Seòmar agus comataidhean

For clarification, the pilot project that I referred to will conclude at the end of this month, so we hope to provide information on it quite shortly.

I thank Daniel Johnson for using his amendments to highlight the important role that the debt advice and information package plays for people who are experiencing debt issues, and I welcome his desire—which, I am sure, we all share—to make improvements to the current processes.

However, I have some concerns about the approach that is taken in amendments 24, 27 and 28. One of those concerns is about ensuring that the information that would be provided during the discussions that were held by creditors would be of a high standard. The Bankruptcy and Debt Advice (Scotland) Act 2014 introduced a requirement for anyone who was considering statutory debt solutions to have received advice from a qualified adviser. The Government wanted to ensure that the advice was accurate and consistent, and that each individual circumstance could be considered. I want us to ensure that that is the case for anyone who is given advice about debts in this context. We need to maintain those high standards.

I also have concerns about a creditor’s ability to hold a discussion on the content of a debt advice and information package. If the creditor was simply to read from the package, I am not sure what value that would add. Some creditors might decide to train their staff to hold such discussions, but we would need to be sure that the content of those discussions was accurate and of a high standard.

That would come at a cost. It is likely that other creditors, especially smaller creditors, would pass on the discussion to an alternative contact, perhaps from the debt advice sector, and we would need to be clear that the debt advice sector could handle an increase in demand. We have heard that it is already under pressure, and I caution against adding more pressure to it at this time. Using an alternative contact might also result in delaying the creditor’s pursuit of the debt while they wait for the discussion to take place.

When we talk about creditors, particularly where diligence is concerned—we have touched on this already this morning—we tend to think about local authorities, which is only to be expected, as they are the biggest users of diligence. However, it is worth bearing in mind that anyone who is trying to recover a debt can use diligence, provided that they follow the correct process. That includes the local plumber or joiner, credit unions and someone who lent a family member money. If we are to introduce new requirements, we need to think about how the process involves all creditors, not just local authorities.

Amendment 30 would require a review of the impact of a debt advice and information package in providing support to individuals experiencing debt recovery action. I am happy to look at alternative ways to encourage people to get the help that they need and to advise on where to find that help, as well as to explain the consequences of doing nothing about the debt. Through amendment 30, the member has highlighted some ways in which we can do that—for example, through online videos and instant messaging—and I very much welcome those suggestions.

I would be happy to conduct further discussions with the member to further understand his concerns and to ensure that they are included in the review of the document. In looking at alternative ways to encourage people to get the help that they need, I am happy to consider the proposals that the member has suggested. However, I remain to be convinced that, at this stage, there is a need to legislate for the review to take place. Earlier, I touched on the way in which the AIB operates, whereby there is an on-going process of review and learning engagement, but I would be happy to discuss that in more detail with the member. I therefore ask the member not to move amendment 30.

Given the concerns that I have outlined, and given that we are already in the process of reviewing the debt advice and information package, I ask the member not to press amendment 24 or to move his other amendments in the group.

The Scottish Government wants to ensure that the current Scottish statutory debt solutions remain fit for purpose and continue to be updated to reflect a modern society. All three amendments have come from recommendations that were made in the committee’s stage 1 report.

Amendment 7 comes from the recommendation to consider the Law Society of Scotland’s suggestion in relation to the payment of interest where sequestration is recalled. That suggestion is that, within the first six months of a sequestration, recall may be awarded on the basis of full repayment of the debts without interest being charged. However, where debts are repaid more than six months after the sequestration begins, interest would have to be paid in order for a petition or application for recall to be successful.

The Scottish Government believes that it is important and beneficial for a debtor to be able to follow a recall process that enables them to extract themselves from an insolvency process timeously where they need not have been made bankrupt and are able to settle their debts in full.

It is also right that creditors should have their debts settled as quickly as possible. Where there is an undue delay in the settlement of those debts, they should be entitled to be compensated with the payment of interest. It is accordingly important, as in bankruptcy generally, to seek to strike a balance between the rights and interests of debtors and those of creditors. I believe that payment of interest on creditors’ debts where those are paid more than six months after the award of sequestration, where recall is being sought, strikes that fair balance and brings clarity to an area of the law where I know there has been some doubt up to this point.

