HC Deb 26 October 1992 vol 212 cc799-823

'( ).—(1) The Secretary of State shall appoint a committee to advise him on the operation of this Act and on sequestration proceedings in Scotland and in particular—

  1. (a) the availability and geographic spread of advice to those contemplating sequestration;
  2. (b) any procedural barrier to petitioners for sequestration in individual cases where that seems the appropriate course; and
  3. (c) the level of debt and deprivation and the links with the growth in sequestration petitioners.

(2) The committee shall include in its membership persons with experience of debt counselling and welfare rights work in the community.'.—[Mr. Tom Clarke.]

Brought up, and read the First time.

Mr. Tom Clarke (Monklands, West)

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

I rise with some trepidation, having read the reports of the Committee. As usually happens, a great deal of debate there turned out to be superfluous, because the matters in question were debated at such length that the relevant amendments and new clauses were not called—but that's life.

I hope on Third Reading to catch the Chair's eye and to pay tribute to hon. Members on both sides for their work on this Bill—particularly to my own very nocturnal colleagues who kept the debate going. Few could complain that the Bill has not been considered in detail.

I am delighted that my new clause has been selected because, although we have had scrupulous debates on other aspects of the Bill, it gives the House an opportunity to consider the role of advisory committees. If we do nothing else, we can at least invite the Minister to give some insight into Government thinking on this matter.

I understand that the main provisions of the Bill are to remove the appointment of an insolvency practitioner as trustee in every sequestration, and in some cases to allow a debtor to petition for sequestration. In cases where assets and debts are under £2,000, the accountant in bankruptcy will be appointed as trustee and will apply for an award of summary administration.

Those provisions have caused great concern to advice workers throughout the country. We have all had representations, in my case right up until this afternoon, because at present insolvency practitioners fulfil an essential role in providing detailed professional advice to clients who may or may not be sequestrated. According to information from the citizens advice bureau, that amounted last year to 2,223 clients.

Insolvency practitioners currently provide counselling and home visits to ascertain that sequestration is the only answer. That layer of advice will vanish with the introduction of the Bill, except in cases where there are assets. If I have misunderstood that, perhaps the Minister would offer clarification.

For the first time, clients will be expected to prepare their own petitions. Although amendments to the Bill make matters slightly easier than originally envisaged, clients will still require technical advice to comply with the "apparently insolvent" requirement. As there are only 11 full-time money advice workers in the citizens advice bureau service, many clients will not be able to receive the detailed technical advice that is required to complete the forms.

All those matters are important. The Government have said that a general rule to bankruptcy procedures and a guide for money advisers will be prepared by the accountant in bankruptcy. However, such leaflets will provide only factual advice and general guidance. If that is a misunderstanding, perhaps the Minister will clarify matters.

The Government's proposal may assist in filling the information gap, but the advice gap, which is so important, will remain and, in view of the expert level of advice that is required, bureau advisers will be unable to step into the breach. For many people, the absence of such advice could lead to financial ruin.

The Government have also said that solicitors will be able to provide that service under the advice and assistance legal aid scheme. Insolvency practitioners have said that approximately 40 per cent. of cases referred to them by solicitors do not proceed to sequestration. That suggests at the very least that proper training will be required, and that issue will be pursued as we see how the Bill's provisions are implemented.

Citizens advice bureaux in Scotland are extremely concerned about the number of solicitors available to carry out this legal aid work. For example, Inverness CAB presently has no solicitor firms in its area willing to take referrals from the CAB for legal aid work. That worries people in that part of Scotland, and I am sure that the Government will bear that in mind.

The Scottish Home and Health Department report of June 1990 included a research report on the location and access to solicitors' firms in Scotland. The report posed many crucial questions, such as the opening hours of the offices, whether firms carry out legal aid work and how many solicitors operating from the offices carry out legal aid work. It is manifest that, in rural Scotland. many people do not have access to a solicitor's office, and that must be a great worry to the House.

In addition, the income of many clients who seek sequestration may be limited. I think that that was mentioned several times in Committee. Such people may be excluded from legal aid advice or may be required to contribute. It seems extremely harsh that a potential bankrupt may be required to meet the cost of his own sequestration.

5.15 pm

The new clause proposes the appointment of an advisory committee to monitor the Bill. I am sure that many organisations in this field agree that it is imperative to address the Bill's impact on the availability and geographical spread of advice. Insolvency practitioners regularly visit clients' homes, which is of great benefit to people in rural areas. In the absence of that service, how will a leaflet fill the gap? Given the potential lack of available solicitors, what advice will the Government offer to rural clients? What will happen to people in such areas who face sequestration?

It is imperative that the level of debt and deprivation and any links with sequestration and the availability of credit be properly researched. If the advisory committee had representatives with experience of debt counselling and welfare rights work in the community, its work would be greatly enhanced. After all, only those who carry out advice work have first-hand knowledge of the trauma of debt on a client, and they can show that, for many people, sequestration is the last step, not the first, in a catalogue of disasters. I am sure that my hon. Friends will elaborate on what I have said, and I look forward to the Minister's considered reply.

Mr. Wilson

The central point of the new clause is the setting up of an advisory committee, a body from which the Government and the Scottish Office could take advice about the workings of the Bill. On this issue of all issues and of all the legislation to emerge from the Scottish Office, there is surely a case for a little humility.

Those who served on the Committee are aware that the legislation is required because, only seven years ago, the Government got the whole thing dramatically wrong when they created a great new tranche of public expenditure, even though that was not their intention. At least they got right the fact that it was a humane measure, which provided an escape hatch for people with multiple debt and no obvious way of extracting themselves from it.

We seek to protect the humane element in the legislation. We want to ensure that it is accessible to those who genuinely need it and that the burden upon the public purse is kept within realistic proportions. If those are the aims of the legislation, the Government should welcome the idea of an advisory committee which will say whether, this time, they are proceeding along the proper lines.

We should put aside the image, beloved by the hon. Member for Tayside, North (Mr. Walker), of varmints driving around in Jaguars, having kidded on all of society so as to escape from their debts. That is one of those folk tales that persist despite being based on very little objective evidence. I support the idea of an advisory committee.

The aspect of the Bill that causes me most concern, given our debates in Committee, is the prospect that it will result in more people being led into the insolvency procedures and ending up in sequestration. That would be the reverse of the stated intention behind the Bill. The Bill has been driven far too much by the image of a small number of insolvency practitioners grabbing in fees of over £2,000 per case at an enormous rate.

Although there may have been some abuse of the system—the hon. Member for Moray (Mrs. Ewing) and others have rightly drawn attention to it in the past few years—it is not the be-all and end-all of this issue. It would be wrong if, in their new-found determination to nationalise the useful service provided by insolvency practitioners, the Government threw out the baby with the bath water, and, in the end, more people were taken into sequestration.

The statistics are important, although there is a danger that I may go over the ground covered in Committee, so I shall not set them out at any length. A whole layer of the procedure will be excluded. At present, a person goes to a citizens advice bureau or an advice agency when he is up to his neck in problems and wants to know how to get out of them. Contrary to the impression given by the hon. Member for Tayside, North through his readings from the advice given by the Drumchapel money advice centre, it is not the normal procedure for workers in these centres to encourage people into personal sequestration. In my experience, they look at the circumstances, listen to the evidence, warn people specifically about the dangers that undoubtedly exist in personal sequestration and only then direct them towards that course if they think that it is the appropriate action.

Of the people who go to advice centres with money problems, only a small proportion go on to see the insolvency practitioner, and even that filter will work less effectively in future. Once people get to the insolvency practitioner—this element is often overlooked—it is by no means axiomatic that they will go on for personal sequestration. This caricature of the insolvency practitioner as someone who entices people into personal sequestration to get hold of the fees is grotesque and false, as the statistics show.

