Meeting of the Parliament [Draft]

Meeting date: Thursday, June 6, 2024

Official Report 1109KB pdf

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Bankruptcy and Diligence (Scotland) Bill

The next item of business is a debate on motion S6M-13477, in the name of Ivan McKee, on the Bankruptcy and Diligence (Scotland) Bill, at stage 3. I invite members who wish to participate to press their request-to-speak button. I call Ivan McKee to speak to and move the motion.

16:02  

Thank you, Presiding Officer, for the opportunity to address the Parliament in this stage 3 debate on the Bankruptcy and Diligence (Scotland) Bill. I thank the convener and members of the Economy and Fair Work Committee for their assiduous scrutiny of the bill during stages 1 and 2 and for their on-going support for the bill’s measures and the small number of amendments that we have made.

I thank the Delegated Powers and Law Reform Committee for its input and everyone who gave evidence during the different stages of the bill. I also thank Scottish Government officials, the Accountant in Bankruptcy and legal colleagues in the Scottish Government for guiding me through the process, as I picked up the bill in its later stages. Finally, I thank my predecessor, Tom Arthur, for his hard work, dedication and commitment to the development of the bill.

This is a focused bill that makes small but important improvements, which I believe reflects the fact that our bankruptcy system is widely perceived as meeting our needs. More importantly, however, it represents a chance to make things better for a number of individuals with serious mental health issues and problem debt. The creation of the enabling power to establish a mental health moratorium through regulations will help to improve the lives of those who are struggling with debt and serious mental health issues.

The development of the bill has been a good example of co-production. The initial provisions in the bill were developed from the recommendations of stakeholder-led groups, which reviewed each of the statutory debt solutions to determine what improvements could be made. The provisions have been subject to extensive public consultation and reflect stakeholder recommendations that have achieved a level of consensus.

The bill has been further developed during the stages of the bill process, in which we listened to feedback from committee members, particularly in their stage 1 report, and from stakeholders to make further amendments to improve the bill.

For the mental health moratorium, we promised and delivered to the Economy and Fair Work Committee a draft set of regulations prior to stage 3. In doing so, we provided it with the opportunity to see the policy intention of the mental health moratorium. We have listened to the committee’s concerns about eligibility criteria for the moratorium and have widened them to allow more people access to the scheme.

We will continue to engage with stakeholders as we further develop the regulations. That will include a public consultation, giving stakeholders and Parliament the opportunity to continue to shape the regulations into a scheme that will help the most vulnerable in our society. We will work with the advice and mental health sector to develop clear guidance and training to ensure a successful delivery of the mental health moratorium, and we will work with the sector to ensure that the tools that it needs are available.

Furthermore, we lodged amendments, which were agreed to today, that ensure that Parliament has the opportunity to fully scrutinise the regulations that will establish the mental health moratorium. We have also made a statutory commitment in the bill to undertake a review of the mental health moratorium five years after its introduction, when a full report will be published and presented to the Scottish ministers.

We have implemented the Economy and Fair Work Committee’s recommendation to introduce provisions that will allow a private insolvency practitioner to be discharged as trustee where a debtor has been non-co-operative and there are no further actions that the trustee can take. We have also clarified the law to provide that, for a successful petition for recall within the first six months of a sequestration, debts can be paid in full without interest being charged, but thereafter interest would have to be paid on those debts.

We have listened to the witnesses who raised concerns with the committee. After further engagement with sheriff officers, we developed the provisions that provide them with more time to cite an individual to appear at a sequestration hearing and allow them to serve arrestment schedules electronically. That will help to make the process more efficient, cost effective and up to date with modern times.

We are aware that the topic of arrestment of funds is of great interest. The issue requires some clarity, particularly around the protection of funds that are wholly derived from social security payments. As mentioned earlier, we commit to consulting on the matter and will take the time to consider all views to ensure that we get it right and that the measures that are taken do not have any unintended consequences.

Some other matters were raised by stakeholders in their evidence to the committee that can be addressed through secondary legislation and which we will continue to look at. They include matters such as the minimum period for reapplying for bankruptcy under the minimal asset process and the minimum protected balance for earnings arrestments. As my predecessor said to the committee, those are things that can be addressed in secondary legislation, and I think that that is the best way to address them.

