Bankruptcy and Diligence (Scotland) Bill: Stage 3

– in the Scottish Parliament at 2:00 pm on 6 June 2024.

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Photo of Annabelle Ewing Annabelle Ewing Scottish National Party 2:00, 6 June 2024

The next item of business is stage 3 proceedings on the Bankruptcy and Diligence (Scotland) Bill. In dealing with the amendments, members should refer to the bill as amended at stage 2—that is, Scottish Parliament bill 27A—the marshalled list and the groupings of amendments.

The division bell will sound and proceedings will be suspended for around five minutes for the first division of stage 3. The period of voting for the first division will be 45 seconds. Thereafter, I will allow a voting period of one minute for the first division after a debate. Members who wish to speak in the debate on any group of amendments should press their request-to-speak buttons or enter RTS in the chat function as soon as possible after I call the group. Members should now refer to the marshalled list of amendments.

Section 1—Moratorium on debt recovery action: debtors who have a mental illness

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Group 1 is on the mental health moratorium. Amendment 15, in the name of Paul O’Kane, is grouped with amendments 1, 23, 2 and 3.

Photo of Paul O'Kane Paul O'Kane Labour

Amendment 15 is rather simple and is intended to give greater permanency to and certainty on the creation of the mental health moratorium.

At stage 2, I lodged amendments that would have put the moratorium and some of the provisions on it into the bill. The driving force behind that—behind all my amendments in this regard—has been the concerns from stakeholders that there has not been certainty about the nature of the moratorium or its creation. At stage 2, we had a good discussion on the potential detail of the moratorium, and I accepted the arguments of the minister at the time, Tom Arthur, about the desire to keep the moratorium in regulations, which would mean that changes and improvements could be made over time as their impact was reviewed. I understand those arguments. That is why, having reflected on the Government’s response, which was to publish regulations to allow people to see what is proposed and interact with it, I have brought back at stage 3 the simpler amendment 15 for the purpose of providing more certainty around the moratorium.

We want certainty that a mental health moratorium will exist. I do not doubt the Scottish Government’s intent or desire. As I have said, there have been numerous productive discussions in that regard. However, it is important that we set that out in the bill because, although we all agree in principle, it is necessary that those who are struggling see the Parliament’s intent on what we will do in regulations to support them.

The other purpose of amendment 15 is to be somewhat probing: to ensure that we can have a debate about the nature of the moratorium, so that the minister can perhaps say more about the details of what he has published to consult on, and so that we can hear a number of views on what should or should not be in scope for the wider moratorium. Indeed, there have been lots of discussions about who will qualify for the moratorium, what sorts of treatments will qualify and what sort of mental health professionals may attest to the need for support through a moratorium. It is important that we continue to have such debates.

I will comment briefly on the other amendments in the group. I support my colleague Daniel Johnson’s amendment 23, which would ensure that ministers could make only regulations that were within the scope of the long title of the bill, maintaining a place for Parliament in any further work. I also note and welcome the minister’s amendments to strengthen the commitment to review and enhance scrutiny procedures in relation to regulations. That is important for scrutiny and getting things right.

I look forward to further debate this afternoon and to the minister laying out the detail of his amendments and any further draft regulations that will be laid before Parliament and consulted on.

I move amendment 15.

Photo of Ivan McKee Ivan McKee Scottish National Party 2:30, 6 June 2024

Amendment 15 seeks to impose on the Scottish ministers a duty to make regulations to establish a mental health moratorium in Scotland. The Scottish Government has already committed to preparing such regulations and has shared a version of the draft regulations with Parliament. I therefore do not believe that it is necessary, through the bill, to impose a duty on Scottish ministers to make such regulations. The bill’s approach in saying that ministers “may” make regulations is common, and that aspect of the bill attracted no comment from the Delegated Powers and Law Reform Committee, whose business it would clearly be.

There is also the technical question of whether it is within the Scottish Government’s gift to make thoe regulations. They would be subject to the affirmative procedure, and ministers cannot be compelled to make such regulations if Parliament does not actively approve them. With a legal requirement in the bill, what sanctions would be envisaged if ministers failed to make the regulations? With what timescale would they have to comply?

