Clause 254 - Disqualification from office: Parliament

Enterprise Bill – in a Public Bill Committee am 5:30 pm ar 14 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Amendments made: No. 482, in page 176, line 6, at end insert—

'(2) In this section ''enactment'' includes a provision made by or under—

(a) an Act of the Scottish Parliament, or

(b) Northern Ireland legislation.'.

No. 483, in page 177, line 16, at end insert 'or body'.

No. 484, in page 177, line 27, after second 'a', insert 'trust'.—[Miss Johnson.]

Question proposed, That the clause, as amended, stand part of the Bill.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

The Under-Secretary's explanation of justices of the peace being able to retain their position when bankrupt seems relevant to this clause, which disqualifies bankrupts as Members of Parliament. Why is someone disqualified for bankruptcy not allowed to stand for Parliament, and why will a Member of Parliament who is declared bankrupt lose his seat? That applies to both Houses—and it will apply to the Lords however people are appointed to that House in the short or the long run.

It was pointed out that, depending on someone else's judgment, it is still possible to get rid of bankrupt JPs. Something complex might be needed in order to carry that provision forward for those elected or appointed to Parliament. Although bankruptcy disqualifications date back to 12 and have travelled from one bit of legislation to another, scant attention

has been paid in Parliament to those provisions. In some cases, no attention has been paid. The Act of 1812 was called An Act to suspend and finally vacate the Seats of Members of the House of Commons, who shall become Bankrupts, and who shall not pay their Debts in full within a limited Time. My researcher in the Library states:

''I have checked the main series of debates held in Derby Gate but have been unable to trace a debate on this particular Act.''

It may be that no debate took place on that Act, and legislation has simply moved on and been adopted from that point.

The 1812 legislation arose because those who stood for Parliament had to meet a property qualification, which was discriminative in democratic terms. However, disfranchising people due to bankruptcy tied in with the logic of having a property qualification, because bankruptcy removed the qualification. That logical link was technically broken in 1858, when the property qualification was removed, but reality chugged on for some time until the first payment of MPs in 1911 and the two-stage move to universal franchise in 1918 and 1928.

To establish that point, I quote from an article published by W. L. Burn in an edition of Parliamentary Affairs from the summer of 1949, entitled ''Property qualifications in the House of Commons.'' A parliamentarian called Locke King introduced the measure in 1858; the year before, on an unsuccessful attempt, he quoted W. L. Burn in arguing that

''so long as the suffrage was not universal the existence of property qualifications for membership of the House of Commons was unnecessary. Certainly the abolition of those qualifications made little immediate or direct difference in the type and standing of Members elected. The fact was that a property qualification continued to exist in fact though not in law.''

The qualification existed until those early 20th century developments to which I referred.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am fascinated, as I am sure that all hon. Members are, by the thorough research that the hon. Gentleman has done. I wonder whether there could be another factor involved, however. I cannot remember at what time in Dickens' lifetime people stopped being imprisoned for debt, which affected Dickens personally as much as it cropped up in his books. Could that have been another factor in why MPs were treated differently?

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

That may be the case, but it does not affect or destroy the logic of my point.

I do not understand what the case is for disqualification when we get past the early 20th century, given that there will be no inhibition in terms of property rights. In 1835, Sir Robert Peel raised the problem that concerns me when he was debating the Municipal Corporations Act, which extended the bankruptcy disqualification to any mayor, alderman or councillor. During the Committee stage of that Bill, he said:

''If property was not to be a qualification, why should bankruptcy or insolvency disqualify?''

That is a key question that needs a response, even if it was not responded to in 1835. However, that was before the change to the property qualification in 1858 and related to local government, where there was a stronger attachment to a fuller franchise.

If the argument is that some people are not fit to serve in Parliament because of their manipulations and incompetencies, resulting in bankruptcy, should that argument apply to those who are not held to be culpable for the bankruptcy, as in the case of justices of the peace, where there is an attempt to square the circle?

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster 5:45, 14 Mai 2002

Likewise, I am fascinated by the research. Before the hon. Gentleman moves on to other concerns in addition to the property qualification, will he say whether he found any evidence that, between 1812 and the end of the 19th century, there were attempts to unseat a Member who did not fulfil the property qualification, although he was not a fully-fledged bankrupt? We can appreciate that bankruptcy would clearly be evidence of failure to meet a property qualification, but was it the property issue alone that was felt to be important, or other aspects of bankruptcy as well?

