§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Arbuthnot.]
§ 8 pm
§ Mr. Donald Anderson (Swansea, East)
I am delighted to be able to speak to my Adjournment debate at such an early hour of the evening, and not much later as I had originally anticipated. I am also delighted to see the Paymaster General in his place. The issue that I want to raise concerns the Government's employment of private bailiffs for the purpose of debt collection. The number of bailiffs and the companies that they represent have mushroomed during the recession. My aim is to expose some of the difficulties and injustices and to urge the Government to respond positively to them.
As a starting point, I concede that some of the problems that I am about to detail also arise when local authorities employ private bailiffs to collect business rates or other debts. I shall rely heavily on investigative journalism, namely, the investigations carried out by HTV, the results of which were contained in its "Wales This Week" programme on 25 February. I want to pay a well-deserved tribute to the quality of the work done by the members of the HTV team—especially Chris Segar, the interviewer—for their commitment to revealing what, in my judgment, should be a major cause of public concern.
I accept the case for bailiffs—someone has to carry out work that is, by its very nature, distasteful because of its effects on both individuals and business people, who try, often against the odds, to keep their businesses afloat.
§ Mr. Bob Cryer (Bradford, South)
My hon. Friend is fortunate to have such a long time for his Adjournment debate. In referring to business people, he is surely talking about small businesses that find themselves in difficulty. The big fry always seem to get away with everything. I doubt whether my hon. Friend will say anything about bailiffs going to get money from Asil Nadir—a man heavily in debt not only to businesses, but to the Tory party. It is a shame that my hon. Friend cannot say tonight that bailiffs were sent round to Nadir's place before he flew out of the country.
§ Mr. Anderson
My hon. Friend raises a new dimension. I think of the words of Ernest Bevin, "When you open the Pandora's box all sorts of Trojan horses come out." Much as I am tempted to go down the path suggested by my hon. Friend, I shall instead confine myself to talking about a number of small businesses that have suffered through the operations of private bailiffs.
I readily concede that enforcement can be effective only if there are sanctions. I accept that whenever there is a forced sale the financial returns, simply by the very nature of the transaction, inevitably will be lower than they would have been in a normal market sale. However, I submit that the HTV revelations show that the public interest and the interest of the debtor are frequently overridden in practice.
The Government should not seek to evade responsibility for the effect of the actions of their agents. After all, Customs and Excise and other Government Departments employ people, who act in the name of the Government, to collect debts that are due and owing to the Government. The Government's responsibility should not end at the point when they put enforcement in the hands of agents and delegate certain functions to them.
255 The HTV revelations show that, in some cases, the Government's agents sell distrained goods down back alleys, in shady places, at ridiculous prices. The public interest is not served, the interests of the debtors are not served and, indeed, the interests of the Government are not served by that practice because the return to, for example, Customs and Excise is very small indeed. The only individuals who benefit from such transactions are the several agents at the points of distrainment, removal and auction. The practice has the makings of a scandal and I urge the Government to investigate and to take appropriate action.
The HTV programme focused on three cases, which I shall use only as examples. I am glad to see the hon. Member for Monmouth (Mr. Evans) in his place because the first case relates to a late constituent of his. It is a tragic case involving John Herbert of Abergavenny, a local family business well known in the area, which had existed almost from the start of the century. Mr. Herbert shot himself in February when agents acting on behalf of Torfaen borough council stripped his furniture store because he owed business rates of £33,000.
As a result of that distrainment, five people are out of work and a family business of longstanding and repute which, alas, had over-extended itself during the recession, has closed. Clearly, I cannot comment on whether the local authority acted responsibly and used its discretion properly, but the tragic results are clear. There is some evidence that in this case, and, more particularly, in the other two cases to which I shall refer, the details of the sale were not properly advertised.
The second and third cases raised in the HTV programme are relevant to the enforcement operation by Customs and Excise for VAT debts. The second case is that of Peter Morgan of Swansea, builders' merchants, who owed £33,000 in VAT. A warrant for distrainment was signed by a VAT official and bailiffs distrained goods of a retail value of £67,000. The debtor took a careful inventory of the goods that had been taken and alleges that the bailiffs handled the goods roughly and took only a rough-and-ready inventory of the goods. Those goods, with a retail value of £67,000, realised only £2,000 at auction. Of that, Customs and Excise was paid £900. Peter Morgan's debt remains. The prices realised at the auction were astonishingly low. For example, 250 doors were sold for a total price of £l.