It may be that the intention of the amendment is to require Scottish ministers to lay regulations for parliamentary approval, but we do not think that that is what the drafting would actually achieve. As a copy of the draft regulations has already been shared with Parliament, there should be no doubt that we intend to lay regulations on the mental health moratorium if the bill is passed. Ministers do not need to be under a statutory duty to do so.

Amendment 23 seeks to restrict the legislation that may be modified by the mental health moratorium regulations. Daniel Johnson may be seeking to introduce some certainty on that aspect of the power in section 1, but we should be very careful before departing from what is standard provision. There may be some unintended consequences in doing so, and it may unnecessarily restrict the ability of the mental health moratorium regulations to give full effect to the policy that is developed alongside stakeholders.

For example, the amendment seeks to ensure that we may amend only the Bankruptcy (Scotland) Act 2016 but, in developing the proposals, we may all agree that other legislation—relating to protections against evictions, for example—needs to be adjusted. Because that legislation is not the 2016 act, the amendment would prevent that.

Members should bear in mind that the bill will not allow the mental health moratorium regulations to amend just any legislation. The modification of any enactment would be limited by the scope of the original power under section 1(1) of the bill. The bill will, therefore, allow the mental health moratorium regulations to modify provision in any enactment, but only in so far as the modification relates to the operation of the mental health moratorium. Modifying an existing enactment may be the best way to achieve the required change and ensure legal accessibility.

The bill as drafted provides more certainty than amendment 23, which refers to the Bankruptcy (Scotland) Act 2016 but also to the law of diligence, the limits of which would not be certain.

I therefore ask Paul O’Kane not to press amendment 15 and Daniel Johnson not to move amendment 23. I ask members, if the amendments are pressed to a vote, to reject them.

I turn to the Government’s amendments in the group. Amendment 1 is required to allow the mental health moratorium regulations to make provision for how the mental health moratorium will interact with a standard moratorium. The Scottish Government proposed in our public consultation on the mental health moratorium regulations that an individual would not be able to apply for a standard moratorium under part 15 of the Bankruptcy (Scotland) Act 2016 within six months of exiting a mental health moratorium. I note that 73 per cent of respondents to the consultation agreed with that approach. Some may disagree with the proposed timescale, which we can consider further.

However, regardless of the timescale that is agreed, it will be necessary for the mental health moratorium regulations to include provision about how the mental health moratorium will interact with the standard moratorium under the 2016 act. Amendment 1 therefore adds a further example of things that the regulations may cover and makes it clear that they may make provision in respect of any post mental health moratorium period.

Turning to amendments 2 and 3, the Scottish Government acknowledges the views that were expressed during the stage 1 and 2 debates regarding the need to afford Parliament sufficient opportunity to scrutinise the detail of the regulations establishing the mental health moratorium. During the committee meetings at stage 2, my predecessor acknowledged the intention of an amendment from Daniel Johnson on that topic and, although that particular amendment was withdrawn, we undertook to look further into what action could be taken to provide Parliament with more comfort about the process for establishing the mental health moratorium.

It is with that in mind that I have lodged amendment 2, which is similar in intention to Mr Johnson’s stage 2 amendment and will allow Parliament further scrutiny of a copy of the first set of mental health moratorium regulations for a period of 60 days prior to those regulations being formally laid. It will also require the Scottish Government to report on any representations made by Parliament regarding those regulations and on any changes made to the regulations as a result of any representations received after the regulations are laid.

In keeping with that scrutiny of the mental health moratorium regulations, amendment 3 requires Scottish ministers to undertake a review of those regulations

“as soon as reasonably practicable”

five years after the regulations that establish the moratorium have come into force.

I am committed to ensuring that the mental health moratorium achieves its goal of helping those with severe mental health issues and problem debt. Although I am ambitious and hope that the regulations will achieve that goal first time round, I entirely accept that the matter must be kept under review to see which elements of the scheme might be refined or improved. I therefore believe that it will be necessary to formally review the impact of the mental health moratorium after a reasonable period of time has elapsed. Amendment 3 puts that commitment on a statutory footing.

In conclusion, I urge members to support my amendments 1, 2 and 3 and to reject amendments 15 and 23.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

I call Daniel Johnson to speak to amendment 23 and other amendments in the group.

