Section 1 — Debt arrangement scheme

Debt Arrangement and Attachment (Scotland) Bill: Stage 3 – in the Scottish Parliament at 2:44 pm on 13th November 2002.

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Photo of Tommy Sheridan Tommy Sheridan SSP 2:45 pm, 13th November 2002

The problem with the discussion at stage 2 was that the minister was in automatic mode for most of it. He kept saying that every reasonable amendment was premature because the Executive was awaiting the outcome of its consultation on civil obligations in Scotland. At the 16 th meeting in 2002 of the Social Justice Committee, the minister said:

"Having proper regard to the consultation responses will enable us to take all interests into account in a balanced and measured way to ensure that workable, practical and user-friendly arrangements can be put in place."—[Official Report, Social Justice Committee, 2 October 2002; c 3072.]

Amendment 24 fits like a hand into a glove in relation to the consultation document to which the minister referred, because analysis of the consultation on the enforcement of civil obligations in Scotland is now available. Of the 44 responses to the consultation, 42 support the position that amendment 24 would include in the bill. Therefore, given that amendment 24 would guarantee that under no circumstances would debtors accessing the debt arrangement scheme have to pay any expenses or costs, I hope that the minister will say that he supports amendment 24, because it is completely in line with the consultation that he consistently referred to at stage 2.

Members will note that section 7 of the bill allows ministers to make regulations about fees and expenses for debt applications and variations. However, if it is agreed in principle that a debtor should not incur more expense by trying to access a debt arrangement scheme, surely that should be included in the bill. What is wrong with writing that into the bill? Amendment 24 would ensure that no debtor would be discriminated against or suffer by trying to access a debt arrangement scheme.

I hope that the minister will be consistent at least, given that the consultation to which he referred consistently during stage 2 is now available and shows clearly that what amendment 24 seeks to do is what the consultation requires us to do. Forty-two of the 44 consultees said that no debtor should incur extra expense by trying to access the debt arrangement scheme. I would hope that the minister will agree to amendment 24.

I move amendment 24.

Photo of Richard Simpson Richard Simpson Labour

As Mr Sheridan said, amendment 24, which reflects the amendment 66 that he moved at stage 2, would provide in the bill a requirement that a debt arrangement scheme would be cost free to debtors. The Executive confirmed at stage 2 that that was a matter of detail best dealt with in regulations, taking account of, as Mr Sheridan said, the views of respondents to the Executive's consultation.

The consultation specifically sought views on how the debt arrangement scheme should be funded. The independent analysis of responses, to which I will refer in connection with amendments that we will debate, was published on 8 November 2002. All members have been provided with a copy of the analysis report. Unfortunately, the report was not available to the Executive or the Social Justice Committee during stage 2, because of the compressed process for the bill. That, in turn, was due to the time restrictions arising as a result of the Abolition of Poindings and Warrant Sales Act 2001. Anyway, that is the situation in which we find ourselves.

The Executive sought views in the consultation on how the debt arrangement scheme should be funded, and the analysis reveals a variety of suggestions for funding the scheme. I do not propose to go into the different options today. The suggestion that there was an absolutely clear consensus is not valid. The Executive will give full consideration to the views that were expressed in the consultation when framing the regulations, which Parliament will be able to debate fully in due course.

As members will know, the Executive gave a commitment at stage 2 to lodge an amendment at stage 3 to change the procedure for scrutiny of the regulations on the debt arrangement scheme from negative to affirmative resolution procedure. I would like to apologise for the late lodging of Executive amendments 91 and 92, which are manuscript amendments. That was due to an oversight. Amendments 91 and 92 deal with the proposal to make the regulations on the debt arrangement scheme subject to affirmative resolution and allow the Parliament to debate fully the terms of any debt charge payment scheme that we introduce. We believe, however, that amendment 24 should be rejected.

Photo of Murray Tosh Murray Tosh Conservative

Mr Sheridan, do you wish to sum up?

Photo of Tommy Sheridan Tommy Sheridan SSP

Briefly, Presiding Officer. I hope that the minister will be prepared either to agree or disagree with the fact that, in the consultation that he refers to, 42 of the 44 consultees said that money advice services in the preparation of a debt arrangement scheme application should be free. Does the minister agree with that fact?

Photo of Murray Tosh Murray Tosh Conservative

The minister has no right of response at this point. You are concluding the debate on the amendment.

Photo of Tommy Sheridan Tommy Sheridan SSP

I am prepared to accept an intervention, but the minister's sedentary position says it all. During stage 2, the minister told us to wait for the consultation. We waited for the consultation, but now he is telling us that he will reject what was said in that consultation

Photo of Richard Simpson Richard Simpson Labour

The free text in the analysis shows that a substantial number of differing views were given and the Executive believes that it would be proper for us to take those views into account in framing regulations, which might or might not emerge in the way that Mr Sheridan suggests. This matter should be dealt with in the regulations, which the Scottish Parliament will have an opportunity to debate.

