HL Deb 18 December 1984 vol 458 cc539-51

2.55 p.m.

The Lord Advocate (Lord Cameron of Lochbroom)

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Bankruptcy (Scotland) Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

My Lords, I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read a third time.—(Lord Cameron of Lochbroom.)

On Question, Bill read a third time.

Clause 71 [Crown application]:

Lord Ross of Marnock moved Amendment No. 1:

Page 68, line 27, at beginning insert ("Subject to Section (Saving for Crown etc.) below,")

The noble Lord said: My Lords, I apologise for my appearance on this legal matter, but due to the unavoidable but understandable absence of my noble and learned friend Lord McCluskey the task has fallen to me. More than that I cannot say at present.

There are 10 amendments, and I suggest that we take them in three groups. I suggest that the first group should consist of Amendments Nos. 1 and 2; that second group should consist of Amendments Nos. 3, 7, 8 and 9; and the last group should consist of Amendments Nos. 4, 5, 6 and 10.

Amendment No. 2: After Clause 71, insert the following new clause:—

Saving for Crown etc.

(". In the case of sequestration under this Act or a protected trust deed under this Act, compensation shall not be available—

  1. (a) between debts due to or by the Crown under the provisions of any statute and debts due to or by the Crown in respect of contractual obligations;
  2. (b) between debts of any nature due to or by one Government department and debts due to or by another Government department.")

The subject which has caused us most concern in respect of this very good Bill has been the fact that the Government have not paid quite the amount of attention which we felt necessary to the privileged position in respect of Crown debts. All the points that we hope to raise today and about which we hope to convince the Government that they should do something, if not now then at a later stage of the Bill, deal with that particular point.

Amendments Nos. 1 and 2 deal with the question of what is technically called compensation or set-off. That matter was not addressed by the Law Commission in their lengthy consideration, but it was considered by the review that was carried out in respect of insolvency law and practice in England and Wales. Clear recommendations were made by the Cork Commission. I should also say that the existing privileges arise in the following way. Mr. A and Mr. B enter into commercial transactions, at the end of which Mr. A owes Mr. B, for example, £100 on the first transaction, and Mr. B owes Mr. A £75 on the second transaction.

Then Mr. B goes bankrupt. It would be tough on Mr. A if he had to hand over the full £100 to Mr. B's trustees in sequestration and then lodge a claim in Mr B's sequestration for £75 in the hope that he might get, for example, 5p in the pound. So at present under the law it is provided that set-off of the debt of £75 against the £100 that he is owing can be extinguished pro tanto— that is, £100 minus £75—leaving him in the position of a certain measure of privilege in having got that fairly clear.

But if the position were that Mr. A and Mr. B entered into the transaction and the second transaction was certainly with Mr. A and company, of which Mr. A probably owned 99 per cent. of the shares with Mr. B, because different legal personae are involved, then that set-off or compensation is not available. If it were the Army or the Navy or the Air Force, they would be counted as one person; so in that case set-off and compensation is freely available. There is more than a feeling that it is prejudicial to treat creditors in this particular way, giving this preference. As I have said, clear recommendations to end this preference were made by the Cork Committee for England and Wales. I do not know what is going to happen there, but I think it is desirable that the law in England and Scotland should be the same for this particular type of case.

Therefore, the first two amendments are aimed purely and simply at ending this discrimination and making all equal in preference for compensation or set-off under the law. I beg to move.

3 p.m.

Lord Cameron of Lochbroom

My Lords, according to its side note, the proposed new clause—I am sure unintentionally—appears as a saving for the Crown, but it is nothing of the kind. It curtails the Crown's rights to set off in ways which I suggest are undesirable. Perhaps I may look at each of the paragraphs of the proposed new clause in turn.

Paragraph (a) would have the effect of placing the Crown in a significantly worse position than other creditors. This is because it applies only to Crown debts and seeks to prevent the Crown from setting off its contractual debts against debts due under statute. However, other creditors will be able to continue to set off their contractual debts against their statutory debts. Perhaps I may take the example of a local authority. A local authority as an education authority owes a bankrupt builder the sum of £5,000 for work done by him on a school. The builder owes the local authority as the rating authority—that is, in a different guise—the sum of £5,000 in rates. As the law presently stands and as it would stand if the amendment were to be passed, the local authority would be able to set off the debt owed by them against the rates owed to them, although in each respect they are different kinds of debts and owed to the local authority in, as it were, different personae.

