Low Income and Debt (Report)

– in the Scottish Parliament on 1st November 2022.

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Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

The next item of business is a debate on motion S6M-06374, in the name of Elena Whitham, on behalf of the Social Justice and Social Security Committee, on “

Robbing Peter to pay Paul: Low income and the debt trap”.

I ask those members who wish to speak in the debate to press their request-to-speak buttons. I call Elena Whitham to speak to and move the motion on behalf of the Social Justice and Social Security Committee. You have up to nine minutes, Ms Whitham.

Photo of Elena Whitham Elena Whitham Scottish National Party

As convener of the Social Justice and Social Security Committee, I am pleased to open the debate on the committee’s important report on low income and debt.

YouGov research that was commissioned by Citizens Advice Scotland found that more than 600,000 people have encountered new debt problems during the pandemic, either getting into debt for the first time or seeing existing debt get worse. With the cost crisis, it is likely that we will see that number grow exponentially.

As the costs of basics rise sharply and energy prices skyrocket, households across the country are limiting their use of essentials and suffering a significant decline in their mental and physical wellbeing. People are desperately worried about the future, and we, as a committee, share their concerns. Spiralling costs will push an increasing number of people into debt because they simply do not have enough money to pay for all basic outgoings and bills.

As a committee, we set out to explore the specific challenges that people with low incomes face in accessing support and finding solutions to their debt situation. We wanted to find out what their key challenges are and how we could help them. What more could be done?

Our starting point for the work was a focus group with people who are experiencing debt problems. We wanted their experience to be at the heart of the inquiry and to inform the scope of our work. Their testimony shaped the questions that we posed in our call for views and the committee’s subsequent evidence-taking sessions.

What a stark picture those people painted. Despite receiving advice on social security entitlement and other forms of income maximisation, many people on low incomes simply did not have enough money to meet essential living costs. They were stuck in an inevitable cycle of debt, operating with deficit budgets, and there was often no obvious way out. Bankruptcy might be a short-term solution for some, but many people rely on money advisers spending significant time trying to negotiate reduced payments with public sector creditors or access charitable support, with the sole aim of enabling their clients to have enough money to live.

Participants from our original focus group formed our panel of experts by experience. The panel made recommendations to the committee on how things could be improved, which fed directly into the committee’s report. For us, this was about empowering people not just to tell us their story but to be involved in shaping change. The report title, “Robbing Peter to pay Paul: Low income and the debt trap”, is taken from a comment from one of our experts by experience.

I thank everyone who gave evidence to the committee and I particularly thank our experts by experience, who diligently engaged with us throughout our work. That would not have been possible without the organisations that supported them—the committee extends its sincere thanks to them all.

During this inquiry we were told:

“Problem debt has a particular stigma and shame attached to it that leaves people feeling trapped, isolated, unable to sleep. Many of these worries are related to wider stigma around poverty.”

Our inquiry was far reaching, and our recommendations span a number of different Scottish Government portfolios as well as local government and United Kingdom Government responsibilities. We looked at the school meal debt that is owed to schools, council tax debt, the advice sector, the availability of information and support, early intervention and prevention, mental health, and statutory debt solutions such as bankruptcy. I hope that my colleagues will touch on a range of those areas today.

In my remaining time, I will focus on just two of the key areas that the committee explored: public sector debt and money advice.

When we think of debt, we often think of the debt that is owed to private businesses, such as credit card debt and loans. Increasingly, we might think of debt as a result of fuel costs. We might not think so quickly about the role that the public sector plays in debt in areas such as social housing, benefit deductions, council tax, care charges and school charges.

We were told that the debt that is owed to public bodies is increasing as people struggle to pay bills. Collection of such debt can be quicker and harsher than collection from private creditors. Failure to pay council tax can result in enforcement action. CAS highlighted that council tax debt is one of the biggest debts that bureaux see. Local authorities tend to favour bank arrestments as a way of enforcing payment, which means that money can be seized from people’s bank accounts.

Steps have been taken to bring greater consistency to local authority debt collection, but we heard that that effort is not always felt on the ground. We were concerned to hear that public sector processes are not always sensitive enough to individual circumstances. Our experts by experience stressed that compassion must be built into processes and services. We cannot have rigid, faceless services that assume that the debtor is always wrong—that makes the whole experience worse and increases anxiety.

We need a fundamental change in attitude from the front-line services that are dealing with people in debt. The public sector should aim to lead best practice, by handling debt in a fairer and more considerate way. Debt recovery should be done proportionately, based on individual circumstances. People should be treated with compassion.