Photo of Tommy Sheridan Tommy Sheridan SSP

There lies the difference: the minister thinks that matters should be dealt with in regulations, whereas other members think that they should be dealt with in the bill so that everybody can understand the position when the bill becomes an act instead of having a situation in which a great deal of power is vested in the Executive.

I urge the Parliament to support amendment 24 on the basis that any debtor who wishes to access a debt arrangement scheme should not incur more expense. If everyone agrees with that, we should include it in the bill rather than leaving it to the discretion of the ministers.

Photo of Murray Tosh Murray Tosh Conservative

The question is, that amendment 24 be agreed to. Are we agreed?

Members:

No.

Division number 2

For: Adam, Brian, Campbell, Colin, Canavan, Dennis, Crawford, Bruce, Ewing, Dr Winnie, Ewing, Mrs Margaret, Gibson, Mr Kenneth, Grahame, Christine, Hamilton, Mr Duncan, Harper, Robin, Hyslop, Fiona, Ingram, Mr Adam, Lochhead, Richard, MacAskill, Mr Kenny, MacDonald, Ms Margo, Marwick, Tricia, McGugan, Irene, McLeod, Fiona, Morgan, Alasdair, Neil, Alex, Paterson, Mr Gil, Quinan, Mr Lloyd, Reid, Mr George, Robison, Shona, Russell, Michael, Sheridan, Tommy, Sturgeon, Nicola, Swinney, Mr John, Welsh, Mr Andrew, White, Ms Sandra, Wilson, Andrew
Against: Aitken, Bill, Alexander, Ms Wendy, Baillie, Jackie, Barrie, Scott, Boyack, Sarah, Brankin, Rhona, Brown, Robert, Butler, Bill, Chisholm, Malcolm, Craigie, Cathie, Curran, Ms Margaret, Douglas-Hamilton, Lord James, Eadie, Helen, Ferguson, Patricia, Fergusson, Alex, Fitzpatrick, Brian, Fraser, Murdo, Gallie, Phil, Gillon, Karen, Godman, Trish, Goldie, Miss Annabel, Gorrie, Donald, Grant, Rhoda, Gray, Iain, Harding, Mr Keith, Henry, Hugh, Home Robertson, Mr John, Hughes, Janis, Jackson, Gordon, Jamieson, Cathy, Jamieson, Margaret, Jenkins, Ian, Johnstone, Alex, Kerr, Mr Andy, Lamont, Johann, Livingstone, Marilyn, Lyon, George, Macdonald, Lewis, Macintosh, Mr Kenneth, MacKay, Angus, Maclean, Kate, Macmillan, Maureen, Martin, Paul, McAllion, Mr John, McAveety, Mr Frank, McCabe, Mr Tom, McConnell, Mr Jack, McIntosh, Mrs Lyndsay, McLetchie, David, McMahon, Mr Michael, McNeil, Mr Duncan, McNeill, Pauline, McNulty, Des, Morrison, Mr Alasdair, Muldoon, Bristow, Mulligan, Mrs Mary, Mundell, David, Munro, John Farquhar, Murray, Dr Elaine, Oldfather, Irene, Peacock, Peter, Peattie, Cathy, Radcliffe, Nora, Raffan, Mr Keith, Robson, Euan, Rumbles, Mr Mike, Scanlon, Mary, Scott, John, Scott, Tavish, Simpson, Dr Richard, Smith, Iain, Smith, Mrs Margaret, Stone, Mr Jamie, Thomson, Elaine, Wallace, Mr Jim, Watson, Mike, Whitefield, Karen, Wilson, Allan, Young, John

Photo of Murray Tosh Murray Tosh Conservative

The result of the division is: For 31, Against 79, Abstentions 0.

Amendment 24 disagreed to.

Photo of Murray Tosh Murray Tosh Conservative

Amendment 25 is grouped with amendments 26 and 28.

Photo of Lyndsay McIntosh Lyndsay McIntosh Conservative

We can agree on the principle that debtors who agree to pay their debts in a managed way should be protected from enforcement by their creditors, but there are some uncertainties about how the legislation will work in practice. The explanatory notes and policy memorandum suggest that the debt arrangement scheme is intended only for those who can pay their debts in full, albeit over time.

However, that intention has not been made explicit in the bill. Payment in full over a reasonable period is central to the credibility of the debt arrangement scheme and to its viability for Scotland's credit markets. Without that safeguard, the debt arrangement scheme is at risk of being abused and could lead, ultimately, to the contraction of credit supply—something that we all wish to avoid. The bill should state explicitly, therefore, that full repayment over a reasonable period is an integral part of the system.