Similarly, an employer might, for example, owe his redundant and now bankrupt employee statutory compensation in respect of the redundancy, but the employee might owe his former employer money in respect of an unsecured loan for a car. Again, as the law stands and as it would stand if this amendment were to commend itself to your Lordships, the employer could plead set-off on a demand for the redundancy payment made by the trustee for the former employee. Why should the Crown be placed in a worse position than other creditors in this respect?

Further, the amendment would also go against the common law principle in Scotland, which has been with us for many years, that there should be a balancing of accounts in bankruptcy no matter the nature of the debits and credits. If there is any case for making inroads into that common law principle, this should be done only after proper and thorough examination by the Scottish Law Commission of the whole subject of compensation in the context of the law of obligations, and not done merely in an ad hoc fashion in the context of bankruptcy as applying only to Crown debts.

Paragraph (b) of the new clause would also have the undesirable effect of making the Crown's right of setoff dependent upon, for instance, the portfolio of particular Government departments. For example, this would mean that set-off would be more readily available in the case of the Scottish Office. As the noble Lord opposite will understand, the range of responsibilities there is of a far greater character than that in certain other United Kingdom departments whose responsibilities are confined to particular subject matters.

Surely it cannot be correct that the principle of setoff should be dependent upon the allocation from time to time of Government business between departments which may, in fact, be determined by administrative convenience.

So far as set-off as affecting other parts of the United Kingdom is concerned, at present there is no intention to alter the position in England and Wales. So the effect of the present proposal would be that, notwithstanding that the Cork Committee recommendation for some limited matter of deviation set-off in England and Wales is not being accepted by the Government, Scotland would diverge in an important particular from the rest of the United Kingdom in the law of bankruptcy.

In my view it is much more likely to produce equitable and consistent results if matters are left as they are at present. The present position is that the Crown Proceedings Act 1947 requires the Crown to obtain the leave of the court if it wishes to set off a debt due by one Government department against a debt due to another. This provides an independent and impartial judicial control over the exercise of the Crown's right of set-off without infringing the common law principle, to which I have already alluded, that there should be a balancing of accounts in bankruptcy or, indeed, and, more importantly perhaps, without making any infringement upon the constitutional doctrine of the indivisibility of the Crown. I would suggest to your Lordships that this amendment goes far too far and that your Lordships should not accept it.

Lord Ross of Marnock

My Lords, that means that we shall hear this argument advanced again when we deal with the English Bill. I do not know why the noble and learned Lord the Lord Advocate took objection to the word "saving"; I thought that he was a lawyer. I thought that he would know that in this context it has nothing to do with financial saving, but that it is a proviso in respect of that. I hope that the noble and learned Lord does not treat the House in that way again. We were here a wee while before he arrived and we have dealt with Bills of this and other complex natures previously. Let the noble and learned Lord take a leaf out of James Mackay's book or even my noble and learned friend Lord McCluskey's book in respect of how he treats the House, and he will get on a little better.

As regards what the noble and learned Lord has said, there is no doubt at all about the situation. It is true that the Cork Committee was set up to deal with England and Wales, and that was its subject, but the recommendations of that committee are clear. The Scottish Law Commission certainly took a long time over its consideration of the law in this respect in Scotland, but simply because the Scottish Law Commission did not address itself to this matter is no reason why we should not regard what was recommended by the Cork Committee as being of some importance.

The point clearly arises that trade creditors are not treated fairly and squarely along the same lines as the Crown, and that is not right. They have privileges; whether they should continue is the subject of our present discussions.

There is also another point to raise in relation to the procedure of insolvency. Very often a Government department will take a long time to find out whether or not something is due by another Government department. So the matter drags on and on and it is a long time before a settlement can be reached.

However, I shall not pursue the matter at the present time. A Third Reading is fairly late to go into this complicated matter as deeply as I could. However, there will be other stages in this Bill, and I hope that the Government will bear in mind the importance of this matter and the important effect that it will have in respect of English law. I am not afraid of going a step ahead of the English law. We have done so in Scotland all along the way and occasionally England has caught up with us, usually very belatedly. In this case it would only be a matter of months. Therefore, I ask the noble and learned Lord not to plead that to us; we have heard it all before and it is not a very strong point. If may coin a phrase dear to the noble and learned Lord's own ears and his own voice, "It is not indisputable". I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 2 not moved.]

