claimed that they have signed on to the sequestration process while in an emotional state without being aware of the consequences and that if they had been so aware they would not have signed on. That is a fact which to my mind is indisputable and which is part of the situation we face.

Mr. Wilson

It may be a fact, but it is certainly not indisputable, nor is it proven. The charge that the hon. Gentleman is levelling, presumably against his local accountants, is sufficiently serious to be taken up with them. I suspect that an interesting meeting would ensue. If the hon. Gentleman makes that charge, he is presumably capable of pursuing it.

Mr. Ernie Ross (Dundee, West)

Does not my hon. Friend think it rather strange that, if what the hon. Member for Ayr (Mr. Gallie) says is correct, there is nothing in the Bill about counselling. The evidence from those involved in the money advice centres and all the other organisations concerned was that they and the insolvency practitioners give a great deal of counselling. As I said in the Scottish Grand Committee, given that such people are in an emotional state, why is there no financial provision for counselling in the Bill?

Mr. Wilson

Those points strengthen the case that we are making for a further examination of the measure. It is offensive to insolvency practitioners, never mind to money advice organisations, to suggest that they are somehow inciting people to sequestrate, as though accountants were out in the street with a hook pulling them in in order to encourage them to sequestrate and thereby secure fees for themselves. It is not a picture that I recognise.

I draw the attention of the hon. Member for Ayr to figures with which I was supplied by the Strathclyde money advice service based in Ayr from a survey of cases in the Ayr, Irvine and Kilmarnock area, where 83 per cent. of multiple debt cases resulted in no sequestration and 17 per cent. did so result. Given those statistics, it is improbable that such incitement is going on. If it is, it should be identified and stopped. However, I have seen no evidence that it is going on, and we should not base legislation on the assumption that it is.

The hon. Member for Ayr referred to people escaping the poll tax by taking that extreme course of action. All hon. Members have had hundreds of cases of people who are in debt and difficulty because of the poll tax. I honestly have not come across one case in my constituency of anyone resolving that difficulty, or dreaming of resolving it, by recourse to sequestration. We are talking about people who are in multiple debt—catalogue, utility and bank debt. The idea that people are escaping from the poll tax by this device is fairly absurd.

I referred to the number of cases in Lerwick where only 16 individuals have sought sequestration in the past year. It was suggested that that said something peculiar about—or to the credit of—Lerwick, but looking through a list of sequestrations by sheriff court area in Scotland I am struck not by the oddity of Lerwick but by the consistency of the position. With one or two blips, which could doubtlessly be investigated further, one finds great consistency of relatively low numbers in each area in proportion to population.

My hon. Friends the Members for Dundee, East (Mr. McAllion) and for Dundee, West (Mr. Ross) would be interested to know that, in the year ended 31 March 1992, the Dundee sheriff court had 131 sequestration cases. That is an extremely modest number in a city where everyone knows that a great deal of hardship exists.

Mr. McAllion

I am grateful to my hon. Friend for drawing that statistic to the attention of the House. He will know from information passed to me from the Dundee money advice project that its estimate of the number of cases of debt problems that it handles in a year—this is just one project in the city—is 12,000.

Mr. Wilson

That is a useful reinforcement of the point. Sequestrations represent only a tiny proportion of the total number of debt cases. Ayr sheriff court had 275 cases. That does not suggest that queues are forming each day to take this easy and attractive course. Incidentally, at Ayr sheriff court, the procedure has cost some £600,000. If the whole thing were wiped out, not many roads could be built on the proceeds. Falkirk has had 554 such cases, Forfar 31 and Elgin 151. Those figures are not excessive, and they do not suggest that a campaign is in operation to persuade people to sequestrate themselves.

We want the Bill to include protection for the right of the individual. We endorse the views of all the consumer organisations that have asked us to introduce such protection, so that people are not priced out of the process as they once were. The Minister told us the other day that the Government did not intend that to happen, but intention—or lack of intention—must be translated into the legislation.

