§ '.—The following shall be inserted after section 415(3) of the Insolvency Act 1986 (Fees orders (individual insolvency proceedings in England and Wales))—
§ "(3A) An order under this section shall provide for:
- (a) exemption from any fees payable under this section by applicants who, at the time when a fee would otherwise be payable. are in receipt of income support, income-based jobseekers allowance, working families tax credit or disabled persons tax credit (working tax credit and pension tax credit from April 2003) and any other benefit that the Secretary of State may by order specify;
- (b) remission of all or part of any fees payable under this section where the Secretary of State considers that the payment of any fees payable under this section would, owing to the exceptional circumstances of the particular case, cause undue financial hardship;
- (c) a reduction in the fees payable under this section where:
- (i) two or more people live in the same household petition for bankruptcy at the same time, and
- (ii) they are jointly and severally liable for at least one debt in both petitions;
- (d) payment of any fees payable under this section by instalments.".'—[Mr. Waterson.]
§ Brought up, and read the First time.
§ Mr. WatersonI beg to move, That the clause be read a Second time.
57 The subject of the new clause is, in part, a re-run of a debate in Committee. We did not get a satisfactory answer from the Minister then and I hope that our luck will be better today.
The aims of the new clause are fairly straightforward. It is based on briefing material and a draft amendment produced by the National Association of Citizens Advice Bureaux, which has wide experience of advising people with debt problems. By the standards of some bankrupts whom we have vilified, some people have modest debts, but they still have no way of paying them off in a reasonable working life. It may not matter for our purposes whether they are benign or malign bankrupts or would-be bankrupts, to use the terminology of the hon. Member for Hemel Hempstead (Mr. McWalter); what matters is that they simply cannot afford to go bankrupt, even if their citizens advice bureau or Member of Parliament advises them that that would be in their best interests. We are not claiming that bankruptcy should never happen and is not appropriate. In some cases, it is the best, if not the only, option.
I hope that the new clause is clear. First, it would remove financial exclusion from bankruptcy for people on means-tested benefits and tax credits by exempting them from paying court and deposit fees. Secondly, it would help people on low incomes to pay those fees by allowing for remission of all or part of those fees and providing for payment by instalments. Thirdly, it attempts to deal with the situation when both people in a couple find it appropriate to apply for bankruptcy at the same time. All that is against the background of an enormous growth in the financial advice given by citizens advice bureaux. They have seen a 39 per cent. increase in consumer credit debt problems in the past four years alone. Last year, they advised on debt and equivalent problems totalling £1.2 billion, so they know what they are talking about.
Almost by definition, citizens advice bureaux advise people who perhaps cannot afford to, or would not usually see, an accountant or an insolvency practitioner but who are at their wits' end because they cannot find a way through the debts that they have accumulated. For many people whom they advise, bankruptcy is the only way to obtain a fresh start. They also say that the administration order process in the county court does not apply if someone owes more than £5,000 or has debts that are not the subject of county court judgments.
Typically, citizens advice bureaux advise people who have debts of £10,000 or more, and I gave one of their worst examples of that in Committee. A local authority tenant, who was employed, managed to run up debts of £33,000. She went to the CAB after considering committing suicide and being depressed about the problem. It advised her that bankruptcy was the best option because otherwise it would take her at least 20 years to repay the debts. The official receiver decided not to make an income payment order or to sell any of her goods. In that legitimate case, a weight was lifted off the shoulders of that lady who, for whatever reason, ran up debts that she had no way of repaying. Another CAB in Sussex dealt with a case in which a £5,000 loan grew to more than £18,000. That caused enormous stress and again the person involved was advised to go bankrupt.
NACAB makes the point that in England, Wales and Northern Ireland—as opposed to Scotland, where it is much cheaper—it costs £370 to go bankrupt. We are in cloud cuckoo land if we think that the people we are 58 talking about can find that amount of available cash. NACAB gives examples of people who have had to borrow money from family or friends simply to pay the fee to go bankrupt. A recent legal case of R v. Lord Chancellor ex parte Lightfoot attempted to deal with that problem in the courts, although it was unsuccessful.