It is also important to note that the bill is part of a wider programme of reform and that we have commissioned an independent review to assess how far current statutory solutions meet the needs of a modern economy. That work has been taken forward by Yvonne MacDermid OBE. Yvonne brings a wealth of experience, having served as chief executive at Money Advice Scotland for many years. Yvonne has now issued a public consultation document to ask for feedback on the current solutions, and she will report back to the Scottish ministers on the results in due course. I look forward to seeing them and to continuing the work to make sure that our statutory debt solutions are fit for purpose.

The real work starts here, and I look forward to working with Parliament, members of the committee and our stakeholders to help ensure that Scotland’s statutory debt solutions meet the needs of the people of Scotland, particularly the most vulnerable in our society who are suffering from serious mental health issues along with problem debt. I commend the bill to Parliament.

I move,

That the Parliament agrees that the Bankruptcy and Diligence (Scotland) Bill be passed.

16:08  

I remind members of my entry in the register of members’ interests, which shows that I am a member of the Law Society of Scotland, although I am not currently practising.

I start by thanking my colleagues on the Economy and Fair Work Committee for their scrutiny of the bill. I thank all those who gave us evidence, the Scottish Parliament information centre for its background briefings, and the committee clerks who assisted us throughout the process. I also put on record my thanks to both ministers involved, Tom McArthur and Ivan McKee, for their engagement throughout. Mr McKee was a very late substitution, who stepped into the breach, but I enjoyed the conversations that we had on the bill.

It is fair to say that the bill has not provoked a great deal of political controversy, although some of the amendments that we discussed at stage 2 and today generated a little more heat.

Essentially, as the minister set out, the bill provides some modest, albeit important, changes to bankruptcy legislation. Its principal measure is to introduce a specific protection for debtors who have a mental illness, with the creation of a moratorium on debt recovery action.

A similar measure was introduced to the law in England and Wales some years ago by the breathing space scheme, under which individuals who are receiving crisis treatment, which encompasses those who are in compulsory treatment as well as those with conditions of comparable severity who are receiving crisis, emergency or acute treatment without compulsion, are protected from bankruptcy proceedings. It was clear from the committee’s work that there was widespread support from stakeholders for the principle of a mental health moratorium to be introduced in Scotland. However, there was also concern about the lack of detail about how such a moratorium would operate in practice.

The committee expressed concern in its stage 1 report that, while we were being asked to agree to the general principles of the bill, the question of how the moratorium would work in practice was being left open. I am pleased that the committee has now seen draft regulations that indicate how the mental health moratorium will work in practice. It was, in our view, essential that a super-affirmative provision be put in the bill for the approval of a mental health moratorium in order to allow the Parliament greater opportunity for scrutiny. In that respect, I was pleased that the minister’s amendment 2 was agreed by the Parliament this afternoon. Those who have debt problems and are suffering from acute mental illness should not face the added burden of the prospect of having diligence done against them. The measures in the bill on a mental health moratorium are therefore very welcome. For that reason alone, we will support the bill at stage 3.

On the amendments that were discussed this afternoon, I have raised the point of the unduly onerous burden on account holders—many of which are banks and other financial institutions—of having to respond to numerous attempts at arrestments, even if there is to be a nil return. I was interested in the figures that the minister set out in the debate indicating that some 200,000 arrestments are done annually in Scotland, of which only 2 per cent are successful. That clearly creates a substantial burden of administration on those who are having to report nil returns. That is a serious issue that was raised at stage 1 with the committee by NatWest, and I know that Scottish Financial Enterprise has also been engaged on the issue on behalf of its members. I welcome the minister’s assurance that he will engage with the financial services industry on that issue to try to find solutions. We know that some of those who are trying to make arrestments adopt a scatter-gun approach, and that that can create significant administrative costs for those who are on the receiving end. I welcome the fact that the Government will take steps to address that and I will be looking to hold the minister to his commitment on it.