Tim Jones, a local solicitor of some standing in the City, gave impressive evidence to the HTV programme. The advertisement for the auction gave no address for it, only the name Roach and Company, and it gave no details of the nature of the goods to be auctioned, so the ordinary member of the public, interested in builders' materials or do-it-yourself for the home, would not have been attracted to the sale.
The auction was carried out by a body called Revenue Collection Services, which the solicitor could not trace in the Registrar of Companies or contact by telephone. The programme illustrated an attempt by its producers to contact the company with only a mobile phone number. Clearly, there was hardly any attempt by those responsible for the auction to advertise it to the general public.
The third case is that of Richard Jenkins of Swansea who owned a small business. That business owed £3,000 in 256 VAT to the Customs and Excise and business rates of roughly £20,000. It claimed that it had sought to pay by instalments but had been refused. The majority of the stock was taken and, again, roughly handled into a van. The business said that the retail value of the stock taken was £40,000 and, again, roughly only £2,000 was realised. From that £2,000, £580 was paid for the removals.
The family of Richard Jenkins of Swansea discovered by chance that the auction was to take place in a seedy back street of Cardiff. Of particular interest is the fact that the family, having learnt the location of the auction, attended it and recognised the bailiffs who had taken the goods. They say that few members of the public, if any, were present. Clearly, in those circumstances, the goods were unlikely to obtain the best price.
The family also allege that the bailiffs were clearly well known to the auctioneer. In between sales, there were a number of conversations between the bailiffs and the auctioneer. The auction took place at the premises of RCS, which is linked to the bailiffs, being the holding company of the bailiffs, Roach and Company. Again, the solicitor, Mr. Tim Jones, could not trace the company at Companies House.
There is a chain from the bailiffs, through to the removal people and the auctioneers, showing the clear dangers of a cosy and possibly corrupt relationship between each link, potentially acting against the public interest.
Revenue Collection Services, or a similar name, was found by the programme compilers at the premises of Roach and Company in Bristol. The managing director was photographed at the auction, which was attended by the programme compilers. There must clearly be a suspicion that the company was exposing and exploiting the looseness of the present controls on the Government agents in this respect.
What points arise from those cases? First, there is the danger of an interrelationship between each link in the chain. Clearly, far from being secret, the auctions should be properly advertised so that members of the general public who wish to attend can do so. It may be too that a reserve price should be set as 250 doors should not be sold for £1.
It is questionable whether those irresponsible—in the full sense of the word—agents are serving the public interest. There are clearly substantial risks of corruption when there is a total lack of monitoring by the Government or any other agency of what is done in such cases.
I shall submit later that the dangers are aggravated by the new privatisation proposals for Customs and Excise. There is no complaints procedure, no investigation procedure and no appeal procedure to investigate the behaviour of agents acting on behalf of their principals—in this case the Customs and Excise.
I am glad that there is evidence that the Government recognise some of the problems that have arisen, but they are extremely slow to respond. I read with interest the consultation document published by the Lord Chancellor's Department in August last year headed "A Review of the Organisation and Management of Civil Enforcement Appeals". In that consultation document, the Lord Chancellor's Department says that the system is "ripe for change". In paragraph 5.1 it is said that there are 257 "compelling reasons for change". The interested citizen would say that the Government have taken the problem on board and are willing to address it with some urgency.
This afternoon, as a member of the Select Committee on Home Affairs, I had the good fortune to be able to question senior officials, including the permanent secretary of the Lord Chancellor's Department, on the progress of the consultation document. I was told by the relevant senior official that the Government had received a large number of responses to the consultation document, that they were being evaluated and that, as a result of those responses, the Lord Chancellor's Department would need to embark on yet another consultation process on a more specific basis.
In the consultation document we are advised that legislation will be necessary to put right the potential abuses that the Government have readily recognised. If legislation is necessary, when might it come about? If there is to be another consultation process, clearly it Hill miss the boat in the next Session of Parliament beginning in November 1993.
