Seòmar agus comataidhean

Amendments 22 and 23 are drafted in similar terms, as Paul O’Kane acknowledged, and both seek to introduce an enabling power to require Scottish ministers to set out in regulations what local authorities need to do before they commence debt recovery action.

The essence of amendments 22 and 23 is that they ensure that debtors are better informed about the debt itself, the help that is available and the potential consequences if they do nothing and a local authority should be doing more to help and support them. I agree with that, in principle. The Scottish Government has recognised that and is working with the Convention of Scottish Local Authorities on a migration to best practice on debt assistance and collection, noting the principles that were set out in the report “Collaborative Council Tax Collection”, which was published by the Improvement Service and StepChange Debt Charity. It aims to use the existing flexibilities that are available to local authorities to take a compassionate and proportionate response to recovery of arrears.

As the committee might be aware, the Scottish Government recently allocated £200,000 to Citizens Advice Scotland and the citizens advice bureau network to provide pilot projects in three local authority areas. The projects will provide additional debt advice to individuals, with a focus on council tax arrears, and will support best practice approaches to council tax debt collection in those local authority areas. The pilot should provide us with invaluable information and help us to establish what is likely to work in the future.

Although I understand why amendments 22 and 23 have been lodged, they have not been consulted on. We therefore do not know whether taking a regulation-making power and making statutory provision about the matter is the right approach. It would be better to wait, allow the pilot projects to be completed and learn lessons from them before we decide how to move forward, rather than doing this through a statutory provision.

Amendment 29 would remove the ability of local authorities to add a 10 per cent surcharge to a debt when someone is in receipt of a council tax reduction or the Scottish child payment. Again, there has been no consultation on the matter. We do not know what the impact would be or how it would work operationally. For example, what would happen if the debt was incurred prior to the person being in receipt of those benefits?

On the impact of amendment 29, we do not know how many ratepayers with a non-domestic rates debt are in receipt of either council tax reduction or the Scottish child payment, but we anticipate that the number will be very low. On the basis of the available data, we know that, for the majority of non-domestic properties, the ratepayers are organisations and that, when the ratepayers are individuals, the properties that they occupy are generally in receipt of 100 per cent relief, mostly through the small business bonus scheme.

We must be cautious with amendment 29. We need to understand what issues we are trying to fix and then work together to determine how to address them. In that spirit, I am happy to consider each of the issues further and to discuss them with members to see whether we can agree on the most appropriate way forward. I would also like the opportunity to learn more from the pilot project that I mentioned earlier. On that basis, I ask Mr O’Kane not to press amendment 22 and not to move amendments 23 or 29. If he chooses to do so, I ask the committee not to support them.

They commenced in November. We are expecting some initial data in the coming months on the back of that, but I will need to confirm that. I am happy to come back to the committee on that specific point. I will provide more details in writing to Paul O’Kane ahead of stage 3, should he wish to reserve his position.

I am happy to oblige, convener.

Amendment 15 will allow arrestments of ships to found jurisdiction to take place on a Sunday and will bring the procedure into line with other forms of ship arrestment. Arrestment to found jurisdiction is an action that is brought specifically to establish jurisdiction in Scotland. Changes to other forms of ship arrestment in Scotland were made in 1993 and 1994 following a recommendation from the Scottish Law Commission, which allowed those forms of ship arrestment to be made on any day. However, no such change was made to arrestment to found jurisdiction. Consequently, that form of ship arrestment could not be executed on a Sunday.

It is clear that that has created a gap that could be exploited by someone owing a debt, if a ship docks in Scotland on a Sunday with the intention of leaving later that day. If the creditor was unable to establish jurisdiction on the ship when it docks in Scotland, they would not be able to rely on the other forms of ship arrestment to secure their claim and prevent the ship from sailing again that day.

Although ship arrestments are not carried out frequently, they can cover claims of significant value. The amendment, which allows all forms of ship arrestment to take place on a Sunday, will support creditors in attempting to recover debts that they are owed.

I move amendment 15.

Thank you for the offer, but I have nothing to add.

Amendment 15 agreed to.

Amendment 30 not moved.

Sections 11 to 13 agreed to.

Long title agreed to.

I offer a clarification for Colin Smyth, which I sought to make clear in my introductory remarks. I am very grateful to Mr McIntosh for raising that point. The potential unintended consequence that has been identified is not the policy intent, which was to provide an additional option, not to create a situation that was materially different to the existing process.