Of referrals that come to insolvency practitioners from citizens advice bureaux, 15 per cent. do not go to the lengths of personal sequestration. That figure reflects that fact that, by and large, workers in these advice bureaux are highly trained and have done a great deal of sifting through the money advice cases with which they have to deal.

Another fact that is overlooked is that only half of the cases that reach the insolvency practitioners come from advice bureaux. The rest are referrals from solicitors and other sources. At this point, the proportion of cases that the insolvency practitioner does not take to personal sequestration goes shooting up to 40 per cent. In other words, for every ten cases referred by solicitors in Scotland, only six go to personal sequestration.

Just as the relatively low level of referrals from the citizens' advice bureaux that do not go to personal sequestration is a reflection of the relatively high level of training in these places, so that fact that 40 per cent. do not go to sequestration in other cases is a reflection of the fact that many solicitors and others who make these referrals are not trained in money advice work. They send people along to the insolvency practitioner, doubtless with the best intentions, but sometimes entirely inappropriately.

At that point, the insolvency practitioner acts as a crucial filter, not in maximising the number of sequestrations but in keeping them down. It is folly to remove this layer in the procedure that has the proven effect of holding down the number of personal sequestrations. That point was never answered in Committee.

Furthermore, the judgment exercised in citizens advice bureaux in each case is influenced by the fact that workers in them know that there will be a second opinion. The insolvency practitioner will give more professional and expert advice than they can offer. In future, if the insolvency practitioner no longer fills this role—and judging by this Bill, no one else will fill it—the bureaux will not take a chance. They will shove many more people towards the insolvency practitioner, because they will not take the unilateral decision that sequestration is not the best path to go down. As a result, more people will end up in sequestration.

Because I had spoken that day to someone from Pannell, Kerr and Foster, who covers the north of Scotland, I quoted in Committee the example of two cases that had been referred to him. In both cases, this person thought that the advice to go for personal sequestration was ridiculous, wrong and inappropriate. He squared those cases by phoning the creditors and telling them that sequestration was not the right idea because they would get nothing out of it, and because the individuals had no assets, sequestration would result in no gain but substantial expense—£4,000 or more—to the public purse.

Unless the Minister can take this away from the abstract and go down to a human personal level and tell the House what would happen under the new procedure in these cases, there is a major flaw in the plan that he is putting forward. All we heard in Committee from the Minister—I shall be pleased if he can do better tonight—was this: There is no reason to believe that insolvency practitioners would not retain an interest in personal insolvency."—[Official Report, First Scottish Standing Committee: 7 July 1992, c. 130.] The theory is that, having been stripped of their businesses, the insolvency practitioners, as an act of public philanthropy, will still give advice such as that given in the cases that I quoted. That is a fiction: they will do no such thing. The prospect is that, contrary to the stated aims of the Bill, the number of personal sequestrations will increase as a result of the Bill, unless this central flaw is addressed.

5.30 pm

I am also concerned about the geographical spread of available advice. It is certain that the quality of advice varies dramatically from one part of the country to another—indeed, in some areas no advice will be available. The more rural and remote an area, the less chance there will be of responsible and high-quality advice being available.

In some towns in rural communities, one finds that good-quality advice is available, but in the immediate hinterland, people will be 30, 40 or 50 miles away from a source of advice. At the same time, they cannot be expected to have the same awareness as others of the existence of relevant advice.

It seems that these people will be shipped direct into the hands of an accountant in bankruptcy. They will not find themselves with an insolvency practitioner, who has responsibility to advise them that perhaps they are not going down the right road. Instead, they will find themselves on a conveyor belt towards sequestration.

Given the terms of the Bill, the accountant in bankruptcy is excluded from giving the sort of disinterested advice that would be offered by an insolvency practitioner. Once they are in the clutches of an accountant in bankruptcy, they stay in that position until the procedure has been completed. That is wrong in urban settings, and it is even more wrong in rural settings, where individuals often will not have had the benefit of advice at an earlier stage. That can lead only to more unnecessary sequestrations.

We must at all stages repeat the message that sequestration, for many reasons, is not an easy option. People should be protected from it if that is at all possible. It should not be made a more likely course for them through the diminution of advice at earlier stages. I support the establishment of an advisory committee.

I wish to press the Minister—perhaps this is a fortuitous day on which to do it—on legal aid. We know that the Minister has accepted at least the spirit of our amendment No. 1. This proposed that this measure will not come into force unless and until provision has been made to extend the legal aid scheme to cover any legal expenses that arise from petitioning the courts for the appointment of an interim trustee under the terms of the relevant section. I understand, as I have said, that the Minister has accepted the spirit of the amendment. Therefore, legal aid will apply. The increasingly pertinent question is to whom it will apply. In that context, it would be interesting to hear something about the Government's policy on legal aid in Scotland. It is difficult to believe that their policy is divorced from the sentiments expressed by the Lord Chancellor, Lord Mackay of Clashfern. It seems from an article that appears in today's edition of The Daily Telegraph that he made a speech during the weekend. I am sure that that means, in the case of Lord Mackay, that the speech was made on Saturday.

We are told: Lord Mackay's proposals that means-testing for civil legal aid should be brought more into line with means-testing for other benefits"— that is an interesting concept— could make it harder for many with families to obtain such aid. Under the proposals, those who remain eligible for legal aid can expect to be required to pay higher contributions in both criminal and civil cases. There is a reference to the granting of quality-controlled franchises to carry out legal aid work. It is suggested that such a course would favour larger firms. Once again, the geographical spread is highly pertinent, because the franchieses of legal aid are the large legal practices in towns and cities. There is not much joy in that for the more peripheral areas.

I recognise that what Lord Mackay said applies to England and Wales and not directly to Scotland. There are, however, two conflicting concepts. First, the Government come forward with a concession under the Bill, which ostensibly extends legal aid to the processes that will arise as a result of its provisions. At the same time, the senior Law Officer in England and Wales is giving notice that the entire legal aid scheme will be subject to shocking cuts and means-testing.

I find that circle hard to square. Ministers have an opportunity this evening to clarify whether legal aid, which will be available under bankruptcy procedures in Scotland, and by extension in all other civil procedures in Scotland, will be subject to the sort of restrictions of which Lord Mackay was speaking in England and Wales. It is an extremely important piece of information. It is unfortunate that we must extrapolate it in the terms of a statement made in respect of England and Wales. However, we would prefer to have answers sooner rather than later.

If legal aid is to be means-tested and is to be harder to obtain for many people with families, we are entitled to ask what additional problems will be created for those who need to seek legal aid under sequestration processes. This consideration applies throughout civil actions, but it clearly applies in the procedures that we are discussing. Ministers are presented with a golden opportunity immediately after the weekend during which Lord Mackay spoke. The Bill is closely related to legal procedures, and includes specific reference to legal aid. I hope that a Minister will tell us—Ministers must know this—what the Government's proposals are for legal aid in Scotland.

I strongly support the proposal to establish an advisory committee. The Government got it wrong in 1985, and we are here as a result. There is a strong prima facie case for supposing that they have got it wrong again. Indeed, it seems that they will create more personal sequestrations rather than fewer. They will do that in the public sector, and it seems—I did not hear anything in Committee to contradict this—that this will be at more rather than less expense to the public purse. In all humility, the Government should establish an advisory committee so that they may find out rather sooner this time where they have got it wrong.