Photo of Daniel Johnson Daniel Johnson Labour

I thank the Government for lodging the amendments that the minister has just outlined, which broadly cover the area of clarifying the process. I think those amendments improve the bill and the clarity of the process and I thank the Government for that.

However, what we heard from the minister also outlines some of the issues with the bill, which is a framework bill in an inherently complex, technical and important area of law. The precise mechanisms that will be implemented are not clear because they will be set out in regulations. It is positive that the Government has published draft regulations, but the Economy and Fair Work Committee was able to look at those only last week.

Our amendments in this group pertain to the nature of framework bills, their efficacy and how well they address fundamentally technical points of law. Paul O’Kane’s amendment 15 is about ensuring that features set out in the bill are brought forward in regulations, so that we have clarity about what those features of the legislation will do. Without that, we have only an indication, rather than a guarantee, of those features.

I listened closely to what the minister said, but subsection (3) of section 1 states:

“Regulations under this section may ... make different provision for different purposes”

and may “modify any enactment”. I am not a lawyer and will happily defer to those who are—I see Murdo Fraser smiling as I say that—but I do not see anything in that wording that restricts ministers in the way that the minister just set out. It seems to me that, if you can make regulations for “different provision” or for “different purposes” to alter any act, that gives you incredibly broad regulation-making powers.

There are, of course, circumstances where having regulation-making powers is a sensible approach, particularly when we are talking about percentages, levies or numerical amounts that may need to change because of circumstance. However, at the other end of the spectrum, we have very broadly stated provisions and cannot scrutinise the legislation, so I am merely seeking to ensure that the bill will enable ministers to bring forward regulations to deal with the purposes set out in the bill.

I do not think that that is unreasonable. I am happy to be persuaded otherwise or to be told that my reading of the law is not accurate, but I do not think that it is unreasonable to ask that regulation-making powers should be limited to the purposes and functions set out in an act of Parliament. That is why I have lodged amendment 23.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

I call Paul O’Kane to wind up and to press or seek to withdraw amendment 15.

Photo of Paul O'Kane Paul O'Kane Labour

Thank you, Deputy Presiding Officer. I do not have too much more to add. Daniel Johnson has made eloquent arguments on all the amendments and, in particular, on my amendment 15.

Through amendment 15, I seek to ensure that the consensus on a mental health moratorium is stated in the bill and in law, compelling ministers to lay regulations before the Parliament for consideration. As we spoke to stakeholders during the progress of the bill, and at stage 2, it was clear that there is a need for the moratorium and a desire to move forward with it as quickly as possible.

Daniel Johnson made a number of important points to the minister about the nature of framework bills. The challenge is often in being able to properly scrutinise them and their detail. The point that he made about the committee’s scrutiny of the draft regulations being done in a tight window was well made. It is clear that, with this framework bill, we want to be able to compel the Government but also to give it the opportunity to introduce further regulations to enhance the bill and move it forward. I note, as Daniel Johnson did, the work that the minister has done through his amendments to bring it forward.

Photo of Martin Whitfield Martin Whitfield Labour

I am grateful to Paul O’Kane for giving way, and I apologise for the way that I phrase this. In amendment 3, which was lodged by the minister, I welcome what is, in essence, an example of post-legislative scrutiny, whereby, after five years, there will be a review that will provide the opportunity to look at the matter again. That is very positive. Is Paul O’Kane aware when the first regulations are likely to be laid, so that those outside the Scottish Parliament understand when the five years will run to?

Photo of Paul O'Kane Paul O'Kane Labour

I thank Martin Whitfield for his intervention and for the point that he raises, which is important and relevant. I think that I said in my remarks that, for those outside the chamber, there is a need for certainty and for understanding about the things that they want to see in the bill that will enhance it, and there is a need to ensure that people are given adequate protection. That is a very clear point, and I am sure that the Government will want to reflect on that more widely in our proceedings today.

I believe that amendment 15 is important and that it will push the Government to ensure that the moratorium is enacted and consulted on widely. I press the amendment.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

The question is, that amendment 15 be agreed to. Are we agreed?



Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

There will be a division. This is the first division, so I suspend for around five minutes to allow members to access the digital voting system.

Meeting suspended.

On resuming—

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

We come to the vote on amendment 15. Members should cast their votes now.

The vote is closed.

Photo of Baroness Katy Clark Baroness Katy Clark Labour

On a point of order, Presiding Officer. My console was not working. I would have voted yes.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Thank you, Ms Clark. Your vote will be recorded.

Division number 1 Bankruptcy and Diligence (Scotland) Bill: Stage 3

Aye: 58 MSPs

No: 55 MSPs

Aye: A-Z by last name

No: A-Z by last name

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party 2:49, 6 June 2024

The result of the division is: For 58, Against 55, Abstentions 0.

Amendment 15 agreed to.

Amendment 1 moved—[Ivan McKee]—and agreed to.

Amendment 23 moved—[Daniel Johnson].

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

The question is, that amendment 23 be agreed to. Are we agreed?



Photo of Graeme Dey Graeme Dey Scottish National Party

On a point of order, Presiding Officer. I am afraid that I was unable to vote. I would have voted no.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Thank you, Mr Dey. Your vote will be recorded.

Division number 2 Bankruptcy and Diligence (Scotland) Bill: Stage 3

Aye: 27 MSPs

No: 88 MSPs

Aye: A-Z by last name

No: A-Z by last name

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party 2:49, 6 June 2024

The result of the division is: For 27, Against 88, Abstentions 0.

Amendment 23 disagreed to.

After section 1

Amendments 2 and 3 moved—[Ivan McKee]—and agreed to.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Group 2 is on local authority debt recovery: pre-action requirements. Amendment 16, in the name of Paul O’Kane, is the only amendment in the group.

Photo of Paul O'Kane Paul O'Kane Labour

Amendment 16 is similar to an amendment that I lodged at stage 2. I took time to reflect on the process at stage 2 before lodging this amendment.

Amendment 16 would grant ministers the power, if it were to be deemed necessary, to make regulations requiring local authorities that are pursuing debt to take certain actions prior to taking any debt recovery action. That could include directing an individual towards free debt, money and legal advice before a summary warrant is granted by a sheriff.

Members across the chamber will know that public debt and, in particular, council tax arrears, has been a growing problem in Scotland and across the United Kingdom. Unlike private debt, it is not covered by Financial Conduct Authority regulations, which compel lenders to take measures to ensure that debtors are treated more fairly and with consideration to vulnerabilities. A 2023 report by Aberlour Children’s Charity highlighted that 55 per cent of low-income families in Scotland that were in receipt of universal credit had at least one deduction from their monthly income to cover debts to public bodies. Another recent report from StepChange found that, in 2021 and 2022, 32 per cent of its clients were in arrears with their council tax. It cannot be right that public bodies and local authorities are on their way to becoming the largest collectors of debt.

Debt collection practices across local authorities vary widely and, in some instances, can be viewed as problematic and quite callous. Examples of that have been relayed in the chamber before, such as the collection of school meals debt by sheriff officers. It is clear that the same level of protection and regulation that often applies to private debt is not there. We seek better practice and more support for individuals, which we are not seeing currently.

I understand from my engagement with Tom Arthur when he was in the role and from my engagement with the current minister that work is on-going with local authorities and the Convention of Scottish Local Authorities on such matters. Indeed, pilot programmes have been conducted and work has been done with third sector organisations such as Citizens Advice Scotland to improve that landscape. I know that that work is under review and that the Scottish Government has not yet decided whether regulations would be the best way to deal with those issues. However, I do not want us to be back in the chamber in six months or a year after the Government has considered all that and for us to conclude that regulations are needed. We do not want to miss the boat on that legislation.

Amendment 16 seeks to create a regulatory space now, without requiring ministers to use the provisions immediately, so that they can continue their on-going consultation work and engagement around need as well as exploring the best path forward for regulations. The Government could then bring forward regulations when it is necessary. I am pleased that my amendment has the support of stakeholders such as Citizens Advice Scotland, Aberlour Children’s Charity and the Govan Law Centre. I look forward to hearing from the minister on the record about the Scottish Government’s thinking on public debt and pre-action requirements. I hope that he can find his way to backing my amendment 16.

