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Report finds Insolvency Service lacks resources 6 February 2013

The Business, Innovation and Skills (BIS) Committee has recommended that the Insolvency Service receives additional funding after it found that the regime remains under resourced.

In a report published today (6 February), the committee warned that resource constraints are undermining stakeholder confidence in the Service’s work.

Chairman Andrew Bailey, Labour MP for West Bromwich West, said: “The aim must be to disqualify or sanction all directors found guilty of misconduct, and the funding necessary to achieve this should be provided. Any dilution of enforcement activity sends completely the wrong message.”

The committee concluded that the fee-generated income model for the Official Receiver Service is “unreliable” and suggested that it look at alternative funding models which are not reliant on unpredictable levels of casework and asset value.

It also had some recommendations related to administration fees for bankruptcy cases.

Bailey added: “The Insolvency Service suggested it is reasonable to expect an individual receiving £30,000 debt relief to pay more than a £535 fee. We agree.

“We also agree that it should be possible for the fee to be staggered.”

Following the inquiry, the committee observed that further reductions in annual running costs and staff may put pressure on the Service.

Bailey, who chaired the BIS committee, acknowledged the “high level of service” maintained by staff but added that good staff are not a substitute for adequate resource.

The committee also reported that issues surrounding pre-pack administrations still need to be addressed.

It called for greater transparency, higher levels of compliance with Statement of Insolvency Practice 16 and a stricter regime of sanctions.

The report welcomed the creation of a single complaints gateway, which is due to be implemented early this year, but it said that more needs to be done to educate the public and creditors about the fee-setting regime for insolvency practitioners.

“The work of insolvency practitioners takes place in difficult circumstances. Common standards and a simplified complaints system can help provide a clearer picture and a deeper understanding of this work,” said Bailey.

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