In conclusion, bankruptcy law is there to try to be fair to both debtor and creditor, and to strike a balance between those things. If we make bankruptcy law too favourable towards the debtor, fewer institutions will be prepared to lend, which would leave those who have limited means being driven into the hands of the illegal money lending sector, which would be to no one’s advantage. At the same time, the law needs to be able to provide appropriate protections for those who find themselves, often through no fault of their own, in financial difficulty. For those who have a mental illness, the bill provides additional protection and, in that respect, it is very welcome. I confirm that we will support the bill at stage 3.

16:13  

I, too, thank the committee for its hard work. This is an important but technical bill; therefore, the hard work that the committee has done in providing insight and scrutiny on the proposed measures is vital. I recognise that because, given that I am not a member of the committee, I am very reliant on its work. I also thank Tom Arthur and Ivan McKee for their constructive engagement on the bill, which has been incredibly useful.

I will start where Murdo Fraser left off. The role of bankruptcy is incredibly important for individuals who find themselves in crisis. The ability to pause, suspend and write off debts is an important element of making sure that people are not unduly penalised when they find themselves in financial difficulties. I also argue that the ability to write off debt is an important element of enabling a well-functioning economy to continue to work. It is important on both counts, but it is particularly important when so many people now find themselves in financial difficulty.

It is estimated that around 700,000 people are at risk of severe debt. According to StepChange, the debt charity, the average level of debt for its clients is now £16,000, which is up by 27 per cent. That is the real impact of the cost of living crisis—the doubling of household bills and the one-third increase in food bills—set in the context of rising instances of poor mental health across our society. This is an important and timely bill, which provides people with protection when they find themselves in such circumstances.

Many critical elements of the bill have been left to regulations, and so it is useful that the Government has brought those forward in draft form. I will make some comments with the full acknowledgment and cognisance that I do not sit on the committee. With that understanding, and having examined the regulations last week, I make the following points.

My first point is about the criteria, and in particular the contribution of a mental health condition to the debt being a requirement. I would argue that a person’s ability to manage the debt is a much more important criterion than the reason why the debt has occurred. Likewise, the need for debts to have been accrued prior to the person entering the solution is problematic. We need to focus more squarely on the ability of the individual to manage the debt.

I still question the need for a register. I recognise that it is no longer to be a public register but, if mental health professionals deem the arrangement to be appropriate, that should be sufficient. I do not entirely understand the need for a register.

Likewise, we need to look at the fact that only moratorium debts are covered. There needs to be further examination around informal or verbal agreements, beyond simply those that are written down.

A broad variety of timescales are set out in the regulations—some are 28 days and some are only 14. I suggest that 14 days is a very short timeframe for people to get their affairs in order.

My broader point is around access. Compulsory treatment has been softened, but the reality is that it is still incredibly hard to get access to crisis treatment, whether that is on a voluntary basis or otherwise. The Royal Edinburgh hospital is in my constituency and, on the basis of my casework, I am aware that people must be in severe mental health crisis, at a point where they are in personal jeopardy, to get anywhere near that sort of crisis care. My fear is that a huge number of people whose mental health conditions are absolutely relevant to their debt and mean that they are unable to manage it will not meet the criteria.

Finally, I will make a brief comment about framework bills. Part of the issue is that, although the bill is important, it has been hard to examine the detail. I understand the need for framework legislation and the need for regulation-making powers, particularly around setting thresholds and specific amounts and delivering the how, but legislation needs to specify its intent—what it seeks to set out—even if the detail of that is going to be left to regulation.

Ultimately, it is about the balance between the Executive and the legislature. The reality is that this legislation, like many others, leans the balance heavily to the Executive, and it is not in the Executive’s interests for the balance to be that far to its side of the equation. Ultimately, when it comes to technical measures, the processes of this Parliament are there to test legislation, to ensure that it is right and that it will have the intended effect. In these areas, those tests can be helpful to good legislation and, indeed, helpful to the Government.