Amendment 8, which again comes from a committee recommendation, will provide sheriff officers with more time to cite the individual to appear at a hearing in a sequestration case. That is achieved by removing the upper limit on the window for citation, which is currently 14 days before the hearing date set by the court.

Amendment 1 would also provide sheriff officers with more time to cite the individual. However, that would be achieved by increasing the upper limit to 21 days instead of removing it completely. Amendment 8 removes the upper limit completely, which will make it competent for sheriff officers to serve the warrant citing the individual on any day from the date the sheriff grants the warrant up to six days before the hearing date. Amendment 8 will therefore provide greater scope for sheriff officers to competently cite the individual by giving them as much time as possible to serve the warrant on individuals, especially in more rural areas or where the individual works away from home frequently and multiple visits from sheriff officers are required to ensure that the warrant is personally served on the individual.

The change that is introduced by amendment 8 will have no adverse effect on debtors, as it will mean in effect that an individual in problem debt could have more notice before having to appear in court than is currently allowed, giving them more time to get appropriate advice.

Although I support the principle of amendment 1, it allows for only a limited extension of the time in which a petition can be served on an individual. As stated previously, amendment 8 will extend that further and be more beneficial to all parties involved, including debtors.

Having engaged with the Society of Messengers-at-Arms and Sheriff Officers, which originally raised the issue with the committee, we have concluded that the upper limit on the window for citation should be removed rather than extended. The Government’s amendment will allow a petition to be served from the date the sheriff grants a warrant to cite up to six days before the hearing. Therefore, I ask the committee to support amendments 7 and 8 and I invite Mr Fraser not to move amendment 1.

I move amendment 7.

I have no further comments, convener.

Amendment 7 agreed to.

Section 3, as amended, agreed to.

After section 3

Amendment 1 not moved.

Amendment 8 moved—[Tom Arthur]—and agreed to.

Sections 4 and 5 agreed to.

After section 5

The committee will be relieved to hear that I will speak only very briefly to amendment 11. This is a technical fix to correct an anomaly that has arisen as a result of various changes to bankruptcy legislation since 2007. Commissioners can have an important role in supervising the actions of trustees, but it is the Accountant in Bankruptcy’s responsibility to supervise both trustees and commissioners. It is therefore inappropriate to have commissioners in a case where the Accountant in Bankruptcy is the trustee.

Cases with commissioners are fairly unusual, so the anomaly, which since 2007 has allowed commissioners to be in office even when the Accountant in Bankruptcy is the trustee, has not caused any major difficulties in practice. However, it is clear that the current situation is not what was intended in policy terms. Amendment 11 is intended to return the position to what it was prior to 2007, which was that no commissioners may be elected when the Accountant in Bankruptcy is the trustee in sequestration and, in a situation where a commissioner already holds office, that commissioner would cease to hold office if the Accountant in Bankruptcy then becomes the trustee.

I move amendment 11.

Amendment 11 agreed to.

I appreciate the point that you make. That explains why we took the extraordinary step of having an uprating of the thresholds a year ahead of schedule. We have the power to achieve that through regulations.

The point that I am making before the committee in this specific instance, in considering an amendment regarding matters that could be addressed through regulations, stems from the representations that I have had from various key stakeholders, including local government. I certainly appreciate the intent behind amendment 12, and I sympathise with its objectives. However, I cannot ignore the significant representations that have been made, so I want further time to engage with stakeholders to see whether we can identify a position of consensus and fully understand what some of the unintended consequences may be. I feel that that is a responsible approach to take, given the representations that have been made to me and to the committee.

I understand that amendment 25 seeks to put a recent decision by the sheriff court on to a statutory footing. The aim is to prevent attachment of funds in a bank account when those funds are solely derived from social security benefits. I am sympathetic to that aim, but I believe that it needs further consideration and consultation with stakeholders. In particular, there are practical considerations about how banks would apply the rule and identify funds that come wholly from benefits. I want to ensure that any amendments along those lines are on the right side of the social security reservation.

There are already provisions in the 1987 act for an application to the sheriff for the release of funds where an arrestment is considered unduly harsh. That existing protection requires the sheriff officer to consider the source of the funds, and it already provides some of the protection sought through amendment 25, although I acknowledge that a court application is required and the measures do not operate automatically.