The Scottish Consumer Council has asked for three specific assurances. First, it wants a simple form of petition which can be completed by a non-legally qualified person". Secondly, it wants the technicalities of the reference to protected trust deeds deleted; a debtor should be able to petition without a qualified creditor and without having to say what the effect would be of a trustee trying to make a trust deed protected". Thirdly, it wants a Government undertaking that there will be no court dues in sequestration petitions.

I am sure that the Minister is as familiar with those demands as I am, and it would be encouraging if he gave an assurance—in the spirit of what he said in the Scottish Grand Committee—that they would be observed. If he does that, we shall be nearer to accepting that the Government's aim is not to limit the number of sequestrations, but to cut the costs in the ways suggested by other hon. Members and by the Institute of Chartered Accountants of Scotland.

The Opposition felt that this was a good opportunity for the Secretary of State to show a modicum of good will and common sense. In effect, the Bill overtakes an Act introduced seven short years ago by the same Government and, largely, the same Ministers. That Act was based on a travesty of false expectation in relation to its financial consequences. Now, the Government are again taking up the time of the House, Committees and individual Members to introduce legislation that is intended to redress the calculating errors that they made in 1985. I feel that a small amount of humility is called for. It should not be beneath Ministers to accept that a bit of advice might help them to get the legislation right this time—legislation that they recognise as largely uncontentious on party grounds—so that we do not have to undo it again in a few years.

Having considered all that the Secretary of State has said since the general election about new approaches to Scottish legislation, the Opposition considered it eminently sensible to use an existing device to involve more people—lay people; people with some knowledge to offer hon. Members on both sides of the House—in the legislative process. It was a modest proposal, which was not especially partisan, a proposal that would have made this a better Bill than it will be. The Secretary of State, however, rejected it, and it is on that basis that his good intentions will be judged.

6.44 pm

The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart)

The hon. Member for Glasgow, Garscadden (Mr. Dewar) said that he had experienced an unexpected pleasure in Scottish politics. No doubt that is a fairly unusual experience for him nowadays. I am not sure whether the Bill was discussed at the meeting of Scottish Labour Members on Tuesday 2 June. We are indebted to the hon. Member for Hamilton (Mr. Robertson), who wrote in the "Commons Diary" in this week's issue of The House Magazine: The day at 8.00 pm is still young and I attend a two and quarter hour meeting of Scottish Labour MPs. The Group these days is to fraternal, constructive discussion what Kylie Minogue is to Shakespearean acting". Let us not be churlish and deny the hon. Member for Garscadden the occasional pleasure in Scottish politics. Such pleasures are rare and unexpected; let him enjoy them.

In our first debate, the hon. Gentleman said that he thought that I had introduced the Bill with gritted teeth. I assure him that my teeth are now ungritted, and I am delighted to be winding up the debate. We have heard a number of constructive speeches from Opposition Members: as well as two excellent speeches from Conservative Members: my hon. Friend the Member for Tayside, North (Mr. Walker) rightly pointed to the essential need for balance between the interests of debtor, creditor and taxpayer, while my hon. Friend the Member for Ayr (Mr. Gallie) made a number of positive suggestions, which the Government will consider.

The hon. Member for Garscadden, and a number of other hon. Members, have used terms such as "nationalisation", "market economy" and "market testing". In a generally constructive speech, for which I pay credit to him, the hon. Member for Cunninghame, North (Mr. Wilson) mentioned those concepts.

Let me make the position clear. It will doubtless come as no surprise to the House to learn that the Government are fully committed to market-testing the delivery of the sequestration service, in accordance with the principles which we have established. We shall look closely—this relates to a number of points made by hon. Members on both sides of the House—at the detailed implementation of the Bill. We shall want to ensure that, wherever possible, the private sector has an opportunity to undertake the work when it can be done in a cost-effective manner.

At present, the advice agency directs the debtor to a particular insolvency practitioner, who in most cases determines who shall act in a particular sequestration. Neither the creditor nor the taxpayer who is paying for the process has any say in the matter. That relates specifically to the points made by my hon. Friends about the need for balance. In effect, the chosen practitioner is in a monopoly: provided that he maintains a good relationship with the advice agency in his handling of its clients, he can be confident of a steady stream of work.