Mr. Wallace

I too, would welcome the creation of an advisory committee. I share the concerns expressed by the hon. Member for Cunninghame, North (Mr. Wilson), particularly those in his concluding remarks. As he said, the Bill is before us because the Government failed to get things right when they introduced what became the Bankruptcy (Scotland) Act 1985. There are signs of omissions and flaws in the Bill that will make it necessary for us to return to these issues sooner rather than later. Apart from the general approach of an advisory committee advising the Secretary of State on the operation of this measure when it is enacted, it would be involved with the very issues that have given rise for concern.

I was not a member of the Committee that considered the Bill, so I feel somewhat estranged from those who became more and more familiar with it as they sat into the early hours of the morning. I read some of the reports of the Committee's proceedings, and I have the greatest admiration for the sterling work done by its members. I am greatly relieved that I was not a member of it.

Once again, I declare an interest. I am the parliamentary adviser to the Institute of Chartered Accountants of Scotland, which has more than a passing interest in the Bill. I should add that the views that I express are my own.

The proposed advisory committee would deal with the availability and geographical spread of advice to those contemplating sequestration. I recall that the matter was raised in the deliberations of the Scottish Grand Committee and subsequently on Second Reading. It is obviously of importance to me as a Member who represents a Scottish constituency.

From a report of proceedings in Committee, I notice that the Minister, the hon. Member for Eastwood (Mr. Stewart), sought to give assurances. I refer especially to columns 150 and 151. For example, the hon. Gentleman said: I entirely accept the point about geographical coverage, which has been made by many hon. Members. I also accept that in establishing market testing, we must secure a quality service … I entirely accept what has been said about proper geographic coverage".—[Official Report, First Scottish Standing Committee, 7 July 1992; c. 150–51.] I have no doubt from previous debates that the Minister got the point, but I am unclear about a Government guarantee of the adequate delivery of a quality service in diverse and scattered parts of Scotland.

A letter that I received from the manager of the citizens advice bureau in Lerwick touches on the point about advice raised by the hon. Member for Cunninghame, North: If the applicant requires counselling prior to signing a trust deed, this can no longer be undertaken by the nominated Insolvency Practitioner nor by the Accountant in Bankruptcy. The applicant will need to find a solicitor who is qualified to provide this, and we already have problems in the islands due to conflict of interest. The applicant may be entitled to legal aid to pay for this counselling session. However, many of the people who have gone through the Shetland office have an income which would take them outside the legal aid scheme but are still insolvent. Would any solicitor take on a client for counselling knowing that their bill may join the other creditors listed in the Trust Deed? Conflict of interest is an important issue in a small community served by a relatively low number of professionals, particularly solicitors. It is almost inevitable that the debtor seeking advice will see a solicitor who is acting for one or more of the creditors who are trying to exert pressure on that debtor. That makes it almost impossible for the solicitor to give impartial advice.

Earlier debates touched on the quality of advice given by outside practitioners coming to the isles, without which many people would be lost. The hon. Member for Cunninghame, North pointed out that, while there will be cases in which, for good social reasons, insolvency practitioners will be prepared to offer advice, it must be remembered that ultimately they are commercial, professional businesses—not charities—and will not provide a service for which they will get little or no remuneration. We may witness—not just in rural Scotland—the loss of professionals who have built up expertise in giving advice that often results in the avoidance of sequestration.

The hon. Member for Tayside, North (Mr. Walker) referred to a particular book offering money advice. He cited the case of the young person about to marry, who would discover in later years the consequences of having gone down the path to sequestration. If an important source of advice is denied to such a young person, it is more likely that he will follow the course that the hon. Member for Tayside, North counselled against. The sequestration process could be to the detriment of many individuals, and would incur greater public cost—because every additional personal sequestration involves added expense.

As to a charge being made on the debtor for the original petition to the court, in Committee the Under-Secretary of State said: I do not believe that court fees for the processing of petitions by debtors for their own sequestration should be waived as a general rule … Court fees can be met under the advice by way of representation scheme. I believe that it is appropriate that assistance to debtor petitions should come from that source."—[Official Report, First Scottish Standing Committee, 9 July 1992, c. 292.] The hon. Member for Cunninghame, North said that the Government accepted the spirit of amendment No. 1, which sought to give legislative force to that intent. I would prefer an explanation on the record of the extent to which people will qualify for legal aid. The hon. Member for Cunninghame, North did the House a service by voicing the considerable doubts that hang over the future of legal aid after the Lord Chancellor's comments at the weekend.

5.45 pm

The suspicion must be that anything not enshrined in legislation can always be taken away without legislation. We need something more tangible than an expression of good will. I do not challenge or question the Minister's good intentions, but they do not bind his successors. We want a guarantee that people already confronting sequestration will not be discouraged—and thus suffer further misery and the problems of continual indebtedness—because they could not afford to petition for their own sequestration.

I am sure that the advisory committee would be well justified in examining the costs created by the Bill. The driving force behind the legislation is a desire to cut costs. The original legislation led to an escalation of costs, but those projected in the explanatory memorandum when the Bill first came before the House revealed an exceptionally dramatic rise, which all of us found it difficult to comprehend. It allowed for one Scot in 10 to be bankrupt by 1996. Perhaps that is more likely than it was, as a result of the Government's economic policies.

Mr. Wilson

That is even more likely now, in October, than it was in July.

Mr. Wallace

Such a prospect gives no joy to anyone, because it suggests that the Government forecast an increase in the misery caused by personal sequestration.

I noted also exchanges involving the hon. Member for Glasgow, Garscadden (Mr. Dewar), who might have been relieved from attending these proceedings but who nevertheless has nobly been in his place to hear these debates. In exchanges with the Minister on 14 July, figures were produced that raised a number of eyebrows and placed in doubt the realism of Government costings.

There was a suggestion, for example, that an allowance of £5.13 be payable for the senior supervision of cases which, by their nature, must endure for three years. Even in the event of zero inflation—which is no longer Government policy—it is hard to believe that costs could be contained to £5.13 for senior supervision.

The sum of £10 is allowed for travel expenses. I do not know anyone who can manage to travel to my constituency for £10—but if they can, perhaps they will please tell me, and the tourism industry, how they do it.

Mr. Wilson

And the Fees Office.

Mr. Wallace

I would do anything to cut Government expenditure. I appreciate that the figure will be an average, and that constituencies such as mine will increase the average. The proposed figure, however, seems very unrealistic.

We have been given to believe that the accountant in bankruptcy's department will spend a total of one and a half hours compiling a statement based on the applicant's background and history. That, too, strikes me as inadequate, in comparison with the volume of work currently involved at the outset of personal sequestration procedures.

To describe the projected figures as optimistic is probably a gross understatement. As they form the basis of the Government's claim, I feel that the Minister should try to justify the figures more than he has done so far, and that he should tell us whether they have been subject to any review since July. If he fails to do that, he will have provided the most compelling case so far for the establishment of an advisory committee.

Mr. McAllion

I had the pleasure of serving on the Standing Committee, and I note that eight of the 14 hon. Members now present—most of them, indeed—served on it with me.

As my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) has reminded me, Report stage gives hon. Members excluded from the Standing Committee an opportunity to debate a Bill. In view of that, Mr. Deputy Speaker, I feel that you should report to Madam Speaker that something has gone wrong with our procedures. Of the three English Members who served on the Committee, only the hon. Member for Swindon (Mr. Coombs) is present—and that is only because, as Parliamentary Private Secretary to the Secretary of State, he has to be present.