I move amendment 16.

Photo of Murdo Fraser Murdo Fraser Conservative

I listened with great interest to the case that Paul O’Kane made for his amendment. He is absolutely right to say that the largest debts tend to be those that are owed to public authorities, particularly local authorities, and include council tax debt. Local authorities are often the most energetic at instructing diligence and instructing sheriff officers and messengers-at-arms. What concerns me about amendment 16 is why it singles out local authorities and not any other public agency or any other form of creditor. It seems to be unfair to put a particular burden on local authorities that is not put on other creditors. Perhaps when Mr O’Kane is winding up he can tell us what engagement he has had with COSLA on that matter and what its view is on amendment 16.

Photo of Ivan McKee Ivan McKee Scottish National Party

Amendment 16 would create a discretionary power for Scottish ministers to set out in regulation what local authorities need to do before they commence debt recovery action. The essence of the amendment is to ensure that debtors are better informed about the debt, the help that is available to them and the potential consequences if they do nothing. It seeks to ensure that local authorities do more to help and to support those debtors.

I agree with that in principle, but I do not think that it is our place to tell separately democratically accountable local authorities how to go about collecting debts. I agree that we should be working together across the entire public sector to develop and support best practice in that area, and local authorities are clearly central to that. We have been working with COSLA to promote best practice on debt assistance and collection, noting the principles that are set out in the “Collaborative Council Tax Collection” report, which was published by the Improvement Service and StepChange Scotland. It aims to use the existing flexibilities that are available to local authorities to take a compassionate and proportionate response to the recovery of arrears.

Last year, £200,000 was allocated to Citizens Advice Scotland and the citizens advice bureaux network to provide a pilot project in three local authority areas. The projects will provide additional debt advice to individuals, with a focus on council tax arrears, and will support best practice in relation to council tax debt collection in their local authority area. The pilot is now completed and I await the report on its findings. The pilot should provide us with invaluable information and help us to establish what is likely to work in the future.

Although I understand why amendment 16 has been lodged, I urge all sides to respect local authorities’ separate accountability. We should not consider legislation until all other routes of promoting best practice have been exhausted.

Therefore, I ask Paul O’Kane not to press amendment 16. If he presses the amendment, I ask members to reject it.

Photo of Paul O'Kane Paul O'Kane Labour 3:00, 6 June 2024

I thank the minister and Murdo Fraser for their contributions to the debate and for the questions that were posed to me on amendment 16. There is a degree of consensus about our concern around the tactics that public sector bodies sometimes employ and, indeed, the growing scale of public sector debt and the challenge therein.

Mr Fraser asked why the amendment singles out local authorities, which is a point that was made at stage 2 by his colleague, Brian Whittle. The answer is that local authorities hold the lion’s share of that public sector debt in a local way and are using those very concerning tactics that I mentioned in relation to things such as school meals debt, council tax arrears and various other sundry debts that come under councils. They have the power to act and take different approaches, and I think that we have seen that.

That also relates to the minister’s point. There is something of a postcode lottery—if I can use that expression—or a variance in the approaches that are taken by local authorities across Scotland, which is proving to be challenging. For example, pilot projects in Tayside, and Dundee City Council, working with Aberlour, as I mentioned, have taken different approaches to the principles that they follow in collection of debt. They have worked intensively with debtors in order to get them the support that is required.

That brings me to the broader point where we have agreement—certainly, I have agreement with the minister—on the need to support local authorities and public bodies to take as many pre-actions as are required in order to support people to be good citizens and, of course, to pay their debt where that is owed, in a way that helps them to maximise their income and get all the support that they are entitled to.

In response to the minister’s point about respect for local authorities, as a former councillor of 10 years’ standing, I have huge respect for local authorities and the decisions that they make. However, it is important to note that the amendment has changed in nature since stage 2. At stage 2, it would have compelled local authorities in a more direct way. The minister, Tom Arthur, and I had an exchange of a similar nature in committee on the stage 2 amendment, which was far more directive and required the Government to direct local authorities. Amendment 16 would simply allow Scottish ministers, if required, to make those regulations. Obviously, we would want to see a huge degree of consultation and discussion before bringing forward any powers. That is why I drafted amendment 16 in this way at stage 3.