Schedule 3 [Preferred Debts]:

Lord Ross of Marnock moved Amendment No. 3: Page 73, line 18, leave out sub-paragraph (1).

The noble Lord said: My Lords, Amendment No. 3 should go with the amendments dealing with the same subject, Nos. 7, 8 and 9.

Amendment No. 7: Page 73, line 40, leave out sub-paragraph (3).

Amendment No. 8: Page 74, line 9, leave out paragraph 3.

Amendment No. 9: Page 74, line 13, leave out paragraph 4, and insert— ("4. All sums which on the relevant date are due from the debtor on account of primary Class 1 contributions from employed earners under the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975 and which became due and payable in the six months next before the relevant date.").

We come back to important points that we raised earlier, although the amendments do not follow exactly what we suggested before. It will be remembeed that we proposed to the Government to substitute the Scottish Law Commission's own proposal, which was a mere draft clause, for those that the Government had put into their Bill in which they went in direct opposition—and certainly unusually for them in respect of their consideration of the Law Commission's report—to what they suggested.

The Law Commission proposed a complete abolition of the existing system of Crown preference whereby on the sequestration of an insolvent—bankruptcy, to English ears—the various amounts due to the Inland Revenue, Customs and Excise, rate collectors, et cetera, fall to be paid in full before any other ordinary debts are paid. In other words, these Crown debts are preferred debts.

The Scottish Law Commission in their Clause 48 defined preferred debts in such a way that the Crown had no preference. The only preferred creditors were unpaid employees in respect of wages and holiday pay, and persons who had advanced money to the bankrupt expressly to allow wages to be paid, but the Government Bill retained the whole panoply of Crown preference, as can be seen in the Bill as it now stands.

Our amendment was rejected at Committee stage, but there is a half-way house. It is one that has been put to us—I do not know whether it has been put to the Government—by the Institute of Chartered Accountants of Scotland. May I say in passing that they are happy to record that there has been full discussion with them during the whole course of the preparation of the Bill following the Law Commission's report, and it has been very productive indeed, but they are still hopeful that some of the suggestions will, even at this late date, be considered by the Government.

Now, this half-way house. At the date when a person becomes bankrupt he may owe certain moneys in his own right—for example, income tax in respect of his own income; rates in respect of his occupation of premises; class 2 contributions under the Social Security Acts. But he may also owe certain moneys which actually, or notionally, come into his hands as an agent. When collecting for the Government the most obvious is VAT.

I think, and the Institute thinks, that the Government have got something here because these are not really the moneys actually belonging to the person who has been declared insolvent. Therefore, the half-way house is one which says that we recognise the Crown's preference and can justify it is repect of the agency debts like VAT where the money was never in any sense the bankrupt's own and he held it purely as a collecting agent on behalf of the Government, but so far as ordinary tax, rates, betting duty and class 2 contributions are concerned his obligation to pay the Government is indistinguishable from his obligation to pay any other creditor. To give effect to this compromise we have these amendments 3, 7, 8, and 9.

This has considerable support. I hope that the Government will have a look at this. It goes part of the way towards what the Scottish Law Commission wanted, and it may even meet with the agreement of the Scottish Law Commission, who were not entirely happy about the amendment we put down at an earlier stage. I beg to move Amendment No. 3.

3.15 p.m.

Lord Cameron of Lochbroom

My Lords, this ground has in part been traversed already in our consideration of the Bill in this House both at Second Reading and in Committee. Indeed there is little I wish to add to what I have already said on this side of the House about the matter. These amendments seek only to abolish the Crown preference for assessed taxes, and from what the noble Lord opposite has said they accept the case for retaining Crown preference for those taxes and duties which are collected by the debtor as agent for the Government.

Perhaps I should say at the outset, because it may be that the noble Lord is under a misapprehension, that the preference is not necessarily for the whole of the debts due to the Crown. I think that is recognised. It may have been a slip of the tongue when the noble Lord, Lord Ross, referred to the whole debts due to the Crown, but it is only in relation to debts for a certain period, and there may of course be debts which go beyond that which would not be covered by the preference for the Crown.

However, perhaps I may just repeat the arguments which I presented to your Lordships' House on previous occasions because I would submit that they are arguments that are worthy of repetition and that they are soundly based. First, the Crown is an involuntary creditor and, as such, is placed at a disadvantage in relation to other creditors. Your Lordships will recall that I previously indicated that taxes on business profits are already payable much later than ordinary commercial debts. I mentioned, for instance, the period of 15 to 27 months after the profits were earned.