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

It seems that the property qualification was not rigorously adhered to. Burn claimed:

''It was a matter of common assumption that such men as Pitt, Fox, Burke and Sheridan possessed no qualifications which could bear examination: indeed Fox said quite candidly that the enforcement of the Act 'would exclude talents from obtaining entrance into the House.'''

The situation began to change a few years later as a result of a particular case in which a Member was removed from the House because of the provision. Presumably, that sent shudders through those Members of the House who might have been in the same position as Fox and others.

New clause 9 would make things easier for those on income support or those who have got into difficulties with the Child Support Agency and built up debts, so that they will not have to incur the expense involved in becoming a bankrupt and will not be prevented from doing something that might enable them to handle their matters better in the future. Will people in that category be excluded? Even though people in certain groups in society might find it easier to get selected, I would have thought it desirable and democratic to be open about who can seek to qualify to represent people. The next clause, on appointments to local government, has similar implications.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

We are all indebted to the hon. Member for North-East Derbyshire for having done such painstaking research on the matter; I knew that red box that he carries would come in handy one day. I think that he said that the arguments applied equally to justices of the peace, as they used to be called, or to members of local government, although my hon. Friend the Member for Cities of London and Westminster might want to pick up some specific points.

We have to be careful as Members of Parliament—by definition, we all have an interest in the clause

about giving ourselves any greater privilege than exists at the moment. I cannot help the hon. Gentleman to pin down why the law changed at the beginning of the 19th century. There are two, or possibly three, reasons for that. He touched on one; the property requirement. Clearly, nobody took the opportunity, when that requirement went, to change the rule about bankrupts, so perhaps it is not that. It might have been the restrictions placed on bankrupts; there are restrictions under the present system, but also the greater restriction in those days of possible incarceration for debt. That would have hampered the average MP, even in those days, from going about his duties. I like to think that it was the feeling that it would bring the House into disrepute. I shall come back to that.

There is a tantalising fourth possibility. I pricked up my ears when the hon. Member for North-East Derbyshire mentioned 1812. If I remember rightly, that was the year in which the only British Prime Minister ever to be assassinated, Spencer Perceval, was shot on his way in to the House of Commons. He was shot by a bankrupt by the name of Bellingham, a direct descendent of whom currently sits in this House for North-West Norfolk. Whether the House took against bankrupts for that reason in 1812, I do not know, but it seems more than a coincidence that that was the year in which they decided that bankrupts should not be able to sit in the House as MPs.

Leaving historical speculation to one side, I return to the possibility of its bringing the House into disrepute. We are, in a sense, back to the stigma argument. Under the previous clause, which I did not rise to speak on, the Under-Secretary used the word ''merely''. That put the whole argument into context. Merely because somebody had become bankrupt, it did not mean that they should not sit as a JP. I assume that the Under-Secretary would apply the same argument to Members of Parliament.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

With regard to the new arrangements, as distinct from somebody subject to a bankruptcy restrictions order, I made a clear distinction.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

Absolutely. I was not going to misrepresent the Under-Secretary. I was coming on to say that. As I understand new section 426A, everything would remain the same as under the current system, but disqualification would apply only to those subject to a BRO. However, people who, to use the Under-Secretary's word, were ''merely'' bankrupt, without the benefit of a BRO, could continue to sit as Members of Parliament. They could even stand for election, although if they stood and were elected under subsection (3), they would be disqualified and their election would be void, as is currently the situation even though there is no distinction between ''mere'' bankruptcy and having a BRO.

There is an argument to be had, as in so many areas, about whether there should be a different test for Members of Parliament and those who wish to become or to remain Members of Parliament and the rest of society. If we are in the business of removing the stigma from ordinary citizens—I am not suggesting that we are extraordinary, as our

proceedings reveal—are we saying that it should no longer apply to Members of Parliament? Or is there a higher test, not one of principle or ethics, in which we simply ask whether people want to have as their Member of Parliament somebody who has managed to become bankrupt, but without a bankruptcy restrictions order?