We were concerned to hear that people are sometimes failed by clunky systems that are not connected or easy to use. People must take it on themselves to navigate complex systems to get the support to which they are entitled—often at a time when they have limited emotional and financial capacity to do that. The burden of responsibility falls too often on the individual. That theme often emerges in our committee work.

Before I turn to the role of the free money advice sector, I want to touch on school meals, which is another important area in which quick action could be taken. Free school meal provision should be increased and rolled out at pace, and school meal debt should be written off. That is already happening in some but not all councils. As I said during my debate on challenge poverty week, weans need to eat.

Last but by no means least, I turn to the advice sector and the people across Scotland who are working tirelessly to help people who are existing in truly desperate circumstances. Money advisers are doing a hugely difficult but important job in helping people to navigate their finances—and advisers might be suffering from their own financial and wellbeing challenges in the process. Debt advisers told us that they are firefighting and hanging on by their fingertips. They are burned out by demand for their services, the complexity of cases and the lack of available options to resolve people’s problems. Witnesses raised issues around awareness of advice services, stigma around seeking help, channel choice and digital exclusion, as well as funding concerns.

Christians Against Poverty shared with us an example of one of the many people whom it supports through its debt advice. The client is coming to the end of a minimal asset process bankruptcy and their sole income is social security benefits. They suffer from depression, anxiety and panic attacks. Once they have been discharged from bankruptcy, they will have £8.55 a week to live on for food and all household items. Living on a budget of £8.55 is not sustainable, and the very tragic reality is that that individual will fall back into problem debt.

Debt advisers highlighted that many low-income households are

“the most prudent money managers you will ever come across. They know where every penny goes and can account for every part of their income. The problem is that the income is simply not enough to cover the costs.”

We must continue to use all available avenues to tackle poverty and resulting debt issues, and we must take a person-centred approach.

I am proud of the committee’s inquiry and the work that it has undertaken to shine a light on the complex circumstances that lead people to become indebted and their struggle to find solutions to that debt. The systemic and interlinking challenges of tackling poverty were interwoven in that work. We made a wide range of recommendations that we think could make a real difference to people who are the most marginalised and overwhelmed by their debt—those whose incomes are so low that there can seem no feasible way to pay off debt and no way out of the debt trap.

I hope that the Scottish Government, the UK Government and local authorities recognise the compelling evidence received by the committee on these issues and work together to enact much-needed collective change.

On behalf of the Social Justice and Social Security Committee, I move,

That the Parliament notes the conclusions and recommendations contained in the Social Justice and Social Security Committee’s 8th Report, 2022 (Session 6):

Robbing Peter to pay Paul: Low income and the debt trap

(SP Paper 211).

I note that I did all of that while having a menopausal hot flush. Yes—go me! [



Photo of Liam McArthur Liam McArthur Liberal Democrat

Thank you and well done, Ms Whitham. I look forward to seeing you back at the members’ business debate later on.

Before we move to the next speaker, I encourage those who have not already done so to press their request-to-speak buttons as soon as possible. I call Gillian Martin to speak on behalf of the Health, Social Care and Sport Committee.

Photo of Gillian Martin Gillian Martin Scottish National Party

I thank the Social Justice and Social Security Committee for bringing the debate to the chamber.

Earlier this year, the Health, Social Care and Sport Committee completed its initial inquiry into health inequalities in Scotland. The rising cost of living inevitably impacted on our evidence.

Scotland has enduring health inequalities that are the result, in due part, of a number of historical factors that were outlined by several experts from whom we heard. We found that health inequalities increased across the population during the years leading up to the pandemic, then the pandemic exacerbated them. We heard that destitution rose during the pandemic. People from black and minority ethnic communities and disabled people were more likely to die, and caring responsibilities became almost insurmountable and caused mental health issues.

This is not a debate about health inequalities, but the inescapable fact is that poverty is the root cause of health inequality, and the rapid rise in the cost of living is set to worsen long-term health inequalities if action is not taken.

During our inquiry, we heard that the number of households in which spending exceeds incomes is rapidly increasing. We hear this phrase a lot, but the reality is that people are choosing between eating and heating, and that is impacting more and more families.

People with complex conditions or those who provide informal care have additional costs and often very little income. We heard that people with multiple sclerosis, for example, will face, on average, an additional £200 per week in bills. We also heard that some families have extensive medical equipment to power—many medical and mobility devices require charging or constant electricity to function. Members will be aware of recent coverage of a family facing an expected £17,000 energy bill to keep their daughter, who has cerebral palsy, warm and alive. The rest of the family will freeze to ensure that she can have heat in her room. Many people with disabilities or reduced mobility must have their heating at higher levels to stay warm or to prevent them from becoming seriously ill.