The hon. Member for Falkirk, East (Mr. Connarty) has moved from a stance of opposition in the Scottish Grand Committee to his present considered scepticism. Let me tell him that the accountant in bankruptcy will be in a position to introduce a much stronger dose of competition into the process. By contracting out the provision of the service to insolvency practitioners, he can ensure that value for money and quality of service are secured. The best, most efficient and most effective practitioners are likely to gain from the process. That is market testing; it is the reverse of nationalisation.

A number of hon. Members—including the hon. Member for Orkney and Shetland (Mr. Wallace) in his intervention on my right hon. Friend the Secretary of State—have rightly focused on the advice function. The hon. Member for Dundee, West (Mr. Ross) was among those who asked who would be responsible for that function. The Government intend to give consideration—in consultation with money advice agencies and others—to the preparation of a guide to sequestration and its consequences, which could be made available to the general public. The preparation and making of such a guide and the provision of purely factual information on the process of sequestration will be the responsibility of the accountant in bankruptcy.

Mr. Dalyell

Will the money advice organisations that the Minister is consulting include the citizens advice bureaux?

Mr. Stewart

I can give the hon. Gentleman an absolute assurance on that point. Many citizens advice bureaux give excellent advice and have developed some excellent computer software in precisely this area.

We shall be preparing a guide and will consult organisations such as the citizens advice bureaux. However, the accountant in bankruptcy will not be involved in advising an individual debtor as to whether to petition for sequestration.

Mr. Wallace

I welcome the fact that the Minister has said that a guide will be drawn up. Will advice and help also be given to the various bureaux with regard to alternatives to sequestration?

Mr. Stewart

Indeed. Both the hon. Member for Cunninghame, North and the hon. Member for Dundee, East (Mr. McAllion) pointed correctly to the fact that the majority of debt problems do not result in sequestration because of the advice that people receive.

Through the urban programme the Government have committed support amounting to £1.25 million to money advice centres in Scotland to ensure that debtors have access to good advice. The hon. Member for Linlithgow (Mr. Dalyell) will be reassured when I tell him that the Government have also provided core funding of over 1.4 million to Citizens Advice Scotland to assist its work with citizens advice bureaux.

Turning to the major point that hon. Members have made in this debate, I repeat the assurance that I have already given and that my right hon. Friend the Secretary of State for Scotland gave earlier today—savings will not be made at the expense of debtors' rights. The savings will come from two sources: more streamlined procedures and the Secretary of State's control of fees. A number of hon. Members have referred to the letter from the Institute of Chartered Accountants of Scotland, which says specifically that a major contributor to the savings that it identified will be the streamlined procedures that are set out in the Bill. I am glad that the hon. Member for Garscadden agrees.

The point that has been made about access relates specifically to legal aid. Debtors will be able to apply for legal aid for the purpose of obtaining the assistance of a solicitor in drawing up and presenting a petition for sequestration. In practice, we expect most debtor petitioners to be funded through the existing legal aid, advice and assistance scheme that is administered by solicitors. That advice can be provided quickly.

I repeat the assurance that I gave to the hon. and learned Member for Fife, North-East (Mr. Campbell) in the Scottish Grand Committee debate: we are also actively considering the extension of the assistance by way of representation scheme to provide legal assistance where a solicitor may have to appear before the court. Hon. Members should, of course, be able to raise questions of eligibility in Committee. That is the correct use of the Standing Committee procedure, but I give that absolute assurance about the Government's intention.

Hon. Members have referred to the provision of services in areas other than rural areas. In the Scottish Grand Committee proceedings the right hon. and learned Member for Monklands, East (Mr. Smith) asked about the position in areas outside Edinburgh. The Bill will enable the accountant in bankruptcy to employ agents to perform any of his functions in individual sequestrations. I envisage the accountant taking advantage of that power, which will allow him to appoint practitioners in the more remote rural areas and in many other parts of Scotland as his agent, in order to ensure that a good quality of service is provided to debtors.

