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I am about to come on to a couple of practical points, Mr Mundell. You will be aware that I have lodged amendments to remove individuals from being able to grant a statutory pledge under part 2 of the bill. If that change is made, it is unclear to me why not-for-profit money advisers would routinely be searching the register of statutory pledges on behalf of their clients.

As I indicated in my recent letter, there is also some doubt over whether searches of the register of assignations would be of much assistance to not-for-profit money advisers, given that, when debts have been assigned in a bulk assignation transaction, it is highly unlikely that the debtor’s name will be on the register, and because the register can be searched only by reference to the assignor of the debt, not the debtor.

In addition, the system has been designed so that the debtor is not expected to search the register. That is why the bill provides that a simple failure to search the register does not mean that the debtor is acting in bad faith if they make payment to the original creditor.

It is also important to recognise that the fees that will apply for registration events and searches in the two new registers will be the subject of consultation before the fee structure is established in regulations under the bill. That consultation is, in my view, the best vehicle for a proper examination of all the issues, and I am happy to reassure members of the committee that the consultation will explore the issue of fee exemptions.

Therefore, I think that it would be inappropriate to bring forward any part of the fee structure for the two new registers in advance of that consultation. It is for those reasons that I ask the member not to press amendment 64 or to move amendment 81.

Amendment 13 relates to section 42 of the bill, which reforms and codifies the law on the delivery of property to a secure creditor for the purpose of creating a possessory pledge. In relation to section 42(1)(c), it had been thought that it would be necessary to provide that a person who is holding property on behalf of a creditor should be a fully independent third party. However, representations were made to the committee that that might not always be possible or desirable.

We understand that delivery of warehouse goods is sometimes effected for the purposes of creating a pledge by instructing the custodian to hold the goods for the pledge when the custodian is a sister company of the pledger, on the basis that the pledger does not control the custodian. Reference to such custodians as being independent of the pledge provider appears to eliminate the current option and might require increased custody costs to be incurred by the pledge provider. Amendment 13 therefore simply removes the requirement for the holder of the property to be fully independent.

Amendment 21 makes a minor change to the position where a secured creditor wishes to purchase all or any of the property that is the subject of a pledge enforcement notice. That already has to happen by means of a public auction. However, instead of the price having to bear a reasonable relationship to market value, it will now have to be that price or more. That will allow a secured creditor to purchase something at above market value, if they wish to do so.

Amendment 27 tweaks the effect of section 92(6) of the bill, which deals with whether an entry in the statutory pledges record would be considered to be seriously misleading in relation to the description of property that is encumbered by a statutory pledge. The amendment is technical and is intended to remove any doubt that if it is not quite clear whether property is of one type or another, it may be described as two different types of property.

At present, the registration would be ineffective if the view was taken that one of those descriptions was erroneous. The amendment will ensure that the registration would be effective, so long as the property is described

“as being of a type that it is”.

A search of either type would disclose the property.

Amendment 29 relates to the procedures around correction of the register of statutory pledges in a case where the registered creditor has failed to comply with a demand for correction from a person with an interest in the pledge. The amendment relates to the right of a secured creditor to object to a proposed correction under section 97(4).

It may be that, in some rare cases, the party who is the registered secured creditor may not actually be the secured creditor, due to an error or an off-register assignation. It would seem appropriate that the true secured creditor should be entitled to object to the proposed correction. The amendment therefore broadens the right to apply to the court to oppose the making of a correction to cover the actual secured creditor as well as the registered secured creditor. The amendment also makes provision for the registered creditor to pass on the notice of the proposed correction, subject to their being able to do so.

Amendments 39 and 41 respond to the committee’s comments on the delegated powers memorandum, and to the committee’s recommendation in its stage 1 report

“that the ... Government ... amend the Bill at Stage 2 to make regulations under section 53(8) subject to the affirmative”

resolution in all cases, so

“that there can be enhanced scrutiny of and proposal to specify the classes of motor vehicle that”

certain protections should

“not apply to.”

The committee recommended that the powers should be amended to be subject to affirmative procedure in all cases, and I am happy to comply with that request.

I turn to Mr Balfour’s amendments. I understand that amendment 79 is intended to clarify that only prior ranking diligence can extinguish a pledge. However, section 76, which this amendment seeks to amend, is not concerned with the ranking of such things; it is concerned only with when an application for correction must be made.

The level of description that is used there will have no effect on the law of the interaction of pledges and diligence. Indeed, I am concerned that amendment 79 could have the opposite effect from that which is intended, because it could be read as implying that only a particular type of diligence is to result in a correction but all diligence would extinguish the pledge. I therefore ask Mr Balfour not to move the amendment. If he has particular concerns about the general law in that area, I am happy to put those concerns to the SLC’s advisory group on his behalf.

Amendment 83 seeks to add trustees and agents to the definition of “secured creditor” in the bill. However, that definition already includes

“any successor in title, or representative, of a secured creditor”.