Mr Fraser asked about my interactions with COSLA. I will be honest about the fact that my discussions have been with individual local authority leaders on some of those issues, rather than with COSLA more directly. Those leaders share the concerns about the postcode lottery that I talked about and agree that, where there is best practice in an authority, that should be replicated across the country. The minister has said that he intends to develop that work and move it forward, but we should have that power, if it is required, on the statute book. On that basis, I press amendment 16.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

The question is, that amendment 16 be agreed to. Are we agreed?

Members: No.

Division number 3 Bankruptcy and Diligence (Scotland) Bill: Stage 3

Aye: 33 MSPs

No: 80 MSPs

No: A-Z by last name

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party 3:00, 6 June 2024

The result of the division is: For 33, Against 80, Abstentions 0.

Amendment 16 disagreed to.

Section 2A—Recall of sequestration: payment of interest

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Group 3 is entitled “Minor”. Amendment 4, in the name of the minister, is the only amendment in the group.

Photo of Ivan McKee Ivan McKee Scottish National Party

Amendment 4 fixes a minor typographical error in section 2A of the bill. It does not represent any change in policy or alter the legal effect of the provision.

I move amendment 4.

Amendment 4 agreed to.

After section 5

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Group 4 is on protected trust deeds: information and time to be provided to debtor. Amendment 5, in the name of the minister, is the only amendment in the group.

Photo of Ivan McKee Ivan McKee Scottish National Party

The Scottish Government recognises that clarity and transparency in the information that is provided to those who are seeking a solution to problem debt is extremely important. Amendment 5 comes from a recommendation that was made by the previous Economy, Energy and Fair Work Committee, following its short inquiry into protected trust deeds, and was endorsed by stakeholders.

I agree that getting the right information in a clear format will help to empower the individual to make the right decision for their circumstances, and amendment 5 will help to achieve that objective. It will create a requirement for a trustee to provide the individual with

“a copy of a trust deed information document”,

in addition to the

“debt advice and information package”

that is already required, before the individual grants the trust deed.

The trust deed information document will provide important information on the benefits and consequences of signing a trust deed, in order to allow the individual to assess whether that is the right step for them. Amendment 5 therefore expands the range of information and advice that must be provided to an individual before a trust deed is signed.

Amendment 5 will also create a requirement for the trustee to give the individual “adequate time to consider” that information before the trust deed is signed. What is meant by that cooling-off period will be further outlined in guidance—which will be published by the Scottish ministers—to which the trustee must have regard. That will ensure that the individual has enough time to digest the information, as well as the other information and advice provided under section 167(3)(a) of the Bankruptcy (Scotland) Act 2016, and to seek further advice as they see fit before taking the serious step of signing a trust deed.

I am aware that the previous minister had planned to meet representatives of insolvency practitioners, who had raised some concerns that the amendment was not necessary. I apologise to them that, in the time available to me since my appointment, it has not been possible to meet. However, the amendment reflects existing best practice, and I believe that it is right to ensure that all trustees are required by statute to meet that standard.

Members will be aware that concerns remain about the trust deed market. Although the proposed change is only a small step in improving transparency, it is, nevertheless, one that is worth taking.

Further proposals to introduce improvements to the current protected trust deed process have been brought forward in the Protected Trust Deeds (Miscellaneous Amendment) (Scotland) Regulations 2024. The regulations include stakeholder-led recommendations that will help to ensure that the statutory solution is fit for purpose and provides the necessary support and protection for those who need access to debt relief through it.

I move amendment 5.

Photo of Murdo Fraser Murdo Fraser Conservative

I need to put on record some of the concerns that have been raised with me—and, I am sure, with other members in the chamber—by the Institute of Chartered Accountants of Scotland about what is being proposed in amendment 5. At this week’s Economy and Fair Work Committee meeting, we discussed protected trust deeds and explored some of these issues.

As a general rule, we should legislate only when legislation is necessary. If voluntary practices are working well, there is, in my view, no need for legislation, and ICAS has expressed that view in relation to the amendment.