The Minister gave part of the answer in Committee. She said that some debtors can seek a waiver or reduction of the £120 court fee. As the hon. Member for North-East Derbyshire (Mr. Barnes) and I made clear, that still leaves £250 that is not covered by the waiver provisions. The Minister was uncharacteristically unsympathetic to the proposal. She stated that waiving all the fees in hardship cases would not be justified and
that all the costs of case administration would have to be met from other sources.I am not clear how the fees are decided. Are they meant to represent the costs of administering the average case? The Minister might not know off the top of her head, but presumably there is some attempt to relate one to the other.The hon. Lady went on to say:
we do not believe that general taxation should pay for people to enter bankruptcy when they may have taken on debts irresponsibly.They might have taken on debts irresponsibly, but they might also be part of the benign category of bankrupts or would-be bankrupts who got into that state through no fault of their own. She dismissed the entire group of potential bankrupts a little too lightly.The Minister also said that
a person's entry into bankruptcy is not a right, and should be considered very much a last resort."—[Official Report, Standing Committee B, 14 May 2002; c. 693.]It is a last resort for the people we are talking about, but there may be much more serious consequences for them if it is not available simply because they cannot afford the fees and court costs.My final suggestion in Committee, before giving up and promising to raise the matter on Report, was that there may be some merit in reconsidering the £5,000 limit for the county court provisions. The Minister was good enough to say that she would reflect on that point, so let us hope that she has done so and that she has proposals to change the situation.
I stress once more that we are talking about a not insignificant number of people who are excluded from the bankruptcy process for one reason—they simply cannot raise the money to pay the costs necessary to start bankruptcy proceedings, even when they have been advised by organisations such as citizens advice bureaux that it is the appropriate course of action and, in some cases, the only way out of their debt problems. We were disappointed when the Minister was somewhat unsympathetic in Committee; I hope that she will be more sympathetic today.
§ 6 pm
§ Mr. CarmichaelI am pleased to support the new clause in the name of the hon. Member for Eastbourne (Mr. Waterson). I am aware from my casework experience that this is a problem, even north of the border, where, as he says, the fees are more lenient. It seems absurd that, for lack of ready money, people cannot afford to make themselves bankrupt when it is manifestly the only course 59 of action open to them. The Government's attitude on this point strikes me as being not only less than helpful but inconsistent with their approach to the rest of the Bill. We have just acknowledged that in some circumstances it is right that creditors should be left unsatisfied, but in the next breath we seem to be saying that the Government must always get their pound of flesh in the form of administrative fees.
The new clause is tightly drawn and it would mean that people could get to the starting gate. The hon. Gentleman referred to the remarks made by the Minister in Committee to the effect that bankruptcy is not a right. That question is ultimately determined by the courts, and it is wrong that access to that determination should be based on one's ability to come up with ready cash.
§ Mr. Mark FieldI want to say a few words in support of the comments made by my hon. Friend the Member for Eastbourne (Mr. Waterson) and the hon. Member for Orkney and Shetland (Mr. Carmichael). It strikes me as odd that when we are trying to diminish the stigma of bankruptcy—the Minister will appreciate that there are, at least among Members on this side of the House, shades of opinion about the desirability of that aim—we are also making it ever more difficult for people to go into bankruptcy if they lack the relatively modest sums required.
I hope that the Minister will think twice. The new clause is tightly drawn and there is no great risk of its being abused. The advice that many hon. Members have received from citizens advice bureaux throughout the country is that the measure would not cost the Treasury huge sums, but it would be a sensible move, given the plan to ease the bankruptcy procedure. I hope that the Minister will have given some thought to the comments made in Committee and here today, and that she will be able to give us some comfort about the concerns that we have expressed.
§ Miss Melanie JohnsonOur debate has clearly shown the importance with which hon. Members regard the issues raised by new clause 2. The costs of entry into bankruptcy were also raised on Second Reading by my hon. Friend the Member for South Ribble (Mr. Borrow), and a new clause identical to this one was tabled by the hon. Member for Eastbourne (Mr. Waterson) in Committee. In addition, NACAB has briefed extensively on this point, as a result of which the Government have received a number of letters from hon. Members. I therefore welcome the opportunity to discuss the issue and the points covered by the new clause.
Before I do so, however, I must say that I am bemused by the arguments advanced by the hon. Member for Eastbourne in support of the new clause, especially in light of his arguments about new clause 6. On the one hand, he argued on Second Reading and in Committee that we are being too soft on bankrupts and opening the floodgates to more consumer bankruptcy. Indeed, he was hot on that trail only moments ago. On the other hand, he has tabled this new clause, so that those who are unable to make any contribution to creditors will be able to enter bankruptcy and wipe the slate clean.
