Legal Aid, Sentencing and Punishment of Offenders Bill

My Lords, we on this side very much support the amendment, in very much the same terms as the noble Lord, Lord Thomas of Gresford, has moved it. As he said, insolvency practitioners are appointed to help insolvent companies sue directors in order to recover money for creditors of the insolvent company. The companies are insolvent; they cannot pay for a lawyer—they have no assets. The practitioners’ job, which is sometimes a difficult one, is to recover as much money as possible. It is always in the public interest that they are able to do so, and I am sure that the Government would agree with that proposition. As both practitioners and regulators have warned, alongside HMRC and the Insolvency Service, these sorts of actions will be severely compromised in future. As the noble Lord has just told the Committee, HMRC is a major creditor, if not the major creditor, to many insolvent companies, so the public purse will itself be hit to the tune of £200 million. I remind the Minister that that is more than half of the total legal aid cuts and enough to pay for social welfare law at least twice over. The Institute of Chartered Accountants for England and Wales, a very respected body, said: "““we are deeply concerned that the legislation in its current form could have a harmful impact on the insolvency process. Unless claims brought by insolvency practitioners are exempted, this legislation would prevent potential recovery from incompetent or fraudulent directors or bankrupts, which will result in greater losses being borne by innocent creditors when a business is made insolvent … Those creditors are usually small businesses or HMRC, who would lose potential tax receipts, a cost ultimately to the taxpayer. Furthermore, fraudulent directors and bankrupt sole traders would keep the gains they made from irresponsible management of their business””." That is why Revenue and Customs and the Insolvency Service have lobbied the Ministry of Justice for an exemption, but to no avail. Let me take noble Lords to the Guardian newspaper on 6 June last year, when it reported: "““A spokesman for the Ministry of Justice said: ‘We are considering the impact of abolishing CFA [conditional fee arrangements] recoverability in insolvency and related proceedings. These proceedings can bring substantial returns to creditors, including Her Majesty’s Revenue & Customs. We are therefore discussing the specific implications with a view to reaching a satisfactory conclusion.’ … A spokesman for Revenue & Customs said: ‘HMRC is in discussion with the Ministry of Justice about the implications of the Jackson Report but is unable at present to comment further on this matter’””." The Minister can comment further on this matter in a few minutes’ time. What was the outcome of the negotiations between the Ministry and HMRC? We have heard why these cases need protection, but nothing on how this will be achieved. If the Minister is to support what is contained in the Bill, he should tell the Committee how he intends to protect against the arguments used by the noble Lord, Lord Thomas of Gresford, and myself in moving and speaking to the amendment. This is a good—if not the best—example of how wrongdoers will benefit at the expense of victims. In this case, it is even more serious, because the victims are us, potentially—the taxpayers and people of this country. That is why this particular amendment supports the proposition that a one-size-fits-all package is not right for the civil justice system and that a degree of flexibility needs to be built in. If the Government maintain their position on insolvency, the wrongdoers will gain and the creditors will lose. I look forward very much to hearing how the Minister defends this particular proposition.