16:19  

I am pleased to speak on behalf of the Scottish Greens in support of the bill. I express my sincere thanks to my colleagues on the Economy and Fair Work Committee and to the clerks and SPICe researchers who supported our scrutiny of the bill during its earlier stages. I also thank Tom Arthur, as the minister who was previously responsible for the bill, and Ivan McKee for their willingness to engage, and for the time that they have taken over the past few months to discuss different elements of the bill.

Perhaps most importantly, I thank all the organisations and individuals who contributed to our scrutiny, in person at committee, in written evidence and briefings and in meetings. Citizens Advice Scotland, Advice Talks Ltd, Money Advice Scotland, the Child Poverty Action Group and so many others have all helped to make the bill, and the regulations that accompany it, stronger and more robust.

During our committee scrutiny, we spent much time on the very important mental health moratorium that the bill will introduce. I believe that it is right that we give proper consideration to small but potentially transformative issues, and the mental health moratorium is just that. In the midst of the technical changes to our bankruptcy and diligence law, there is the potential for us to make the lives of people who are struggling with debt and poor mental health much more manageable.

As we heard clearly in committee, debt has a huge impact on mental health. Participants in the engagement session that we held with One Parent Families Scotland and the Poverty Alliance told us their personal stories of mental health issues spiralling out of control because of the pressures of debts, alongside other issues associated with family, work, physical health and so on. The session was very effective.

As Becca Stacey from the Money and Mental Health Policy Institute said,

“we know that people with mental health problems are three and a half times more likely to be in debt, and that half of the people who are in problem debt are experiencing a mental health problem.”—[Official Report, Economy and Fair Work Committee, 20 September 2023; c 2.]

It is a vicious circle. Debt and poor mental health are clearly linked, and are reinforcing.

I am pleased, therefore, that the Scottish Government has, in producing the draft regulations that it has laid for the mental health moratorium, listened to the lived experience of those who have struggled with both mental ill health and debt, and to the advice from those who seek to support them.

The widening of the moratorium’s eligibility criteria to include people who do not have a compulsory treatment order will benefit many people, giving those who are receiving voluntary treatment the much-needed support that the moratorium provides. However, as Daniel Johnson outlined, we believe that we still need to do more in that space, and the eligibility criteria remain too narrow.

With regard to the regulations, there are other aspects that still give me cause for concern. I remain to be convinced that the register is appropriate, even though what is proposed is not a public register. We heard clearly in evidence that a register could exacerbate the stigma that is experienced by people who are struggling with both poor mental health and debt. That stigma comes not necessarily from the information being publicly available, but simply from people knowing that there is a register at all. Stigma destroys people’s lives, and we should not be reinforcing structures and systems of oppression that we know will stigmatise vulnerable people. I therefore look forward to future scrutiny of the regulations with interest.

A final issue is the need for financial advice and support organisations and others to have the support, training and resources that they need to do their jobs effectively. The legislation will not have the positive impact that is intended if front-line debt advisers and mental health professionals do not have the time, training or resources that they need to do their jobs. Specialist trauma-informed training and support will be needed so that they are adequately equipped to support people who are struggling with both mental ill health and debt.

I do not have time to address all the other issues in the bill just now, but I look forward to the rest of the debate, and I am pleased to support the bill.

We move to the open debate.

16:23  

I will be pleased to vote for the Bankruptcy and Diligence (Scotland) Bill at decision time. This relatively small bill does not propose radical change, but it represents a chance to make things better for a small number of individuals with both severe debt problems and severe mental health issues, and that is not a small thing.

If the bill is passed, it will do three things. It will give Scottish ministers powers to create a mental health moratorium; it will make minor and technical reforms to bankruptcy legislation; and it will make changes to the law on debt enforcement.

According to research from the Money Advice Service, more than 55 per cent of adults have struggled with their wellbeing because of money problems at some time in their lives. A total of 38 per cent pointed the finger at debt as the biggest financial issue linked to suffering with mental illness, and being unable to cope with everyday costs, such as bills, came in a close second.

A recent report from the Money Advice Service found that 59 per cent of people who contacted it for debt advice reported that they had been diagnosed with a mental health condition. That is much higher than the United Kingdom average of 17 per cent, which highlights how money problems and mental health and wellbeing can be interlinked.