During our inquiry, people told us that they have had to stop social and recreational activities due to the increased costs. We and our predecessor committees have advocated for the importance of physical activity, social interaction and participation in social and cultural activities as ways to prevent ill health. If people are unable to afford to do those activities, physical and mental health suffers and social isolation increases. We heard of people being unable to attend health and social care services and stopping self-management because of financial hardship. We heard of pensioners being pushed into extreme fuel poverty and that, as a result of the cost of living crisis, and despite all the interventions that have been made by the Scottish Government, child poverty is on the rise.

The poorest and most vulnerable people in society are bearing the brunt of the crisis, and things could get significantly worse for a lot of households. Professor Sir Michael Marmot told us that inflation has a much bigger impact on households with low incomes than it does on households with higher incomes. That seems self evident. This is not just an exercise in philosophy—inflation is making a real difference and pushing people who live on the margins of their income into poverty, thus widening health inequalities. That was laid bare to the committee. We were told that people in the poorest communities are, quite literally, dying because of inequalities, poverty and the repeated challenges that they are facing. Professor Gerry McCartney told us plainly that

“rising mortality for our poorest communities will get worse, and ... get worse faster, if those challenges are not addressed properly.”—[

Official Report, Health, Social Care and Sport Committee

, 24 May 2022; c 24.]

We are left in no doubt that the cost of living crisis is an urgent public health and social justice emergency. As a committee, we have recommended targeted action to address health inequalities, including tackling underlying inequality and poverty, the root causes, at all levels: local government, Scottish Government and UK Government. Action is needed at all levels, and it is needed now, or we will be seeing widening health inequalities for generations to come.

The Deputy Presiding Officer:

I call Siobhian Brown to speak on behalf of the COVID-19 Recovery Committee.

Photo of Siobhian Brown Siobhian Brown Scottish National Party

As convener of the COVID-19 Recovery Committee, it is my pleasure to speak about such an important topic, and I commend the Social Justice and Social Security Committee for bringing the debate to the chamber.

I will shortly talk about some of the COVID-19 Recovery Committee’s work within the context of the cost crisis. First, though, it is important to stress that the impact of the cost crisis is a cross-cutting issue that affects everyone. This debate is an excellent opportunity to highlight parliamentary committees’ welcome scrutiny of the issue.

Like other committees, we have just completed our pre-budget scrutiny. Last week, we wrote to the Deputy First Minister with our recommendations, which included calling on the Scottish Government to clarify whether the cost crisis will affect the funding of the Covid recovery strategy. As members are aware, the strategy was published in October 2021, well before the scale of the cost crisis was apparent. During evidence, we heard how the impact of the cost crisis could affect the funding and delivery of the strategy, with stark warnings that it will pose significant challenges for organisations, service providers and individuals that are even greater than those faced during the pandemic. The Scottish Government’s budget is worth roughly £1.7 billion less than it was last December, and we asked whether the Government intends to refresh the strategy to reflect any policy changes in the light of the cost crisis.

In a similar vein, at a recent Conveners Group meeting, I asked the First Minister whether the Government’s priorities for recovery had changed in the light of the cost crisis. She confirmed that its aims and objectives for recovery had not changed but that the context had. The First Minister spoke of the importance of focusing on inequalities made worse by the pandemic and the cost crisis, particularly for ethnic minorities and those who are less well off.

Among many other things, the report considered bankruptcy and digital exclusion, both of which have been impacted by the cost crisis. The COVID-19 Recovery Committee also considered those areas as part of our scrutiny of the Coronavirus (Recovery and Reform) (Scotland) Bill. Put simply, the bill was introduced to make permanent some provisions that were introduced through emergency Covid legislation in relation to public health and public service reform, which covered the remote delivery of public services. The aim was to retain service improvements that had been brought in during the pandemic and support resilience against future public health threats.

We heard about the experience of delivering public services remotely, including increased flexibilities and resource savings. However, witnesses highlighted some of the barriers to accessibility that exist for some users. The committee recommended that the bill be amended to ensure that all local authorities provide a choice of remote or in-person services, including the provision of hard copy documents where required.