Further provision is made on representatives in section 116(2). As a result, we believe that amendment 83 is unnecessary and potentially confusing. I ask Mr Balfour not to move it, on the basis that the policy that I believe that these amendments are designed to achieve is already provided for.

I move amendment 13.

Amendment 53, in the name of Carol Mochan, and amendment 85, in the name of Jeremy Balfour, are, as Mr Balfour has acknowledged, almost identical in terms and would place a requirement on the Scottish ministers to undertake a review of the act and report on that review after the end of the review period, which would be three years after the legislation receives royal assent.

In addition, amendment 53 requires that the review places a particular emphasis on the impact of the statutory pledge provisions on sole traders and small businesses. I appreciate that those are based on a recommendation contained in the committee’s stage 1 report, although they have been modified slightly from the report’s proposal in order to reflect the removal of individual consumers from the statutory pledge provisions. I responded to the committee in writing back in December about that recommendation and it may be helpful if I restate my concerns about including such a requirement in the bill.

As I referred to earlier in relation to other amendments, there is nothing to stop either the Scottish Government or the Scottish Parliament from carrying out a review of any aspect of a piece of legislation at any time. That is, of course, a good thing. Undertaking such reviews, as and when the need for them becomes apparent, is, in my view, a more flexible and responsive approach.

Amendments 54, 67 and 74, all in the name of Mr Balfour, come from a suggestion by the Law Society of Scotland that it would be helpful to replicate a provision at section 2(4) of the bill in respect of the assignation of a claim that is subject to a condition. That provision enables a condition to be specified by reference to another document.

The amendments would add the provision in respect of assignation documents, constitutive documents for pledges, and documents that amend pledges. We do not think that the amendments are strictly necessary. Section 2 of the bill is about the requirement to specify information. In contrast, the sections now being amended are just about the requirement to identify something. That much more readily admits to the idea of doing so by reference to an external document. However, if stakeholders consider that such a clarification would be helpful, we have no objections to making the necessary changes.

There are, however, some issues with the precise detail of the amendments. In particular, amendment 54 is technically defective. When read with section 1(2) of the bill, it provides that an assignation document must identify the claim, including by making reference to another document. That could be read as meaning that the assignation document must include reference to another document, which is not the intention.

The other technical difficulties with the amendments are that they refer to data as well as documents. That is unnecessary because of the definition of a document in the Interpretation and Legislative Reform (Scotland) Act 2010. Including it here but not in section 2(4) might also cause difficulties.

I am therefore happy to commit to working with Mr Balfour to lodge suitable amendments at stage 3, if he decides not to press his amendments today. Alternatively, if he wishes to press them, I am happy to support them on the understanding that they will need to be adjusted at stage 3.

I reiterate my sincere thanks to the committee for its input on this issue. I also put on record my sincere thanks to the money advice organisations and those in the small business community who have engaged on this. Clearly, the key challenge has been to get the balance right; I believe that the suite of amendments from the Government has achieved that balance. We are protecting individual consumers but not denying small businesses and sole traders the opportunity to utilise the provisions in the legislation. I know that that will be warmly welcomed.

I recognise the well-intentioned nature of Carol Mochan’s amendments, but I do not think that they are required. On the risk relating to household goods, as has been touched on, the existing provisions in the amendments effectively mean that household goods would not fall under the category of goods that could be used as collateral for a statutory pledge, owing to the fact that they are goods that are not predominantly used for business, and indeed are likely to be under the £3,000 monetary threshold.

I acknowledge the intent behind amendment 16B, which pertains to an annual increase in the monetary threshold, but a better approach would be to have greater flexibility. The way in which the amendment is drafted means that there would be no change on the face of the bill, which would necessitate complex calculations, unless ministers were to bring forward annual updates. However, as I outlined in my earlier remarks, such updates could be negligible, particularly as we move towards a period of lower inflation.

On that basis, I ask Carol Mochan not to move her amendments, and ask the committee to support my amendments.

Amendment 14 agreed to.

Amendment 15 moved—[Tom Arthur]—and agreed to.

Amendment 67 moved—[Jeremy Balfour]—and agreed to.

Section 43, as amended, agreed to.

After section 43

Amendment 16 moved—[Tom Arthur].

Amendment 16A not moved.

Amendment 16B moved—[Carol Mochan].

My amendments in this group give effect to the Scottish Government’s undertaking to remove the ability of individual consumers to grant a statutory pledge.

Amendment 17 will remove from the bill section 48, which allowed the provider of a statutory pledge to be an individual as long as the pledge met certain criteria.

Amendment 16 is the most important amendment in the group. It provides that it will not be competent for individuals to grant a statutory pledge unless the individual falls within a specified exception. The primary exception is where the

“individual is acting in the course of”

their own business and

“the encumbered property is a permitted asset”

that will be used

“wholly or mainly for the purposes of the individual’s business”.

