Cuts in the Insolvency Service’s (IS) funding have reduced its ability to clamp down on director misconduct, the Commons Select Committee heard today.
The enquiry – held by the Business, Innovation and Skills Committee – raised concerns about the body’s power to tackle errant bosses.
Frances Coulson, president of R3, warned the “large number of staff which have left the service could cause problems” for UK businesses.
“Disqualifications have halved over the last few years and only 20% of reports are taken forward to disqualification.” she said.
“We have seen a dip in funding and that is something we are concerned about.”
“The service has had to work under very difficult circumstances – its funding model is largely funded by companies winding up.
“Strangely that works when there are a lot going under but when there isn’t that self funding model doesn’t work.”
Last year the IS was forced to refute reports swingeing budget cuts have led to serious cases of director misconduct going unpunished.
Meanwhile, at the same hearing, the issue of replacing the existing Regulatory Professional Bodies (RPBs) with just one single body also came under the spotlight.
Executive director of the ICAEW, Vernon Soare, explained the formation of multiple RPBs was due to a blend of “history and geography”.
He said: “We don’t want to see one (regulatory body), just a reduction, however, a little bit of competition for regulators in the best sense keeps us on our toes – that’s obviously an issue for the IS to look at.”
Chairman of the Joint Insolvency Committee, John Milsom, insisted the creation of a single regulator would not be a “panacea” to solving the current issues of transparency and consistency.
And David Kerr, chief executive of the Insolvency Practitioners Association, said the imminent publication of the Commons Sanctions Guidance would go a long way to boosting confidence in the insolvency profession.