Clause 12 — Insolvency

Part of Scotland Bill – in the House of Commons at 8:45 pm on 7th March 2011.

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Photo of David Mundell David Mundell The Parliamentary Under-Secretary of State for Scotland 8:45 pm, 7th March 2011

I understand where the hon. Gentleman is coming from, and his party’s position in relation to matters European, which, as I understand it, would have Scotland as a member of the euro, which I steadfastly disagree with.

The Law Society of Scotland reported in its evidence to the commission that, because of the increased number of insolvencies of groups of companies, practitioners have for a number of years been having difficulties where parts of the group are subject to the English rules and part to the Scottish rules. The Calman commission was persuaded that a consistent approach should be taken to winding up rules, and the UK Government agree. The commission recognised that its first option for implementing its recommendation—UK legislation followed by a legislative consent motion—might not be achievable, so it suggested primary legislation amending the devolution settlement as an alternative means of securing the desired effect. The first option would not fully and effectively transfer legislative and Executive competence in this area, and that could result in continuing divergences in the rules. That would frustrate the objective expressed by the Calman commission, which is why we are adopting the second of the commission’s options and re-reserving the winding up of business associations in its entirety.

Schedule 2 is introduced by clause 12. Having just one Parliament responsible for the rules relating to winding up in Scotland will aid flexibility and responsiveness, and address problems that have been reported by insolvency office holders when the law changed in one jurisdiction but not the other. In fact, we are seizing the opportunity that the Bill provides to deliver for Scotland the benefits of modernisation changes, some of which have been in place in England and Wales—and for the existing reserved insolvency procedures in Scotland—for nearly two years. These changes lift administrative burdens by allowing insolvency office holders to make full use of advances in information technology made over the past quarter of a century to communicate with creditors, thus reducing the costs—for the benefit of creditors.

The changes were made to reserved insolvency procedures in Scotland in 2009 and 2010 by a combination of legislative reform orders and subordinate legislation, but because of the division of responsibility for rules between the UK and Scottish Parliaments the changes could not at that time be extended to windings up taking place in Scotland. That is an example of some of the unnecessary and confusing divergences that have developed between the two jurisdictions about which the Calman commission expressed concern. We are taking steps to address that concern and thereby ensure that creditors of windings up taking place in Scotland are able to enjoy similar benefits to those provided for creditors of windings up in England and Wales.

I wish to deal specifically with the points raised about registered social landlords. In that context, I fully agreed with the appraisal of the hon. Member for Linlithgow and East Falkirk (Michael Connarty) of the contribution of Dr Whiteford. I accept that she has legitimate concerns, which she raised in the Scottish Affairs Committee. As part of my appearance before that Committee, I undertook to meet representatives of the Scottish Federation of Housing Associations. I am pleased to report to this Committee, as I have done to the Scottish Affairs Committee, that that meeting has taken place and we were able to have a full discussion about these concerns.

The first and most important point is that no change to the Housing (Scotland) Act 2010 will be brought about by these measures. They will not change the provisions of that Act or the regime and regulator that were put in place; they will not change the insolvency processes envisaged by that Act. Part of the concern appeared to be about what happened if the insolvency procedures put in place by that Act did not work and had to be changed, and whether this House would be as responsive in dealing with those concerns as the Scottish Parliament. I know that the hon. Lady has a fundamental view about the balance between the former and the latter. However the experience of not just this Government, but the previous one, when Ann McKechin was in the Scotland Office and Tom Greatrex was aiding her, suggests that the UK Government have demonstrated a willingness to support the legislative intentions of the Scottish Parliament. The Insolvency Service is held in particular regard for the measures it has brought forward to modernise insolvency practice in areas for which it has responsibility in Scotland and, indeed, in England and Wales. I am pleased to report that the Insolvency Service will meet the Scottish Federation of Housing Associations at the beginning of April to discuss any specific ongoing concerns that might still exist.