Sarah Albon opening Insolvency Live!
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Welcome to our inaugural stakeholder event, Insolvency Live!
Our aim is to encourage a collaborative relationship with you, our stakeholders. And of course we do already meet with you regularly, for example we have a monthly catch up with colleagues from R3 as well as ad hoc meetings. And we really saw the benefits of meeting with a mixed group of you here today to talk to us and to talk to each other and we really hope it works well.
I hope you find this afternoon a useful opportunity to hear from some of our team, to ask questions and to give us feedback.
And I hope that this new event will help to strengthen these relationships.
A year of solid progress
I have been in post as chief executive for over a year now. I want to thank all those that I have met for your time and for the warm welcome you have shown me.
We’ve just published our annual report and as we drafted it I reflected on what a busy year it has been.
We’re now at the forefront of the government’s Digital by Default agenda after moving three of our key services online.
We took on very high profile and complex corporate insolvencies such as the SSI steel plant in Redcar and the Keeping Kids Company charity here in London.
And we continued to transform how we deliver our services by introducing more efficient ways to do our work and reducing our cost base.
I’ll touch further on each of these achievements this afternoon.
Our goal is to deliver confidence in the marketplace. We do this through supporting those in financial distress, tackling financial wrongdoing and maximizing returns to creditors.
To achieve these objectives we recognise that we need to work in partnership with you.
We are proud to provide an insolvency regime which is highly regarded globally.
Last year, we continued to deliver high quality services across the full range of our functions, meeting the majority of our targets and achieving high levels of customer satisfaction.
As you are all aware, insolvencies have continued to fall. We have reduced staff numbers, recognising the reduction in the cases we handle, which means that the level of work has remained challenging for our remaining staff.
We dealt with just over 15,000 new bankruptcies last year. And we made nearly 25,000 Debt Relief Orders.
Changes were made to the thresholds for DROs in October to give wider access to this simple and cheap solution. The early evidence has shown that the changes are enabling more people living with unsustainable personal debt to obtain debt relief.
Also in October the petition level for creditor bankruptcies was raised for the first time since 1986. The new £5,000 minimum debt level will ensure that bankruptcy is used proportionately.
Last year we also dealt with 2,794 new insolvent companies.
Acting as trustee and liquidator we have distributed over £33m to creditors.
And our Estate Account services dealt with over 110,000 payments out of the Insolvency Service Account and processed 94% of these within 2 days of requisition.
Investigation and enforcement
The work that our investigation and enforcement teams do to tackle individuals and companies who act against the public interest helps to retain confidence that Britain is a great place to do business.
For example, you’ll know that the previous Secretary of State asked us to fast-track our investigation into the failure of BHS. We’re currently devoting 10% of our investigation resource on this case alone and we’ve retained specialised senior counsel, specialist forensic accountancy advice, and have acquired specialised IT equipment to deal with the high volume of electronic data. This is a complex investigation with in excess of 1 million documents to be examined, dozens of individuals to be interviewed and the information we’ve received from the Administrators to be considered.
Last year we disqualified just over 1,200 directors and made 483 criminal referrals to prosecuting authorities. The average length of disqualification undertakings and orders secured against directors was 6 years – with 10% disqualified for 10 years or more, showing that we are prepared to tackle the most serious cases of misconduct.
We estimate that the net benefit to the market for each director disqualified is estimated to be over £100,000 in terms of creditor damage prevented.
We wound up 131 companies in the public interest
Investigation of 103 investment and other scams wound up in the public interest showed that at least £195m had been taken from victims and our interventions have prevented the loss of a further £228m
Last year we also introduced online applications for redundancy payments. We managed over 60,000 claims and exceeded our processing targets.
The year ahead
Over the course of the coming year we expect to be just as busy.
Our annual plan recently laid in Parliament identifies four key themes - operational processes, a focus on our customers, developing our people, and ensuring we have robust funding and support functions.
We continue to measure our performance against Ministerial targets and have set ourselves a stretching range of new targets for the coming year.
As the government implements the decision of the British people to leave the European Union we’ll also have an important role to ensure that insolvency issues are fully considered. We know that the profession are involved in a substantial number of cross-border insolvency cases every year. As the Prime Minister has stated for now it is business as usual, but going forward this is very much on our radar.