A number of hon. Members referred to the Institute of Chartered Accountants of Scotland's proposals which we have received today. We shall need to consider them carefully. A number of interesting ideas are set out in the institute's letter.

Mr. Dewar

They represent not minor amendments but a fundamental change to the Bill which sets out to deal with an enormous increase in schedule 2 cases and the consequential burden on the public purse. It has been decided that that problem should be dealt with by passing responsibility to the accountant in bankruptcy. The Institute of Chartered Accountants of Scotland proposes that it should remain in the driving seat but that there should be a very much lower fee scale and simplified procedures. It is not just a matter of looking at the proposal with interest. The fundamental question is whether, subject to detailed examination, that is an acceptable proposition.

Mr. Stewart

The Institute of Chartered Accountants of Scotland does not ask in its letter for the withdrawal of the Bill—quite the reverse. The institute has argued consistently that there is a great deal of merit in the Bill, as I believe the hon. Member for Orkney and Shetland would confirm. It has put forward a series of detailed proposals and interesting ideas. One of those is encouragement of the greater use of protected trust deeds. One would need to take account of the interets of creditors when examining the proposals. The hon. Member for Orkney and Shetland and others have confirmed that we are looking sympathetically at a change in procedure for non-schedule 2 cases.

A number of hon. Members asked detailed questions, one of which related to the self-employed. The statistics are unreliable, but they show that of those who have indicated their status, about 49 per cent. have no occupation or are unemployed and about 32 per cent. are employees. The balance is 19 per cent.

During the debate, Opposition Members have alleged that there has not been proper consultation. It is widely recognised that reform of the 1985 Act is needed urgently. We have brought forward our proposals after careful monitoring of the operation of the 1985 Act by the Department of Trade and Industry. The Bill was published on 8 May. It was then available to interested parties. It was considered in the Scottish Grand Committee on 4 June and 7 June, some 27 days after publication. Between then and today's Second Reading debate, nine more days have passed.

The earliest date for consideration of the Bill in Standing Committee is 30 June, merely a fortnight from now.

As my right hon. Friend the Secretary of State rightly told the House, by then there will have been seven and a half weeks for representations to be made and considered. I share entirely the objective of all hon. Members that we should get the Bill right. There is broad agreement on the objectives of the Bill. There is also broad agreement on the need to achieve a balance between the interests of the debtors, the creditors and the taxpayer. Of course it is our objective to get it right in Committee. That is the sensible way to proceed. I urge the House to accept the Bill and to reject the Opposition's motion.

Amendment negatived.

Main Question put forthwith, pursuant to Standing Order No. 60 (Amendment on Second or Third Reading), and agreed to.

Bill accordingly read a Second time.

Motion made, and Question put forthwith, pursuant to Standing Order No. 61 (Committal of Bills), That the Bill be committed to a Special Standing Committee.—[Mr. Dewar.]

The House divided: Ayes 262, Noes 294.

Division No. 34]	[7.00 pm
AYES
Abbott, Ms Diane	Anderson, Donald (Swansea E)
Adams, Mrs Irene	Anderson, Ms Janet (Ros'dale)
Ainger, Nicholas	Armstrong, Hilary
Ainsworth, Robert (Cov'try NE)	Ashdown, Rt Hon Paddy
Allen, Graham	Ashton, Joe
Alton, David	Austin-Walker, John