The other two, who were present throughout the Committee stage, show no interest in being present tonight. I can only assume that that is because they do not expect any Divisions to take place and their only interest in the Bill is in exercising their votes to ensure that the Tory majority is made to tell at every stage. If you report to Madam Speaker about the breakdown in procedure, Mr. Deputy Speaker, perhaps you will recommend her to approach the Government with a simple solution—the setting up of a Scottish Parliament—which would enable Bills of this kind to be handled properly and efficiently.

I agree with my hon. Friend the Member for Cunninghame, North (Mr. Wilson). The key question is how we are to preserve the humane side of the existing arrangements for sequestration and bankruptcy—the side which allows the poorest members of society to retain sequestration as a way of finding their way out of debt. My hon. Friend is right: the Bill has nothing to do with fat cats who are ripping off the public purse. I for one am all in favour of cracking down on fat cats—especially those who support the Tory party—but I am not in favour of cracking down on anyone at the expense of the poorest sector of the population, and I fear that unless the Bill is improved, that is what it will do.

The Government should listen carefully to what I am saying. After all, their responsibility is not just to ensure that the legislation is adequate. They instigated the level of debt which now exists throughout Scotland and, indeed, throughout the United Kingdom: the policies of the three Governments led by Lady Thatcher in the 1980s created the massive debt problems which now affect so many people. The Minister shakes his head; let me remind him of some local instances.

I am informed by the Dundee money advice project that it deals with between 40 and 50 cases a week of individuals and families with serious debt problems—which suggests that the project must handle some 1,200 serious debt cases in a year. Its members believe that that is only the tip of the iceberg. They believe that, for every person who appeals to them for help, a further 10 outside in the community never approach them. They estimate that, in Dundee alone, there are 12,000 cases of indebtedness—12,000 people who have nowhere to turn, and do not know how to get out of debt.

This is not simply a Dundee problem; it exists throughout Scotland. In Committee, I reminded the Minister of a report produced by the National Consumers Council, which stated that, at the end of the 1980s, the level of debt—excluding mortgages and fuel bills—stood at £43,000 million, compared with £11,000 million in 1980. In the course of Lady Thatcher's three Parliaments, indebtedness had increased almost fourfold. Anyone who claims that such statistics are not clearly the Government's responsibility is not living in the real world.

The Minister may say that there is no connection between Tory Administrations and the level of debt, but I remember the recession of 1979–81. It was not unlike the present recession: a massively overvalued exchange rate ripped the heart out of British industry, and threw millions on to the dole. The Government's response was to create a boom, in which banks and building societies were deregulated and allowed to lend to anyone they wanted. In 1987 and 1988, the Government introduced tax-cutting Budgets, leading people to believe that the good times would never end and that they could continue to spend, spend, spend—thus becoming deeper and deeper in debt. It was suggested that, at the end of the day, they would be able to find money from somewhere to dig themselves out.

People certainly got into debt, but they did so as a direct result of the Government's policies. The Government therefore have a clear responsibility to ensure that assistance is offered to those whom they led into that debt. The Bill, however, will remove the option of bankrupty, for the simple reason that it is costing the Government too much. The story is clearly told by the statistics relating to individual sequestrations in Scotland. In 1987, there were only 808; by 1991, the figure had risen to 7,665. At a cost of £2,000 a time, that imposed a burden on the public purse which the Government were not prepared to tolerate. The Government have introduced the Bill not to improve the administration of bankruptcies in Scotland, but simply to reduce the cost to their own purse.

It is therefore all the more important for the new clause to be accepted. At least it would give poor peolple the possibility of an escape route. The Minister has told us repeatedly that the legislation would not deter people from using bankruptcy and sequestration, but he does not know that that is the case—he merely hopes that it is. What will happen if it is not? The Minister will not even know, unless he accepts the proposal that a committee be set up to monitor the operation of the Act and to report to the Secretary of State on its impact on ordinary people. That would allow the Secretary of State to take action. I am especially concerned about the availability of advice to those in debt, as opposed to the "geographical spread of advice" across Scotland.

In Committee, my hon. Friend the Member for Falkirk, East (Mr. Connarty) referred to "debtors' right to advice". The Minister replied: there is no such right. People receive advice, but they do not receive it because Parliament has voted funds for that purpose. Parliament has voted funds for insolvency practitioners to undertake sequestration procedures, not to give advice."—[Official Report, First Scottish Standing Committee, 7 July 1992; c. 149.] The Minister saw a clear distinction between the role of insolvency practitioners who implement sequestration proceedings and the role of giving advice to those in debt. There is no clear distinction between those two roles in the real world. Somebody who goes for advice to the Dundee money advice project on how to cope with his or her problem may obtain advice from that project, but it will not be the skilled advice that is required in sequestration cases. The Dundee money advice project depends upon its link with insolvency practitioners, based in Edinburgh, to give it advice that it can pass on to the poor debtor. If the Minister breaks the link between insolvency practitioners and money advice projects, those projects will be less able to give accurate and useful advice to people who urgently require it.

6 pm

I raised in Committee with the Minister the problem of the change in the fees paid to insolvency practitioners. At the moment they receive £2,000 a case. The Minister said in Committee, at column 150, that that sum was to be reduced to £400—a massive difference. The insolvency practitioners who work in Dundee are based in Edinburgh. What commercial incentive will there be for them to carry on operating in the Dundee area when the commercial return for so doing is to be reduced by 80 per cent.? If the Bill is passed, I fear that insolvency practitioners will be forced, by market conditions, to turn their back on areas such as Dundee and to concentrate on cases that arise in the Edinburgh area.

When I pressed the Minister on this point he did not give a clear answer. He said: The hon. Gentleman has made a fair point … there should be detailed discussions between the accountant in bankruptcy, the Scottish Office and the Institute of Chartered Accountants of Scotland about detailed costs of work in different circumstances. That should be the next part of the process. Circumstances will, of course, vary."—[Official Report, First Scottish Standing Committee, 7 July 1992; c. 150.] The Minister therefore said that he did know what the arrangements would be in the circumstances that I have just described. We shall have to wait until the next stage of the procedure before we find out what arrangements will be made for people who find themselves in this position.

The Minister is asking the House to accept a pig in a poke. He promises that things will be all right, but when we ask him to explain why they will be all right he cannot do so. All he says is that there will be discussions with the Institute of Chartered Accountants of Scotland and the accountant in bankruptcy and that he hopes that something will come out of them. Unless the Minister changes his mind and accepts the new clause, the Bill ought not to be passed. The new clause is particularly important on account of the geographical spread of insolvency practitioners and advice throughout the country.

The Minister referred frequently in Committee to the fact that the Government already fund money advice projects, either through the urban aid project or through local authorities. However, given what has happened since the general election, we know that the Government intend to crack down on public expenditure, and to crack down far more than they have done during the last 13 years. Therefore, I do not think it likely that there will be local authority money to support money advice projects. If the Government continue in office, all that is certain is that public expenditure cuts will continue. If that happens, money advice projects will be put at risk. They will be the first in the firing line. Consequently, no advice whatever will be available for people who find themselves in debt.

If expert advice is to be available for people with multiple debt problems, there must be a network of insolvency practitioners throughout Scotland who are able to provide advice and support to money advice projects. The only way of ensuring that that happens—the Minister referred to his proposal for market testing the system—is to provide a commercial return for the insolvency practitioners. The Bill does not provide such a return for them. That is all the more reason why new clause 3 should be supported.

The Lord Chancellor has suggested that civil legal aid in England and Wales should be means-tested. In effect, that means that legal aid will be cut. Scotland is treated differently from England and Wales, but Scotland first had the poll tax and it was only a matter of time before it spread to England and Wales. Although water privatisation was intended only for England and Wales, it will soon spread to Scotland.