Photo of Mr Tony McWalter Mr Tony McWalter Labour/Co-operative, Hemel Hempstead

Does the hon. Gentleman not agree that people can end up bankrupt through circumstances outside their control? They may not have been profligate or behaved unwisely, but may have been badly let down by people whom they had every right to trust. They may have become subject to legal proceedings, as has happened in the House, and, through no will or fault of their own, become drawn into a process that results in the haemorrhaging of their resources. I hope that the hon. Gentleman would be rather more sympathetic to such cases.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I do not mean to be unsympathetic, although it may come across that way, because, but for the grace of God, it could happen to any of us. However, I wonder if we should ask a little more than that of people who want to be Members of Parliament.

The hon. Gentleman is touching upon what, in another context, the Under-Secretary called bad-luck bankrupts. I remind the Committee that the Opposition do not accept that we should use neat little boxes to contain culpable and non-culpable bankrupts; the totally innocent bankrupts, and the rogues, the villains and the reckless, who should be pilloried and subject to the stigma of bankruptcy restrictions orders. As I said before, some people are pathological optimists. Do we really want as our Member of Parliament—or even as our neighbouring Member of Parliament—someone who may be a rogue? We have had our share of those; the name Maxwell, the former Member for Buckingham, comes to mind, as do John Stonehouse and others. It has happened reasonably regularly for 200 years or more, so we are not discussing the subject in a vacuum.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

The argument is about existing Members being removed because they have brought the House into disrepute, but it is a bit difficult to have a provision that applies only to people who are already Members. The question is about those who wish to become Members, and whether the electorate should have the right, even when they know about a person's bankruptcy and other factors, freely to elect them. We might have to put up with those who could bring the place into disrepute in order to protect the electorate's right to elect someone whom we might judge to be unsuitable.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am not sure that I wholly follow that intervention. It was way over my head. As the hon. Gentleman pointed out, we are talking people who are already Members, who can be excluded from the House if they become bankrupt, and about those who stand for election and become Members who, it subsequently emerges, are already bankrupt and cannot be allowed to sit, in which case the election would be void. I hope that any remotely competent party would try to ensure that its candidates were checked beforehand, particularly if they thought there was a chance of them winning.

It occurs to me that there is a third category. Even if someone were discharged from bankruptcy, having satisfied all his creditors, it would be difficult for the fact not to end up in the public domain; it is bound to come out sooner or later. Again, it is one of the judgments that voters have to make about the candidates standing in the election.

I return to the central issue. We have a problem with the stigma argument. First, is it Parliament's business to tell people that there should not be a stigma attached to being bankrupt for any reason, except in certain circumstances and if there is a bankruptcy restrictions order? Whatever the arguments in favour of that for the ordinary citizen, should we not apply a slightly stiffer test for Members of Parliament or potential Members? I am slightly troubled by that, because I believe that even if a bankruptcy is wholly innocent—it may be due to optimism, world trends or whatever—for a Member to be bankrupt is a pretty serious business. Whatever the motives or reasons, there are victims. It is not a victimless crime—it is not a crime at all—but it is not victimless because creditors are left behind who will not get their money.

If an MP has been judicious enough to run up debts elsewhere than in his constituency, I can understand the argument that has been made, but if he is leaving a lot of his constituents out of pocket, everything becomes very messy. That is why we would be unwise, without proper debate, simply to change the position for Members of Parliament—for ourselves—without due consideration.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster 6:00, 14 Mai 2002

I endorse entirely what my hon. Friend the Member for Eastbourne said about not trying to address such things in this Bill. There is a good case to be made for, if not exempting Members of Parliament from bankruptcy rules, not automatically disqualifying them on the basis of bankruptcy. The hon. Member for North-East Derbyshire (Mr. Barnes) went into great detail about that and the hon. Member for Hemel Hempstead (Mr. McWalter) made similar comments. Although the matter should perhaps be discussed in great detail, it would be wholly inappropriate to reach any conclusion in debate of this Bill alone.

Discretion might be the better part of valour; I am perhaps a more sympathetic soul than my hon. Friend the Member for Eastbourne, who is now absent. Although on many occasions a Member of Parliament would be ill advised to get himself into a position to go bankrupt, there are certain circumstances in which he or she could spiral quickly into enormous financial problems. The hon. Member for Hemel Hempstead brought that up earlier. Although it would not be a Government's first priority to look at that, it would be sensible for Parliament to consider at some point whether MPs who go bankrupt should automatically be disqualified.