With regard to Mr Smyth’s request, we will, as I said, look to introduce an amendment at stage 3 to remedy that, to ensure that the policy intent is met and that the unintended consequence that Mr McIntosh has identified does not materialise. I would be happy to engage with the member directly ahead of stage 3 to provide that reassurance.

We will address the issue at stage 3, and I reiterate my gratitude for it being brought to the Government’s attention.

On Mr Fraser’s points, I appreciate his approach in trying to identify a halfway house. The Government has engaged and consulted on a range of proposals. I recognise the implications for arrestees that he mentioned. That is why, as I said earlier, the Accountant in Bankruptcy is committed to a process of engagement and to minimise the administrative implications.

I note that the arrestee will already have to undertake and be subject to a process. If there is no requirement to report, there is always the risk that, should someone follow up to identify whether an arrestment has failed, a duplication of work will occur. However, I reassure the member and the committee that we are committed to engaging constructively to ensure that the measure can be implemented as effectively as possible and to minimise any additional administrative requirements. It is an important provision that will strengthen the existing processes and support the rights of creditors.

On that basis, I ask the committee not to support amendments 4, 5 and 6.

Amendment 13 agreed to.

Amendment 26 moved—[Paul O’Kane].

Both Government amendment 10 and Murdo Fraser’s amendment 3 seek to introduce a process to allow sequestrations to be transferred to the AIB when a debtor fails to co-operate with their trustee. They both address a recommendation that the committee made, as we have heard. However, there are some important differences between how the two amendments would achieve that aim, and those differences mean that, although I support the principle of amendment 3, I invite Murdo Fraser not to move it and the committee to support amendment 10.

My amendment 9 is ancillary to the changes in amendment 10 and is intended to avoid introducing any doubt about the current position under the Bankruptcy (Scotland) Act 2016. Although Murdo Fraser’s amendment 2 is also complementary to his other amendment, it seeks to change the current position on a trustee’s resignation and entitlement to fees when dealing with an untraceable debtor, so I cannot support it.

It is not unreasonable to expect a bankrupt debtor to co-operate with their trustee in return for relief from debts. However, we accept that, in some cases of serious or long-term non-co-operation, there is an issue with trustees being left unable to be discharged and having to carry out nugatory administrative tasks.

Under the provisions applying to bankruptcies made on or after 1 April 2015, the discharge of a debtor from bankruptcy is within the Accountant in Bankruptcy’s discretion. If a debtor co-operates with their trustee, they can ordinarily expect to be discharged from bankruptcy and have their debts written off after one year.

Although the Accountant in Bankruptcy’s general policy position has been to refuse discharge in instances of non-co-operation, the AIB recognises that it is not appropriate to defer discharge indefinitely when the failure to co-operate is not significant to the administration or likely final outcome of the case—for example, when contributions have been paid but some of the paperwork is missing. In August 2023, an advice letter that addressed that point was issued to trustees. Therefore, the Accountant in Bankruptcy does not refuse discharge in all cases of non-co-operation.

However, that leaves cases in which non-co-operation is more substantial. That can leave the trustee in limbo, despite having done everything that they could have reasonably been expected to have done to get the debtor to engage with the process. Private trustees accept these appointments. They have chosen to act as a trustee, sometimes in exchange for a fee from the creditor, so there is a reasonable expectation that they will make all reasonable efforts to engage with the debtor over a reasonable period of time and that they should be able to demonstrate that they have done so. However, ultimately, if a debtor steadfastly refuses to co-operate, a case will reach a point at which there is no benefit to anyone from the trustee remaining in post, unable to carry out the statutory functions of their office.

I turn to the differences between the amendments. My amendment 10 provides that, when a debtor has not co-operated with their trustee and, as a result of that non-co-operation, the trustee has been unable to carry out their statutory functions, and a period of five years has elapsed, the trustee may apply to the Accountant in Bankruptcy for authority to resign from office. If that is granted, the Accountant in Bankruptcy will be deemed to be the trustee and will take over the case.

A period of five years is considered to be appropriate. It may be apparent much earlier that an individual is unwilling to engage with the process of their sequestration, but we expect that trustees will have made some effort to persuade a debtor to co-operate—and, in most cases, a period of five years is sufficient for dealing with assets, contributions and acquirenda. Some cases take longer to complete, but that is not necessarily due to non-co-operation and is not inconsistent with the debtor’s discharge at an earlier date.

It is important that this function be one of last resort, designed to deal with the most serious cases of persistent and continuing non-co-operation. It should not be used lightly.

It is also worth noting that amendment 10 will allow for the counting of any part of the five-year period that predates the changes in the bill. That means that cases in which non-co-operation is already an issue will be included—provided, of course, that the other tests are met.

