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Item 2 is oral evidence on the Home Owner and Debtor Protection (Scotland) Bill at stage 1. Today we will focus on the bankruptcy aspects of the bill. I welcome the witness panel: Rachel Grant, partner at Brodies LLP, representing the Law Society of Scotland; Eric Leenders, executive director of the British Bankers Association; Maureen Leslie, partner at MLM Insolvency LLP, representing the Insolvency Practitioners Association; and Blair Nimmo, joint administrator and head of restructuring at KPMG, representing the Institute of Chartered Accountants of Scotland. Thank you for joining us this morning.
There is, as the convener said, no shortage of written evidence, much of which has been submitted to the committee by insolvency practitioners. I invite Maureen Leslie to say more about why so many of the evidence papers from insolvency practitioners are so hostile to certain parts of the bill. Perhaps she and other panel members could provide evidence to back up the views that the profession has expressed.
I will not comment on the submission from Barry Stewart of Wilson Andrews. He is not a member of the Insolvency Practitioners Association, and that area was not covered in our submission. Our main concern is that while we understand Parliament's desire to react to what it views as a homelessness crisis, it is rushing through legislation that will potentially have significant unintended consequences.
Is that the view of the other witnesses?
On behalf of the Law Society, I can say that the changes that the bill will produce are quite fundamental. The proposals on excluding the matrimonial home from trust deeds was raised briefly at the debt action forum, but a consensus was reached that because those proposals involved such a fundamental change to personal insolvency and would potentially have far-reaching consequences, there should be full consultation on them. The Law Society understood that that would happen and was therefore surprised that the part 2 changes were contained in the bill. In our view, the bill exists primarily to deal with debtors who face repossession, and there is an element of urgency to get through changes to protect people in the present economic climate. However, the same urgency does not exist in relation to changing personal insolvency legislation. The bill deals with important issues that affect the fundamental rights of both debtors and creditors, and it should not be rushed through.
I appreciate the points that have been made about consultation, and I realise that I am concentrating on one particular paper, but the points that it makes are so strongly put that it is a good place to start if we are to find out whether the views expressed enjoy support in the Parliament. It is claimed that there is
I wonder whether I might change the perspective slightly. The panel is supportive of whatever measures will help individuals who find themselves in financial difficulty and who have debt issues. In response to the point that my Law Society colleague made, there is concern that some of the potential unintended consequences could have been drawn out and reflected on more fully through a process of consultation. Some of the content of the documents that you have seen reflects an anxiety that those points have not been drawn out in that way.
Do other panel members share that view that there are lessons to be learned from the experience in England?
We are not in the best position to talk about that—Eric Leenders probably is. Returning to the original question about the ability of debtors to abuse the process, ICAS sees some potential for that to happen. In simplistic terms, if a householder decides to build an extension or garage with the support of a local tradesman or with the help of unsecured lending, they can put themselves into some form of restricted trust deed immediately after having built it. Theoretically, that person could retain the equity in their extension or garage at the expense of the debt that is due to the trader or lender. You can appreciate the potential for the process to be abused.
IVAs effectively achieve the same purpose in England as trust deeds achieve in Scotland, but they are quite different creatures. It is not possible to transfer bits of the law concerning IVAs that we think are quite good into the law relating to trust deeds. That will just not work—it is a recipe for disaster. If the Government likes what happens down south and likes the IVA approach, something completely new will have to be brought in; the two things are not the same animal, and it is not possible simply to take the good bits and leave behind the bad.
I want to pick up on a point made by Rachel Grant. If the committee thinks that what is going on in England and Wales is a good thing, that is fine. I represent the IPA, which regulates a large number of practitioners in England and Wales. As Rachel said, an individual voluntary arrangement is an entirely different animal. The bill says that we can propose excluding the family home, but once that has been put into a trust deed, the only mechanism for creditors who are not happy with that is to reject it. The trust deed would therefore fail, and the only recourse that the individual would have would be to go into sequestration, which puts the family home at risk. That is the unintended consequence.