The legal aid cuts proposed for England and Wales will, I fear, find their way north of the border. Access to legal aid, which would allow individual debtors to exercise their rights under this legislation through the courts, will then be cut off. Between 1987–88 and 1992–93 grants to the legal aid fund in Scotland increased from £45 million to £77 million. Costs are soaring well above what the Government are prepared to tolerate. As with every other aspect of public expenditure, the Government will look for every means of bringing down that figure of £77 million. One of the best ways to bring it down is to introduce means testing and cut off the right to legal aid of all kinds of people, including those with multiple debt problems.

The Minister must address the problem of access to legal aid when he replies to the debate. In particular, he must deal with the difference between the announcements made for England and Wales by the Lord Chancellor and what will happen in Scotland. I fear that what England and Wales have today we shall have tomorrow. There will be cuts in legal aid. If that happens, the provisions of the Bill will not work for poor people who find themselves in debt. Therefore, it is more essential than ever that new clause 3 should be accepted.

Mr. Connarty

I support new clause 3. Given the procedure that we went through in Committee, it is very much needed. Like my hon. Friend the Member for Dundee, East (Mr. McAllion), I spent many hours in Committee, many of them on my feet. For the rest of the time I listened to what the Government had to say about a Bill that is a shambles. The civil servants did their best, having consulted Ministers, to correct the problems that had been encountered with the 1985 Act, but the Bill that we considered in Committee was so empty of provisions that it led to 90 amendments being tabled, some of them procedural amendments.

It could be said that the Government had been listening, but they did not listen for seven years between 1985 and 1992. There is therefore a need for a committee to which the Government will be forced by statute to listen to regularly. It could be argued that the Ministers who piloted the Bill through Committee were not involved between 1985 and 1992. It was obvious from the way that they read their briefs during the first few sittings of the Committee that they had not been thinking about the problem. Although their reading improved, the Bill has not been improved sufficiently to satisfy us. That is why those hon. Members who sat on the Committee have come here to speak in the debate. If sufficient thought had been given to the Bill in its original form, so many amendments would not have been needed, and we should not have had to make this point again tonight.

It is still a cheap and patchwork Bill, and even in its present form it is a sad Bill. After having spent so many hours in Committee, I should have preferred to come here to commend the Government on the Bill, but I cannot do so because it still contains major defects. It does nothing about bankruptcy and it does nothing to help people who are seriously in debt and who do not have assets to get out of debt without recourse to the courts.

I shall give an example that I mentioned a number of times in Committee. A couple with debts of £5,000 had realisable assets of £15,000 in a part paid-up house. They came into a cash sum of £5,000, because of redundancy. However, on account of procedures that the Bill has not obviated, they find themselves having to pay out £5,000 to accountants, £6,000 to the accountant in bankruptcy for his fees and £2,000 to lawyers. In other words, they will end up with £2,000 in cash. They ended up with no house, no assets and £2,000. The Bill does nothing to change that.

In Committee, I tabled amendments to tackle the major flaws in debtors' rights, but they were rejected because the Government promised that my points were being taken on board. I see no evidence of that. It is necessary, therefore, to have a committee to oversee the Bill and to show how, again and again, the bankruptcy procedures in Scotland have caused suffering to debtors well outwith their debts and have not allowed them to get out of debt without filling the pockets of accountants and paying substantial fees to the accountant in bankruptcy. It is unfortunate that I cannot support the Government for introducing a good Bill that helps debtors in Scotland.

Two main elements of the Bill will make the tragedies that I have described more likely. The first is what some people see as a major climbdown by the Government—the reinsertion, under proposed new section 1A, of the interim trustee, who need not be the accountant in bankruptcy, in the process of sequestration. In Committee, in response to Members representing rural areas, this was portrayed as a sign that the Government would expect to use such insolvency practitioners in a rural location. It is absurd that the insolvency practitioner will receive travel expenses of £10 for travelling from Leith to far-flung parts of the country. The Government said that they would deal with that, but we should like some assurance that they have done so.

I noted that as I was speaking the hon. Member for Eastwood (Mr. Stewart) was nodding in a negative fashion. Perhaps I misinterpreted his comments in Committee, but Opposition Members would like the Government to state clearly that, in the first instance, interim trustees in rural locations will be used rather than leaving it to a case-by-case decision.

Many money advice groups remain unconvinced that the fee proposed by the Government will attract anyone to act as interim trustee in any location. There is a dispute between the Institute of Chartered Accountants and the Government about the cost of sequestration, even when there are no assets.

I am sure that my point will be proven: it will be easy to find interim trustees where assets appear to be sufficient to pay their fees and those of the accountants. People who can afford to pay the accountant will be put on the conveyor belt. Debtors whose assets outweigh their debts will remain on that conveyor belt until they are sucked dry by having to pay accountants' fees and the accountant in bankruptcy's fees—the first two charges on their assets—after which, as the hon. Member for Moray (Mrs. Ewing) said, there is little left for the creditor. There is nothing in the Bill to change that.

It is little wonder that the public wonder whether the only purpose of the bankruptcy laws in Scotland is to pay money to accountants and to meet the running costs of the accountant in bankruptcy's office. Our bankruptcy laws seem to do little for people who are made bankrupt.

6.15 pm

The second problem with the Bill is created by clause 9, which defines the remuneration of permanent trustees. It is clear that—[Interruption.] I am not sure what my hon. Friend the Member for Glasgow, Rutherglen (Mr. McAvoy) is trying to signal to me. The regulations proposed under clause 9 are causing the difference of opinion between the Institute of Chartered Accountants and the Government. How much will those who act as trustees be paid? It is argued that the Government are not offering enough to attract people to act as insolvency practitioners. Members of a firm in east Scotland tell me that they are extracting themselves from—[Interruption.] I am sorry, but I am getting all sorts of signals.

Mr. Deputy Speaker (Mr. Michael Morris)

Order. Perhaps I may assist the hon. Gentleman. There is a tenuous link between clause 9 and new clause 3, but it is extremely tenuous. I hope that the hon. Gentleman has done his homework and knows the extent of that tenuous link. Otherwise, perhaps we may return to new clause 3.

Mr. Connarty

I do not need to apologise to you, Mr. Deputy Speaker, as I thought, because it is clear that without an advisory Committee the deficiencies in the Bill that I am highlighting will become apparent. We need the advisory committee because of the Bill's deficiencies and because of the problem with remuneration that will arise from clause 9. The regulations proposed under the clause have been a constant cause of friction between the Government and the Institute of Chartered Accountants. The Bill is likely to cause the collapse of advice and of the system that allows people who are facing sequestration to go to insolvency practitioners. I hope that the Government will accept my comments as a strong argument for setting up the advisory committee.

The Government must realise that without the advisory committee they are likely to blunder on as they did between 1985 and 1992. I believe that clause 3 will cause a problem with the availability and geographical spread of advice and will erect procedural barriers between petitioners and sequestration. It is clear that the Bill is about the Government's accounting and financial concerns rather than about the interests of bankrupts in Scotland.

I wish to express some sympathy for the part of the equation that has not received any sympathy so far. I have been critical of accountants, who may have led to the tabling of the amendments that will cause problems for debtors in Scotland, but I have much sympathy for those in accountancy practice who diligently attempt to deal with complicated sequestrations where there are problems with realising assets and other matters.

It is important to have an advisory committee which takes into account the needs of all those people. If we do not take them into account, we shall end up with problems about the availability and geographic spread of advice, as was said in Committee. Accountants will not come forward to do the job, although their fees are probably some balm to their hurt.