The earliest opportunity for legislation to he put before the House would be in the parliamentary Session 1994–95 and that will depend on the Lord Chancellor's Department's good fortune in finding a place in a Session that is coming perilously close to an election. This is clearly not a major area of partisan interest.
It is very likely that, having recognised the compelling need for change and the injustices that may arise from the current position, the Government will allow matters to drift for several years while those injustices continue to be suffered by individual business people. That should not be allowed to happen. Even if the Paymaster General concedes—as I think he must—that the Government will not introduce the necessary legislation for at least two or three years, I hope that he will tell us that the Government will seek to end the abuses, and to prevent the exploitation of business misfortunes, in the interim period before such legislation is in force.
Having acknowledged the existence of compelling reasons for change and public concern about the lack of regulation of private bailiffs, the consultation document stresses that any system must be cost effective. Given that less than £1,000 was realised on a VAT debt of £30,000, the system clearly was not cost effective in that instance.
The Government concede that there is a lack of general statutory control over the fees charged by agents. Perhaps a strict table should be drawn up showing the fees that are relevant in each case; perhaps a general professional or trade body should be established to regulate the performance and behaviour of bailiffs, including those who act on behalf of the Government, granting certificates only to those of good standing and character and ensuring that certain professional standards are maintained in the enforcement of civil debts. It is also clear that the Government have not carried out adequate supervision.
I believe objectively—on the basis of the examples that have been given and, indeed, on the basis of the Government's concessions and admissions in their consultation paper—that the position is now very unsatisfactory. It is likely to be made even worse, and the temptations are likely to increase, as a result of action that the Government are likely to take soon. That action may well move the position even further away from public accountability, unless the change to a privatised system is coupled with stringent safeguards.
258 Those dealing with the VAT side of Customs and Excise who give orders to bailiffs may be privatised in the next steps programme that is currently under way. It is conceded that that is relevant to the part of the Customs and Excise operation that covers south Wales and the borders—the south Wales and the borders VAT debt collection management services. A decision from the Government is expected in December.
It is interesting to note that the Roach Group—which has figured largely in the examples that I have given, and which also figured in the HTV programme—was taken over last year by the Capita Group. Capita is a respectable company, which does finance work on behalf of Kensington and Chelsea borough council and has set up an accountancy firm in the white-collar section of the market; it is now trying to move into the blue-collar section, dealing with debt collection. It has expressed an interest in tendering for the contract for the work currently done by civil servants in Customs and Excise: there is 'thus a danger that the work involved in such enforcement will become even further removed from public control, and further outside the public domain.
We need greater accountability, and a separation of the different stages of the operation. The auctions must cease to be secret, and the public need to feel confident that the agents employed by the Government are acting responsibly. Do the Government accept that something needs to be done in the interim before the necessary legislation is introduced—that is, over the next three or four years? Are they prepared to do anything to prevent potential abuses, and to prevent the cosy relationship between bailiffs and auctioneers that is currently possible? If they are not, the abuses that have been revealed will he allowed to continue.
I suggest that, in the interim, the Government resume a former practice, and allow Customs and Excise officials to carry out spot checks on auctions. Clearly they have contracts with their agents, the bailiffs; under those contracts, they could insist—on a normal commercial basis—that all sales of distrained goods are properly advertised to the general public. That, by definition, is more likely to lead to an adequate return from the sale, and less likely to tempt people to enrich themselves at the expense of a business and an adequate return to Customs and Excise.
Are the Government happy about what is being done in their name by agents? If they are not—and the evidence suggests that they may not be—they should not wait several years for legislation; they should take action now.
I accept that the revelations in the HTV programme may not tell the whole truth, given the nature of the operations available to the journalists and television investigators involved. I accept that there may have been some exaggeration; I accept that those revelations may not have been accurate in every detail. Surely, however, the Government will support a view buttressed by a well-respected solicitor in the city of Swansea. If they accept that the revelations in the programme are substantially true, surely they must now act before more business men are fleeced in the same way—before we see further examples of the public interest not being served, and of business men going to the wall purely to benefit those who purport to act in the name of Government, and as Government's agents.
§ Mr. Roger Evans (Monmouth)
In Monmouthshire, the full horror of this unhappy issue was brought home by the tragic case of Mr. John Herbert, which was mentioned by the hon. Member for Swansea, East (Mr. Anderson).