The knock-on impact could be that, because of the creditors' rejection of the trust deed or their more aggressive pursuit of the debt, there could be more sequestrations and more homes at risk.
As well as the potential for abuse and sequestration, is it too fanciful to think that what has been proposed—this point has been mentioned in some of the evidence—could lead to more stringent lending criteria and higher rates in Scotland? Could it create a two-tier lending framework, with one framework for the rest of the UK and another for Scotland? Could that be a serious unintended consequence if we go ahead with things as they stand?
We believe so. If a creditor has access to a debtor's home in England and Wales, but not in Scotland, the risk to the creditor is increased, and there is a price to pay for that risk. Debt will either become less available or more expensive to people in Scotland.
Is that a given? Do all the witnesses agree with that?
Yes.
The Law Society agrees with that; we mentioned it in our written submission.
Just to expand on that, we must be careful to differentiate between different sectors and classes of lender. The banks position themselves as top-tier lenders in their view of the distribution of unsecured credit. The issue of pricing might only arise at the margins, but if one were to consider the provision of credit by near-prime and sub-prime lenders, it would be a more acute consideration.
So a market in which things are already quite difficult could get worse.
I invite the witnesses to comment on the processes by which the debt action forum came to its conclusions and report.
We participated fully in the completion of the report, on the understanding that that might lead to recommendations that would be consulted on, with some form of cost benefit analysis. The point has already been made that we seem to have missed out that middle part: a consultation and a cost benefit analysis that reflected the findings of the consultation. Given the confidentiality around the compilation of the report, we have not been able to consult our members as comprehensively as we might have wished. However, all those points are rather negative. At some point, something needs to get started. As a catalyst for debate such as we are having this morning, the report has served its purpose, to an extent.
Yes, but that is a different issue. It is no longer about having a catalyst for debate—we are considering a bill. Given your answer, is it fair to say that members of the debt action forum believed that their report and its recommendations would be the subject of a wider consultation process before the Government introduced any proposals such as those that are in the bill?
That is my understanding. There was a consistent view that a number of stakeholders were not involved in the discussion group and did not know that the discussions would lead to the bill that is before us. Many of the provisions in the bill were not discussed at all. Some matters, such as the key issue of the family home, were discussed, but no consensus was reached. It was agreed only that further extensive consultation was required, because of the wide-ranging impact that the proposals would have in a number of areas. Members of the forum who were involved in the discussions were surprised to see the bill in its current form.
So the Government is rushing to legislate in these areas without the support and consent of the stakeholders who were involved in the debt action forum.
We agree.
That was the point that I made at the outset. In its submission, the Law Society refers to the final report, which states specifically:
Mr Leenders is anxious to respond further.
Like the Law Society of Scotland, I will rely on our written submission. In it, we reference correspondence with Fergus Ewing, as chairman of the debt action forum, in which we stated:
In fairness to the Government, the view that we need legislation is born of the consideration that the number of repossessions may increase as a result of the current economic situation and that, therefore, we need to amend the law urgently to protect people who might otherwise be adversely affected by the operation of the existing law and procedures. That is a fair summary of the Government's view on the matter.
We carried out that study to get a proper indication of whether there was any evidence to support the idea that the legislation needs be changed to protect the family home. At meetings at which we spoke to practitioners who deal with a substantial number of such cases, the collective view was expressed that, over several years and several thousand cases, there has been very little evidence that any of us are having to force people out of their homes. We carried out that small study to get some proper evidence on the issue, and the conclusion was that there are no forced sales. To a large extent, that is because the trust deed involves a voluntary process in which the debtor enters into discussion with his trustee about where he is going. The process is, therefore, relatively consensual—it is not, as some people suggest, adversarial. In the two or three meetings that we had with the minister, we made the point that he seemed to be trying to solve a problem that does not exist.
Were those meetings with Mr Ewing?