I am happy to consider further what needs to be done in addition to the existing protection, so I am grateful to the member for lodging amendment 25, as it highlights some of the issues that we need to consider and consult on. The amendment lists eight social security benefits as included, but we need to consider whether others should be included, too, and how any list would be future proofed. The amendment requires the funds to be wholly from benefits and leaves the facts of that to the judgment of the creditor before funds are released. That might be difficult in practice. How would any change interact with the protected minimum balance?

The letter from Dr MacPherson and Professor McKenzie Skene sets out a number of issues that we need to consider. There will no doubt be other practical and technical matters to consider with all interested parties, and that means I cannot support the provisions in amendment 25 at this time and in this form.

Amendment 26 proposes to create a requirement on ministers to review, on an annual basis, the protected minimum balance when bank account arrestments are executed, and to uprate that figure if it is materially lower than the inflation-adjusted figure and amend it through affirmative regulations.

The protected minimum balance is an important protection for individuals, so that only funds above the minimum in a bank account can be attached by a creditor. The figure for the protected balance was increased to £1,000 as recently as November 2022, following changes made under the Coronavirus (Recovery and Reform) (Scotland) Act 2022. That was a significant increase of roughly 52 per cent from the figure that applied before then. That increase was made very much from the viewpoint of wanting to protect universal credit payments, and we need to consider the interaction of all the various protections.

The 2022 act also gives ministers powers to further vary the figures by regulations under the negative procedure. I believe that that power, which was approved just two years ago, is the appropriate method for dealing with this issue, rather than the automatic changes through affirmative procedure that are required under amendment 26.

As was mentioned by the Society of Messengers-at-Arms and Sheriff Officers at an evidence-taking session, no statistical evidence is available that confirms whether the current figure is correct and what impacts it has had. That highlights the need for more detailed and longer-term investigations and consultation with stakeholders to establish what, if any, changes would be required under existing powers. That said, I agree entirely that the protected minimum balance will need regular updating. As I have outlined, we already have the means to do that and, indeed, have been able to do it previously.

For all those reasons, I ask the members not to press amendment 12 and not to move amendments 25 and 26. If the amendments are pressed or moved, I ask the committee not to support them.

Good morning. I put on record my thanks to members for the proposed amendments 18, 19, 16, 17, 20 and 21, which are in relation to section 1 of the bill.

As has been outlined, the bill currently provides an enabling power for Scottish ministers to implement a mental health moratorium by regulations. There is sound reasoning for having the detail of the moratorium process in regulations. As has been acknowledged by the committee and others, the mental health landscape is multifaceted and the treatment for those who have mental health issues is ever evolving. As a result, achieving a balance between protecting vulnerable individuals who have mental health issues and the rights of their creditors is a complex task.

Understandably, stakeholders expect a review of the moratorium to be undertaken after a reasonable period of time has lapsed since its introduction. Such a review might identify improvements to the moratorium process, such as further widening the eligibility criteria. Amendments 16 to 19 would alter that approach by requiring specific provisions to be included in the bill, as well as requiring specific provisions to be included or specifically prohibited from inclusion in the regulations.

Having specific provisions in the bill, as with amendments 18 and 19, would mean that any improvements that are identified from a review would require to be made through future primary legislation. That would take longer to implement than if changes are made through secondary legislation, and I wish to avoid any unnecessary delays in making improvements to the system. For that reason, the expert working group and stakeholders agree that having the details in secondary legislation is the most reasonable approach to take. It is also the reason that the details of the mental health crisis breathing space scheme in England and Wales are contained in secondary legislation.

Although I understand the desire to have aspects of the mental health moratorium prescribed in the bill, the provisions in amendment 18 have not been consulted on and their unintended consequences would need to be considered. That is where I would agree with the principle of amendment 20, which is that we get the process correct through consultation.

Section 1(2)(e) of the bill provides that the regulations that establish a moratorium may include provisions about

“the actions creditors must, may or may not take during the moratorium”

and

“the consequences (if any) for creditors of taking or failing to take such actions”.

I believe that that is the correct approach, rather than requiring sanctions to be stipulated in the regulations, as stated in amendment 16.