It is, of course, public Departments that have the widest powers of distraint and the most privileged position in insolvency. That is why we see more examples of public Departments abusing those powers than ordinary litigants. The fact remains, however, that enforcement against personal chattels, whether it be by a Government Department, Torfaen or a private litigant, brings us into that extraordinary Dickensian, murky world of bailiffs and auctions in back streets. The picture is every bit as appalling as anything that Charles Dickens depicted—of landlords seizing the last sticks of furniture.
This has gone on for far too long. There may be all sorts of arguments for altering the law on enforcement. There may also be all sorts of interesting arguments as to whether the position of Customs and Excise should be quite as privileged as it is in the case of insolvency. However, the simple, practical question that business men are asking is whether something can be done immediately to improve standards and the way in which the system operates. There should not be conflicts of interest whereby bailiffs and auctioneers are in any way connected.
It may be that the existing law could resolve that problem, but people who are going bust are not the people most likely to litigate. We need a system under which much higher standards are required of bailiffs, with much stricter supervision of them. I hope that my right hon. Friend the Paymaster General can give us some good news about what may be done.
§ The Paymaster General (Sir John Cope)
There are two parts to what the hon. Member for Swansea, East (Mr. Anderson) and my hon. Friend the Member for Monmouth (Mr. Evans) said which I shall do my best to try to unravel and deal with separately.
The first part relates to the general law and rules that apply to bailiffs, particularly private bailiffs. Those rules are the responsibility of the Lord Chancellor. The second part relates to the operation of the procedures by Customs and Excise in the case of value added tax. That is a more limited aspect of the question for which I have ministerial responsibility in the Treasury, under my right hon. Friend the Chancellor of the Exchequer.
I shall say a few words about matters that are not my direct responsibility. I refer to the consultation paper, to which the hon. Gentleman drew attention, issued by the Lord Chancellor's Department in August 1992 on the employment of private bailiffs for distress work. That paper covers the law and practice in England and Wales. In Scotland, the law is different in certain respects. Some of the proposals in the consultation document would bring the law and practice in England and Wales nearer to the arrangements in Scotland, which were revised much more recently than those for England and Wales by a recent Act of Parliament.
The paper sought views on whether changes should be made to the organisation and management of bailiffs in the civil enforcement process, the part that the state should play in the organisation and management of bailiffs, the ways in which any changes to the organisation and 260 management of bailiffs could be achieved, and whether any changes to the law governing their work were necessary or desirable.
The hon. Gentleman referred to private bailiffs. There are two types of private bailiff: certificated private bailiffs and non-certificated, plain private bailiffs who are not certificated by the courts.
§ Mr. Anderson
I understand that the distinction means very little in practice. It is a certificate in respect of road traffic matters. There is no difference in terms of the controls on those bailiffs.
§ Sir John Cope
It is about rent as well as road traffic matters, but there is another important difference to which I shall turn in a few moments. It was shown that the appointment of certificated bailiffs, as set out in the consultation paper, is subject to varying degrees of regulation by statute, but that there is little statutory control over private bailiffs who are not certificated. The law governing their activities is unclear.
The important distinction, from my point of view, is that Customs and Excise, as a matter of practice, use only certificated bailiffs. That gives Customs and Excise an extra leverage over those whom it employs for this purpose. It is not for me to anticipate what the Lord Chancellor's proposals might be when the consultation period is concluded. It may, however, be worth quoting from the consultation document in order to give the flavour of the Lord Chancellor's approach.
Paragraph 4.4 says:The Lord Chancellor believes that all civil enforcement agents should be subject to some form of control over their appointment and that there should be some control over how they do their job, in that they must be subject to disciplinary arrangements if they fail to meet whatever minimum standards of competence and conduct are deemed necessary. There is much room for debate on what these controls and minimum standards should be, and the next section of the paper will consider the various options for change.The Lord Chancellor welcomed the expression of views. I shall draw my noble Friend's attention to what the hon. Gentleman said about the urgency, as he sees it, of addressing these general points regarding the law and the courts' activities relating to bailiffs.
I intend to deal specifically with matters for which I have personal responsibility—the management of Customs and Excise, and, in particular, the use by Customs and Excise of certificated bailiffs. It may help if I outline the general approach of Customs and Excise to collecting VAT.