Yes.
I see. According to Wilson Andrews, when Mr Ewing came along to his first meeting with the Institute of Chartered Accountants of Scotland, he had not read your report and, at the second meeting, he refused to discuss it—is that correct?
To be fair, at the first meeting the view was expressed that the report had been submitted too late and that he had not had time to consider it before the meeting.
He is a slow reader.
At the second meeting, the view was expressed that it was so near to the introduction of the bill that it would be inappropriate for him to discuss it with us.
So, the report was never properly discussed with Mr Ewing.
The institute recommended that the aim of part 1—to ensure that the family home is protected—could be achieved in a relatively simple way by agreeing the protection of some de minimis level of equity, which would take 90 per cent of people out of the process. For most trust deeds, the level of equity is relatively low, so protecting a de minimis level of equity would exempt most people and achieve much of what the Government is trying to achieve by a much simpler process and without giving rise to the unintended consequences to which we have referred. Similarly, we recommended a variety of other mechanisms whereby the aim of part 2—to ensure that some form of debt relief is available to all—could be achieved by making several relatively small changes to the existing procedure that would not have any knock-on impact. To be honest, however, we did not end up having any real discussion of those issues for the reasons that I have just given.
Let me pick up a point that Mr Nimmo has made. First, the IPA was not invited to be a member of the debt action forum and did not even know that the forum existed. Nevertheless, we are prepared to accept that the Institute of Chartered Accountants of Scotland could represent the interests of our members, all of whom are insolvency practitioners.
Is the view of the organisations represented on the panel that it would be better to include the provisions in part 2 of the bill in the forthcoming and more wide-ranging legislation that is to be the subject of consultation, and that the bill is premature, rushed and might give rise to damaging unintended consequences?
That is the IPA's view.
Speaking for ICAS, I agree entirely with that.
As does the Law Society of Scotland.
And my association.
The very fact that we are having this discussion; that, as Mr Nimmo and Mrs Leslie have made clear, alternatives exist; and that, as we have confirmed, we have always been willing to work with the Government on clear good law supports the argument for full consultation.
What effect will the bill have on advertising in the Edinburgh Gazette? We have heard that section 12, which removes certain requirements to advertise in that journal, will result in significant financial losses to the organisation and might well impact on jobs. Do the witnesses believe that the necessary information will be available and accessible in the register of insolvencies? Moreover, with regard to plans to amend protected trust deed regulations to remove further requirements to advertise such deeds in the Edinburgh Gazette, do you think that the register of insolvencies can be extended to provide a similar service?
We were quite comfortable with those proposals, but we had not considered the point made in the submission that I think you highlight about potential financial and job losses at that newspaper.
I, too, had not considered the point. However, I point out that, that in notifying creditors of an insolvency event, the Edinburgh Gazette provides not only a single register for searching but a number of associated names. A creditor will have an awful lot more work to do if they have to identify and relate names in the register of insolvencies to their customer base.
I suppose that this is another example of unintended consequences. I agree with everything that Maureen Leslie has said. A whole section of case law relates to deemed knowledge, and the idea behind trust deeds or sequestration is that the general public need to know because, obviously, those who have signed a deed or who have gone into sequestration are restricted in what they can do. Whatever form it takes, advertisement is very important. I do not know whether the register of insolvencies will achieve the same result; after all, even in this day and age, not everyone has access to computers. Moreover, how regularly will the register be updated? I think that additional legislation will be needed to clarify when deemed knowledge is deemed to have become available.
By extension, that suggests that advertising in the Edinburgh Gazette might be of more use to the involuntary creditor—for example, the small businessman who was mentioned earlier. There are other ways for our membership to access that information.
I do not disagree with Maureen Leslie or Rachel Grant.
I appreciate those comments. There seems to be concern. As Ms Leslie rightly pointed out, the Edinburgh Gazette currently puts the information in the public domain, but the Government is seeking to use a more online way of doing that through the bill. Despite the concern about not everybody having access to computers, those who want to chase debts for whatever reason will more than likely do so. I put it to the witnesses that the proposal is probably worth while, but there may be unintended consequences, as Ms Grant rightly said.