Sympathy should also go to the debtors with whom the advisory committee would be most concerned in bankruptcy cases. Debtors will be left with little advice if our predictions about the Bill are justified. They will be left with a new summary administration system under clause 6 and with no marked route to lead them to using that system. It seems that it is also a system that debtors must find money to initiate. I find no clear guidance for the new system. I welcome the sudden attention of the hon. Member for Stirling (Mr. Forsyth) to the bankruptcy problems of the people of Scotland.

I wish mainly to address Scottish Office Ministers. From my recollection, we were promised that on Report Ministers would clarify how people would get advice, how they would find their way through the maze of their debt problems into the courts and how they would use the new system. We were told that there would be an explanatory leaflet, but I have not seen such a draft. It is a grave concern to the House that we have had no information on paper about how people will be advised if they lose the support of the insolvency practitioners, which I predict will happen if the regulations are introduced under clause 9.

Not by chance but by design, I had a meeting with the Scottish Legal Aid Board. The chair of the board, Christine Davis, who is a constituent of the hon. Member for Stirling, who popped into the Chamber recently, and the chief executive, Mr. Douglas, pointed out that the board was responsible, as my hon. Friend the Member for Dundee, East said, for £77 million of legal aid distribution. They expressed concern about what they had read in the reports of the Committee. Promises were made, although as usual with some caution, by the hon. Member for Eastwood that legal aid would be available for advice—at least the first £90 and perhaps automatically to the upper limit which can be claimed on the signature of a solicitor. Christine Davis and Mr. Douglas expressed concern to me that if that were the case, they would have to be provided with sums more substantial than those they disburse at present.

I join my colleagues in saying that it is difficult to believe that Lord Mackay was speaking only for England and that he was not describing the Government's general policy which would bring about a cut in the availability of legal aid in Scotland, as well as such a cut in England in the near future.

The board also explained that it was cash limited in some areas of administration expenditure. I hope that we have an advisory committee to consider that point. If the board is cash-limited, it is a matter not just of how much money can be given out in legal aid, but of whether the board has the administration necessary to run the system efficiently. It will have not only the present legal aid distribution, but new legal aid moneys to distribute if solicitors suddenly take on the role of giving advice to people who want to use the new summary procedure under clause 6. I ask the Government to give an assurance, perhaps not an unqualified assurance, that they will not cash limit any part of the legal aid board's additional costs which come from running a proper advice system under the Bill.

My hon. Friends have made the case again and again for the new clause to be accepted. I am pleased that we have the support of members of other Opposition parties. The Government should take on board the fact that we represent 75 per cent. of the opinion of the Scottish people in terms of their choice of representative. I hope that the Government will seriously consider the new clause and will not treat it in an offhand fashion. It is a positive addition to the Bill, and a future Government, although perhaps not of the present Government's colour, will thank the House for it.

Mr. Stewart

It may be for the convenience of the House if I give the Government's response. Opposition Front-Bench Members may then seek to catch your eye, Mr. Deputy Speaker.

I congratulate the hon. Member for Monklands, West (Mr. Clarke) on reading the Committee proceedings. That is a considerable feat, and shows that he has taken to his new task with considerable determination.

We have had a useful debate, covering a wide range of points. I assure the hon. Member for Falkirk, East (Mr. Connarty) that, although I do not accept his charge of nodding negatively, I entirely accept his general point, which was also made by the hon. Members for Dundee, East (Mr. McAllion) and for Orkney and Shetland (Mr. Wallace), that the background to the tabling of the new clause is the reasonable desire of hon. Members to ensure that the Bill is monitored and that it does not give rise to problems in practice which we cannot foresee.

I assure hon. Members, especially the hon. Member for Cunninghame, North (Mr. Wilson), who has slipped out of the Chamber, that, given the Government's experience with the Bankruptcy (Scotland) Act 1985, to which the hon. Member for Falkirk, East referred, Ministers have no intention of simply announcing the legislation and then forgetting about it. We shall want to ensure that the Bill meets the objectives set for it at the outset and that it improves the conduct of sequestrations in Scotland, at a lower cost to the taxpayer and with better value for money.

Mrs. Margaret Ewing (Moray)

I thank the Minister for accepting the need to monitor the Bill. He will recall that the 1985 Act came under the supervision of the Department of Trade and Industry. Will the supervision and monitoring of this Bill come under the Scottish Office?

Mr. Stewart

I am happy to be in the unusual position of being able to give the hon. Lady a wholly unqualified assurance on that point.

Opposition Members have rightly referred to the experience of outside organisations with an interest in the subject. I have no doubt that bodies such as the Scottish Consumer Council and Citizens Advice Scotland will monitor closely how the new legislation works from the point of view of debtors, while others with a legitimate interest, such as the Institute of Chartered Accountants of Scotland, will check to ensure that the new procedures and the new role for the accountant in bankruptcy provide value for money for the taxpayer.

The hon. Member for Falkirk, East was wrong to refer to friction with the Institute of Chartered Accountants of Scotland. We have found discussions with the institute over the summer to be constructive and positive. Of course organisations that have a genuine interest in the Bill will soon draw to the attention of my right hon. Friend the Secretary of State and, if necessary, to the attention of any hon. Member any problems about how the legislation works in practice.

I will deal with some of the detailed points made by hon. Members when putting the case for the new clause.

I do not believe that it is appropriate to require the accountant in bankruptcy to provide advice to debtors, for the reasons that I have given in previous debates on that issue. I accept the need for the accountant to provide general advice on the procedures and consequences of sequestration. The hon. Member for Falkirk, East asked me specifically when the advice would be published. He will understand that it would be wrong to publish the advice before the Bill has reached the statute book, which would be the normal practice with such matters.

However, I assure the hon. Member for Falkirk, East and the House that officials have already been in contact with the Scottish Consumer Council and Citizens Advice Scotland among others, to discuss how the advice should be taken forward. That is the right route to take.

6.30 pm

With regard to the point about advice given by insolvency practitioners, in only 15 per cent. of cases referred to insolvency practitioners by citizens advice bureaux did they recommend against sequestration.

Mr. Wilson

What did the Minister mean when he used the word "only"?

Mr. Stewart

That means that the recommendation went the other way for the other 85 per cent. I was about to agree with the correct reference of the hon. Member for Cunninghame, North to the fact that people often go to insolvency practitioners and are advised against proceeding to sequestration. The figure that I was given for that was 15 per cent.

Mr. Wallace

Will the Minister give way?

Mr. Stewart

I do not want to get too bogged down on this, but I will give way to the hon. Gentleman.

Mr. Wallace

What does 15 per cent. represent in figures?

Mr. Stewart

I shall write to the hon. Gentleman at an early date about that, unless illumination comes to me in the very near future. The advice to which I have referred is important, but it also shows that the information provided by citizens' advice bureaux is often along the right lines.

To give effect to the suggestion of maintaining the role of insolvency practitioners in all cases would require us to maintain the effective status quo that insolvency practitioners have an effective monopoly in bringing petitions for sequestration. In general, that is not the view taken by members of the Committee.

Mr. Wilson

I hope that I am not about to pre-empt the Minister, who will probably tell me that he was just about to clarify this point. However, he referred to "only" 15 per cent. of cases going to insolvency petitions which do not then go to sequestration. Surely he is honour bound to refer also to the 40 per cent. of cases referred by bodies other than money advice services or bureaux—mainly by solicitors—which do not go to sequestration. Once the figures arrive, I am sure that they will translate into substantial human terms. Even by the Minister's standards, 40 per cent. does not qualify for a description of "only".

Mr. Stewart

I can see that I obviously made a great mistake when I qualified the 15 per cent. with "only". That has delayed the House for several minutes, although I do not believe that it was of particular significance. I naturally accept the figure of 40 per cent. to which the hon. Gentleman referred.

