Enterprise Bill

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Mr. Waterson: Will the Minister at least give us an assurance that he will not completely shut his mind—or the collective departmental mind—on this issue? Organisations such as the Royal Institution of Chartered Surveyors are serious players that clearly have a view. In the City, £50 million may seem like small change, but for others, such a threshold is too high. Will he at least not rule out the possibility of changing it?

Mr. Alexander: Perhaps the appropriate way forward would be to invite those individuals who have concerns to contact me or my ministerial colleagues, so that we are fully briefed on the points that were raised earlier in the debate.

On the specific point raised by the hon. Member for Huntingdon, who gave us a graphic description of the potential powers of the Government in relation to the use of AR procedure, the issue in question is the protection of essential services—for example, hospital units or other places where exactly that sort of mechanism has been anticipated. There are other project finance exceptions for the private sector, but we will, no doubt, have an opportunity to consider those in subsequent discussions.

Question put and agreed to.

Clause 241, as amended, ordered to stand part of the Bill.

Schedule 18

Schedule 2a to Insolvency Act 1986

Amendments made: No. 507, in page 280, line 28, leave out

    'raising finance as part of'

and insert 'implementing'.

No. 508, in page 281, line 42, after 'to' insert—

    '(a)'

No. 509, in page 281, line 43, at end insert—

    ', or

    (b) make arrangements for carrying out all or part of the project.

    '(2) In sub-paragraph (1) a reference to the provision of finance includes a reference to the provision of an indemnity.'.—[Mr. Alexander.]

Question proposed, That schedule 18, as amended, be the eighteenth schedule to the Bill.

Mr. Field: I am afraid that the discussion that the

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Minister was throwing into the slightly longer grass is going to occur sooner, because I want to touch on one or two points that have already been discussed in relation to that limit.

I think that we all accept that there should be exceptions to the prohibition on the appointment of administrative receivers. Certainly, from the perspective of the City of London, it is important that such an exception should apply to several capital markets, arrangements and transactions. I have two concerns. One has already been covered during the stand part debate on clause 241. I also think that £50 million is far too high. I know that my hon. Friend the Member for Eastbourne has tried to tease out of the Minister at least some concession that the threshold will be reconsidered. Many thresholds for arrangements in other capital markets, especially in third world and developing countries, will be set lower than £50 million. The risk is that such funds will begin to dry up if there is no protection for the banks that lend money to a riskier debtor, whether in a sovereign state or not. Will the Minister give us guidance drawn from the research that was conducted as part of the consultation process? Was full consideration given to that point?

Will the Minister give us some guidance on paragraph 9 relating to public bodies? In view of the fact that an increasing number of public bodies will be caught up in the PFI and PPP regime, will the special purpose vehicles created as part of those initiatives be considered public bodies for the purposes of the paragraph, or will they be left outside the confines of the arrangement?

Conservative Members have some concerns about how the measures will operate, although we welcome the idea that exceptions will be made. Will the Minister give us some guidance on how in practice exceptions will be made?

Mr. Alexander: I shall deal briefly with the hon. Gentleman's substantive points. I made it clear that the figure of £50 million was decided on after discussions with the City of London Law Society. As a reflection of our desire for consultation, I should add that if any parties think that we have made a substantive error in this respect, they may contact us with any evidence that they want to present. However, we believe that the figure is correct, and I shall explain why it is correct in relation to the relevant scale of figures.

We set a financial threshold of £50 million for the arrangements, which emphasises the point that the structures are specialised finance structures, not normal everyday lending. One should also take into account the environs in which the figure emerges. We are talking about a thriving area of business for UK plc, particularly in the City. True-sale arrangements, of which the Canary wharf securitisations are examples, are worth £180 billion in Europe, and some 40 per cent. of such deals are done in the United Kingdom. It is estimated that whole-business arrangements, of which the Punch Tavern securitisations is but one example, are worth some £3 billion and are used in few other jurisdictions, as

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most jurisdictions do not have administrative receivership.

The hon. Gentleman also raised the matter of public-private partnerships. I emphasise that there will be opportunities to discuss the matter in more detail. Commonly known as PPPs, they enable projects that provide essential public services. Continued delivery of some public services is obviously essential, and continued recourse to administrative receivership provides for a continued exercise of step-in rights. Without recourse to administrative receivership, step-in rights could be blocked by the moratorium on administration. On that basis, we came to the view that it was appropriate for one of the exceptions to be defined in terms of the PPP, as outlined in the drafting.

I hope that that answers the queries, although there will be further opportunities to discuss the matter as the afternoon goes on.

Mr. Field: Will the Minister confirm that PPP and PFI-type arrangements will fall under the confines of paragraph 9 and that they will be regarded as public bodies for the purposes of the schedule?