In principle, there is no reason why the proposal should not be taken up. However, that is another example of something that should perhaps be considered more fully.
There seems to be general resistance to many of the proposals in the bill. I do not mean that there is resistance to dealing with issues that exist; rather, I mean that there is resistance to the solutions that have been offered. I listened carefully to Mr McLetchie, who tried to establish whether there is a problem that needs to be solved. During the exchanges, one of the witnesses said that there is not a problem that needs to be solved, but all of you seem to be quite upset about the solutions that have been offered to solve a problem that does not exist. If the family home is not currently an issue, which is what you have said, why are you bothered about its being excluded from a protected trust deed? That does not seem to follow logically.
Perhaps I could help. It is important to understand what protected trust deeds are and why they were introduced. We have had trust deeds for hundreds of years, but protected trust deeds were introduced in 1985. They were viewed as things that would be more acceptable to debtors. There would not be a court process or the stigma of sequestration. However, the most important thing about protected trust deeds is that the debtor is given debt forgiveness. They are discharged from their debts. Debt forgiveness is probably the most important thing from a debtor's point of view. There is also debt forgiveness with sequestrations. Debt arrangement schemes are completely different.
Unlike my question, your answer was very clear. I appreciate that.
In its submission to the minister, ICAS suggested a de minimis level of equity that would not be subject to attack by anybody. That would be one way of protecting such people without opening the system up to abuse by those with a substantial level of equity that is more than enough to pay their creditors. That proposal was not taken on board.
The point that I am driving at is that, although you might not like the solutions that have been offered and you do not feel that you have been consulted on them enough, you have made suggestions about how they could be amended to make them more workable. Assuming that the bill was to make its way through Parliament, would you be interested in further development of the idea of having a discussion on the level of equity in any property that was affected?
An informal protocol is under discussion with the majority creditors—the creditors who tend to be involved in a number of such cases—whereby, even if that de minimis was not legislated for, the profession as a whole could work with the lenders and agree a figure that was acceptable to all parties. It could be part of a legislative process or could sit outside it. There is a fair amount of consensus on trying to make the process work for the benefit of debtors and creditors.
That is helpful. Looking through my notes on the matter, I see that some debts will be included in protected trust deeds, but others will not, which might lead to an uneven playing field between creditors as they try to pursue debts. Who will have the advantage: a creditor whose debts are outwith the protected trust deed or one whose debts are within it? Some more information on that would be helpful.
That matter gives the IPA concern. I worked as a money adviser in the recession in the 1980s and I point to a potential unintended consequence of the provisions. I am certain that sub-prime lenders and others who lend to people at the margins of society—such as Provident Personal Credit, which was the big one—would seek to exclude themselves from every trust deed. Therefore, the bill may, in fact, disadvantage the people whom it tries to help.
How many people at the margins of society own a home with significant equity in it and how many people are evicted from a home that is worth £200,000? We have had a page or so of evidence from a money adviser that differs from all the rest. It is right to put that evidence to you. His view is that
We agree totally with the quotation. In practice, the vast majority of people have no equity or have relatively small amounts of equity. The existing process deals with that—small amounts of equity are ignored and consequently the family home is not touched. That is why we have 934 cases—
Where is the beef? Where is the argument?
In the study that ICAS conducted, 90 per cent of cases involved less than £10,000 of equity. Such de minimis equity is already protected and an agreement could be made informally or under legislation that it would continue to be protected. However, we argue that, in the top 10 per cent, substantial equity could be involved and the measure could be open to the abuse to which we referred.
We are talking about 10 per cent.
A small number.
If we follow Mr McLetchie's train of thought, the issue does not arise, because not many people lose the family home and the numbers are declining all along the way. What number of cases does 10 per cent equate to?