I can tell the hon. Member for Orkney and Shetland that I have suddenly recalled the figure that he requested. It is about 333 cases. That is 15 per cent. of the 2,223 cases referred by citizens advice bureaux to practitioners.

Mr. Wilson

Will the Minister give way for the last time?

Mr. Stewart

If it is for the last time, yes.

Mr. Wilson

Well, for the last time on this subject.

Let us get this right, because the point is serious. If 15 per cent. equals 333 cases from the 50 per cent. of cases referred from advice bureaux, 40 per cent. of the 50 per cent. referred by solicitors and others equals about 888 cases. If we add the two together, we are talking about more than 1,200 families a year in Scotland who are saved from sequestration because of the filter of the insolvency practitioner. That is not an insignificant number.

Mr. Stewart

I did not suggest that it was an insignificant figure. I was simply responding to the point made by the hon. Member for Monklands, West about the important role and very often correct advice given by citizens' advice bureaux in the first instance. There is no dispute across the Floor of the House about that.

I must repeat what I said in Committee about this point in general. I do not share the fear that insolvency practitioners will withdraw entirely from that field. They have an important role to play in sequestrations in future. It is for insolvency practitioners to decide whether to continue to provide advice which they provide at present on a voluntary basis. A key point about costs and advice is that the major savings that resulting from the Bill will arise through simplification of the procedures. That point is not in dispute.

The hon. Member for Falkirk, East and others asked me about the costs of the accountant in bankruptcy and the negotiations to which I have referred. The costs that I quoted were necessarily averages spread over a large number of cases. The most complex cases will involve more time than others and cost more. I must reassure hon. Members that the Government have the same interest as they have expressed in getting those costs right. We have no interest in getting our estimates other than correct. That is why we have had discussions with the professional bodies over the summer, and adjustments have been made.

The hon. Member for Orkney and Shetland referred to the figures in detail. I can assure hon. Members that the gap in the figures produced by the accountant in bankruptcy and those put forward by the Institute of Chartered Accountants of Scotland has substantially narrowed as a result of those negotiations.

Mr. Wallace

I take the Minister's point that it is in the Government's interest to keep costs down. What assumptions have been fed in about the capital start-up costs of the accountant in bankruptcy in terms of computer equipment? Has any assumption been made in the medium term about the fact that many insolvency practitioners and accountancy practices may not now be engaged in training young people in the skills that they would previously have deployed in their insolvency divisions, and that that cost for training may have to fall on the accountant in bankruptcy? What provision or assumptions have been made about that?

Mr. Stewart

The hon. Gentleman may not have seen the detailed documents that were set before the Committee. There were certainly assumptions about capital costs and training costs. I assure him that they have been subject to the most detailed discussion over the summer among those involved, and they have resulted in the gap between the two sets of figures being substantially narrowed.

The hon. Member for Orkney and Shetland and other hon. Members questioned the geographical coverage of sequestrations. I emphasise that the accountant in bankruptcy will have a statutory duty to creditors to ensure that all sequestrations in which he is appointed are carried out properly, wherever the sequestration arises. The Bill also allows him to administer such cases directly or through agents. I have no doubt that, in Orkney and Shetland, it will make good sense to continue to use local practioners to deliver that service when it is cost-effective. Therefore, the means exist to ensure proper coverage across Scotland.

The hon. Member for Orkney and Shetland asked about court fees. My right hon. and noble Friend the Minister of State has written to the hon. Member for Glasgow, Garscadden (Mr. Dewar) on that point. The simplest thing would be to let the hon. Member for Orkney and Shetland have a copy of that letter.

Hon. Members also asked me about legal aid. I can confirm that debtors petitioning for their own sequestration will be able to apply for legal aid, assistance and representation under the assistance by way of representation scheme.

The hon. Member for Falkirk, East asked about the present position. Officials have been involved in detailed discussions with the Scottish Legal Aid Board on the details of these proposals. I am sure that they will extend those discussions to include the Law Society of Scotland.

I was asking about the timing of the changes. It remains our intention that the legal aid arrangements will be in place before the new petition procedures of what is now clause 3 are introduced. That depends, among other things, on the progress of the legislation through Parliament.

Mr. Connarty

I did not hear the Minister mention the cash-limited sums to which the Scottish Legal Aid Board referred in a meeting with me. The cash-limited sums are not necessarily the amounts paid to solicitors. Administration costs are cash-limited. The board expressed genuine anxiety that, if it experienced a large increase in administration as a result of the new demand for legal aid, it would find itself in difficulty because the sums for administration are cash-limited.

Mr. Stewart

The hon. Gentleman will understand my caution in giving a detailed response. Officials are involved in detailed discussions about how the proposals would work in practice. I cannot say anything further.

The hon. Member for Cunninghame, North and others made a general point about legal aid which goes wider than the Bill. As the hon. Gentleman will know, any general changes to legal aid are subject to debate in the House. I could not go further than that this evening.

Mr. Wallace

To some extent, we understand that it may be difficult to go into the detail of what changes will be made to legal aid and the legal advice and assistance scheme. Can the Minister confirm that any changes will be the subject of secondary legislation which will come before the House? Even if he cannot go into detail, can he express with clarity on the record the principles of the changes and what and who will be covered in terms of income range and so on?

Mr. Stewart

I think that I can help the hon. Gentleman. As I said in Committee, debtors who petition for their own sequestration will be able to apply for legal advice, assistance and representation under the ABWOR scheme. The details still need to be worked out. As I have said, these arrangments will be in place before any change in the petition procedures is introduced.

Mr. Wilson

Will the Minister give way?

Mr. Stewart

There is nothing further that I can add, but I will give way for the last time.

6.45 pm
Mr. Wilson

I am sure that the Minister understands the unsatisfactory conclusion to which his comments bring us. We have the assurance that people will qualify for legal aid, but that is in the context of what would appear to be major changes in the whole legal aid system. Will the Minister convey to the Minister of State, Scottish Office, or whomever is responsible for legal aid, that Scottish Members would like to hear a statement, preferably in the House, and not have to draw secondary conclusions on the basis of a speech made by Lord Mackay of Clashfern?

Mr. Stewart

I am sure that the Minister of State will in any event read these proceedings with the greatest interest and care. Perhaps I can reassure the hon. Gentleman to some extent by emphasising that eligibility for legal aid is kept under review. Any changes are debated by the House each spring, and any future changes will also be debated by the House.

The essential proposal is that an advisory committee should be set up to keep the legislation under review. I cannot find any precedent for a committee of the nature suggested. As I have said, the outside expert organisations will have every opportunity to monitor the progress of legislation and to inform hon. Members of their views.

However, I take seriously the point about the importance of monitoring which several hon. Members made. Therefore, I can give an assurance that, once we have experienced the operation of the Bill when enacted, we intend to have outside research work undertaken on how the system operates in practice. We envisage that the results of that research will be made available to hon. Members.

I think that hon. Members will accept that the establishment of a committee such as they have suggested is without precedent and not without difficulty. I certainly take seriously the general point about the importance of monitoring the legislation when it is enacted.

Mr. John McFall (Dumbarton)

It is my pleasure to sum up the debate on new clause 3 for the Opposition. I was not aware that I was to he involved in this Committee until the summer. I asked a senior colleague in my party how to go about the Bill. I suggested that I read the Committee's proceedings, and he said, "Don't do that. That would only mix you up." If I am wayward tonight, it is the result of my assiduity in not taking that advice.