VAT-registered traders are required to pay the correct tax at the correct time. They are obliged to render and pay their VAT returns by the due date—usually one month following the end of the VAT return period which, in the majority of cases, is three months. If traders do not submit their returns, an assessment is issued. Where either a VAT return is rendered but not paid, or an assessment is issued but is then not paid, a debt is established and recovery action is required.
The vast majority of traders pay their VAT on time, but some do not. It is important that those who pay on time are not put at a disadvantage compared with those who do not. All must be treated equitably. It is in the interests of those traders who pay on time that, among other things, Customs and Excise should collect the debts from those 261 who do not pay on time. The prime responsibility of Customs and Excise is to collect the right tax at the right time.
VAT is collected by each registered business from its customers, and Customs and Excise has to collect it properly from each business. A business that delays payment gains a commercial advantage over its competitors. While Customs and Excise is prepared to be as helpful as possible when businesses find themselves in unexpected difficulties, it is rightly criticised, not least by the Public Accounts Committee of this House and others, if it does not carry out its responsibility firmly arid fairly within the regulations approved by Parliament.
It is worthing quoting some of the conclusions of this year's Public Accounts Committee's hearing on the subject. The Committee said:We note the Department's assurance that they have now stabilised the VAT arrears position. It is important that the further measures now being introduced lead to a significant reduction in arrears in the future…We recognise that the Department's primary responsibility is to collect the revenue.I am sure that the hon. Member for Swansea, East and my hon. Friend the Member for Monmouth will appreciate that Customs has that primary obligation to protect Government revenue. At the same time, however——
§ Mr. Anderson
I accept that it is the primary responsibility of Customs to collect revenues that are due and owing, but is it the Minister's contention that his Department's responsibility ends at that point and that it has no responsibility for the position thereafter?
§ Sir John Cope
No, I certainly do not contend that. As I shall explain, the bailiffs act as agents of Customs and Excise in carrying out their duties, as do the auctioneers and so on. But we try, and have tried—particularly at a time of recession—to take account of the fact that businesses are experiencing difficulties. It is not, of course, an easy balance for the Customs and Excise to strike but it has to do it every day—it is doing it all the time.
We need as sympathetic an approach as possible subject to the primary responsibility to collect the revenue. What was called the enforcement division has recently changed its name to the debt management division. That indicates a change of attitude. In addition, that division is working through an action programme putting into effect the recommendations of an efficiency unit scrutiny to improve the debt management process.
There are a couple of measures in this year's Finance Bill which will help in that regard and which we shall debate in due course. I refer to the bad debt relief provisions, which reduce the time limit to six months, and to the changes in the VAT penalties. Those measures indicate a positive response to the changes that we are making in the matter of debt management generally.
Once a debt has been established, Customs issues a written demand and gives fair warning of the consequences of failure to pay. The time from the establishment of a debt to the warning letter—during which many people pay—is typically about six weeks. The local VAT office then decides how best to set about recovering the debt if it has not been paid. The decision will be based on the particular circumstances and particular information available about the individual trader.
In the majority of cases, traders have sufficient goods or assets to justify distraint action against them. But if there are no assets either known to exist or discovered on a visit, 262 action through the courts—for example, bankruptcy or liquidation—may be considered, although that is very much a last resort, to be used after other processes have been exhausted.
The position of Customs and the Inland Revenue is different from that of other creditors. I draw that to the attention of my hon. Friend the Member for Monmouth in particular, as he referred to the privileges of the Revenue departments in their position as creditors. Unlike the commercial sector, neither Customs nor the Inland Revenue can choose its customers. Both are therefore involuntary creditors. They do not have available to them the normal commercial practices such as the withholding of supplies to ensure that a debt does not rise further. As long as a trader is trading, his VAT debt is likely to be increasing. The same is true in respect of debt to the Inland Revenue.
As a result, in some cases, insolvency or distraint can be the only recourse to prevent a VAT debt from rising through the trader's being allowed to carry on trading. There is a big difference in the relative positions of a commercial creditor or a bank—which probably has various charges against assets and so on on which it can call and other actions available to it—and the Revenue departments.