We could probably find a number.
That information would be interesting, because it would allow us to focus on the issue.
About 8,000 trust deeds were arranged last year.
Trust deeds vary. How many of them involved significant equity, as described by Blair Nimmo?
More detailed research would need to be done, but if the theory is that a figure of 90 per cent applies, 90 per cent of 8,000 will have no equity over £10,000. Beyond that, equity could range dramatically from £11,000 to a substantial amount.
We heard evidence about unintended consequences—that the Scottish economy will be damaged, that people will lose their homes and that the system will be abused. Surely we are not a million miles away from doing work that would reassure lenders that abuse would be targeted. The measures would free thousands of people from the additional anxiety, cost and worry of losing their home. In the economic crisis, surely we as parliamentarians should pursue such a purpose.
We do not disagree. We all agree that that aim should be achieved. Our issue with the bill is that it will not achieve what you described. Perhaps that is because the bill has been pushed through too quickly. We are all on the same side. We all agree—
I do not want to be overly dramatic, but the reaction from practitioners uses strong language and is excitable about the consequences. We are talking about a relatively small number of people who might abuse the system. Surely we can look forward to productive discussions between your organisations and the Government to address the issues, rather than throwing the baby out with the bath water.
As we have said, following on from the debt action forum, our approach is that we want to work with the Government. As I said at the outset, good law is in everybody's interests.
We return to the question from my colleague Bob Doris. If the current proposals are unsatisfactory and make you fear the consequences that have been described, what proposals do practitioners make to address abuse and relieve people of the additional burden and fear of losing their home? Where is your contribution to bring us to the point that we all want to reach?
A number of parties have contributed to identifying the issues that need to be resolved in a more acceptable manner. ICAS, for one, has made a submission. It is just unfortunate that not much thought has been given to it. Although there is consensus about a number of issues, there are some sensitive issues, whose unintended consequences are not a place that you would want to be.
One of our suggestions is that there should be discretion to consider cases individually, rather than having blanket legislation. That might be another way of achieving the same end. The equity suggestion seems a reasonable way of containing that issue as well.
I think that we all agree on the important point that looking at trust deeds in isolation does not make sense. We should consider the whole personal insolvency arena and have joined-up, coherent legislation that is fit for purpose and serves the interests of debtors and creditors.
The point is well made, and builds on evidence from last week.
The evidence so far this morning has been quite helpful in explaining the technical side of what you are doing. However, to come back to David McLetchie's points, we are not having a debate; we are considering a bill, which was introduced by the Scottish Government because there were concerns about the number of people who, due to the economic circumstances, were likely to lose their homes. Last week, we heard that there was a feeling that part 1 of the bill would go some way to address that, although there were concerns that there had been insufficient consultation on it. Today, we hear that you feel that there has not been sufficient consultation on part 2 of the bill. To be honest, I wonder whether there is anything to be rescued from the bill in order to meet the aim that we have all said that we share, which is to protect people in difficult circumstances. Is there a need for this bill in order to meet that aim? Will the bill do that? If not, is there another way of addressing the issue, perhaps through a different, more effective piece of legislation?
We do not believe that the bill will get you to where you want to be. As I said earlier, as a practitioner, I would appreciate clarity on the issue of dealing with equity, in trust deeds and in sequestrations. In many cases in sequestration, the family home is pretty much fully secured, and there are issues there requiring trustees to abandon interests in property. We feel that good legislation would come from considering all of those issues in the round, and we would be happy to provide input to that process.
You would have a couple of options. You could either take some of the more simplistic, non-contentious suggestions such as imposing some sort of de minimis level of equity, and perhaps considering an adjustment to the low-income, low-asset debtor scheme to allow access by people who currently cannot access it. That can be done in the relatively short term, without any general consensus. You could then look at the wider matters as part of the consultation that you are engaged in or are about to be engaged in on related areas such as the DAF scheme. You could either take the short-term route of solving some of the issues quite quickly or wrap it all up in a much wider consultation, which would address inconsistencies—we have an inconsistency at the moment between trustees and sequestrations, which has to be resolved one way or another. This thing does not work unless you look at that, and consider where you want to be from a policy point of view.