Next year the UK will host the annual conference of the International Association of Insolvency Regulators here in London bringing together officials from around 30 countries, including Australia, New Zealand, South Africa, Malaysia and Canada. Our regime is widely respected around the world and the conference will provide an opportunity to exchange information about how other nations are reforming their insolvency systems.
We are looking at our current operating model to see how we can further increase our efficiency and effectiveness.
Some examples of the work we have in mind here are improving the efficiency of our payment to creditors process. We are also adopting a new expedited approach to investigations, initiating disqualification undertakings at the earliest possible point whilst being consistent with the fair treatment of the defendant.
This will increase our investigator capacity and benefit the economy by minimising the harm caused by rogue directors.
We are introducing an expanded satisfaction survey to help us better understand what our customers want from us and to evaluate their experience of our services.
We are implementing a new process to deal with complaints received by the service. This will increase our accountability and better capturing lessons to help drive a culture of continuous improvement.
And we will continue with the rewrite of our guidance to customers, using plain language and moving this information to GOV.UK where it can more easily be found via search engines.
Nurturing our people is a central element to driving our performance.
We will be reassessing our work force strategy, addressing talent development, reward and recognition, increasing apprenticeships and focusing on increasing staff engagement.
Robust Funding and Support Functions
Delivering our objectives within the envelope of the 2015-20 spending review will prove a challenge.
We have already made a significant effort to become more efficient with a 36% reduction in our cost base since 2010-11. But we have more work to do.
Last week we introduced a new fee structure following a joint review with the Treasury. We have an obligation to fully cover our costs and for costs to fall on those who use our services.
The new system is far more transparent and reduces the cross subsidy between cases with assets and those without. We cannot refuse to take on cases – even those without any assets – so whilst we are trying to reduce cross-subsidy it is not possible to eliminate it entirely.
Rebalancing fees in this way will give a fairer recovery of costs across cases. Creditors and debtors will know upfront what it will cost to both initiate insolvency and have it administered either by the Official Receiver or by an Insolvency Practitioner.
It’s important to clear up a misunderstanding about the new system. There has been some sense that the official receiver might seek to remain in office as trustee or liquidator against the wishes of creditors. We respect the absolute right of a majority of creditors to appoint whoever they wish to handle a case – this will not change.
The future of digital services
One of our biggest achievements over the past year has been the successful launch of our new digital services.
Online services not only help us to better meet customers’ needs – they also bring opportunities for increased value for money.
All the services have been designed using comprehensive testing with users to ensure they are easy to use. I’m grateful to those of you here today who helped us to road test the new applications – we truly couldn’t have launched them with without your help, a really good example of collaborative working. And we will continue to make improvements to them so please continue to give us your feedback.
Our services are high profile digital projects.
The new online redundancy claims service was one of the Governments Digital Service’s 25 exemplar projects. It was part of the move generally across government to adopt a ‘Digital by Default’ approach.
Online applications for bankruptcy began in April and these are now considered in house by an Adjudicator who is an employee of the Insolvency Service. The service is available to applicants 24 hours a day, 7 days a week and is usually making orders within 2 working days of the application being submitted.
The new service has received very positive feedback with 78% saying they are satisfied with the service. Nine in ten say they are pleased they can apply online.
We know that for many people the process of going to Court to petition for bankruptcy was daunting. For some it put them off applying for what is otherwise the best debt solution for them.
Personal and corporate insolvency statistics for April to June were released this morning. The number of personal insolvencies increased for the fourth consecutive quarter, driven by an increase in IVAs. It is too early to discern if the change to online applications for bankruptcy has led to a change in the number of people applying – but we can now say that the change to DROs last year has led to more people using this debt solution so it will be interesting to see if removing bankruptcy from the court makes it more accessible as we hope it will.
Of course, It’s not our role to advise people whether a bankruptcy or an IVA or another debt solution is right for them But we do hope that the simple to use new online process will break down the stigma that can be prevent some people from seeing bankruptcy as a debt solution worth considering.
We’ve also overhauled the director conduct ‘D Reports’ that insolvency practitioners file with us.
Reports are now filed on line, simplifying the process for IPs, with a single online return. Online applications also improve the consistency of information reported to us. This in turn enables us to speed up our decision making about whether to take enforcement action against directors.