Secondly, the Crown is unable to pick and choose its debtors even when it knows that a person has a previous record of indebtedness, and is also of course unable to insist upon security. At Committee stage the noble and learned Lord, Lord McCluskey—and naturally I am sorry that he cannot be present here today but I fully understand the reason alluded to by the noble Lord, Lord Ross—suggested that in practice small traders cannot insist upon security. But they can, and indeed do, take steps to assess the creditworthiness of those with whom they deal. This is a significant argument in comparison with the steps which are available to the Crown.

The purpose of the limited preference is to restore the balance. If the Crown were not to be given this limited preferential right this would lead to a greater liability falling upon the general body of taxpayers. Therefore I ask once again, why should the general body of taxpayers pay higher taxes to meet the unpaid taxes of a bankrupt? I said before that one man's tax arrears become everyone else's taxes.

The Government have taken full cognisance of the arguments presented by the Scottish Law Commission, by the Cork Commission, and by other bodies such as those mentioned by the noble Lord, Lord Ross, the Institute of Chartered Accountants of Scotland and indeed the Law Society of Scotland. In the Government's view, however, these arguments do not make a sufficient case for changing the present system. I am myself convinced that the advantages both to the country and taxpayers as a whole, and indeed in some cases to individual debtors and creditors alike, are such that to sweep away the system of Crown preference for assessed taxes could turn out to be a counter-productive decision.

With this amendment the noble Lord, Lord Ross, also dealt with Amendments Nos. 7, 8 and 9, and perhaps at this stage it would be convenient if I simply said that, so far as concerns Amendment No. 7, which deals with betting, gaming, and bingo duties, I can see no reason why they should be treated any differently from assessed taxes or any other taxes and duties which are collected on the Government's behalf by an agent. To do so would create an inconsistency in collecting arrangements to no particular end. If your Lordships accept the principle of the retention of a limited preference for taxes and duties collected by an agent as it appears from other amendments which we have discussed and are discussing at present, then there is no compelling reason to make an exception, with all the problems which that entails, for the various duties.

So far as Amendment No. 8 is concerned, which relates to rates, again I suggest that the arguments for retaining this preference—which, of course, is in relation to debts due to a local authority—are really similar to those which I have previously advanced for retaining the Crown preferences for assessed taxes; even more so, one might think, in the case of the rates which are, in some respects, like income tax in that it cannot be right that the local community of ratepayers should be obliged to subsidise the creditors of a bankrupt, as they would certainly be required to do if the preference is to be abolished.

I should say that the Valuation and Rating Committee of the Local Government Finance Working Party were consulted upon this proposed amendment to abolish the preference at a meeting which they held on the 14th of this month. Their view was that the preference should be retained, and they pointed out that if it were to be abolished, local authorities would require to pursue stricter policies for the collection of rates which would work to the detriment of ratepayers generally. Accordingly, on the basis of arguments similar to those which I have advanced in relation to the assessed taxes, I suggest that there is no reason for making any exception in regard to rates.

Finally, in relation to the Crown preference for national insurance contributions, what is proposed, as I understand, is that there would be a restriction to primary Class 1 contributions: that is to say, the contributions payable from an employee which are collected by his employer. The effect of this amendment would be to abolish any existing preferences for other national insurance contributions and, again, for the reasons which I have already outlined, I suggest the effect of this amendment would be undesirable. Why should the general community subsidise the individual creditors of a bankrupt? I think, too, in this regard it is significant that the Cork Committee did not recommend the abolition of the existing preferences for the national insurance contributions. They did, of course, recommend that the period for such preferences should be reduced, but that is a different matter. So far as the existing preferences are concerned, they did not recommend that they should be abolished. For those various reasons, I cannot suggest to your Lordships that these amendments are acceptable.

Lord Ross of Marnock

My Lords, personally I am not too happy about some of the amending preferences that we have put down but, of course, the various linkings of paragraphs here are endless. When they come to it there will be plenty of opportunity in the Scottish Grand Committee to try out all these types of amendments. Quite frankly, I base my arguments purely and simply on the fact that the Scottish Law Commission (which is a rather more important body than the Scottish Valuation Advisory Committee) was the body which recommended the complete abolition of this preference. I do not like the argument of why should so and so do this? It reminds me of the old Scottish music hall joke: why should the blind man pay for the lobby gas, or why should he pay for street lighting when he gets no benefit out of it? That is the kind of false argument which we are getting from the noble Lord the Lord Advocate on this occasion. But I shall leave it to others to argue at very considerable length on another occasion.