Uncertainty regarding the full payment of debts through the DAS will impact on creditor behaviour. If the operation of the DAS appears to increase the incidence of non-payment among certain types of borrowers, creditors will respond by contracting supply. In the parliamentary debate on 19 September, the Minister for Social Justice said:

"We cannot create a debt enforcement system that can be avoided and exploited."

In the same debate, the Deputy Minister for Justice said:

"We must have a system that protects the poorest in our society".—[Official Report, 19 September 2002; c 13888 and 13947.]

However, we must have a system that ensures that those people who can pay, do so.

The DAS must contain the quid pro quo that debtors will not be pursued by creditors because they have made a commitment to repay their debts in full under a debt payment programme. Existing voluntary debt repayment schemes—the minister mentioned some of those schemes at an earlier point—enjoy creditor support because they enshrine the principle of assisted repayment in full. In the debate on 19 September, the deputy minister also acknowledged the effectiveness of debt repayment schemes run by the Consumer Credit Counselling Service. Therefore, the principle of repayment in full should be enshrined in the primary legislation from the outset. Otherwise, creditor participation and confidence will risk being undermined by possible changes to the secondary regulations further down the line.

My series of amendments is designed to address an area of ambiguity in the bill. As drafted, section 2 appears to allow the debtor to determine which creditors are to be paid under the debt payment programme. Some creditors could be preferred over others in an arbitrary way and others could be left out altogether. Both scenarios are inequitable. It should not be for the debtor to pick and choose between creditors; the interests of all creditors must be taken into account. Any blanket prohibition or enforcement would be unfair. The bill should require the debtor to include all creditors in the debt payment programme and to give reasons for any proposed differential treatment. The importance of certainty for creditors was recognised on 2 October, when the deputy minister stated:

"We believe that there is a danger in permitting the debtor to be vague about his debts and about his creditors, particularly as participation in the scheme prevents creditors from exercising their rights to enforce."—[Official Report, Social Justice Committee, 2 October 2002; c 3080.]

I look forward to hearing the deputy minister's observations.

I move amendment 25.

Photo of Robert Brown Robert Brown Liberal Democrat

As this is the first time I have spoken in the debate, I declare that I am a member of the Law Society of Scotland and a consultant to Ross Harper solicitors in Glasgow and, for the avoidance of doubt, I declare my former chairmanship of the Rutherglen and Cambuslang citizens advice bureau.

I speak against amendment 25. Lyndsay McIntosh talked about the normal position of people requiring to pay their debts, which is correct, but we are not talking about the normal situation—we are talking about a situation where the arrangements for payment have broken down. We are trying to deal with the question of the enforceability of those arrangements under circumstances where they can be enforced and where they cannot. I will deal with this subject in my later amendment on the composition of debt and freezing of interest, but if the sort of arrangement to which Lyndsay McIntosh referred is to work satisfactorily, there must be an element of realism about it, which did not come through in her speech.

Many debts can be repaid over a year, 18 months or two years, but there have been numerous examples at stage 1 and in other contributions to the debate, of situations where debtors' ability to repay their debts is such that it could take 27 years, 54 years or 128 years. We have to be realistic and not rule out the possibility of voluntary composition of debts. We should be examining seriously the possibility—in limited circumstances—of applying for a composition arrangement. I accept that that will be covered later on. What we should certainly not do is to rule out—as Lindsay McIntosh seeks to do—alternative arrangements by introducing a technical, unrealistic requirement for debtors in the debt arrangement scheme to repay their debts in full, under all circumstances.

This is not about applications being made by the debtor alone. The debtor has to have had access to, or have benefited from the involvement of, a money adviser. That is intrinsic to the scheme. The applications have to be approved in due course under the procedures that the bill sets out. It is not simply a matter of the debtor making an application and of everybody falling in with the arrangements and that being the end of the story. A whole lot of safeguards would be required before the arrangements could be put in place.

Against that background, Parliament would be ill-advised to agree to the amendments in Lyndsay McIntosh's name.

Photo of Richard Simpson Richard Simpson Labour 3:00 pm, 13th November 2002

Amendments 25 and 26 would make it a condition of participation in a debt payment programme that all debts will be paid in full. That may appear a laudable aim, but we have reservations about the unconditional terms of the amendments.

We have discussed the issue before in connection with the possibilities of composition and the freezing of interest, to which Robert Brown alluded, and on which an amendment is coming up later—I will not pre-empt that discussion now. Suffice it to say that the amendments in this group would actually prevent creditors who are prepared to accept less than the total that is due to them from being able to accept it under a debt payment programme. They could, of course, accept it separately, on a voluntary basis, but it would be difficult for the scheme to recognise and incorporate that. Creditors will generally be asked to consent to the debtor's application to participate in a programme. Any creditor who is not satisfied with the proposed arrangements for repayment of a debt, whether in whole or in part, will not give that consent.