The Minister said that the Government had a vested interest in getting the costs correct. We must remind ourselves that the same Government had that vested interest in getting the costs right in 1985, and got them horribly wrong. Costs have increased from £13,000 in 1986 to £18.5 million in 1991. On historical trends, the costs will increase to £50 million by 1993–94 and to £80 million by 1994–95. The Minister's comments do not give us much assurance that the costs and the procedures will be correct.

Judging from speeches by my colleagues, legal aid seems to be the central issue. I tabled amendments Nos. I and 2, which dealt with legal aid, but Madam Speaker in her wisdom did not accept them. I was told that the Minister accepted them on principle, but his summing up appeared to contradict that.

Opposition Members are still worried about the legal aid scheme. It is obvious that it needs to be restructured before clause 3 comes into force. We are not satisfied with the Minister's comments, because at present legal aid allows advice and assistance free. However, when someone petitions for personal sequestration, he or she will not be able to get a solicitor to do it. In practice, the procedure allowing a debtor to petition for his sequestration will not be simple enough for debtors to use it without legal assistance. Although one welcomes the Minister's undertaking that debtors will be able to apply for legal aid, that is no guarantee that they will receive it. That is the nub of our concern.

Sometimes debtors with no assets have employed income which might make them financially ineligible. My hon. Friend the Member for Monklands, West moved new clause 3, which seeks to establish a committee to advise on the availability of advice to those contemplating sequestration. The main concerns are access and justice.

Justice depends on many factors, but the foundations lie in our laws—the rules and regulations which govern our lives and our relationships with people, organisations and the rest of society. People must have access to knowledge about those laws, independent advice and an assured and effective judicial system. The Minister's comments fall far short of reassuring us on those matters.

Access to justice is denied to many people. There have been many representations—I received a number this afternoon from the Scottish Consumer Council, citizens advice bureaux of Scotland and the Law Society of Scotland. They feel that access is denied to many and restricted for most, and the legal aid procedures in the Bill could restrict it even more. They realise the complexity of modern law. Reflecting modern society, it is so complex that many people need expert advice. The cost of legal action is rising, and only the extremely rich or the extremely poor can resort to it. The legal aid system has been undermined to such an extent that the voluntary bodies are extremely concerned.

My hon. Friend the Member for Monklands, West mentioned the Inverness citizens advice bureau, which was seriously concerned about the decline in the number of lawyers prepared to take on civil legal aid cases.

I have received a communication from the House of Commons Library which shows that, in 1989–90, there were 29,527 applications for civil legal aid, of which only 20,463 were granted. In 1991–92, there were 33,180 applications, with only 23,027 granted. The latter is a 44 per cent. refusal rate.

Is it the case that in Scotland today, only 23,027 poor people in any year have to turn to the courts to enforce civil rights? As the Minister will acknowledge in private, although perhaps not in public, that is not the case.

The costs are extremely high, and the legal aid system is in crisis. The Law Society and voluntary agencies have told us so. New clause 3(2) says: The committee shall include in its membership persons with experience of debt counselling and welfare rights work in the community. In Scotland, citizens advice bureaux dealt with almost 300,000 debt-related inquiries last year. An increased burden is falling on an already overstretched voluntary agency. Do the Government intend to provide the voluntary organisations with additional resources, to allow them to expand their role in welfare and counselling? That is another important aspect of our new clause 3.

Unless the procedure can continue to be available at no cost to debtors with few or no assets, they will not use it, and the lifeline thrown to them by the Bankruptcy (Scotland) Act 1985, will be withdrawn. Remarks were made to Lord Mackay of Clashfern on the legal aid system, which is why we are so pessimistic about its future.

The Minister said that major savings would be made from the simplification of procedures. It was the same story over the poll tax. Hon. Members have had to deal with the results of those simplified procedures every week in their constituency surgeries and mailbags. That phrase sends a shock through us, especially as the Minister said that major savings will be made from the simplified procedures.

While we shall not press the new clause to a vote, we hope that the Bill will not come down on Government heads in the same way that poll tax legislation has done. We hope so for the sake of many poor people in Scotland, who are disadvantaged and cannot have access to justice to ensure that their affairs are carried out properly.

Question put and negatived.

Mr. Wallace

I beg to move amendment No. 3, in page 1, line 29, at end insert— '(6) For the avoidance of doubt, the Accountant in Bankruptcy may be liable for damages in respect of any loss sustained by any person as a result of any negligent action or omission by the Accountant in Bankruptcy or a member of his staff in the performance of his duties.'. I acknowledge that a similar amendment was moved by the hon. Member for Glasgow, Garscadden (Mr. Dewar) in Committee, which sought to exclude any question of Crown immunity. The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) responded by saying that Crown immunity would not apply. As we are dealing with the somewhat unusual case of someone who is a paid official or servant of the state engaging in professional practice, we think that there should be no doubt as to his liability or that of any member of his staff. We are in a vicarious position as regards members of his staff. Clearly they should he liable in respect of losses sustained by the debtor or creditor.

One can imagine a situation in which a creditor believes that, through some act of negligence, he or she has not received the full payment of a dividend and subsequently maintains that there was negligence when managing to ingather the estate. The accountant in bankruptcy should not he able to slide out of any liability for that, and it is equally important that that applies to those practitioners who undertake work on behalf of the accountant in bankruptcy.

As I understand it, the tender document will include an obligation to indemnify the Crown for the actions of anyone who is contracted to do the work. Given that those who do the work on behalf of the accountant in bankruptcy will have to accept and follow his general and specific directions, the contractor will tend to be put at a disadvantage. If work has been undertaken by an independent contractor and a claim subsequently arises, will the Minister assure us that that claim will be met by the accountant in bankruptcy, and that, if it transpires that the claim was due to a fault by the contractor, liability will then be passed on?

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Mr. Stewart

As the hon. Member for Orkney and Shetland (Mr. Wallace) reminded us, the question of the liability of the accountant in bankruptcy and whether he can he sued for damages arose on a number of occasions during the proceedings on the Bill. The accountant in bankruptcy is and will be answerable to the courts for his actions. As I have previously reassured the House, the accountant may he sued for damages if any loss is sustained by a third party as a consequence of any negligence by the accountant, his staff or his agents. By virtue of the Crown Proceedings Act 1947, proceedings may be raised in the courts.

The answer to the hon. Gentleman's specific question is that, where an agent acts on behalf of the accountant in bankruptcy, in accordance with the principles of the law of agency, the accountant as principal may be sued, not the agent. The hon. Gentleman is right to say that, should damages be awarded against the accountant as a consequence of his agent's negligent act, the accountant may seek to recover the damages as a separate action.

Mr. Tom Clarke

May I ask the Minister a question that I should have asked the hon. Member for Orkney and Shetland (Mr. Wallace)? Has the Institute of Chartered Accountants expressed a view on that matter?

Mr. Stewart

Yes, the Institute of Chartered Accountants has expressed a view on the matter. It has written to my right hon. and learned Friend the Minister of State about the indemnity that we are discussing and about a number of related matters, and a response will be sent to the institute shortly.

I repeat my assurance that the accountant in bankruptcy may, as a separate action, seek to recover damages from the agent if a breach of contract can be shown, but that would be a matter for him. The Government will not seek a blanket indemnity, as was feared by the institute earlier in our proceedings.

Mr. Wallace

I welcome the general tenor of the Minister's reassurances and, in those circumstances, I seek the leave of the House to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Stewart

I beg to move amendment No. 6, in page 3, line 28 after 'perform' insert 'on his behalf'.

Mr. Deputy Speaker

With this it will be convenient to consider Government amendments Nos. 7, 8, 9, 11, 17, 18 and 36.

Mr. Stewart

These are purely technical drafting amendments.

Amendment agreed to.

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