We also considered the bill’s provisions on bankruptcy. Before I go on, it is worth explaining that people can only be forced into bankruptcy by their creditors if they owe more than a certain amount of money. Covid emergency legislation increased the debt threshold at which a creditor could make someone bankrupt, to protect people from harsh outcomes during the pandemic, and the bill set it permanently at a higher rate. The committee heard mixed views on what the debt threshold level should be, and it noted that the cost crisis had escalated considerably since the bill was introduced. The Government subsequently acknowledged the need to keep the threshold under review, particularly in the light of the current economic situation.

I turn to the committee’s future work. We are about to look at the impact of Covid on the labour market, focusing specifically on the proportion of economically inactive people who are on long-term sickness absence, as well as those who have chosen early retirement.? I am sure that issues relating to the cost crisis are bound to come up over the course of our inquiry.

As has been the case with Covid itself, this issue is a complex one that will not go away any time soon. As other members have said, addressing it will require actions from both the UK and Scottish Governments. Today’s debate highlights the strong parliamentary scrutiny that is being carried out to ensure that we can respond appropriately to the fiscal pressures that we all face.

The Deputy Presiding Officer:

I advise members that we have a little time in hand, so, for the foreseeable future, members who take interventions will get their time back.

Photo of Shona Robison Shona Robison Scottish National Party

I am grateful to Elena Whitham and her committee for their substantial work on this inquiry. I thank the individuals and organisations who took the time to give evidence on the issues that are affecting people and on how Governments can target their efforts to help those who are most in need. I also thank Gillian Martin and Siobhian Brown for their contributions on behalf of their committees.

The continuing negative impact of Brexit and the current cost of living crisis have pushed households into hardship, and I am acutely aware of that. Those pressures have been made worse by the economic mayhem that the UK Government has caused over the past few weeks. All of that has exacerbated existing inequalities and financial stress since the committee published its report and the Scottish Government provided our response on the actions that we are taking and our plans for the future.

The committee’s recommendations raised a number of issues that span a wide range of policy areas and local, Scottish and UK Government responsibilities. Within our limited powers and finite budget, the Scottish Government is already addressing many of the recommendations in the inquiry report. We will continue to work across Government as well as with partners, including the Convention of Scottish Local Authorities, to improve the response to and the services available for people who are experiencing problem debt.

Households are facing the most severe economic upheaval in a generation, with alarming rises in energy bills, food prices and inflation rates undoubtedly hitting people who are on the lowest incomes the hardest. The Scottish Government’s budget is not immune to such economic shocks. As the Deputy First Minister set out last month, our budget is now worth around £1.7 billion less than when it was set in December, because of increasing inflation.

Yet, in stark contrast to the UK Government, the Scottish Government has taken sustained and significant action to tackle poverty. This year, we have allocated almost £3 billion for support that will mitigate the impact of increasing costs on households, more than £1 billion of which support is available only in Scotland. Through free childcare, bus travel, prescriptions, eye tests, dental check-ups and period products, we are supporting households in all areas of life through a range of actions, all of which will help people through this crisis and beyond.

Putting a total of £150 million in the pockets of low-income families through bridging payments over this year and last is also providing direct cash support to households now. In direct response to the additional pressure that families face this winter, we are also doubling the December payment for eligible families.

Photo of Jeremy Balfour Jeremy Balfour Conservative

One of the budget measures that had been hoped for was that free school meals for primary 7 pupils would be provided in this financial year, but that has been delayed by at least one year. Will the cabinet secretary confirm that, in the next academic year, every child in Scotland who is in P7 will have free school meals?

Photo of Shona Robison Shona Robison Scottish National Party

As Jeremy Balfour will be aware, the free school meal provision in Scotland is way in excess of that offered anywhere else in these islands—particularly England, where his party is in power.

The fact that pupils are already receiving free school meals in primaries 1 to 5 is saving parents £400 per eligible child per year. We continue to work with our partners in local authorities to plan for expansion of that provision to pupils in primaries 6 and 7. That is being supported by £30 million of capital investment.

We will get on with supporting families in as many ways as we can.

Our actions show that the Scottish Government will always do what it can to help those in need and take action to tackle child poverty, reduce inequalities, and help households to maximise their money. Through up to £86 million in discretionary housing payments, we are fully mitigating the bedroom tax for 91,000 households this year, supporting tenancies and reducing the chances of getting into debt and rent arrears. We have now committed to additional funding to mitigate the benefit cap as far as we are able for up to 4,000 families.

That is a clear commitment in our tackling child poverty delivery plan and an example of our track record of using all of the powers available to us to soften the blow of the worst of the UK Government’s policy decisions. We also recently announced that local authorities can use their discretionary housing payments budget to support households with energy bills—we have committed an additional £5 million for that.

