A BILL that aims to improve the recovery of civil debts has been given its third reading in the House of Keys – despite Treasury concerns it would leave the government out of pocket.
The private member’s bill drawn up by John Houghton MHK (Douglas North) will permit licensed debt collectors to enforce and recover debts on behalf of creditors.
But a clause in the bill which changes the government’s preferred creditor status so that recovered funds are split equally between government and other creditors has sparked concern in Treasury, which fears it will lose income in difficult economic times.
The clause, which amends the Preferential Payments Act, was introduced into the bill following an amendment moved by Juan Watterson (Rushen).
Treasury Minister Anne Craine warned MHKs that the impact of the clause could be £400,000 per year – and public services could be cut as a result.
But she added: ‘The truth of the matter is that it is virtually impossible to predict with a great degree of confidence what this [impact] actually might be.
‘This clause proposes a change to the government’s preferential status for any debt. Given our current economic circumstances, the likelihood of the quantum of debt owing to government increasing significantly is only too real.
‘There is a genuine possibility that the impact of the change this clause brings with it could be annually into six figures.
‘Members should know, to place this in context, that for income tax and VAT, as at December 2010, warrants outstanding with the coroners amounted to a value in the region of £5 million.
‘While an individual may stand to benefit from this process, it should not be overlooked that it will be to the detriment of the taxpayer, who will be left to pick up the shortfall or face a reduction in the public services they use.’
But Bill Malarkey (Douglas South) asked: ‘Why should government get to cherry pick all the money?’
He asked whether Mrs Craine had taken into account how much private individuals, companies – and the Treasury – were going to lose through small companies sent to the wall because of bad debt.
‘Companies that will not be able to pay their NI or their VAT or their tax, because they have not been able to collect their debts. Over the years, there have been hundreds and hundreds of companies in that position in the Isle of Man and I am quite sure there will be in the future.
‘Why should government always have first choice, 100 per cent? I think this bill goes a long way, when it comes with 50:50. It is a much fairer means of sharing debts from companies that go under and it also will save a lot of companies from going under.’