Deregulation Bill — House of Lords, 2015-02-03
Topic: Domestic Commerce
Dianne Hayter (Labour, Centre-left): My Lords, the Government’s new partial authorisation for insolvency practitioners would split the existing regulation of this quite tiny profession—some 1,350 who take appointments, according to the noble and learned Lord the Minister—into three. There would be company-only and individual-only insolvency practitioners, and some of course doing both. On the basis of no evidence, the Government have decided to dilute this very small but specialist profession. Amendment 6 would preclude the development of corporate-only licences The Government admitted to the insolvency practitioners’ professional body, R3, that Clause 17 was not being introduced to "fix a problem". Indeed, the Government cited no evidence of undercapacity in the market, nor of complaints about the current system. Virtually all the insolvency practitioners consulted, and their major representatives, said that the proposal was a bad idea. The ICAEW’s consultation evidenced no support for the partial qualification. Indeed, the only body cited as being in support, the IPA, found that 61% of its respondents were against—they did not think that the proposals were a good idea According to the Government, it was only some of the IPA’s non-practitioner members who were in favour. More than that, having finally seen the IPA’s survey last week, I discovered that its questionnaire did not distinguish between individual insolvency-only licences, which we support, and corporate-only licences, about which we have grave reservations. So the IPA has no idea whether any of its respondents support the idea of practitioners undertaking corporate insolvencies without also being qualified in individual insolvency. Furthermore, despite finding that a majority of its respondents did not think it was a good idea, the IPA dismissed these views as being those only "of current licence holders". Surely those are exactly the people who know what they are talking about Without Amendment 6, Clause 17 would allow insolvency practitioners to undertake corporate bankruptcies, which almost always also affect the financial status of individuals, with no qualification as to the latter’s needs. Indeed, insolvency practitioners often do not know at the outset of a case, particularly with micro-businesses, whether they are dealing with a corporate or personal insolvency—or, indeed, with both, given the involvement of personal guarantees and the nature of creditors It is strange that this Deregulation Bill will create three types of licence—rather than the current one—with new exams, oversight and monitoring. The assertion has been made, but with no evidence, that it will attract new entrants; the assertion has been made by the Government that IP fees will be reduced, without any evidence; and the assertion has been made that training costs will be reduced. Again, no evidence was supplied. This whole shake-up is on the basis, by the Government’s own estimates, that there will be only about 100 partial licences Furthermore, it is likely to be the large insolvency firms that train corporate-only practitioners at the expense of smaller insolvency firms, of which two-thirds do both corporate and personal insolvencies. More than 80% of smaller firms 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. Smaller firms are least likely to specialise and are therefore least likely to benefit from the change. So there is no help to smaller firms—just when the Small Business, Enterprise and Employment Bill is aimed at trying to help small firms Why have the Government dreamt up this clause? There is no evidence of a waiting group of would-be IPs dying to enter the market if only they could train simply in corporate insolvencies. Indeed, a number of firms have been reducing their workforce. The Insolvency Lawyers’ Association questioned the logistics of operating a two-tier mixed system, while R3 has serious concerns about the change. It considers that partial licences will have a negative impact on businesses and individuals seeking financial advice, and on the quality and competitiveness of the UK’s insolvency regime, which is currently rated one of the world’s best by the World Bank. Meanwhile the Institute of Chartered Accountants of England and Wales, the largest authorised body regulating insolvency practitioners—regulating, I think, about half the profession—opposes this partial insolvency licence system. It set out its reasoning to the Government a year ago. The Government, however, ignored that, despite the reputation and expertise of the ICAEW. The institute sees no need for partial licensing; it is unaware of any demand for it; and it does not consider that regulatory costs would be lower The ICAEW is also concerned that an insolvency practitioner with partial authorisation would not acquire the broad range of knowledge and expertise necessary to provide appropriate advice in a corporate insolvency. We also fear that the proposal would lower standards, given that Jenny Willott MP, the Minister in the Commons, said that the partial licence would, "reduce a little the high bar on entry to the profession" As the ICAEW retorted: "Reducing the breadth of knowledge required of IPs could be regarded as a lowering of standards" We are talking about people’s futures: whether jobs are to be saved or a company liquidated; whether individuals will be made bankrupt; whether creditors will get their money back; whether a company will be sold to someone who can retain at least some of the business The Institute of Chartered Accountants of England and Wales, which operates under a royal charter, works in the public interest. Given the potential impact on standards of practice that partial authorisation might have, it does not believe that the proposed reform would be beneficial to the public. The proposal to allow corporate bankruptcies to be handled by people who are unqualified in personal insolvency is misguided, unnecessary, criticised by the profession and other stakeholders and based on unsubstantiated claims. Apart from that, it seems a very good idea I urge the Government—even at this late stage—to think again, to listen to R3, the ICAEW and other specialists, and to accept Amendment 6. I beg to move.