In addition to issuing the warning letter, staff al the local VAT office may telephone or visit to attempt to recover the debt. Requests for time in which to settle debts are considered and sometimes agreed to. Customs will consider realistic offers of instalments right up to the time at which any order is made in court for bankruptcy. During 1991–92 there was a 52 per cent. increase in the number of time-to-pay agreements and a 70 per cent. increase in their overall value, which was, of course, a response to the problems of the recession.
If payment is not forthcoming, a distress warrant will be issued by a senior executive officer in the local VAT office. The warrant directs an authorised person, who is a named individual and usually a bailiff—although he can be a Customs officer—to visit the trader and, where necessary, levy distraint on goods. The trader is given an opportunity to pay the debt before such a levy commences.
A walking possession agreement is a legal document, with an undertaking signed by the trader, which allows him to retain the goods distrained for a period of time—usually 15 days and perhaps longer—in exchange for the goods not being removed, sold or otherwise disposed of. The effect of such a walking possession agreement is to give the trader additional time to settle the debt and the costs which are by then beginning to be added to it. At the expiry of the walking possession agreement, if the debt and costs are not settled, the goods are removed for sale.
If the debtor pays the debt and the costs at that stage, the goods are not removed or can be returned. Where it is necessary to proceed to a sale, the goods are removed to a place of storage—usually an auction room—and advertised for sale by public auction. That is the process to which the hon. Member for Swansea, East drew particular attention. It is not a process that is as uncontrolled as he suggested. The VAT (General) Regulations 1985 require that goods distrained upon are sold by public auction. We require that they are properly advertised for sale and appraised before that happens.
§ Mr. Anderson
The Minister said that Customs requires and ensures that proper advertisement is made. Is he 263 saying that the case in which only a mobile telephone number was given, and in which there was no address, no means of contact and no specific description of the goods for sale, was a one-off—or does it expose a general fault in the system?
§ Sir John Cope
I shall deal with the details of that case a little later. I want to deal first with the general position, and hope to reassure the hon. Gentleman that the position is not quite as unsound as he may think.
At the sale, both the general public and the trader himself can bid for the goods. The trader is informed about when the sale will take place. That enables him to attend and monitor—or, if he wishes, to bid.
That whole process is quite an effective means of recovering VAT debt. In the year to December 1992 some 407,000 written demands were issued. More than half of those prompted payment without further action, but 186,000 distress visits followed when payments had not been made. Of those, only 27,900 required distress to be levied and a large proportion paid as a result, so that only 1,242 cases continued to sale. That was 0.3 per cent. of the cases for which a written demand was issued.
As the hon. Gentleman realises, it is important that bailiffs who act for Customs should be properly selected. They are selected by local management only from those certified by the county court and believed by the local Customs and Excise to be capable of dealing with VAT debts. Most have experience and provide a service for us frequently, but they are employed on a flexible basis which allows local management to choose alternatives, should the standard of service decline or be unsatisfactory, or should practices be entered into which they do not approve of.
All bailiffs working alone on VAT debt recovery have been issued with written guidance on how to proceed. It is not generally the policy of the Department now for officers to accompany bailiffs in the course of their work, although that happens sometimes. If a certified bailiff fails to perform his duties to a satisfactory standard, two things can happen. First, the local VAT office monitors the performance of the bailiff and draws attention to any shortcomings which it observes, so the sanction is that the bailiff may lose his work for Customs and Excise. Secondly, if the bailiff still fails to perform his duties to a satisfactory standard, the court can withdraw the certificate which allows him to do other work.
In the case highlighted by the hon. Gentleman, he accepted that the television programme may not have given a 100 per cent. accurate impression, but I do not want to get involved in quibbling about details. As a result of the programme, the local VAT office examined the actions of the bailiff company concerned and found that some at any rate of the allegations were unfounded. In the light of what the hon. Gentleman has said, I shall call for further reports to follow up the concerns which remain about that case.
In general, it is not uncommon for auction firms to be associated with firms of bailiffs. However, collusion between an auctioneer and a buyer—the nub of the mischief to which the hon. Gentleman and the programme apparently drew attention—is illegal and against normal commercial law. It is not a matter primarily for Customs, except where auctioneers or bailiffs are acting as its agents, 264 but where there were indications of such practices, Customs would bring that to the attention of the appropriate authorities. The hon. Gentleman suggested that there was no monitoring or insufficient monitoring of the process, but Customs attempts to carry out monitoring.