The amendment will also permit individuals to grant a pledge if they are acting as a trustee of a charity or as a member of an unincorporated association. In such cases, a permitted asset would have to be an asset of the charity or owned on behalf of the unincorporated organisation.

This is a technical group of amendments relating to section 91 of the bill. A number of other sections of the bill protect good-faith purchasers more generally, but this section is concerned specifically with the situation in which people rely on the register but the register is wrong.

Section 91 provides that a person who acquires encumbered property for value in good faith and exercising reasonable care will acquire the property free from the pledge, in certain circumstances. Those circumstances are where the person searches the register but the entry in the statutory pledge as recorded at the time of acquisition has come to include an inaccuracy in the entry that is seriously misleading or an inaccuracy by reason of the removal of an entry from the record.

Amendment 23 can be taken in two parts but the changes both relate to encumbered property that has an identifying number—for example, a vehicle identification number. First, the effect of amendment 23 is that, in relation to an entry where the property has an identifying number, the purchaser will receive the property free from the pledge in the circumstances that I have just mentioned only if that identifying number is wrong or absent and it was a requirement under the register’s rules to include it. If there was no such requirement, but the person who was registering the statutory pledge included the number voluntarily, the property would be immune from the reach of section 91. That reflects the fact that people should not be penalised for including additional information, and it brings the section into line with the rules that apply under section 92 at the time that the pledge is created.

Secondly, it is possible that an identifying number that is correctly included at the time of registration could later be removed by some malfunction or mistake. The entire entry could also be removed in error, which means that the fact that the entry previously had a searchable identifying number will be of no help. Even though that is likely to be a very rare occurrence, it could have significant consequences for those involved. Amendment 23 therefore provides that, in such circumstances, the good-faith buyer will be protected and will acquire the property free from the pledge.

Amendment 30 will adjust the rules about what register search facilities must be provided to take account of the fact that, in light of amendment 23, there will be no significance to an identifying number for property being wrong in cases in which that information was not mandatory.

Amendments 24 to 26 and 28 are consequential to amendment 23. They will simply update cross-references.

I move amendment 23.

I think that the most recent review is taking place right now. This is an on-going learning process. The cabinet secretary, Kate Forbes, and I, in my role as public finance minister, have both been strongly committed to seeking to provide as much information as possible to the finance committee and to Parliament to assist in scrutiny and understanding.

However, this is an iterative process. I recognise that having these twice-yearly budget revision events might be insufficient to progress the type of change that we want to see in presentation as quickly as we would like. It might be useful for dialogue to take place with the finance committee, perhaps along with one of the budget review sessions, to consider that more formally.

I appreciate that it is for the committee to determine its own work programme, but if the committee has any more general reflections on having something beyond a specific presentation of a specific spring or autumn budget revision, I would be keen to hear them. Transparency and engagement are at the heart of not just our framework for tax but how we want to go about the business of ensuring that Parliament can come to decisions based upon the most accurate information possible, which is as easy to grasp as possible. A priority for me is trying to ensure that members of the public have the fullest understanding without having to wade through dozens and dozens of pages of dense, technical language and a lot of numbers.

It is an open invitation—I am keen to have that engagement, because it is very important. There are a lot of things that we have drawn out in this session. I recognise that members take a keen interest in specific budget lines and it can be difficult to give the authoritative answers that I would like to be able to give, given the breadth of possible questions that may arise.

I recognise the points that the convener, Mr Gibson, has made with regard to different aspects of the budget—discretionary and non-discretionary—and the points that Mr Johnson has raised with regard to presentation relative to the last budget revision, compared with the budget as passed by Parliament.

We can draw a number of things from this meeting. I would be keen to have an on-going dialogue about how we can improve the presentation.

This may sound as if I am shifting that position, which I do not mean it to, but the Government has to decide how much information to provide. We do not want to overload you, because we appreciate that you have many other things to consider. We could give you 50, 100 or 150 pages, but that would become more challenging and would probably raise suspicion about what is in there that might be missed.

I am keen to have that dialogue to understand what would be best for the committee and what would assist you as custodians of the Parliament’s responsibility for financial scrutiny, and I am keen to work collaboratively to deliver a better product for you, Parliament and the public to utilise.

I have two points. First, the forecasts that we operate within are a matter for the Scottish Fiscal Commission, which is directly accountable to Parliament. I understand, Ms Thomson, that you are asking about the processes and methodology that inform our in-year budget monitoring and how we go about that. This is axiomatic: if there are new and novel spending lines, or if new taxes are devolved, it will take some time to get a sense of how any estimates and forecasts are borne out by reality. That is something for the SFC to consider when new taxes are devolved.

Internal processes for in-year budget monitoring are led by officials. Niall Caldwell can give an overview of how continuous learning takes place.

Do you have the details of the underspends in front of you, Niall?