I certainly deplore the fact that the Government have seen fit to throw overboard completely the recommendations of the Scottish Law Commission and have not been prepared to look at this particular compromise which I put forward. There will be other opportunities. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Ross of Marnock moved Amendment No. 4: Page 73, line 24, leave out ("twelve"), and insert ("six").

The noble Lord said: My Lords, the noble Lord the Lord Advocate picked me up on a slip of the tongue when I seemed to imply all debts. Now we come to a point which he himself said we would come to later, which is the extent to which we should allow the Crown preference to trail back for a year in respect of unpaid debts.

The feeling certainly with the Institute of Chartered Accountants of Scotland, which is also one of which we have evidence of in England, is that the period should be not one year, but six months. The noble Lord the Lord Advocate spoke about collection of rates in Scotland. I do not know many local authorities who will allow debts to extend for one year beyond the final period; in fact they tend to collect them in advance rather than after a year. I think it is fair to suggest that the period in respect of which the Crown's preference extends should be limited with all its preferences to six months. After all, you could get the position where by the dilatoriness of the Government in respect of the agency debts or of the local authority in not collecting its rates in time, an insolvent person might be enabled to deceive others about his actual position because he was mixing their money with his.

There is one other matter which arises, and I am sure that the noble Lord the Lord Advocate will know about it. Her Majesty's Commissioners of Customs and Excise have issued a paper entitled The Collection of Value Added Tax which puts forward proposals for tightening the collection procedure. The Inland Revenue are consulting interested bodies on similar proposals relating to the collection of PAYE and national insurance contributions—all the things we have been talking about. Now, the question arises: should these debts be allowed to accumulate for a year, or should the Government department be allowed to go back six months?

The very fact that the Government themselves are conscious of their weakness from the point of view of all the other taxpayers—which is dear to the heart of the noble Lord the Lord Advocate—means, I suggest, that tighter collection procedure will undoubtedly add strength to the view expressed in these amendments that the preference extended to these matters should be reduced. Tighter collection within just limits is, in principle, preferable to giving Crown preference. The Government must not always take the easy way out. In fact, the most efficient way out here is to accept these amendments proposing six months instead of a year. I beg to move Amendment No. 4.

3.30 p.m.

Lord Cameron of Lochbroom

My Lords, despite the blandishments of the noble Lord opposite, I cannot commend these amendments to your Lordships. The preference period of 12 months was originally introduced for assessed taxes. When PAYE was introduced under the Finance Act 1952 it was then decided that the preference should similarly be restricted to the 12-month period in the interests of treating assessed and non-assessed taxes alike. At that time I suppose the question might have been asked whether, given the nature of PAYE, it was right to restrict the Crown's preference at all. As I previously mentioned, we are here speaking of money which does not and indeed never did belong to the employer, and the noble Lord, Lord Ross, has this afternoon accepted that that constitutes a distinction.

That said, however, PAYE operates on an annual cycle and though the preference period may span two cycles, in the interests of conformity with assessed taxes it was decided to limit the preference for PAYE to the 12-month period preceding bankruptcy. I stress to your Lordships that this is only a maximum period. There are many cases where the amount of PAYE owed is less than that for 12 months. In view of these factors I can see no arguments in favour of a further restriction of the preference for PAYE to a period of six months.

The noble Lord, Lord Ross, referred to certain procedures which have been considered for tightening the enforcement for the collection of such taxes. These arise from proposals made by a committee which was chaired by the noble and learned Lord, Lord Keith. Tightening enforcement will only affect those who can and are willing to pay. It would not affect the insolvent and, regretfully, often not even those who are potentially insolvent. These matters do not touch upon the problems which arise in the event of insolvency.

The amendments which were linked with this amendment also affect other taxes. Amendment No. 5 deals with value added tax. I hope that I do not weary the House, but it is important that your Lordships be aware of the particular reasons, in relation to VAT preference—these arguments also apply in relation to the other taxes and duties mentioned in later amendments—why the period of the six months' preference in relation to VAT is an impracticable one. This period is very short for preference because it may well take longer than six months from the date when the debt first arises to the date of sequestration. If that were so, the preferential status for the earlier part of the debt would be lost. A further inevitable result of a reduction in the preference period would be that Customs and Excise would be more reluctant to allow traders to pay outstanding tax over relatively short periods. This might cause additional business failures.