Amendment 28 requires an applicant to attest that all creditors are included in the application, and, if they are not, to state why not. That is a matter of detail for the regulations, and there is power to cover that under paragraphs (a) and (b) of section 7(1).

The Executive's consultation asked for views on whether the penalty for making a false declaration should be revocation. Respondents recognised that there may be instances where debtors genuinely are not conscious of the full level of their indebtedness and that, in those instances, there should be some discretion. Most respondents agreed that, where the declaration has deliberately been falsified, the penalty should be revocation. When drawing up the regulations, the Executive will be taking those views into account, as well as our similar discussion on this topic at stage 2, in relation to variation of the debt payment programme.

Amendments 25, 26 and 28 should, therefore, be withdrawn or rejected.

Photo of Lyndsay McIntosh Lyndsay McIntosh Conservative

I have listened carefully to what the minister has said today, and I carefully went over the minister's previous remarks to try to find something that would accommodate our point of view. He said that the debt arrangement scheme should be framed in such a way as to

"avoid unintended consequences for the Scots law of contract and property".—[Official Report, Social Justice Committee, 2 October 2002; c 3094.]

Specific reference was made to "serious concerns" that, if a DAS resulted in an infringement of creditors' rights to property, that might contravene article 1 of protocol 1 of the European convention on human rights.

The Executive's consultation document "Enforcement of Civil Obligations in Scotland" also refers to the requirement for the debt arrangement scheme to be compatible with the ECHR in regard not only to

"the rights of the person against whom enforcement activity is taken" but also to

"the rights of the person who needs to seek recourse to enforcement action."

Photo of Murray Tosh Murray Tosh Conservative

The question is, that amendment 25 be agreed to. Are we all agreed?

Members:

No.

Division number 3

For: Aitken, Bill, Douglas-Hamilton, Lord James, Fergusson, Alex, Fraser, Murdo, Gallie, Phil, Goldie, Miss Annabel, Harding, Mr Keith, Johnstone, Alex, McIntosh, Mrs Lyndsay, McLetchie, David, Monteith, Mr Brian, Mundell, David, Scanlon, Mary, Scott, John, Smith, Iain, Young, John
Against: Adam, Brian, Alexander, Ms Wendy, Baillie, Jackie, Barrie, Scott, Boyack, Sarah, Brankin, Rhona, Brown, Robert, Butler, Bill, Campbell, Colin, Canavan, Dennis, Chisholm, Malcolm, Craigie, Cathie, Crawford, Bruce, Curran, Ms Margaret, Deacon, Susan, Eadie, Helen, Ewing, Dr Winnie, Ewing, Mrs Margaret, Ferguson, Patricia, Fitzpatrick, Brian, Gibson, Mr Kenneth, Gillon, Karen, Godman, Trish, Gorrie, Donald, Grahame, Christine, Grant, Rhoda, Gray, Iain, Hamilton, Mr Duncan, Harper, Robin, Henry, Hugh, Home Robertson, Mr John, Hughes, Janis, Hyslop, Fiona, Ingram, Mr Adam, Jackson, Gordon, Jamieson, Cathy, Jamieson, Margaret, Jenkins, Ian, Kerr, Mr Andy, Lamont, Johann, Livingstone, Marilyn, Lochhead, Richard, Lyon, George, MacAskill, Mr Kenny, Macdonald, Lewis, MacDonald, Ms Margo, Macintosh, Mr Kenneth, MacKay, Angus, Maclean, Kate, Macmillan, Maureen, Martin, Paul, Marwick, Tricia, McAllion, Mr John, McAveety, Mr Frank, McCabe, Mr Tom, McGugan, Irene, McLeod, Fiona, McMahon, Mr Michael, McNeil, Mr Duncan, McNeill, Pauline, McNulty, Des, Morgan, Alasdair, Morrison, Mr Alasdair, Muldoon, Bristow, Mulligan, Mrs Mary, Munro, John Farquhar, Murray, Dr Elaine, Neil, Alex, Oldfather, Irene, Paterson, Mr Gil, Peacock, Peter, Peattie, Cathy, Quinan, Mr Lloyd, Radcliffe, Nora, Raffan, Mr Keith, Robison, Shona, Robson, Euan, Rumbles, Mr Mike, Russell, Michael, Scott, Tavish, Sheridan, Tommy, Simpson, Dr Richard, Smith, Mrs Margaret, Stephen, Nicol, Stone, Mr Jamie, Sturgeon, Nicola, Swinney, Mr John, Thomson, Elaine, Wallace, Mr Jim, Watson, Mike, Welsh, Mr Andrew, White, Ms Sandra, Whitefield, Karen, Wilson, Allan, Wilson, Andrew

Photo of Murray Tosh Murray Tosh Conservative

The result of the division is: For 16, Against 95, Abstentions 0.

Amendment 25 disagreed to.