As the House will be aware, bankruptcy is not the only method of dealing with debts; nor, depending on the circumstances of the case, does bankruptcy necessarily 60 provide the best outcomes for both the debtor and the creditor. I point out also that the courts have found that a person's entry into bankruptcy is not a right. The hon. Gentleman referred to the case of R v. Lord Chancellor ex parte Lightfoot, saying that the law would not help on this point, but the Court of Appeal held that the requirement to pay a deposit did not unlawfully restrict any fundamental right of access to the courts. Bankruptcy should be considered as a last resort; indeed, I thought that that was what Conservative Members were arguing. On this occasion they seem to be arguing that bankruptcy is too difficult for many people, and should be made easier, even though they may have no resources for creditors to access.
There are several other routes available to individuals with financial problems, many of which do not require a deposit. Many individuals can, and do, apply to the county court for administration orders and discharge their liabilities through monthly payments, which are set at a level that the individual can afford. More than 7,500 debtors took advantage of that route in 2001. Additionally, growing numbers of individuals with debt problems seek advice and assistance from organisations in the voluntary sector such as the Consumer Credit Counselling Service and Paylink. Those organisations will administer debt repayment plans on behalf of debtors at no cost to the debtor, the administration cost being met by creditors who agree to forgo a proportion of new debt. Several of them offer repayment plans of as little as £1 per week.
In considering changes to the arrangements for bankruptcy, account must be taken of the impact on creditors' interests, and that is my concern in considering the new clause. That point is particularly important in considering any proposal to reduce or waive entry costs in hardship cases. The bankruptcy entry deposit defrays part of the costs of administering the case. The deposit does not cover the full economic costs of administering the case, and any reduction in the deposit would mean that a greater proportion of the costs of case administration would have to be met from elsewhere, which would lead to lower returns to creditors.
The level of the deposit and fees are set through secondary legislation. It is therefore unnecessary and unduly inflexible to deal with the matter in the Bill. We recognise that this is an issue of concern, but it is also a complex matter. In considering the need for changes, it would be necessary to ensure that there is a continuing balance between the interests of the debtors and creditors. We believe that the current arrangements strike the correct balance, whereas the new clause would not.
To answer the specific point on deposits raised by the hon. Member for Orkney and Shetland (Mr. Carmichael), none of the individual insolvency provisions, nor those on fees and deposits, applies north of the border. I hope that that helps him.
The current arrangements strike the right balance, and I ask the hon. Member for Eastbourne to withdraw the motion. If he does not, and in view of the fairly fundamental inconsistency in the Opposition's approach to these matters, I shall ask the House to oppose the new clause.
§ Mr. WatersonThe Minister has scored a spectacular own goal. I might as easily describe her extremely tough 61 and Gradgrind-like attitude to the new clause as wholly inconsistent with her attitude to the new clause relating to bankrupts' homes. She takes a stern line now—although perhaps I should be grateful that she has not invited me to a seminar on the issue. I thought I had made it clear that I was talking about people for whom bankruptcy is indeed the last resort, and that the only thing that keeps them from it is an inability to raise the money for the fees that have to be paid if they are to become bankrupt.
There is a way forward that does not involve the complication from which the hon. Lady shies away. I raised it in Committee and the Minister promised to reflect on it; I repeated it in my speech moving the new clause, but the Minister signally failed to touch on it in her reply. That way forward is to do something about the £5,000 limit that applies in the county court, which may have become outdated.
§ Miss JohnsonI should have addressed that point and I apologise for not doing so. The hon. Gentleman asked in Committee whether there might be some merit in reconsidering the upper limit of £5,000 of total debts that currently applies for the purpose of qualifying for a county court administration order, and I said that I would reflect on it.
Such matters are for my right hon. and learned Friend the Lord Chancellor to decide. His review of the enforcement of civil court judgments includes reform of county court administration orders. The Government are considering a range of options, both court based and non-court based. We do not intend to take any interim measures such as increasing the scope of the existing county court administration orders scheme, including increasing the limit, before we have considered the options for reform in that wider context. I hope that the hon. Gentleman appreciates that that is the sensible setting for further consideration of the issues.
§ Mr. WatersonI am grateful for that, and I suppose it does make sense that the matter is to be considered in a broader context. I am moderately delighted that it has not been lost sight of altogether.
The Minister is taking an unnecessarily stern line. We know the sort of people that the provision covers—they are the sort of people described in NACAB's extensive briefing. I am sorry that the Government are not prepared to be more flexible; despite that, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.