Amendment 5 requires information to be provided to debtors before they enter a trust deed. In practice, that already happens. In fact, as ICAS says, there is no evidence that debtors are not currently being provided with the information before they enter a trust deed. Therefore, it is difficult to see what social ill the amendment is trying to cure, because there is no evidence that it is required.

ICAS also makes the point that, if the Government wants to introduce the principle of providing adequate information and time to consider debt solutions, it should apply not only to protected trust deeds but to all statutory debt solutions, including the debt arrangement scheme and sequestration. Therefore, ICAS’s view, which seems reasonable, is that we need a more holistic consideration of those issues, rather than bringing in measures on a piecemeal basis and only in relation to protected trust deeds, as the amendment does.

ICAS is concerned that there has not been adequate discussion and consultation on the matter. The minister reflected on the fact that his predecessor, Tom Arthur, had promised that the Government would allow a further stakeholder discussion on the matter before the amendment was lodged, but that did not happen. Therefore, the provision is being introduced without proper discussion.

Amendment 5 is premature and, in our view, there are better ways of approaching the issue than through an amendment at this stage.

Photo of Daniel Johnson Daniel Johnson Labour

In some ways, I am very relieved that Murdo Fraser’s contribution preceded mine, because my expertise in matters of accountancy is somewhat similar to my expertise in matters of the law. He made a good point. The Institute of Chartered Accountants of Scotland provided us with that information just in the past couple of days, but it makes some important points. The fact that statement of insolvency practice 3.3 requires insolvency practitioners to provide the information that is alluded to in amendment 5 suggests that the amendment is unnecessary.

If undertakings were given to consult practitioners and the relevant professions, that consultation really should have taken place. For me, it is an important point of principle that, when we deal with legislation, especially that relating to professional practice or matters of business, decisions should be made in partnership with the people who will be affected. Those decisions should be made in consultation with professional bodies, such as the Institute of Chartered Accountants of Scotland, or the Law Society of Scotland when the issues pertain to matters of the law, and we need to take their views very seriously. Notwithstanding that, I hear what the minister has said.

I think that Labour members will abstain on amendment 5 because of the late notice, which makes it very difficult to scrutinise the provision, and I wanted to make the point on the record that we need to treat with some concern the submission of the Institute of Chartered Accountants of Scotland.

Photo of Ivan McKee Ivan McKee Scottish National Party

I thank Murdo Fraser and Daniel Johnson for their contributions on the matter. I also thank ICAS for its submission.

I reiterate my apology for being unable to engage with ICAS in advance of stage 3 as a consequence of the recent changeover of ministerial responsibilities. I remind members that the recommendation was made by the Economy, Energy and Fair Work Committee and was endorsed by stakeholders. From my perspective, it is important that debtors who are about to take the serious step of signing a trust deed are provided with information in an easily accessible form at the point when they are making that important decision. The amendment will ensure that that happens in a consistent way, which will allow debtors to be fully appraised in an easily communicated way of the step that they are about to take.

Therefore, I ask members to support amendment 5.



Photo of Neil Gray Neil Gray Scottish National Party

On a point of order, Presiding Officer. I apologise—I could not connect, but I would have voted yes.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Thank you, Mr Gray. Your vote will be recorded.

Division number 4 Bankruptcy and Diligence (Scotland) Bill: Stage 3

Aye: 65 MSPs

No: 25 MSPs

Aye: A-Z by last name

No: A-Z by last name

Abstained: 22 MSPs

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party 3:15, 6 June 2024

The result of the division is: For 65, Against 25, Abstentions 22.

Amendment 5 agreed to.

Section 6—Arrestment and action of furthcoming

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Group 5 is on the service of documents. Amendment 6, in the name of Colin Smyth, is grouped with amendments 7 to 9, 11 to 14 and 25.

Photo of Colin Smyth Colin Smyth Labour

The purpose of my amendments in this group is to ensure that bank and earnings arrestments are served in person only where it is impossible or impracticable to do so by post or electronically.

Concerns were brought to the attention of members ahead of stage 2 by Alan McIntosh from Advice Talks, of an unintended consequence of Government amendments at that stage: that to introduce digital as a means to serve bank and earnings arrestments, but without ensuring that serving such arrestments in person should remain a last resort, risked that becoming a first resort in some cases.