As Maggie Chapman said, money issues and mental health problems can cycle, with mental health problems making it harder to earn and manage money or to ask for help, which leads to financial difficulty. Financial difficulty, in turn, increases stress and anxiety, perhaps exacerbated by collection activity from creditors and going without essentials, which increases mental health problems, and so on.

The bill contains powers that would allow Scottish ministers to create a mental health moratorium to protect people with serious mental health issues from debt recovery action. I understand that the idea of a moratorium to provide special protection for those with serious mental health conditions achieved broad support in the bankruptcy and debt advice review consultation. As has been laid out, responses to the Economy and Fair Work Committee also showed strong support for the principle of such protection, notwithstanding people’s questions over the details.

The bill proposes relatively minor reforms, with some benefiting creditors and some benefiting debtors. In summary, the debt enforcement changes would require bodies such as banks and employers to tell creditors why attempts to arrest a debtor’s assets have been unsuccessful; require debtors to be provided with a debt advice and information package in advance of the relevant hearing for diligence on the dependence; extend the timeframe that a debtor has to reclaim assets seized at their home; and increase flexibility around when a money attachment can be carried out on business premises.

The bill will make a small but important change to bankruptcy and diligence. The introduction of a mental health moratorium is an important step that will help those with the most severe mental health conditions and financial challenges. I will be very pleased to vote for the bill tonight.

16:26  

When the Bankruptcy and Diligence (Scotland) Bill was first published, stakeholders raised concerns that it did not go far enough and that it did not deliver the protections that we need for the most vulnerable at a time when families are facing a real cost of living crisis. There has been some progress since. On the mental health moratorium, I welcome the decision to widen the criteria and not to proceed with a public register, although I still have concerns over the need for any form of register.

Weaknesses remain with the draft regulations. Alan McIntosh from Advice Talks Ltd, Citizens Advice Scotland and the Economy and Fair Work Committee have highlighted several concerns. First, the moratorium will not prevent people from being evicted from their home or having it repossessed, as is the case in the rest of the UK. Under Scottish housing law, a judge should grant an eviction or repossession only if it is reasonable to do so in all the circumstances. However, that ignores the crucial point that such protection is available only if someone can seek advice and obtain representation at any court or tribunal case. Clearly, someone who is suffering a mental health crisis might not be able to do that, or the process of doing so might be too much—it could set back their recovery completely.

Secondly, people will be protected only from debts that were owed up to the date of award of the moratorium. Individuals will have to maintain their on-going liabilities. If they fail to do so, their moratorium could be cancelled.

Thirdly, creditors will have the right to challenge the legality of a mental health moratorium and the right to request cancellation. Surely it is the medical professional, not the creditor, who has the expertise to decide whether someone should be under the moratorium.

Those are just some concerns about the regulations for the proposed moratorium; I could have mentioned others.

The member has raised a number of issues that the committee was interested in. Does he agree that the issue of the capacity of people who might wish to access the scheme is still to be addressed? The minister might want to consider that further.

I thank Claire Baker for her intervention. I hope that, in his concluding remarks, the minister will address that point. It was certainly debated at some length in the committee and it needs to be addressed.

Another concern is the lack of detail on enforcement action that will be taken against creditors that fail to adhere to the moratorium.

Money worries take their toll on most people, but the anxiety and stress that they create for those suffering from a mental health crisis is all the greater. Many are simply not in the state of mind to deal with the debt. There can be a downward spiral—as the debt grows, the mental health impact also grows.

Some members may have seen the survey that was carried out by Advice Talks adviser Alan McIntosh, which showed that earnings arrestments left people in severe hardship. Most were unable to pay for essentials and had fallen into arrears. They were left unable to pay other debts. Many respondents reported a deterioration in their mental health. One woman said that she was struggling to keep her head above water because of the amount that the courts were taking off her wages. Some had left their jobs to escape arrestment.

I welcome the Government’s decision to consult further on that issue and to bring forward changes on earnings arrestment levels. Preventing creditors from arresting people’s benefits from their bank account is also vital. I acknowledge the Government’s commitment to stop that from happening through my amendments.

