Despite complaints from insolvency practitioners that staff and budget cuts at the Insolvency Service are allowing unscrupulous directors to escape justice, the Department for Business, Innovation and Skills shelved an initiative to streamline the process for reporting misconduct.
The Government said a drive to reduce red tape for the smallest companies was behind the decision.
Toby Perkins MP, Labour’s shadow small business minister, said: “The Government’s approach to regulation means that even sensible changes, supported by the overwhelming majority of insolvency practitioners – including those who are ‘micro businesses’ – are thwarted. This would have led to a more cost-effective service for the public. You couldn’t make it up.”
Last year, a working group was established to design a simplified online system to replace the “D1 reports” that insolvency practitioners send to the Service.
The D1 reports are complex and little-changed in two decades, Mr Perkins said. There are concerns among insolvency workers that lack of resources at the Insolvency Service and an outmoded warning system leads to reports being missed.
Of the 5,401 reports passed to the Insolvency Service in the year to March, just 1,151 – or 21pc – resulted in a disqualification. This compares with 27pc last year and 45pc 10 years ago.
An Insolvency Service spokesman said: “We recognise that new forms may enhance the reporting of director misconduct but legislation is needed to amend them; we have recently issued revised guidance available to insolvency practitioners and need to assess its effect; we also need to consider the small business moratorium.
“We have set up a stakeholder group to consider issues surrounding disqualification, [which gives] an indication of our desire to work with profession on this.”