Banks, Tony (Newham NW)	Garrett, John
Barnes, Harry	Gerrard, Neil
Battle, John	Gilbert, Rt Hon Dr John
Bayley, Hugh	Godman, Dr Norman A.
Beckett, Margaret	Godsiff, Roger
Benn, Rt Hon Tony	Golding, Mrs Llin
Bennett, Andrew F.	Gordon, Mildred
Benton, Joe	Graham, Thomas
Bermingham, Gerald	Grant, Bernie (Tottenham)
Berry, Roger	Griffiths, Nigel (Edinburgh S)
Betts, Clive	Griffiths, Win (Bridgend)
Blair, Tony	Grocott, Bruce
Blunkett, David	Gunnell, John
Boyce, Jimmy	Hain, Peter
Boyes, Roland	Hall, Mike
Bradley, Keith	Hanson, David
Bray, Dr Jeremy	Hardy, Peter
Brown, Gordon (Dunfermline E)	Harman, Ms Harriet
Brown, N. (N'c'tle upon Tyne E)	Harvey, Nick
Bruce, Malcolm (Gordon)	Henderson, Doug
Burden, Richard	Heppell, John
Byers, Stephen	Hill, Keith (Streatham)
Caborn, Richard	Hinchliffe, David
Callaghan, Jim	Hogg, Norman (Cumbernauld)
Campbell, Ms Anne (C'bridge)	Home Robertson, John
Campbell, Menzies (Fife NE)	Hood, Jimmy
Campbell, Ronald (Blyth V)	Hoon, Geoff
Canavan, Dennis	Howarth, George (Knowsley N)
Cann, James	Howells, Dr. Kim (Pontypridd)
Carlile, Alexander (Montgomry)	Hoyle, Doug
Chisholm, Malcolm	Hughes, Kevin (Doncaster N)
Clapham, Michael	Hughes, Robert (Aberdeen N)
Clark, Dr David (South Shields)	Hughes, Roy (Newport E)
Clarke, Eric (Midlothian)	Hutton, John
Clarke, Tom (Monklands W)	Ingram, Adam
Clelland, David	Jackson, Ms Glenda (H'stead)
Coffey, Ms Ann	Jackson, Ms Helen (Shef'ld, H)
Connarty, Michael	Jamieson, David
Cook, Robin (Livingston)	Johnston, Sir Russell
Corbyn, Jeremy	Jones, Barry (Alyn and D'side)
Cousins, Jim	Jones, Jon Owen (Cardiff C)
Cox, Tom	Jones, Ms Lynne (B'ham S O)
Cryer, Bob	Jones, Martyn (Clwyd, SW)
Cummings, John	Jones, Nigel (Cheltenham)
Cunliffe, Lawrence	Jowell, Ms Tessa
Cunningham, Jim (Covy SE)	Kaufman, Rt Hon Gerald
Cunningham, Dr John (C'p'l'nd)	Kennedy, Charles (Ross, C & S)
Dafis, Cynog	Kennedy, Ms Jane (L'P'l Br'g'n)
Dalyell, Tam	Kilfoyle, Peter
Darling, Alistair	Kirkwood, Archy
Davidson, Ian	Leighton, Ron
Davies, Bryan (Oldham C'tral)	Lestor, Joan (Eccles)
Davies, Rt Hon Denzil (Llanelli)	Lewis, Terry
Davies, Ron (Caerphilly)	Litherland, Robert
Davis, Terry (B'ham, H'dge H'l)	Livingstone, Ken
Denham, John	Lloyd, Tony (Stretford)
Dewar, Donald	Llwyd, Elfyn
Dixon, Don	Loyden, Eddie
Dobson, Frank	Lynne, Ms Liz
Donohoe, Brian	McAllion, John
Dowd, Jim	McCartney, Ian
Dunnachie, Jimmy	MacDonald, Calum
Dunwoody, Mrs Gwyneth	McFall, John
Eagle, Ms Angela	McKelvey, William
Eastham, Ken	Mackinlay, Andrew
Enright, Derek	McLeish, Henry
Etherington, William	Maclennan, Robert
Evans, John (St Helens N)	McMaster, Gordon
Ewing, Mrs Margaret	McNamara, Kevin
Fatchett, Derek	McWilliam, John
Faulds, Andrew	Madden, Max
Fisher, Mark	Mahon, Alice
Flynn, Paul	Mandelson, Peter
Foster, Derek (B'p Auckland)	Marek, Dr John
Foster, Donald (Bath)	Marshall, David (Shettleston)
Fraser, John	Marshall, Jim (Leicester, S)
Fyfe, Maria	Martin, Michael J. (Springburn)
Galbraith, Sam	Martlew, Eric
Galloway, George	Maxton, John
Gapes, Michael	Meacher, Michael

