My Lords, I was hoping to have a short breather while we discussed other important matters, but unfortunately that has not happened. We move on to Amendment 47, which refers back to some of the issues that we have been dealing with regarding process, particularly what happens to assets. Clearly much of the work of the special administration scheme will be the ability to bring forward and, if necessary, sell—in other words, dispose of—assets that would otherwise not be there that could be used to repay the creditors, and I suppose might in part be used to maintain the operation of the college that is under liquidation.
To stand back a little from the issue, the interesting thing is that much of what we are trying to achieve in this special educational administration is more akin to the Chapter 11 processes in American bankruptcy law than to those here. We have the same basic elements: a court-driven procedure, the protection measure in place in order to make sure that the institution is kept as a going concern, and a commitment that is well expressed in terms of the special purposes of the education administrator to take it through. The question is whether or not that follows through all the way.
The amendment is probing, but it builds on one or two issues regarding which we want to get responses from the Minister on the record. In the first place, it would be helpful if we clarified that, as has been explained by the Ministers in their responses, this is unlikely to be a regular occurrence and will not be precipitated by the Bill, but it might happen and therefore we should walk through it and understand it. If we have a situation where a college is going insolvent, either the system can then operate on existing measures or the Secretary of State can apply for and obtain an order to establish the special administration, and then we are into the process that we have talked about at length and do not need to go back to.
However, it may arise that funds coming into the college to maintain it as a going concern are difficult to sustain. There may be changes in government policy or other changes in external funding that mean that it will not remain a going concern. So we are talking about maintaining the services and facilities for the students for as long as possible but in the certain knowledge that the institution is going to close down. At that point, I am sure it will be in the mind of the special administrator that some assets could be sold so that money could be obtained. Depending on the rules laid down for them, it would probably be rather difficult for that person not to engage with that possibility. However much we may wish to have the assets and the buildings maintained in case there is an uplift and the funds come back, the cruel reality of the situation will probably kick in and mean that the assets will be sold.
If the institution were a charity, as many of these bodies are, the question would not arise because, under charity law, charitable bodies holding assets are not allowed to dispose of them to third parties—in fact there is a prohibition that they must dispose of them to charities of similar nature and purpose so that the charitable purpose under which they were originally established may be maintained. I would be grateful if the Minister could confirm that that is the Government’s
understanding of the issue. Where special systems or incorporation arrangements are in place, I assume that that will also apply, but charitable status is the main area here, so we are talking about a relatively small group of places where the natural process would be perhaps to squeeze the college down to a smaller area and get rid of buildings, equipment and so on.
The problem then arises that funding was almost certainly originally provided from local authorities but, since then, certainly from central government, so there is an investment issue about whether the funding that has been provided should not be better retained in the sector, even if it cannot be retained within the existing body as a going concern. So the amendment poses this question: in the relatively unlikely event of this happening where the college is not a charity, what happens to freeheld assets that could be disposed of where those assets were originally funded from the public purse? Is there not at least a moral obligation to ensure that they are retained within the sector? I beg to move.