Secondly, there is the justification that the trader who has collected VAT from his customers is holding money that belongs to the Crown. In law the trader is directly liable for the payment of VAT on goods and services supplied by him: but the reality is that he collects the appropriate amount of tax from the person to whom the goods and services are supplied. It would be wrong if this collected tax were made available to the general creditors instead of finding its proper destination, the Crown. Thirdly—I have already mentioned this in relation to another amendment—the Crown cannot choose its debtors or require them to grant security for their debts.

Finally (again I make this point particularly in relation to VAT) the Government have a duty to look after the interests of taxpayers generally. The majority of taxpayers are not traders but are cash customers. For VAT the number of non-trading customers who pay VAT as part of the price of their purchases far outweighs the number of potential trade creditors. The reduction of the preference period for VAT is therefore tantamount to providing a subsidy to trade creditors out of tax paid by the general body of taxpayers. Where the non-trading customer pays in advance—this was an argument mentioned by the noble and learned Lord, Lord McCluskey, at Committee stage—for example, on a holiday, he may cover himself by some form of insurance or bond. That is not something which is open to the Government as collector.

Similar arguments apply in relation both to car tax and to betting tax. I shall not weary the House by making any specific arguments in relation to these two. They are covered by the general arguments which I have put forward. In my submission, a reduction in the period of six months would result in inconsistency on a scale which I do not think the noble Lord opposite has contemplated. I suggest that this amendment and those related to it are really not acceptable.

Lord Ross of Marnock

My Lords, I can always understand that phrase "not acceptable". It is when the Lord Advocate forgets where he is and starts to use words such as "indisputable" that my hackles begin to rise. He says that he can see no argument—I do not know that one "sees" arguments but rather one hears them—for further restrictions on the Crown. It depends on one's point of view.

Bearing in mind that this whole Bill stems from the Scottish Law Commission's Report, which was for complete abolition, which the Government have rejected in principle, this is a case of seeking further privilege for the Crown in respect of time. I do not think anyone will argue with me—or should reasonably argue with me, since I am being pedantic—that it is far better to collect quickly and tighten up procedures than to seek preference when things go wrong.

I am glad that we have had this argument, I am grateful to the noble and learned Lord for the extent of the time and the attention he has given to the amendments. He has declared fully exactly why he is opposing them. This is an early stage in the Bill. It is a quiet stage. Soon the Bill will go to another place and we shall have a Scottish Committee sitting with all its expertise. I have seen Lord Advocates grovel before they were finished with such a Bill wishing that they had never seen the place. The noble and learned Lord, Lord Cameron, does not know how lucky he is!

I am sure the Committee will be grateful for the arguments that have been put forward and which they can readily contest now that they have been openly given by the Lord Advocate. I am grateful to him for the attention that he has paid to this stage of the Bill. I regret that he has not seen fit at the moment to concede any of our amendments or even to suggest some changes that would make them acceptable.

I have no desire to divide the House, important as this is, but there are so few bankrupts in Scotland. There have been far, far more—even in Scotland—since this Government came into power. A bankrupt country with a bankrupt Government, that is what we shall have before very long. I will not divide the House. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 5 to 10 not moved.]

Lord Hughes

My Lords, now that Amendment No. 8 has not been moved, I take it that it will not be necessary to move an amendment to line 11 on page 74 to put the first word into the plural instead of the way in which it appears in the Bill.

Lord Cameron of Lochbroom

My Lords, perhaps at this stage I might beg to move the privilege amendment.

Lord Hughes

My Lords, before that is done, could I have an answer to the question which I put to the Lord Advocate? I did not think it was a stumper.

Lord Cameron of Lochbroom

My Lords, yes. Perhaps I should simply say that I think, as the noble Lord has already suggested, it is a printing error and will be corrected. I am much obliged to the noble Lord for having drawn it to the attention of the House.

An amendment (privilege) made.

3.41 p.m.

Lord Cameron of Lochbroom

My Lords, I beg to move that this Bill do now pass.

We have had a very full and useful discussion on the points which have been raised by the noble Lord opposite, Lord Ross of Marnock. On a previous occasion this House devoted considerable energy to a very thorough examination of a number of provisions in this Bill. I should say immediately that I am grateful to your Lordships for giving the Bill this kind of attention. It undoubtedly properly deserves such attention as a major law reform measure.