§ Mr. Anderson
Can the Minister confirm that practice has changed, and that for the past three or four years Customs officials have not attended auctions?
§ Sir John Cope
No. From time to time Customs officials attend auctions, sometimes making their presence known and sometimes observing the auction as members of the general public. That is how they attempt to monitor what happens.
I should make clear too that the fees which are charged, and which incidentally are recoverable from the debtor, are in accordance with a scale set out as part of the VAT (General) Regulations 1985. They are printed on the distress documents. Sometimes special action has to be taken for which a special fee is agreed, but the basic fee for the basic service is laid down. Bailiffs do not retain their fees from the proceeds of sale or any money paid on account. All the money is paid to the local VAT office, and the bailiff sends in a bill for his services. The office checks the accuracy of the bill before payment.
There is a difficulty about prices realised at public auction. The hon. Gentleman acknowledged, as I know from experience, that the value of articles can vary according to different circumstances. It is required that goods are sold at public auction and, in the absence of evidence of collusion and of improper practices, Customs have to be satisfied with the amount raised. From time to time, Customs officials attend auctions to ensure that goods are properly handled. Of course, further use of auctioneers and/or bailiffs depends on their findings. Specialist auctioneers are used when certain goods, such as commercial vehicles or machinery, are being sold.
The HTV programme alleged that goods were treated carelessly and in a manner likely to cause damage. Such an approach would work against the interest of an auctioneer, because his remuneration comes from commission on the proceeds of the sale. Therefore, an auctioneer has a direct financial interest in raising as much as possible.
The hon. Gentleman also expressed concern about the possible result of market testing which, as he rightly said, is being undertaken under the Government's general market testing policy. I am not anticipating the results of market testing, but if it was decided to contract out the activity, it would be subject to a contract which laid down a detailed specification of the responsibilities of debt collectors. Policy would remain the responsibility of Customs and Excise, who would still have to ensure that the contractors carried out their duties.
In addition, Customs and Excise officials will continue to be the only people who can sign warrants. Therefore, the hon. Gentleman's description of officials who give orders to bailiffs overstated the proposals.
§ Mr. Anderson
Is not the Minister troubled by the danger that each stage of the process after the signing of the warrant by a Customs official will be in the hands effectively of one company? If the Capita Group is successful in its bid, it will colonise Customs and Excise and be responsible for each stage of the operation from the bailiffs through to the auctions.
§ Sir John Cope
That may lead to improvements in efficiency and running as well as the difficulties to which the hon. Gentleman has drawn attention. The contract is not without safeguards. I must emphasise that Customs and Excise will still remain responsible for what the contractors undertake on its behalf and will continue to monitor contracts and so on, if that is the way it goes. In addition, debt management officials will continue to be Customs and Excise officials at the warrant signing stage.
The hon. Gentleman referred to various companies. I do not want to comment on individual companies, but I understand that some changes were made in the companies involved between the time that some of the events referred to took place and the time that inquiries were made into them, which may have led to some of the difficulties.
The advertisements in the specific case identified the general type of goods that were involved, such as a photocopier, furniture and so on. There were some telephone difficulties as a result of a reorganisation—the company was moving offices at the time. All of that is not satisfactory. Nevertheless, it explains some of the matters which seem to have caused concern in the cases that were raised on the television programme.
266 Any decision on contracting out will be taken in the light of assessments of benefits as well as costs in terms of improved efficiency and cost savings, and ensuring that the work involved is carried out effectively. Customs are market-testing the debt management units in 11 of its 22 collections, including the one in south Wales. As the hon. Gentleman said, the result of that market testing is expected in the autumn.
Controls on the use of bailiffs and others by Customs to collect debts are not as non-existent as the hon. Gentleman suggested. However, I certainly acknowledge that it is important that the duties of bailiffs as agents of Customs and Excise, and hence the public, should be properly carried out and that the various regulations that apply to the auctioning of goods in difficult cases should be properly carried out.
All those matters are specific to the management of debt by Customs and Excise. I acknowledge that there are concerns about the general points raised in the Lord Chancellor's consultative document. As I said, I will draw them to the attention of the Lord Chancellor.
§ Question put and agreed to.
§ Adjourned accordingly at one minute past Nine o'clock.