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Part of the debate – in the Scottish Parliament at 9:31 am on 8th June 2000.

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Photo of Jim Wallace Jim Wallace Liberal Democrat 9:31 am, 8th June 2000

I am glad to have this opportunity to bring members up to date with the Executive's plans for the law of diligence.

Diligence is the Scots law term for the procedures that enable court orders in civil matters to be enforced, usually for the payment of money. A number of different diligence procedures are available to enforce payment. Poinding and warrant sale is only one type among many. Different measures exist for use against different types of property, such as heritable property—all types of land and buildings—and movable property, including income, money held in different forms and all sorts of goods and assets.

The fundamental tenet that underpins the system of diligence in Scotland—indeed it underpins our society—is that people have responsibilities as well as rights. We come together in civil society on the basis that we honour our responsibilities and expect others to do the same. That expectation and belief is at the heart of every transaction, whether it be between individuals, between individuals and enterprises, or between people or organisations and the state. The payment of debts is one such responsibility. Unfortunately, some people simply refuse to pay their debts until they are forced, even though they are able to do so. In those circumstances, the legal system must have a mechanism that people can use to enforce payment that is due to them. Those who pay their debts should not have to subsidise those who choose not to.

The system must be able to ensure that those who attempt to avoid meeting their liabilities cannot do so. There should be no loopholes for the cheats who can, but do not, pay to sneak through. The system needs to strike a fair balance between effective enforcement and protection of the vulnerable. It must support hard-working families who pay their taxes against those who decide not to bother. It must also free from oppression those who are genuinely unable to pay. To do that the diligence system must be comprehensive—no form of property can be exempted from it. Such an exemption would be exploited by the small number of people who seek any opportunity not to pay.

I will explain the Executive's plans for the law of diligence. I have said on previous occasions that it is essential to consider the law of diligence as a whole because there are many facets to the system, all of which are complementary and interlink to form a complete whole. Improvements to any one part must be considered in light of the impact that they will have on the remainder. A complete set of measures covering all types of property must be available so that all types of creditor, including individuals, local authorities and businesses, can recover all types of debt, and so that reluctant debtors cannot take advantage of gaps or loopholes.

The Executive has planned a review of the law of diligence as a whole for some time and I confirmed to members on 4 May that arrangements for such a review were under way. The review is thorough, wide ranging and, perhaps most important, coherent. All aspects of the diligence system are included. The reform of one part is being assessed to ensure that there are no unintended negative consequences on any other part. Above all, debtor protection and effective enforcement are being carefully balanced.

I will mention some areas of the review in particular. Members will be aware of the research study that was commissioned by the Scottish Office on the operation of the diligence procedures that were introduced by the Debtors (Scotland) Act 1987. That act effected widespread reform of the existing system and introduced new procedures for earnings arrestments and time-to-pay orders and directions.

The research study into the operation of the act was a substantial work of eight reports, which were published in April 1999. Among the conclusions reached by the study was the view that certain new procedures introduced by the 1987 act are not operating properly, particularly in the case of procedures designed to assist those who have difficulty paying their debts or who have multiple debts. We are examining those procedures and will introduce appropriate reforms.

Published Scottish Law Commission reports relating to diligence remain unimplemented, including its "Report on Diligence on the Dependence and Admiralty Arrestments". I expect to receive two further reports from the commission—on diligence against land and on attachment orders and money orders. Those areas are being examined and appropriate reform will be introduced.

Furthermore, the review covers areas of the diligence system that the Executive has identified as requiring further investigation, some of which flow from concerns raised by organisations or individuals. Let me be clear that representations are welcome from anyone with concerns. In any event, the review will involve wide consultation to take into account all interests.

Some of the issues that the review is considering cut across the whole of the diligence system and affect various different types of diligence. For example, the review is considering the arrangements that can best assist both debtors and creditors in managing the very real problem of multiple debt, whether by a debt arrangement scheme or otherwise. Issues identified in the research include debtors' reluctance to use existing protections and the need to improve information and advice to debtors to that end. Another important issue is access to information to enable creditors properly to target the most appropriate form of diligence that should be used in particular circumstances.

We must give careful consideration to these very real and problematic areas, to achieve a solution that genuinely makes a difference. Those key issues are fundamentally important to how the diligence system operates and of course they will be included in the review of the law of diligence. We are considering all aspects of the diligence system and we intend to produce a coherent, systematic and comprehensive package of reform. Legislation to implement the reforms identified by the review will be introduced within the lifetime of this Parliament. That legislation will give us a modern system of diligence in Scotland—not one that is rooted in past centuries.

As members are well aware, legislation is already passing through Parliament for the abolition of poinding and warrant sales. Members will recall that the Justice and Home Affairs Committee recognised that that legislation would have to be coupled with an alternative, humane replacement diligence against movable property, which would have to be formulated before the Abolition of Poindings and Warrant Sales Bill is brought into force. The committee recommended a delay between the passing of the bill and its coming into force. The serious consequences that would follow from a failure to do so are abundantly clear, and I am sure that we would not want to create the loophole that would result.

Therefore, the Executive has undertaken to resolve that problem. On 27 April, I said that the Executive would meet the committee's challenge to find a workable and humane alternative and that it would set up a cross-party parliamentary working group to identify the essential elements of an alternative to poinding and sale. I am able to inform members that I have issued invitations to those people whom I would like to join the group, which will be chaired by the Deputy Minister for Justice, Angus MacKay. On the parliamentary side, they include the conveners of the Justice and Home Affairs Committee, the Local Government Committee and the Social Inclusion, Housing and Voluntary Sector Committee, Mr Tommy Sheridan, a representative from the Conservatives and a representative from my own party. Others invited, who can bring the perspectives of both creditor and debtor to the group, include Citizens Advice Scotland, the Scottish Consumer Council, Money Advice Scotland, the Institute of Credit Management, the Convention of Scottish Local Authorities, a business representative and an academic in the field of diligence.

The group will be faced with a challenging but extremely important task and will have to work to a tight time scale. I intend that the group should meet for the first time later this month and regularly after that. Following on from the work of the group, we will introduce legislation no later than the 2000-02 parliamentary year.

In the meantime, I am taking immediate steps, by way of secondary legislation, to extend the list of goods exempt from poinding, largely in line with the recommendations of the Scottish Law Commission in its recent publication, "Report on Poinding and Warrant Sale". New items to be added to the list include televisions, radios, microwave ovens, telephones and computers. I made a commitment in Parliament to put in place that reform before the summer and I confirm that I will lay the regulations before the Parliament next week.

The Executive's position on the proposal for an arrestment bill, which has recently been lodged by Mr Alex Neil, is that we recognise and are sympathetic to the concerns that led him to make that proposal. We are also sympathetic, in principle, to the idea of preserving within bank accounts arrested a basic sum, similar to the protection that already exists when earnings are arrested. We think that the idea is a good starting point for dealing with the problem, but it requires considerably more work to be done on it.

The Executive is willing to take up the idea and to develop it to ensure that those who have their accounts arrested are not left bereft of the wherewithal to live. As the review will consider all types of diligence, it will include a range of issues concerning non-earnings arrestments. We cannot support Alex Neil's bill because of its piecemeal approach. Nevertheless, the comprehensive, systematic and co-ordinated approach of which I have spoken and which my department is taking forward can take account of any impact on other types of diligence and avoid unintended negative consequences. That is better than piecemeal reform.

I welcome this opportunity to set out the Executive's intentions for the reform of the law of diligence. I hope that members will agree that this is a wide-ranging and challenging undertaking.