Response to Enquiry about Proposals for the Early Reform of Bankruptcy Law (Thursday 24 July 1980)

Reginald Eyre

“The Government has decided in principle that a simpler and more straightforward system of personal bankruptcy is called for. This would involve replacing the Official Receiver in the administration of personal bankruptcy by receivers appointed from the private sector. This would be a further extension of the changes made in 1976 when, as a result of the increases in the deposits on petitions and monetary limits the number of personal bankruptcies dealt with by Official Receivers declined by about 40 percent.

For many years the Insolvency Service, which handles both personal bankruptcy and companies winding-up has been unable to recruit sufficient specialised staff to cope with its work load. To relieve the Official Receiver of personal bankruptcy work would enable these scarce specialist resources to be concentrated on companies winding-up investigations. This is where they are most needed.

These proposals in no way imply that the Government is relaxing its pursuit of fraud. In fact, as far as compulsory winding-up of companies is concerned, the Official Receiver will not only continue to pursue fraud, he will be better staffed to do so.

To ensure that creditors’ rights continue to be protected, the new procedure would remain under official control. It would therefore remain under the control of the Court with the Department of Trade continuing to have supervisory functions. The Secretary of State would still be directly responsible to Parliament for its proper administration.

In cases of personal bankruptcy unconnected with company failure, there would be the same obligation on the receiver (albeit from the private sector) to report to the Department any prima facie evidence of criminal offence as there was on the Official Receiver.

Even allowing for increased costs, we believe that the new procedure will continue to be, at the very least, an equally effective means of debt collection and of relieving debtors of the burden of their debts as the present system.

I am now considering the translation of this general policy into firm legislative proposals. This is a complex and technically demanding task calling for wide consultation with all interested parties, and for this reason I am arranging for a consultative document to be published today. This will give an outline of the proposed alternative bankruptcy procedure to replace the existing one in England and Wales and will invite comments on the new policy which we are proposing. Under the new policy there will be a consequent saving of approximately 570 staff and a net financial saving of £3 million a year.

The Insolvency Law Review Committee, appointed under the chairmanship of Sir Kenneth Cork by the previous Government, produced an Interim Report on bankruptcy at the end of last year, proposing major changes in bankruptcy law and procedure. I am arranging for that Report also to be published today. However, the present Government has radically different views from its predecessor on the responsibilities of the Civil Service, it is of course no reflection on the Cork Committee that the change should have occurred while they were at work, but in consequence the Government are now considering this very different approach. To operate the present personal bankruptcy system, or even the modernised system devised by the Cork Committee, requires a large technically-trained staff employed in the Government service. Changes in society, in processes for recovery of debt, and in the value of money, all suggest that it is now unnecessary to maintain this costly public structure for the administration of the civil process of personal bankruptcy.

Fortunately the Cork Committee has already received and assessed much expert evidence on those areas of general insolvency law reform which will still be directly applicable to the cases to be dealt with under the new procedure. The Committee’s views on these law reform aspects will be of great assistance to us and may well appropriately be included in any proposed legislation. In this connection those who gave evidence to the Cork Committee can be assured that their work will remain of considerable value.”