I am mindful that many creditors that will be impacted by a mental health moratorium have regulatory bodies that can impose sanctions, such as fines. It might be best to use the consequences that have already been established rather than convoluting those with consequences that we propose. That was the approach that was proposed in the consultation, which received 77 per cent support from respondents. It is also the approach that has been taken in England and Wales, and the expert working group recommended mirroring that approach.

As I have said before, a review of the mental health moratorium might conclude that such an approach is not sufficient and, if so, regulations can be amended accordingly. Therefore, it is better to have a flexible approach to the bill when requiring sanctions to be stipulated in regulations. Section 1(2)(g) of the bill includes provisions to the effect that the regulations establishing the moratorium may make

“arrangements for the recording of, and access to, information that the moratorium is applying in relation to an individual”.

There is no provision restricting what approach should be taken with respect to accessing that information.

I understand and fully sympathise with the concerns that have been raised about a public register for the mental health moratorium and the potential to stigmatise the individual. I have not committed to having a public register. I am listening to the various concerns that have been raised and am determined to achieve the right balance. I am sure that the committee will understand that I must also consider the rights of creditors. I want to ensure that, where possible, potential future lenders are aware that someone is in a mental health moratorium prior to lending, as is the case under the existing standard moratorium. That would be of benefit not only to the creditor but to the individual, who could be borrowing beyond their means and further exacerbating their difficulty.

Yes, I am happy to confirm that we are considering the system that is provided for in the regulations in England, which is why I accept that a fully public register might not be the answer. However, it would be better for the bill not to restrict the options that are available for the recording of, and access to, information relating to a mental health moratorium, so that we avoid any unintended consequences of restricting what we can do in the regulations that would be consistent with addressing the concerns that the committee has expressed.

My point on Colin Smyth’s amendment 17 is that there is a risk of unintended consequences around the drafting of the amendment and the specific language that is used. There is concern that the amendment might unintentionally—I know that this would not be your intention, Mr Smyth—preclude the possibility of a register that is comparable to what is used in the equivalent scheme in England. It is not that I lack sympathy with the policy intent; the point is that we can address those issues in the regulations. However, I am happy to give further consideration to the points that you raise. Later in my remarks, I will come to what I think is a way forward for this and the other issues that are raised in your amendments.

With respect to amendment 20, the Scottish Government has consulted fully with the appropriate stakeholders, such as debt advice agencies, throughout the process of developing the bill and the regulations, and we will continue to do so. I have committed to providing the committee with a draft copy of the mental health moratorium regulations prior to stage 3, so members will have an opportunity to propose amendments if they believe that that remains necessary. Those regulations will be subject to wider public consultation.

That brings me to amendment 21. I am open to considering what enhanced processes we can put in place beyond our commitment to share draft regulations ahead of stage 3. However, I am concerned that the process that is outlined in amendment 21 could be overly onerous and lead to unnecessary delays in the introduction of the mental health moratorium. I ask Daniel Johnson not to move his amendment, but I would be happy to discuss the issue further with him, and any other members who might be interested, in advance of stage 3.

I ask Paul O’Kane not to press amendment 18 and not to move amendment 19, and I ask Colin Smyth and Daniel Johnson not to move amendments 16, 17, 20 and 21. Were they to do so, I ask the committee not to support the amendments.

The central concern that has been expressed is about the level of engagement that the Parliament will have with regard to the regulations, and I accept that that is a fair and legitimate concern. I suggest that the way that we could address it is to discuss, ahead of stage 3, what would be a satisfactory process for parliamentary engagement on the regulations, with regard to both the immediate priority of being able to introduce the regulations and have the scheme operational, and the need for clarity around what the process will be for the Parliament’s involvement in reviewing the regulations at an appropriate point.

Mr Johnson makes some fair and reasonable points. I am not opposed to the principle of exploring how we can develop a form of super-affirmative procedure that would address the committee’s concerns, while at the same time retaining the flexibility that comes through regulations.

I fully sympathise with and appreciate the points that have been raised about wanting detail in the bill, but the simple concern that I have in the circumstances is that, where we identify improvements, we would not be able to implement them, because that would require primary legislation.