Financial pressures are often felt most acutely by people who rent their home. That is why we took action through the Cost of Living (Tenant Protection) (Scotland) Act 2022, which came into force last week, to help tenants through the challenging months ahead by freezing rents and preventing evictions.

When people are in need of a safety net, our Scottish social security system, built on the principles of fairness, dignity and respect, provides 12 benefits, seven of which are unique to Scotland. In just over a week, our package of five family payments will be worth more than £10,000 for eligible families by the time that their first child turns six. That package includes the Scottish child payment, which we doubled to £20 per week per child in April and will increase again to £25 when we extend it to under-16s on 14 November. That is a 150 per cent rise in eight months, which is way ahead of anything available anywhere else on these islands.

In addition, our child winter heating assistance supports the families of almost 20,000 severely disabled children and young people, with payments totalling around £4 million each year. This year’s payment of £214.10 is already reaching people. Again, that is a Scottish benefit that is available only to those in Scotland, as is our new winter heating payment, which will replace the UK cold weather payments. That guaranteed £50 annual payment will be paid from next February to around 400,000 low-income households. That is backed by investment of £20 million and is guaranteed help with winter fuel bills for thousands of people in need.

Photo of Pam Duncan-Glancy Pam Duncan-Glancy Labour

I note what the cabinet secretary has said about the child winter heating assistance. Does she agree that disabled people over the age of 16 also face increased fuel costs? What can the Scottish Government do to support those families?

Photo of Shona Robison Shona Robison Scottish National Party

We recognise that. Many of the things that I have already talked about will help people with disabled family members. The Scottish welfare fund, which we also fund, is available to families that have someone with a disability. We will continue to look at what more we can do within the context of a very constrained financial outlook.

We are already spending £460 million above the level of funding that we receive from the UK Government in relation to benefit expenditure. That is substantial.

We are doing much more to support people. We are also leading the way with the provision of the most generous universal free school meal provision in the UK, so that our children are not hungry in school and can focus on learning. We also continue to provide funding for local authorities across Scotland for schemes such as the council tax reduction scheme, and the Scottish welfare fund, which I just mentioned. Those schemes can provide much-needed support to vulnerable households.

Furthermore, we are the only part of the UK to have a statutory debt repayment scheme, which offers important protections for those taking control of their debt. We have also taken action on the protected minimum balance that can be retained in relation to a bank arrestment—the minister will say more on that later.

We recognise that financial difficulties can sometimes overwhelm people. At those most difficult times, advice services play a vital role in helping people to understand what they are entitled to and what their rights are. That is why we have allocated £12.5 million this year to advice services, including advice on debt, welfare and income maximisation. Over the past four years, our Money Talk Team service has put just over £47 million into the pockets of almost 21,500 people. We have also committed to an additional £1.2 million package to enable the expansion of energy advice services. That is in addition to our welfare advice practitioners in general practices, who help people when they go to see a health professional.

I will close now, Presiding Officer.

The Deputy Presiding Officer:

I can give you a bit more time, because we have a bit of time in hand.

Photo of Shona Robison Shona Robison Scottish National Party

That would be extremely helpful. Thank you.

We have tried to bring together in one place all the information that I have described, because we know that it can be challenging for people to find out what they are entitled to. That is why we recently launched a cost of living website, as part of the Scottish Government’s website, which provides trusted advice to help people to understand the significant range of support that is available.

We are acutely aware of the growing impact on low-income households of debts to the public sector, which Elena Whitham mentioned. Local authorities have powers to write off arrears, and we continue to encourage them to share good practice on debt assistance and collection and to show empathy and dignity when they are working with people who are struggling with debts.

The UK Government holds many of the levers that would lift households out of poverty, and I remain deeply concerned about its long-standing approach to social security. Although we are using all of the powers that are available to us to support households where we can, including uprating our benefits, the social impacts of real-terms cuts to UK Government benefits are significant, and more people on a low income are being driven into poverty or deeper into poverty. I urge the UK Government to reflect on that when it comes to its budget statement.

We cannot have further austerity inflicted by the UK Government. As the First Minister told the Prime Minister last week, the UK Government holds the levers over energy, tax and the bulk of benefits, along with business support and regulation that could help to address the crisis and support households, public bodies and business in the future. We have called on the UK Government to provide an inflationary uplift to the 2022-23 budget to enable the Scottish Government to take further steps to support people with the cost of living crisis, provide fair public sector pay uplifts and support public services, given the fiscal constraints on devolution.

I once again thank the committee for its comprehensive report and for bringing the debate to the chamber to allow us to shine a light on all those issues.