Meale, Alan	Sheerman, Barry
Michael, Alun	Sheldon, Rt Hon Robert
Michie, Bill (Sheffield Heeley)	Shore, Rt Hon Peter
Michie, Mrs Ray (Argyll Bute)	Short, Clare
Milburn, Alan	Simpson, Alan
Miller, Andrew	Skinner, Dennis
Mitchell, Austin (Gt Grimsby)	Smith, Andrew (Oxford E)
Moonie, Dr Lewis	Smith, C. (Isl'ton S & F'sbury)
Morgan, Rhodri	Smith, Rt Hon John (M'kl'ds E)
Morley, Elliot	Smith, Llew (Blaenau Gwent)
Morris, Rt Hon A. (Wy'nshawe)	Snape, Peter
Morris, Estelle (B'ham Yardley)	Soley, Clive
Morris, Rt Hon J. (Aberavon)	Spellar, John
Mudie, George	Squire, Rachel (Dunfermline W)
Murphy, Paul	Steel, Rt Hon Sir David
Oakes, Rt Hon Gordon	Steinberg, Gerry
O'Brien, Michael (N W'kshire)	Stevenson, George
O'Brien, William (Normanton)	Stott, Roger
O'Hara, Edward	Strang, Gavin
Olner, William	Straw, Jack
Orme, Rt Hon Stanley	Taylor, Mrs Ann (Dewsbury)
Parry, Robert	Taylor, Matthew (Truro)
Patchett, Terry	Thompson, Jack (Wansbeck)
Pendry, Tom	Turner, Dennis
Pickthall, Colin	Tyler, Paul
Pike, Peter L.	Vaz, Keith
Pope, Greg	Walker, Rt Hon Sir Harold
Powell, Ray (Ogmore)	Wallace, James
Prentice, Ms Bridget (Lew'm E)	Walley, Joan
Prentice, Gordon (Pendle)	Wardell, Gareth (Gower)
Primarolo, Dawn	Wareing, Robert N
Purchase, Ken	Watson, Mike
Quin, Ms Joyce	Wicks, Malcolm
Randall, Stuart	Wigley, Dafydd
Redmond, Martin	Williams, Rt hon Alan (Sw'n W)
Richardson, Jo	Williams, Alan W (Carmarthen)
Robertson, George (Hamilton)	Wilson, Brian
Robinson, Geoffrey (Co'try NW)	Winnick, David
Roche, Ms Barbara	Wise, Audrey
Rogers, Allan	Worthington, Tony
Rooker, Jeff	Wray, Jimmy
Rooney, Terry	Wright, Dr Tony
Ross, Ernie (Dundee W)	Young, David (Bolton SE)
Rowlands, Ted
Ruddock, Joan	Tellers for the Ayes:
Salmond, Alex	Mr. Sydney Chapman and
Sedgemore, Brian	Mr. David Lightbown

NOES
Adley, Robert	Bottomley, Peter (Eltham)
Ainsworth, Peter (East Surrey)	Bottomley, Rt Hon Virginia
Aitken, Jonathan	Bowden, Andrew
Alexander, Richard	Bowis, John
Alison, Rt Hon Michael (Selby)	Boyson, Rt Hon Sir Rhodes
Allason, Rupert (Torbay)	Brandreth, Gyles
Amess, David	Brazier, Julian
Ancram, Michael	Bright, Graham
Arbuthnot, James	Brooke, Rt Hon Peter
Arnold, Jacques (Gravesham)	Brown, M. (Brigg & Cl'thorpes)
Arnold, Sir Thomas (Hazel Grv)	Browning, Mrs. Angela
Ashby, David	Bruce, Ian (S Dorset)
Aspinwall, Jack	Budgen, Nicholas
Atkins, Robert	Burt, Alistair
Atkinson, David (Bour'mouth E)	Butcher, John
Atkinson, Peter (Hexham)	Butler, Peter
Baker, Nicholas (Dorset North)	Butterfill, John
Baldry, Tony	Carlisle, Kenneth (Lincoln)
Banks, Matthew (Southport)	Carrington, Matthew
Banks, Robert (Harrogate)	Carttiss, Michael
Bates, Michael	Cash, William
Batiste, Spencer	Channon, Rt Hon Paul
Beggs, Roy	Chaplin, Mrs Judith
Bellingham, Henry	Clappison, James
Bendall, Vivian	Clarke, Rt Hon Kenneth (Ruclif)
Beresford, Sir Paul	Clifton-Brown, Geoffrey
Biffen, Rt Hon John	Coe, Sebastian
Blackburn, Dr John G.	Colvin, Michael
Bonsor, Sir Nicholas	Congdon, David
Booth, Hartley	Conway, Derek
Boswell, Tim	Coombs, Anthony (Wyre For'st)