The discussions we have had have raised a number of important issues which I and my colleagues will be discussing in detail before the Bill is considered in another place. I am perhaps unable to bring seasonable joy to the noble Lord opposite on the question of Crown preference, but I should add that in a number of areas we shall be looking again at the provisions of the Bill, in the light of points raised at both Second Reading and in Committee by the noble and learned Lord, Lord McCluskey, with a view to producing greater harmonisation in certain specific areas between this Bill and the insolvency Bill, which was introduced into your Lordships' House last week. At this stage I should like to thank the noble and learned Lords who have spoken in this and previous debates, and in Committee, for raising points which certainly will be looked at in regard to these matters.

I shall also be asking my colleagues in another place to consider tabling further amendments to the Bill which arise specifically from the discussions that we have had in this House. These relate, in particular, to the point which was raised by the noble and learned Lord. Lord McCluskey, about the power of an interim trustee to appoint a solicitor, and to certain other procedural points.

I would not wish to allow the general welcome that the Bill has received in your Lordships' House to be outstayed. I will therefore detain your Lordships only to extend once again the Government's thanks to all those who have offered their advice on what is such a complicated area of law reform. This is a Bill which has been generally welcomed by professional bodies and by business interests throughout Scotland. It represents a formidable amount of work by the Scottish Law Commission and others. It preserves much of what is best about existing procedures and at the same time introduces new concepts, such as the interim trustee procedure and automatic discharge, which are designed to meet the perceived needs for today's bankruptcy procedures.

In conclusion, may I thank your Lordships for your interest in the consideration of this Bill? In particular, may I express my appreciation of the major and informed contribution of the noble and learned Lords, Lord McCluskey and Lord Wilson of Langside, and indeed to the noble Lord, Lord Ross of Marnock, who have helped us in our path through some of the thornier thickets in this Bill. I now commend the Bill to your Lordships. I beg to move.

Moved, That the Bill do now pass.—(Lord Cameron Lochbroom.)

Lord Ross of Marnock

My Lords, there has been a general acceptance of the benefits of this Bill. It is a welcome updating of the law. Of course, it was a monumental effort by the Law Commission, and it is good to see here the speedy enactment of their recommendations. I am sorry, and I express my regret, that the decisions and recommendations of the Law Commission with respect to Crown preference have not been found acceptable to the Government. But the Government promised at Committee—although they have not found time to do it on either Report or Third Reading—to make some changes to which my noble and learned friend and others also drew attention. Apart from anything else, I think attention was drawn by my noble and learned friend Lord McCluskey to the penal provisions. We are hopeful that the Government will do something there.

We have been promised that amendments will be made. We shall certainly look forward to seeing those amendments; and, indeed, to the constructive discussion of the few principles that have caused some disharmony here in our House, when the Government take the step of entering the lists on the Scottish Committee with this particular Bill. But, on the whole, I think it has been a good exercise. The Law Commission should be satisfied. Professional bodies in Scotland, I know, are very grateful to the Crown Office and to the Scottish Office, where they were concerned with the discussions that they had with them, and, indeed, found that they were prepared to accept recommendations that they made. It is the right kind of Bill in which this can be done and for the spirit in which it can be done. So I certainly welcome the changes that are being made. I hope that the Government will not weary in well-doing when the further stages of the Bill are reached.

Lord Wilson of Langside

My Lords, I content myself from these Benches with simply saying that I agree with the noble Lord, Lord Ross of Marnock, that this has been a useful exercise, that we have had a useful discussion on the provisions of the Bill, and that we are in debt to the noble and learned Lord the Lord Advocate and to the Scottish Law Commission for bringing it about. I would merely add that I was somewhat touched that the noble and learned Lord the Lord Advocate should express any thanks towards myself, because I have really made very little contribution to the discussions which we have had. However, I have listened carefully, and there is a lot to be said for listening as well as talking.

So far as the preferred debts are concerned, I felt that, although the Government's answers were perhaps not thoroughly convincing, perhaps this Bill was not the appropriate vehicle in which to make the amendments to this branch of the law. Finally, I would only say that I hope that among the matters which the noble and learned Lord the Lord Advocate will be considering with his colleagues, as he has said, will be those provisions relating to the criminal offences under the Bill and to the provisions for the (on the face of it) somewhat severe penalties which may follow the commission of certain of these offences.

On Question, Bill passed, and sent to the Commons.