Insolvency practitioner Steven Wiseglass is waging a campaign against government plans which it is claimed will let unscrupulous company directors off the hook and blow a huge hole in the public purse.

Mr Wiseglass, a director at Manchester-based Inquesta, has written to Justice Minister Shailesh Vara urging the government to abandon proposals for a new regime for insolvency litigation.

He has also written to north west MPs to garner support in his capacity as the regional representative on national trade body R3’s Smaller Practices Group.

Following the Jackson reforms, claimants in civil litigation matters now have to pay a bigger proportion of the legal costs of a case.

The government has granted a two-year exemption for insolvency litigation, which expires in April 2015, but Mr Wiseglass and R3 are campaigning for it to be made permanent.

They say there are no alternative measures that will secure creditors the same level of returns and ensure fraudulent directors are brought to justice.

An independent report for R3 showed creditors could overall lose £150m-£160m a year – including £70m owed to HM Revenue & Customs – if the exemption does not continue, as many cases are unlikely to be pursued.

Insolvency practitioners personally undertake litigation on behalf of creditors against rogue directors. The costs are currently funded from the assets of the insolvent companies, or through no-win no fee arrangements with lawyers and after-the-event insurance policies.

Mr Wiseglass said that, if the rules change and the litigation costs cannot be fully recovered, most cases are unlikely to be taken on by insolvency practitioners.

“The current system brings individuals who have committed bad practice to justice and leaves more money for creditors,” he said.

“It works in the public interest, and protects public funds by returning money owed to HMRC.

“There is no viable alternative to this regime. Without a permanent exemption, businesses and HMRC will lose millions of pounds a year and dishonest directors will escape justice.

“If the government does not introduce a permanent exemption, it will be undermining its own objectives for civil litigation reform, and harm both HMRC and businesses.”