Coombs, Simon (Swindon)	Hunt, Rt Hon David (Wirral W)
Cope, Rt Hon Sir John	Hunt, Sir John (Ravensbourne)
Couchman, James	Hunter, Andrew
Cran, James	Hurd, Rt Hon Douglas
Currie, Mrs Edwina (S D'by'ire)	Jack, Michael
Curry, David (Skipton & Ripon)	Jenkin, Bernard
Davies, Quentin (Stamford)	Jessel, Toby
Davis, David (Boothferry)	Johnson Smith, Sir Geoffrey
Day, Stephen	Jones, Gwilym (Cardiff N)
Devlin, Tim	Jones, Robert B. (W H'f'rdshire)
Dicks, Terry	Kilfedder, Sir James
Dorrell, Stephen	Kirkhope, Timothy
Douglas-Hamilton, Lord James	Knapman, Roger
Dover, Den	Knight, Mrs Angela (Erewash)
Duncan, Alan	Knight, Greg (Derby N)
Duncan-Smith, Iain	Knight, Dame Jill (Bir'm E'st'n)
Dunn, Bob	Knox, David
Durant, Sir Anthony	Kynoch, George (Kincardine)
Dykes, Hugh	Lait, Mrs Jacqui
Eggar, Tim	Lamont, Rt Hon Norman
Elletson, Harold	Lang, Rt Hon Ian
Evans, David (Welwyn Hatfield)	Lawrence, Sir Ivan
Evans, Jonathan (Brecon)	Legg, Barry
Evans, Nigel (Ribble Valley)	Lennox-Boyd, Hon Mark
Evans, Roger (Monmouth)	Lidington, David
Evennett, David	Lilley, Rt Hon Peter
Faber, David	Lloyd, Peter (Fareham)
Fabricant, Michael	Lord, Michael
Fairbairn, Sir Nicholas	Luff, Peter
Fenner, Dame Peggy	Lyell, Rt Hon Sir Nicholas
Field, Barry (Isle of Wight)	MacGregor, Rt Hon John
Fishburn, John Dudley	MacKay, Andrew
Forman, Nigel	Maclean, David
Forsyth, Michael (Stirling)	McLoughlin, Patrick
Forsythe, Clifford (Antrim S)	McNair-Wilson, Sir Patrick
Forth, Eric	Madel, David
Fox, Dr Liam (Woodspring)	Maitland, Lady Olga
Fox, Sir Marcus (Shipley)	Malone, Gerald
Freeman, Roger	Mans, Keith
French, Douglas	Marland, Paul
Fry, Peter	Marlow, Tony
Gallie, Phil	Marshall, John (Hendon S)
Gardiner, Sir George	Martin, David (Portsmouth S)
Garel-Jones, Rt Hon Tristan	Mawhinney, Dr Brian
Garnier, Edward	Merchant, Piers
Gill, Christopher	Milligan, Stephen
Gillan, Ms Cheryl	Mills, Iain
Goodlad, Rt Hon Alastair	Mitchell, Andrew (Gedling)
Goodson-Wickes, Dr Charles	Moate, Roger
Gorman, Mrs Teresa	Monro, Sir Hector
Gorst, John	Montgomery, Sir Fergus
Greenway, Harry (Ealing N)	Moss, Malcolm
Griffiths, Peter (Portsmouth, N)	Nelson, Anthony
Grylls, Sir Michael	Neubert, Sir Michael
Gummer, Rt Hon John Selwyn	Newton, Rt Hon Tony
Hague, William	Nicholls, Patrick
Hamilton, Neil (Tatton)	Nicholson, David (Taunton)
Hampson, Dr Keith	Nicholson, Emma (Devon West)
Hannam, Sir John	Norris, Steve
Hargreaves, Andrew	Onslow, Rt Hon Cranley
Harris, David	Oppenheim, Phillip
Haselhurst, Alan	Ottaway, Richard
Hawkins, Nicholas	Page, Richard
Hawksley, Warren	Paice, James
Hayes, Jerry	Patnick, Irvine
Heald, Oliver	Patten, Rt Hon John
Heathcoat-Amory, David	Pawsey, James
Hendry, Charles	Peacock, Mrs Elizabeth
Heseltine, Rt Hon Michael	Pickles, Eric
Hicks, Robert	Porter, Barry (Wirral S)
Higgins, Rt Hon Terence L.	Porter, David (Waveney)
Hill, James (Southampton Test)	Portillo, Rt Hon Michael
Hogg, Rt Hon Douglas (G'tham)	Powell, William (Corby)
Horam, John	Redwood, John
Hordern, Sir Peter	Renton, Rt Hon Tim
Howard, Rt Hon Michael	Richards, Rod
Howarth, Alan (Strat'rd-on-A)	Riddick, Graham
Howell, Rt Hon David (G'dford)	Robathan, Andrew
Howell, Ralph (North Norfolk)	Roberts, Rt Hon Sir Wyn
Hughes Robert G. (Harrow W)	Robertson, Raymond (Ab'd'n S)