By contrast, amendment 3, in the name of Murdo Fraser, does not specify any minimum period of time over which non-co-operation would require to be established. Under amendment 3, a trustee could apply to resign at any time—even very soon after the sequestration had been awarded. As I said, my view is that a minimum period of time should elapse before the trustee may seek to resign, to ensure that the power is available only for cases of true and long-term non-co-operation.

Similarly, under amendment 10, trustees will have to provide evidence of non-co-operation and show that they have made reasonable efforts to secure the debtor’s co-operation before the Accountant in Bankruptcy will be able to grant authority for the trustee to resign office. The amendment includes a process for review by the Accountant in Bankruptcy and, if necessary, for onward appeal to a sheriff. Review and appeal are available for the trustee, the debtor, and any creditor who objects to the trustee’s application being granted by the Accountant in Bankruptcy.

By contrast, amendment 3 does not require the trustee to provide evidence about the debtor or demonstrate that they have made reasonable efforts to secure co-operation; it does not provide any rights of review or appeal; and it does not give the AIB any discretion in the process—it seems that, if a trustee applied for change, the Accountant in Bankruptcy would be compelled to grant that application without hearing from any other affected parties. That is not a fair way of approaching the process. It is important that the AIB, as decision maker, is able to hear from all interested parties on any given application, and that those decisions are subject to review or onward appeal. The Accountant in Bankruptcy must also have some discretion to refuse applications for discharge if the AIB takes a different view of the case.

When it comes to how a trustee should be released from a sequestration, I consider that the trustee should resign, as provided for in my amendment 10, rather than be discharged, as is proposed in amendment 3 and in amendment 2 as regards untraceable debtors. Resignation is more appropriate if the case is incomplete and the office of trustee remains necessary. When trustees resign, they are entitled to outlays and remuneration for work done as trustee up to the date of their resignation, and to be paid out of any funds that have been ingathered from the sequestrated estate or contributions. However, if any amount is not paid because those funds are insufficient, the trustee must make a claim on the estate as an ordinary creditor should anything be ingathered after their resignation.

My amendment 10 also makes some administrative processes discretionary for cases that have been transferred to the Accountant in Bankruptcy under its provisions. The intention is that the ball be put into the debtor’s court. As long as the debtor refuses to co-operate, nothing else will happen and they will remain bankrupt. As soon as the debtor co-operates, it will be in the power of the Accountant in Bankruptcy to complete whatever actions remain outstanding and to grant the debtor’s discharge. It is important that there should be a route out of bankruptcy, and that people should not remain bankrupt for longer than is necessary, but I remain of the view that discharge should not happen until a debtor has made reasonable efforts to engage with the process.

Amendment 10 provides the same administrative discretion in cases that meet the same conditions but in which the Accountant in Bankruptcy is already the trustee. That is not the case with amendment 3, which would leave an undesirable disconnect between cases that are managed by the AIB as a trustee and cases that are managed by a private trustee.

Amendment 9, in my name, makes a small change to section 142 of the Bankruptcy (Scotland) Act 2016, consequent on amendment 10, to maintain the current position and to avoid any implication that the process is different where a trustee resigns in the case of a debtor who cannot be traced.

I ask the committee to support amendments 10 and 9, and I ask Mr Fraser not to press amendments 2 and 3. If he chooses to do so, I ask the committee to reject them.

We are operating within the parameters of the 2016 act concerning the commercial exploitation of aggregates. I am conscious that questions were raised in the committee previously as to whether there was another point of charge. The fact that we have to operate within the parameters of the legislation creates a limitation, but that is what the consensus was, that is what the agreement was and that is what we have to work with.

As for different approaches, as we have set out—we went into some detail on this earlier—the rationale behind our approach, with a broader alignment with the existing UK aggregates levy, is that it reflects what business is familiar with. It recognises that it has not been a straightforward process to get to the point of the current UK scheme, as I appreciate the committee will understand.

That has been our starting point. Indeed, that is perhaps a better way to put it: the bill represents a starting point, and one on which there has been broad consensus from industry. The bill is not an end point. How the power is used and develops will be for Governments in the future to determine.

The flexibilities that are afforded to us by the Scotland Act 2016 determine what we can do, to an extent.

Robert, did anything come up on those areas during the deliberations of the advisory group?

I am sorry, convener, but is this with regard to interaction with Revenue Scotland?

I only want to thank the committee for the opportunity to speak this morning and for all your engagement in the matter. I look forward to further discussions as the bill goes forward.