This service will be used by about 1,000 IPs who are active appointment takers, and by their staff and also the Service’s ORs and their staff.
We expect to receive approximately 15,000 reports this year.
We will continue to look at what further of our services we could move online.
In September we expect to launch a new improved tool for intermediaries to use to submit Debt Relief Order applications. The current tool was introduced in 2009 and we know it can be difficult to use. The new tool, accessible from gov.uk, promises to be easier and quicker for you to use.
Another big job nearing completion now is the introduction of the new set of modernized and consolidated insolvency rules. We have been through a very long and detailed consultation process on the modernised rules with you, our key stakeholders, and the Insolvency Rules Committee.
The need to modernise, consolidate and make consistent the insolvency rules was identified in 2013 as part of the Government’s Red Tape Challenge to simplify and remove unnecessary regulations and lower the cost of compliance. Indeed we estimate that these rules will deliver a saving of £22 million to business each year.
We are very nearly there and are now going through the final stages of validation. For a document of over 400 pages of detailed, technical rules, this is a time-consuming, but vital job!
We have listened to your feedback on how much lead in time you need to prepare your systems and train your staff.
Our current intention, subject to Ministerial approval, is to make the Rules this autumn and for commencement to be in April 2017, giving a clear 6 months preparation time.
There is an opportunity in the policy workshop later today to discuss with us how we can help to ensure that you are ready for commencement.
High profile insolvencies
I want to finish by looking at two very high profile insolvencies we’ve recently taken on and what we have learned from that experience.
The SSI steel plant in Redcar was easily the biggest and most complex case we have ever handled and the children’s charity Keeping Kids Company was one of most high profile we’ve ever managed.
Both cases were challenging for us. The Official Receiver had only 2 hours notice of the application to court to wind up SSI and there was no direct engagement with the OR by the company’s directors who were foreign nationals.
We took over a 16 square mile sensitive site with in excess of 500 buildings, more than 2,000 employees, coke ovens that had to be kept working for safety reasons, an operating power stations and a blast furnace that needed to be kept in a steady state while we attempted to find a buyer.
This was also a big challenge for Redundancy Payments Services to ensure that employees received what was owed to them. All the more so because this was also the first major test of online redundancy payment applications which had only fully launched only the previous month.
There was enormous local interest – the plant had a major effect on the local community – there was huge political and press interest.
We are still heavily involved in the management of the site and keeping it safe.
We took on the liquidation of Keeping Kids Company following a winding up petition presented by the Company itself.
The company operated from 17 different premises and directly employed over 500 staff and contracted with a further 850 people.
There was a considerable challenge in dealing with and getting in sensitive records, and with a high volume of company and third party assets.
It’s well known that the Company had recently received significant funding from government and that funding was the subject of the interest of parliamentary select committees.
Again there was an enormous amount of press interest.
We’ve been taking stock to learn the lessons for similar complex or high profile liquidations that may come our way in the future.
What both these cases demonstrated was the Official Receiver has the expertise and capacity to step in at very short notice and handle complex liquidations.
They have also made clear to us the importance of teamwork. We made use of special managers and external legal support from the very beginning in SSI. The case could not have been conducted anywhere near as effectively without the hugely important contributions that those individuals and teams made, and the close working relationships that we formed.
Both cases presented major funding challenges for us to ensure they were kept running while being wound down safely.
It has been important to stress the independence of the official receiver as office holder – the OR does not hold the position of liquidator as a civil servant and we need to ensure that that distinction is respected.
But as a government department the Insolvency Service has a critical role in liaising closely with other parts of the government and public authorities where appropriate and in keeping ministers informed of what is going in the case. It’s clear that, wherever possible, early meaningful involvement and discussions ahead of high profile liquidations are very important.
That is just a brief run through of the challenges we have faced. I believe the insolvency regime works best where we collaborate effectively with our key stakeholders.
Before we begin the afternoon’s agenda I would like to thank you all for coming and hope that you will find all of the sessions interesting and useful.
I would also like to thank my team for organising the event and particularly the senior management team and the Insolvency Service board for your ongoing commitment and expertise.
Finally, although this may seem belated, it is the first opportunity I have had to say publically how delighted I was that David Ereira, our chairman, was recognised in the New Year Honours list and awarded an OBE for his service both to insolvency work and to charity.
Thank you and enjoy the afternoon.