Mr. Alexander: That would depend on whether the bodies were project companies within the meaning of new schedule 2A. If it will be helpful, I shall write and clarify the matter.

Question put and agreed to.

Schedule 18, as amended, agreed to.

Clause 242

Abolition of Crown preference

Mr. Waterson: I beg to move amendment No. 437, in page 170, line 5, after 'production)'' ', insert

    'and immediately after those words there shall be inserted ''after deducting any amounts paid or payable by the Secretary of State in respect of such debts under Part XII of the Employment Rights Act 1996.''.'.

The Chairman: With this we may discuss amendment No. 438, in page 170, line 5, at end insert—

    '(4) In section 189 of the Employment Rights Act 1996 (Transfer to Secretary of State of Rights and Remedies) subsections (2) to (4) shall cease to have effect.'.

Mr. Waterson: On one level, the abolition of Crown preference is a dramatic step. I hope that, with your indulgence, Mr. Beard, we can have a modest clause stand part debate on the concept after we have dealt with these fairly narrow amendments. The proposal has been widely welcomed, but as with so much else to which the Chancellor turns his hand, one must be careful about the small print.

The amendments deal with one situation. The expectation from all the DTI's announcements and from the forest of press releases was that Crown preference would be completely scrapped, and a great cheer went up when that was announced. However, although the clause abolishes the Crown's preferential rights to the debts listed in subsection (1), it does not abolish the DTI's subrogated preferential rights in respect of the salary and wage arrears that it is

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required to pay employees under the insolvency provisions of the Employment Rights Act 1996. Those subrogated preferential payments can be very substantial, and must be paid in full before anything can be paid out on any remaining preferential claims that employees may have. That can seriously reduce an employee's chances of receiving any payment in excess of the sums payable by the Secretary of State. It seems, therefore, that the Chancellor giveth with one hand and taketh away with the other.

These are probing amendments, however. I would be interested to hear on what basis the Government will maintain the existing position for such preferential claims.

Mr. Djanogly: I welcome the abolition of Crown preference in the round, although I shall give my stand part speech on the next clause, which deals with the substance.

I have one question. The Bill refers to certain categories, and subsection (1)(a) deals with Inland Revenue debts. The explanatory notes state, however, that those are debts that are due to the Inland Revenue for 12 months prior to the relevant date. Similarly, paragraph (b) refers to Customs and Excise debts, but those are debts owed six to 12 months prior to the relevant date. Why does the clause refer to debts owed for 12 months, not to all debts? Perhaps other debts are cancelled in some other way, but I doubt it. I would be interested to hear the Minister's opinion.

Mr. Alexander: I have listened with interest to the points that have been made in favour of the amendments, and I shall deal first with amendment No. 437.

When amounts are paid out of the national insurance fund under the insolvency payments provisions, the position of the Secretary of State is somewhat different from that of other Crown preferential creditors. She assumes the rights of all the former employees concerned and becomes a single creditor of the employer in their place. She steps into the former employees' shoes, and has the same preference as they would have had in respect of those debts. Indeed, she has the same preference as they still have in respect of the proportion of those debts that exceeds the statutory maximum payable under the insolvency payments provisions, which are intended to provide a minimum safety net.

It would be odd for the Secretary of State to have a different status in the insolvency proceedings than the former employees themselves would have in respect of the same debts. Any private sector individual or organisation that paid the former employees' claims would have the same preference as the employees, and I am not at all convinced that the Secretary of State should be placed in a worse position than other creditors in equivalent circumstances.

It should be borne in mind that debts under the insolvency payments provisions arise at or around the time of a business's insolvency. That contrasts with other Crown preferential debts, which are levied as Government revenue, and have generally accrued or been owed during the trading life of the business.

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Debts under the insolvency payments provisions also arise from money being paid out of the national insurance fund. The Secretary of State has a responsibility to safeguard the fund, into which employees and employers have paid their contributions for eventualities such as those that we are discussing. In the light of all those considerations, I cannot accept amendment No. 437, and will ask the Committee to vote against it if it is pressed.

4.45 pm

I have listened carefully to the points that have been made on amendment No. 438 with regard to removing the ''super preference'', as it might be best described. The amendment cuts across several areas of Government policy, and I am sure that hon. Members will appreciate that I cannot accept it. However, if Opposition Members are prepared not to press it, I will reflect on what has been said. I should make it clear, however, that I am not making any promises that I will conclude that changes are necessary.

I was asked a specific question on the scope of preferential debts to Customs and Excise, as opposed to those of the Inland Revenue. The scope of the status was set out in the Insolvency Act 1986. If that clarity is insufficient and the hon. Member for Huntingdon wants further guidance on the terms of that, I would be happy to write to him.

 
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