Robinson, Mark (Somerton)	Temple-Morris, Peter
Roe, Mrs Marion (Broxbourne)	Thomason, Roy
Rowe, Andrew (Mid Kent)	Thompson, Patrick (Norwich N)
Rumbold, Rt Hon Dame Angela	Thornton, Sir Malcolm
Ryder, Rt Hon Richard	Thurnham, Peter
Sackville, Tom	Townend, John (Bridlington)
Scott, Rt Hon Nicholas	Tracey, Richard
Shaw, David (Dover)	Tredinnick, David
Shaw, Sir Giles (Pudsey)	Trend, Michael
Shephard, Rt Hon Gillian	Twinn, Dr Ian
Shepherd, Colin (Hereford)	Vaughan, Sir Gerard
Shepherd, Richard (Aldridge)	Walden, George
Shersby, Michael	Walker, Bill (N Tayside)
Sims, Roger	Waller, Gary
Skeet, Sir Trevor	Ward, John
Smith, Tim (Beaconsfield)	Wardle, Charles (Bexhill)
Soames, Nicholas	Waterson, Nigel
Spencer, Sir Derek	Watts, John
Spicer, Sir James (W Dorset)	Wells, Bowen
Spicer, Michael (S Worcs)	Wheeler, Sir John
Spink, Dr Robert	Whitney, Ray
Spring, Richard	Whittingdale, John
Sproat, Iain	Widdecombe, Ann
Squire, Robin (Hornchurch)	Wiggin, Jerry
Stanley, Rt Hon Sir John	Wilkinson, John
Steen, Anthony	Willetts, David
Stephen, Michael	Wilshire, David
Stern, Michael	Winterton, Mrs Ann (Congleton)
Stewart, Allan	Winterton, Nicholas (Macc'f'ld)
Streeter, Gary	Wolfson, Mark
Sumberg, David	Wood, Timothy
Sweeney, Walter	Yeo, Tim
Sykes, John	Young, Sir George (Acton)
Tapsell, Sir Peter
Taylor, Ian (Esher)	Tellers for the Noes:
Taylor, Rt Hon D. (Strangford)	Mr. Eric Illsley and
Taylor, John M. (Solihull)	Mr. Thomas McAvoy.
Taylor, Sir Teddy (Southend, E)

Question accordingly negatived.

Bill committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).