MPs warned against insolvency shake-up

Shake-up at Insolvency Service 'will undermine efficiency', MPs told

The current change programme for the Insolvency Service is not evidence-based and losing local functions will damage standards of service, Prospect warned MPs yesterday.

At a hearing by the business, innovation and skills select committee on the Insolvency Service, Prospect’s branch president said the service delivery strategy now being implemented made blanket assumptions that did not take regional variations into account.

The service had changed in the last 20 years and had already streamlined operations within local offices. Tony Butcher said the IS branch fundamentally disagreed with the decision to reduce the estate and centralise functions further.

The strategy had been costed at £33.5m, but in reality this would be incorrect as not everything could be moved in one ‘big bang’. At a practical level, staff would be moved into eight centres and would have to investigate across very wide areas, undermining efficiency.

Asked by Labour MP Julie Elliott about the impact of redundancies, Butcher said that nearly 500 staff had been lost last year with another 100 to come, which was a third of the workforce.

The Insolvency Service might look like it had maintained output, but there had been an impact on its ability to progress work. Cases had lagged behind, so the backlog would rise over the next year, he stated.

Morale was “comfortably numb” but the high level of work could not continue indefinitely.

After Conservative MP Margot James noted that the investigation budget had been cut by 11%, Butcher said that 40 experienced short-term appointees had been lost immediately, which had damaged investigatory capacity.

Labour MP Ann McKechin said there was concern over the funding for official receivers. The branch president said that receivers had to recoup as much as they spent, which was irrational as the service dealt with people with no money who often could not contribute.

Since the service could not recover its costs, by its very nature the funding model was illogical. The last IS annual report showed that £15m of bad debt had been written off.

Asked by Conservative MP Simon Kirby how more money could be justified in the current economic climate, Butcher said that to reduce staff by more than a third could stop the service meeting its statutory obligations.

His comments to MPs follow Prospect’s warning about the service earlier this month in written evidence to the committee.