Blair Nimmo makes a valid point in raising LILA. If we were to take a step back, one of the issues that we could usefully consider is the causes of people's financial difficulty. Right now, it is overwhelmingly income shock because of unemployment. One of the unintended consequences of the bill is, in effect, to create another income-based remedy. A debtor would be making payments to their creditors through this scheme but, because they might not have money available to make those payments, they would be forced into sequestration. I do not know that the scheme necessarily addresses the issue of how to help an individual comprehensively when they face an income shock. That might be a different starting point from which to get to a far more mutually acceptable outcome.
Ms Grant, I appreciate that the witnesses are being asked specifically about part 2 of the bill, but I want to ask about part 1, which is to do with repossessions in particular. Part of the repossessions discussion was around court protocols for repossessions. Does the Law Society have a view on how we can improve the protocols to protect people?
I am not an expert in the area of repossessions, but the Law Society's response covered various aspects of part 1. From my reading of the bill, I understand that there is consensus that the protocols must be followed to ensure that people are not evicted from their houses inappropriately. I am aware from my own experience that protocols are in place. It is probably just a question of ensuring that the law that is there is followed.
Thank you for that. I appreciate that the question was on an area that you were not asked to comment on. I just wanted to give you an opportunity to say whether you wanted to add anything to what your written submission said. However, thank you for that attempt, anyway.
We have direct experience of the pre-action protocol through the home loan divisions of the banks, and we would regard that as being very successful. Empirically, while I do not have the absolute figures to hand, a best-guess estimate would be that retail banking groups, applying the pre-action protocol, probably possess something of the order of two properties per 1,000 mortgages outstanding, whereas other sectors possess four, five or six properties per 1,000 mortgages outstanding. The protocol has therefore had a significant impact. The Council of Mortgage Lenders suggests that the aggregate number is of the order of 75,000 possessions across the United Kingdom. The absolute number will fall far short of that, being probably more like 60,000 or 65,000. The protocol has therefore had a beneficial effect. Regrettably, we were not part of the working party that considered that aspect, but I am sure that our colleagues in the Council of Mortgage Lenders, who did participate in the working party, will have fed in that sort of information.
The CML was represented at last week's meeting, but what you said is helpful—thank you very much.
I have a question about the role of the Accountant in Bankruptcy. The Scottish Government seems to suggest that the only people who would take the certificate of insolvency route would be those with very limited means, and that therefore the Accountant in Bankruptcy should be the only available trustee in that circumstance. Do any of the witnesses have a comment on that? More specifically, do you think that the Accountant in Bankruptcy is the right place for that role?
You are right that the certificate of insolvency route leads directly to the appointment of the Accountant in Bankruptcy. If the bill as drafted becomes law and I, as a trustee, put forward a trust deed with a proposal to exclude all or some of the equity in a family home, and that trust deed fails to become protected, I will no longer have the right to present a petition for the individual's sequestration. I would have to sign a certificate of insolvency and the individual would be passed to the office of the Accountant in Bankruptcy. That individual would have been advised by members of my staff over a period and would have formed a relationship with them. Trust deeds are never signed on the basis of one interview. They would have a relationship with and a relative degree of trust in my staff. Under the bill, I would have to hand the matter over to someone else, which is not particularly satisfactory, not only from my point of view, but from the point of view of the people whom I advise.