We know that mental ill health and money problems go hand in hand. People can get caught in a vicious cycle, where the debt builds and builds. The bill’s overarching aim of supporting vulnerable people who face financial hardship is an important one, although the proposed regulations need to go further.

I add my thanks to all who gave evidence to the Economy and Fair Work Committee as the bill went through Parliament, as well as the committee clerks for the work that they did, and indeed Government officials and the ministers themselves. I pay particular tribute to Alan McIntosh from Advice Talks, who was forensic in his scrutiny of the bill and the regulations and drew attention to several weaknesses that might not have come to light otherwise. He put forward several constructive proposals that could provide much-needed help to people who are struggling with their mental health and facing severe hardship. I am grateful for that input.

We now move to closing speeches.

16:31  

I thank all those who contributed to the debate this afternoon and to the discussion of amendments earlier. The Bankruptcy and Diligence (Scotland) Bill might not be the most exciting piece of legislation and this debate is not the most politically heated, as Murdo Fraser suggested. It has not attracted a great deal of attention. However, it does some very important, if small, things to support people who are struggling with debt and poor mental health, while ensuring that creditors are protected, too.

In my closing speech I will focus on what we need to do after the bill passes, as we know it will. We must listen to those who are directly involved in supporting people who are in debt and who struggle with mental ill health, and we must listen to those who have direct lived experience of both of those. Citizens Advice Scotland and others remain concerned that the regulations that we have in draft form, which will bring the mental health moratorium into effect, will not completely deliver the policy intent of the bill. It is not clear, for example, that the regulations will provide the space and security that are needed for individuals to prioritise their mental health recovery or to halt the vicious cycle of increasing debt and worsening mental health.

We know that recovery from mental ill health is never a linear process. It can cycle through improvements and setbacks and can be totally derailed by unpredictable and unforeseen events. People who have severe mental illness face many barriers to much-needed support, and treatment and crisis can fluctuate. The situation is often enduring, and one-off treatment or one-off support may not work or deal with the issue. In fact, it is very rare that one-off treatment is all that will be required.

As Colin Smyth has outlined this afternoon, for the mental health moratorium to be effective, it needs to do some very specific things. It needs to protect individuals from eviction. We cannot expect somebody to take their mental health recovery seriously if they are worried about losing their home. The moratorium needs to protect individuals from debts that are accrued after it is awarded, including by removing the requirement for maintaining on-going payments. The creditor’s right to challenge or request cancellation of a mental health moratorium needs to be removed. Those are the kinds of issues that we need to take seriously as we consider the draft regulations in the coming months. I hope that the Scottish Government will listen to those concerns and will amend the draft regulations before they are brought to Parliament for approval.

The Bankruptcy and Diligence (Scotland) Bill matters. It will make a significant difference to a number of people who need it to work for them if we get the regulations right, if the eligibility criteria are set wide enough, if we ensure that the legislation does not embed stigmatising measures such as a register, and if we ensure that it gives people the security and safety that they need to deal not only with their mental health recovery but with their debts. That will be good for them, for their families and their communities, and for creditors.

16:34  

It is a pleasure to close this debate on behalf of Scottish Labour.

As we heard from my colleague Daniel Johnson, Labour members have sought to support the aims and principles of the bill. We have heard from members across the chamber that the bill is technical, but I think that it has the scope to make a real impact on many of the challenges that exist in the area. As we know, there is much more to be done.

I join colleagues in thanking Ivan McKee and the previous minister, Tom Arthur, for their stewardship of the bill and the way in which they have engaged. I also thank their officials.

A lot of our debate this afternoon has rightly been taken up with thinking about those in our society who are vulnerable and who, because of the debt that they face or other factors, deserve support to escape those problems and get on to a more stable footing. It is very important that that is approached with compassion.

That is why there has been such strong support for a mental health moratorium on debt recovery actions. We have heard that roundly across the chamber and, indeed, calls for the provisions to be as strong as possible. I was successful in securing an amendment to change “may” to “must”; that small change is important because it shows the intent in the legislation that that must happen and the will of Parliament in supporting it.