The hon. Member for North-East Derbyshire offered an important historical analysis. Restrictions

may well have been put into place 200 years ago with property aspects and considerations in mind. It might therefore be that that somewhat dated concept should be reconsidered. Equally, however, here and now is not quite the place and time for such a full and important debate.

Photo of Mr Tony McWalter Mr Tony McWalter Labour/Co-operative, Hemel Hempstead

I want to comment briefly on a matter that goes to the heart of the Bill, although it might appear peripheral and tangential. It comes down to whether we agree with the hon. Member for Eastbourne in not making a distinction, among bankrupt people, between those who are malign and those who are benign. It seems clear to me that in some cases the bankruptcy is malign—a person has deliberately run up a series of debts, let lots of people down, cheated, lied and dissimulated their way into a lifestyle way beyond their resources, and made many other people suffer for it.

I understand that such people are likely to be made subject to a bankruptcy restrictions order, and I think it quite right, because they have failed to co-operate or have evaded their responsibility, to make the judgment that they will have the weight of bankruptcy around their neck for a considerable time and have their behaviour made subject to various kinds of restriction. It is entirely appropriate that we call the people at that end of the spectrum malign bankrupts.

There is another set of people, who get into the same financial predicament, but who have fully co-operated, tried their level best to discharge their responsibilities to the victims of their straitened economic circumstances, and done everything that they can to co-operate with the authorities, whether that results in the winding up of their business or in other inconveniences for them. They have tried hard to discharge their responsibilities, and I call them benign—for want of a better word—bankrupts.

That distinction is at the core of the Bill. Those in the benign category will not be tarred and feathered in the same way as the other lot. On any spectrum, there will be intermediate and difficult cases. We know those at one end of the spectrum when we meet them, which, luckily, we do so often. We know those at the other end, too. Then there are the difficult cases in the middle—there always are—when the law requires judgments to be made. However it turns out, I hope that my hon. Friend the Under-Secretary will stick to her guns and say that the distinction will be made in all cases and that the clause will remain as drafted. It removes the odium that has always been visited on benign bankrupts, and I welcome the fact that the matter has been thought through in that regard as well as others.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I should put on record my thanks to my hon. Friend the Member for North-East Derbyshire for provoking such an interesting debate and for giving such an interesting set of historical perspectives. The issue is of interest to us because we are Members of Parliament, and of interest to the House and society more generally because it concerns the standing of Members and their credibility as and appropriateness to be MPs.

We made clear in the White Paper on insolvency our intention to review the mandatory restrictions on bankrupts and cited the restrictions placed on Members of Parliament as examples. They include a restriction on being elected to the House and sitting or voting in either House or in a Committee of either House in the event of becoming subject to section 427 of the Insolvency Act 1986, which provides that a person who becomes bankrupt in England and Wales or Northern Ireland, or has their estate sequestrated in Scotland, is disqualified. A Member of this House could continue to undertake constituency work, but if after six months they remained bankrupt or sequestrated, their seat would be vacated. Those are the current arrangements.

We recognise that the arrangements are a matter for Parliament and not for the Government alone. In drawing up the proposals in the Bill, my right hon. Friend the President of the Council consulted the Chairman of the Standards and Privileges Committee.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

If the Under-Secretary is conceding—rightly—that this is a matter for the House and not the Government, will the Committee have a free vote on the clause?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

It is not for me to comment on voting in Committee. As the hon. Gentleman knows well, my hon. Friend the Member for Dudley, South (Mr. Pearson), who has remained silent, is the person to whom the question might be addressed outside the Committee.

In his reply to the request from my right hon. Friend the President of the Council, the Chairman of the Standards and Privileges Committee, the right hon. Member for North-West Hampshire (Sir George Young), confirmed that in the context of the Government's objective of reducing the stigma of bankruptcy, it would no longer be appropriate for a Member who becomes bankrupt to be disqualified from sitting or voting, nor would it be fair to their constituents. The Standards and Privileges Committee also felt that when a Member becomes subject to a bankruptcy restrictions order or an interim order, their seat should be vacated along the lines of the points made by my hon. Friends. By the same token, only bankrupts subject to a bankruptcy restrictions order or an interim order should be disqualified from election to the House.

