My Lords, I move Amendment 12 but also give notice that I will oppose the Question that Clause 18 stand part of the Bill. I hope that the Government will accept, as a minimum, Amendment 12, even if they cannot accept the bigger—and in my view better—alternative, which is to drop the clause altogether.
The Government have come up with the rather strange idea of partial authorisation for insolvency practitioners. This would split in two the regulation of what is quite a tiny profession—fewer than 2,000 people. You would then have a profession for company insolvencies and a different one for individual insolvencies. On the basis of no evidence whatever, the Government have decided, in effect, to dumb down the specialist profession of insolvency practitioners. By doing so, they risk helping the larger insolvency firms at the expense of smaller companies, over 80% of which do not believe that they would get much benefit from lower training costs. Indeed, 90% said that they would not train a partial licence holder. The Government admitted to R3, which is the professional organisation involved, that the clause was not being introduced to fix a problem and they have cited no evidence of any undercapacity in the market or any evidence of complaints about the current system. The Joint Committee on the draft Bill, which was ably chaired by the noble Lord, Lord Rooker, was worried about the lack of stakeholder consultation on the issue. Subsequent discussions with the industry have not alleviated any of its concerns.
Clause 18 would allow insolvency practitioners to undertake corporate bankruptcies, which will almost always affect the financial status of individuals involved, with absolutely no training or qualifications relevant to the needs of such individuals when they also face insolvency. Indeed, insolvency practitioners very often do not know at the outset of a case, particularly with micro-businesses, whether they are dealing with a corporate bankruptcy or with a personal insolvency, given the involvement of personal guarantees and the nature of the creditors. The clause would harm small firms, two-thirds of which do both corporate and personal insolvency, just when the Government’s small business strategy is meant to be helping small firms. They do not like this one. Furthermore, it would add enormous expense to the profession, as it would require the development, the delivery and the oversight of new and additional systems of exam qualification.
This would be on the basis of the Government’s own estimate that there will be about only 100 such partial licences.
It is hard to imagine how the Government dreamt up this clause. There is no significant demand—we could not find any—for any change. The only suggestion ever to have been around has been for a personal insolvency-only regime, but never for a corporate-only insolvency regime. There is no evidence of there being a group of people who would just love to be IPs and who are dying to enter the market. Indeed, a number of firms are reducing their workforce and there is no evidence for the argument that we need more.
The Insolvency Lawyers’ Association has questioned the logic of operating this proposed two-tier, mixed system. Indeed, in a way, it would be a three-tier system because some insolvency practitioners would be licensed to do individual insolvency only, some would opt to do corporate insolvency only and some would qualify to do both. R3, the professional body, which knows rather a lot about insolvency, has serious concerns about this change. It considers that partial licences would have a negative impact on business and individuals seeking financial advice, as well as on the quality and competitiveness of the UK’s insolvency regime, which, as I am sure the Minister knows, is assessed by the World Bank as being one of the world’s best.
If we look across all the professions, be they doctors, lawyers or accountants, we see that they always start by getting their initial qualification through a broad training that crosses the whole area of their discipline and they then go on to specialise. The Government seem to want to carve insolvency practitioners out of this, making them jump directly to a specialism. Even worse, it could lower standards. Jenny Willott MP, speaking as a Minister in the other House, said that partial licences will reduce a little,
“the high bar on entry to the profession”.
That sounds to me like a dumbing-down.
We are talking about people’s futures—whether jobs are to be saved or a company liquidated, whether it can be sold off so that some of those jobs can be retained, whether individuals will be made bankrupt, whether creditors will get back money that they have already sent to the insolvent company, whether someone with unsupportable debts can be helped to find a way through or whether a company can be sold to someone else who can keep at least some of it running as an ongoing concern. These are big issues that affect people’s futures.
The clause is misguided; it is unnecessary; and it has been criticised by the profession and other stakeholders. The Government would do well just to withdraw it gracefully rather than be forced to do so. My guess is that the clause would never be commenced and that wiser heads would finally prevail. The provision may be in law but I doubt that it would ever be put into practice, so better perhaps to lift the threat now. I beg to move.