We know that the regulations have been drafted and brought forward by the minister, so we hope that the moratorium will continue to progress and come into effect in the near future. However, there are concerns remaining about the strength of those regulations and the protections that will be provided by that moratorium. Those concerns have been outlined by Maggie Chapman, Daniel Johnson and other members.

We know that many organisations, such as Citizens Advice Scotland, have called for the inclusion of protections from eviction or repossession from on-going liabilities. We have also heard, in the exchange involving my colleagues Claire Baker and Colin Smyth, about the need to do more to create a process that would enable access for those who lack capacity. It is clear that there is still time to address those concerns before regulations go through the necessary parliamentary scrutiny. I hope that the minister recognises the concerns of members as well as those of stakeholders, and that he will reflect on some of those in his closing speech and as the bill progresses.

More broadly, beyond the moratorium, we know that the bill could have gone further in many places and could have been stronger. The Economy and Fair Work Committee made a number of recommendations to the Government at stage 1 that have not been taken forward. However, there is the opportunity for further work and dialogue in that regard.

Overall, the bill is an improvement on the status quo. We should not let the perfect be the enemy of the good and the enemy of progress when the scale of the debt problem that Scottish families face is as large as it is. Every positive measure, however small, goes some way in helping them just a little bit more than they are currently being helped.

This is not necessarily the end of the line. There is scope to strengthen and support protections in enhanced regulations or better working practices. We should continue to engage and learn from third sector organisations. We are all grateful for the contribution that such organisations—not least Advice Talks, which Colin Smyth mentioned, Citizens Advice Scotland and Aberlour Children’s Charity—have made in the process. In speaking to the amendments, I mentioned the innovative work that has been done, such as in the Tayside pilot that is run by Aberlour, which provides wraparound support to families in problem debt. We should all engage with such organisations where we can.

To conclude, people have been pushed further into debt in this cost of living crisis. The Money and Pensions Service has estimated that 700,000 people in Scotland are at risk of being in, or are already in, problem debt. We know that those people cannot afford to wait for the perfect solution to come along. We need to use the bill’s provisions to benefit those people. I hope that we will continue to engage on all of these issues, not least the mental health moratorium, in order to try to make as much change as we can.

16:39  

I apologise to my colleagues for not being able to be in the chamber for the debate. Given the consensual nature of the debate and of the bill, members will be pleased to hear that I will be keeping my contribution to a minimum.

I echo others’ thanks to my committee colleagues, the committee clerks and all those who gave us evidence on the bill. I thank SPICe for the very helpful background briefings.

As has been demonstrated in the debate, the committee was mostly in agreement throughout the evidence-gathering process, with very little dissent. My colleague Murdo Fraser, with his usual attention to detail, helpfully highlighted that bankruptcy provides a solution for those who find themselves unable to meet their financial obligations. It avoids the need for creditors to pursue those individuals indefinitely and offers a way to clear the deck, so to speak. All the while, though, there is an understanding that there is a balance to be sought between creditors and debtors.

In evidence, and in the cases that we have been considering this afternoon, we have heard that it is predominantly public bodies such as local councils—especially in the case of council tax arrears—and His Majesty’s Revenue and Customs that are the main creditors. There is, therefore, a requirement to balance the needs of debtors against the collection of funds to support public services.

As members have said, the bill represents mostly minor and technical changes to existing bankruptcy legislation. Much of the evidence taken and discussed centred around debtors with significant mental illness and their capacity to attend to the debt recovery procedures against them adequately. We all agreed that that was a legitimate reason to support a moratorium on the recovery of said debt.

Other speakers in the debate have cited breathing space, which is a similar scheme in England and Wales, where individuals receiving what is termed crisis treatment are offered such protections. That includes those subject to compulsory orders but, crucially, those suffering from conditions of comparable severity who are receiving crisis, emergency or acute treatment without compulsion. The lack of detail on how the moratorium would operate has raised concerns. It is, therefore, good to see that draft regulations indicating how the mental health moratorium would work in practice have been made available. Again, the provision for a super-affirmative procedure is very welcome. It has been raised that creditors also need some assurance and support, and it is welcome that the minister has assured us that he will engage with the financial sector to look for optimum solutions.