As I said when discussing justices of the peace in response to earlier remarks, that picks up on the pattern and philosophy that we are advocating in other areas of the Bill, as argued for by my hon. Friends. The Government are grateful for the Committee's consideration and have accepted its advice, which is reflected in this clause and in clause 256.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

I accept very much that the provision on bankruptcy restrictions orders goes a long way to meeting the points that I have been making. If they are dealt with in the way that my hon. Friend the Member for Hemel Hempstead has suggested, the provision will go a considerable way towards meeting my concerns. I welcome the fact that the provision is a change from the previous position.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am grateful for my hon. Friend's remarks and for his support and clarification on how the provision connects with what he feels should be included in the Bill.

The clause disqualifies peers who are subject to a bankruptcy restrictions or interim order from sitting and voting. Initially, the proposals will apply only to those persons made bankrupt in England and Wales. That is because Scotland and Northern Ireland have their own devolved, individual, insolvency regimes. Until such times as those are amended, Members sequestrated in Scotland or made bankrupt in Northern Ireland will continue to be subject to the current arrangements. However, we have consulted colleagues in the devolved Administrations and, as with the current arrangements, the new provisions will apply in the same way to Westminster and the devolved Assemblies. For example, Members of this House, the Scottish Parliament, the Northern Ireland Assembly or the Welsh Assembly who are made bankrupt in England or Wales will be able to carry on sitting and voting unless a bankruptcy restrictions or interim order is made against them, at which point their seats will become vacant.

We also propose that Greater London Assembly Members and the Mayor of London should be treated on an equivalent basis to Members of Parliament and members of local authorities. We intend to use the order-making powers in the Bill to give effect to that intention.

We have not sufficiently considered the question raised by my hon. Friend the Member for North-East Derbyshire on whether there is a need for a further, consequential amendment to deal with the election of Members of Parliament. That is not covered in the way that it might be. I advise my hon. Friend that I will consider his particularly useful points and see whether a consequential amendment is necessary. Under proposed new section 426A, only a person subject to a bankruptcy restrictions order will be disqualified from membership of the House of Commons. It is our intention that people subject to a bankruptcy order will be able to stand for election and to sit in the House—but the standing part needs to be considered further.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster 6:15, 14 Mai 2002

There are of course already some anomalies as a result of which people are entitled to stand for Parliament even if they are not entitled to take their seat and represent their constituents. Someone between the ages of 18 and 21 can stand for Parliament, but would not be able to take a seat if elected. As the Under-Secretary will recall, when Viscount Stansgate—as he briefly was—stood for the Bristol South-East by-election in 1961, he was re-elected, but his Conservative opponent was declared the winner even though he had come second in the poll.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am grateful to the hon. Gentleman for that. Obviously, we are specifically considering the context of insolvency and bankruptcy, and it is to that context that we have confined our consideration. I am sure that the Committees of the House take an active

interest in many of those issues and there are appropriate forums for discussion of other aspects of legislation as it affects the House or other related bodies.

I agree that we cannot—indeed, should not—tell people that there will be no stigma and cannot legislate to enshrine a stigma. One important thing that we have heard in this afternoon's debate is that whatever happens on the provision concerning bankruptcy and MPs, at the end of the day the electorate will decide, as they always do, whether or not it is appropriate to support someone's candidature and make them a Member of Parliament. Nothing that we do in Committee will interfere with that. The changes that we are making reflect both what the Joint Committee felt was necessary and the new regime. It will not place undue demands on Members of Parliament, but they will not be treated differently from—to use the words of the hon. Member for Eastbourne—any other ordinary member of the public. That is right because we are here as ordinary members of the public representing ordinary members of the public.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

We have discussed the whole gamut from bad-luck bankrupts to benign bankrupts, which I hope do not become terms of art in the insolvency practitioners' world. We are a long way away from enterprise. What changing the rules for Members of Parliament has to do with encouraging enterprise and risk taking in this country completely eludes me, but I dare say that one of these days wisdom will descend on me and I will work it out.

Question put and agreed to.

Clause 254, as amended, ordered to stand part of the Bill.