I agree with everything that Maureen Leslie said, but I will take it a bit further. The measure was one of the issues that was not part of the DAF consultation at all—the first sign of it was when the bill was produced. We see no reason why it should be the sole domain of the Accountant in Bankruptcy to do that work. The potential for breakage when the proposed but unprotected trust deed finds its way to the Accountant in Bankruptcy for sequestration will not be good for debtors and they will not particularly like it. It will not provide the access to advice that they currently have. We do not think that the Accountant in Bankruptcy can provide the same quality of advice, as it does not have the people with the requisite experience to do so. Ultimately, the measure will result in a cost to the public purse that does not currently exist. In the circumstances, it is bizarre that a process is being suggested that arguably will increase the size of the public sector and which will be a cost to the public purse. At present, there is no such cost, but there would be a cost in respect of the people whom the Accountant in Bankruptcy has to administer.
An alternative might be a panel with prescribed standards. That would get round the potential bottlenecks and pressures and the public purse issues. That could be worked through. There are probably alternative solutions that would be far more acceptable and cost effective.
I agree with Ms Leslie and Mr Nimmo. The bill as drafted envisages that, prior to the Accountant in Bankruptcy being appointed as trustee, somebody who is called an "authorised person" will have a central role, yet we do not know who that authorised person will be, what qualifications they might have and whether they will be regulated or insured. Do we need those people? Who will pay for them? What will be their relationship, if any, with money advisers who deal with the DAS? Why not just use the insolvency practitioner profession, who are already there and who are experienced, qualified, heavily regulated and insured?
That is very helpful. You have asked what was going to be my second question.
I want to examine further Mr Nimmo's comments about the additional cost to the public purse. In evidence presented to us last week, we were advised that scrapping advertising in the Edinburgh Gazette could mean a saving of £890,000 to the public purse. Would Mr Nimmo or any of the other witnesses like to hazard a guess at the possible additional cost to the public purse of administering what is in the bill as it is presented?
That is a very fair point. At one stage during the consultation process, such as it was, and the meetings that we had with Mr Ewing, it was mentioned that the Accountant in Bankruptcy could administer a process for £500. Most of the people around the table felt that that figure was surprising, so they asked for some analysis to support it. The minister agreed to provide us with the costing but, despite several reminders from ICAS, it was never forthcoming. Either the costing does not exist, or the Government is not prepared to provide it for some other reason.
We could use the £500 figure and the calculations of how many cases would be referred to the Accountant in Bankruptcy to come to some figure. Are you saying that the £500 figure is unrealistic? Is it well short of what would be considered to be the actual cost of processing individual cases?
Without any detailed assessment, our view is that it seems to be well short of what it would actually cost.
How far short?
That is impossible to say. A subcontracted case currently has a fairly high cost, even before adding the cost that the Accountant in Bankruptcy incurs in running the operation, and the additional cost of providing the advice that the insolvency practitioner profession provides at the moment but that would no longer be available under the proposals. You would take the subcontracted cost away from the Accountant in Bankruptcy and add it to the commercial profession's costs and the costs of the advice, and the final price could be significant. We could be talking about a multiple of £500.
Would any of the witnesses like to hazard a guess at the number of cases that would be referred to the Accountant in Bankruptcy?
We have had a look at the bill's financial memorandum. I do not think that our submission is in yet. I understand that the AIB suggested that, if it were passed, the bill would lead to 500 cases. The only experience that I have is of the LILA—low-income, low-assets—scheme. The AIB suggested that there would be a maximum of 2,000 cases, and there were almost 10,000 cases in the first year of operation. Even assuming that the estimate is not quite so wildly out for the bill, there is still a substantial margin for error and we are working on that while looking at the financial provisions for the bill.
If there were 500 cases, and we use the Government's estimate of £500, there would be a saving of roughly £390,000 because of losing the need to advertise in the Edinburgh Gazette.
I have not looked at the issue in detail but a footnote on page 19 of the bill's financial memorandum refers to "£5.298 million" being available
The areas are not directly related. If in policy terms it is felt acceptable to stop advertising in the Edinburgh Gazette, that money will be saved come what may, irrespective of what happens in the rest of the process and whether or not the Accountant in Bankruptcy continues as proposed.
I thank the witnesses for attending and giving evidence. It is very much appreciated.