Those who have a debt issue while suffering from an acute mental health issue should expect a degree of protection. Indeed, the debt issue could be a reason for their poor mental health. That alone is reason enough to support the bill at stage 3, and we will therefore be voting for the bill at decision time.

16:42  

It is a pleasure to close the debate. I am grateful to all the members who have contributed to the debate, lodged amendments and taken part in the constructive discussions on the bill over the past few weeks since I have been involved. I will touch on a few of those points, although by no means all of them, given the brief time that I have available.

On Murdo Fraser’s point about potential additional workload for the banking sector, he can rest assured that I will commit to working with the sector to minimise effort or any onerous workload that will be required of it. Indeed, I hope that we can get better data to understand the on-going situation, which will perhaps lead to a reduced workload in the future, which would certainly be our intention.

I thank Murdo Fraser and Daniel Johnson for raising the importance of balance in the bankruptcy process and its critical impact on individuals, businesses and the overall economy. It is important that we get the balance right and that we have a functioning bankruptcy system that works for everyone. It is in that spirit that we will seek continually to improve the relevant legislation and regulations.

Daniel Johnson raised a number of issues about regulations. He can rest assured that those have been noted and will be considered. He also mentioned framework bills—he is keen to mention them whenever he has the opportunity.

On the point that the minister just made, how we define “crisis” is important, as is the nature of the conditions that meet the threshold. The reality is that acute care in our mental health system is quite difficult to access at the moment. Therefore, getting the definition right in the regulations is important. Will the minister comment on that?

Daniel Johnson has made an important point. The Government will follow up on that issue—as it will do on a number of other issues that members raised in the debate—through the process that we are taking forward with regulations and beyond implementation. We will focus on understanding how we can find the best definitions that work for everyone concerned, bearing in mind the points that Daniel Johnson has rightly raised.

Members have made a number of other important points, although I do not have time to go through them all. Maggie Smyth—I am sorry; I meant to say Maggie Chapman and Colin Smyth. I am now in the business of renaming members, ad hoc, from the Government benches. [Laughter.] Those members raised similar points, both of which were well made. They have my commitment that we will continue to consult publicly on the regulations, and that we will work with stakeholders and members to ensure that we deliver solutions while taking on board all the important points.

As I mentioned, the draft regulations that now sit with a committee will be the subject of public consultation. I will reflect on the feedback from that and will undertake further work with stakeholders and the committee to shape the regulations to ensure that they can deliver their intention and improve the lives of people who are struggling with debt and serious mental health issues.

Furthermore, now that amendment 2 has been agreed to, there will be more time for Parliament to scrutinise the regulations when they are laid, to ensure that they are fit for purpose. Although Parliament has rejected some of the amendments that were debated today—my thanks to members who chose not to press their amendments, having heard the Government’s comments, in particular on the attachment of property and funds—I am, as I have said, sympathetic to the aims behind them and will work with members to take them forward, where appropriate.

The Scottish Government agrees that it is important that welfare payments be protected for the purposes for which they are paid. However, it is also important that we get that right, so taking time to consider the amendments and the statutory requirement to consult before making regulations is the correct way to proceed.

We have also committed to consulting on a different approach to the bandings for earnings arrestment in order to reduce its impact on people who are on low incomes. It strikes me that taking time to consider that fully would be a fairer and more effective way of addressing the issue.

Throughout the process, we have committed to introducing more bankruptcy measures that can be achieved through secondary legislation. We will continue to work with stakeholders on those issues in order to ensure that our statutory debt solutions are fit for purpose.

This is certainly not the end of the process. We will continue to engage in work with stakeholders and the Parliament to improve Scotland’s statutory debt solutions and to ensure that they meet the needs of the people of Scotland. As many members recognised during the debate, the bill is only a small step that might help only a limited number of people, but it is, nonetheless, an important step in demonstrating Parliament’s commitment to helping all the people whom we represent.

I commend the bill to Parliament.

That concludes the debate on the Bankruptcy and Diligence (Scotland) Bill at stage 3.