Serving the arrestments in person brings with it a hefty fee for the recipient. The current minister’s predecessor, Tom Arthur, fully recognised that at stage 2, and I am grateful to the current minister and his officials for working with me to develop amendments that will introduce a requirement that earnings and bank arrestments can be served personally only if it is not possible or impracticable to serve them digitally or by post. That could reduce sheriff officers’ fees that are passed on to the individual in debt, ensuring that their financial situation is not exacerbated unnecessarily.

As Citizens Advice Scotland highlighted in its briefing ahead of the debate, that will also avoid the stigma that can exist, as many individuals can feel shame and embarrassment from the presence of sheriff officers serving arrestment notices in person.

My amendments complement Maggie Chapman’s amendment 25, which also deals with charges, but those before earnings arrestment.

I encourage members to support the amendments in this group.

I move amendment 6.

Photo of Maggie Chapman Maggie Chapman Green

Before I speak to my amendment 25, I put on record my thanks to the Minister for Public Finance, to Tom Arthur, the minister who previously had responsibility for the bill, and to all those I have had conversations with over the past few weeks about amendments. I am also very grateful to all those who have provided briefings and information in advance of this afternoon’s discussion.

I confirm that we will be supporting Colin Smyth’s amendments in this group.

My amendment 25 would require sheriff officers to try and serve a 14-day charge for payment by post or digitally first, before they decide to serve it personally. It does not interfere with the other amendments in the group, as Colin Smyth has said.

The reason why the amendment is important is that more than 200,000 charges for payments are served each year, and the cost of postal diligence—when sheriff officers add fees to people’s debts—is £48.01, while the cost of the personal service is £96.27. The cost of the personal service is therefore twice that of postal diligence.

The amendment could therefore save people, some of whom will already be struggling with debt, £9 million to £10 million a year in sheriff officer fees. That would not cost the public purse any money, it would significantly reduce the amount of debt that people need to pay, primarily for council tax, and it would not cost sheriff officers anything. It would just reduce the profitability for those sheriff officers of doing diligence in the way that they currently do.

Photo of Ivan McKee Ivan McKee Scottish National Party

I am aware of the concern that a stakeholder previously raised that the Government’s stage 2 amendments on the service of arrestment schedules on the arrestee or employer may have had some unintended consequences, in encouraging personal service over less intrusive and less expensive methods. As the Minister for Community Wealth and Public Finance highlighted during the stage 2 debate, that was not the policy intention.

I have since had an opportunity to discuss the matter with Colin Smyth, and I am grateful to him for working constructively with the Government. I am happy to support his amendments 6 to 9 and 11 to 14, which will remedy the unintended consequence and reflect the policy intention of providing an additional method of service by electronic means.

Amendments 6 to 9 will amend section 6, which relates to arrestment and action of furthcoming, and amendments 11 to 14 will amend section 7, which relates to diligence against earnings, to specify that arrestment schedules must be served by post, registered or recorded delivery, or transmitted by electronic means—for example, by email, where the intended recipient has agreed to receive documents electronically. Additionally, the amendments will enable arrestment documents to be served by other competent means, but only where it is impossible or impracticable to serve documents by post or electronically.

Amendment 25 seeks to provide for electronic service charges for payment. As Maggie Chapman has said, more than a quarter of a million such charges are served every year. They are the final warning before the start of formal diligence. The bulk will be issued by councils in pursuit of council tax debt.

Before Ms Chapman lodged the amendment last week, I had not been aware of any stakeholder asking for that change, and I think that we should take time to consult on it. It is, of course, all too easy for an individual to overlook an email or a letter and then find themselves in serious difficulty. Personal service reflects the seriousness of a charge for payment and the need for action by the debtor, and it often comes after previous attempts to resolve an outstanding debt have been ignored. However, I would be happy to take forward discussions with sheriff officers, councils, debt charities and others if they felt thatf that would be of value.

I therefore support amendments 6 to 9 and 11 to 14, but I ask Ms Chapman not to move amendment 25. If amendment 25 is moved, I ask members not to support it.

Photo of Colin Smyth Colin Smyth Labour

I am grateful for the support for my amendments. I appreciate that the Government’s amendments at stage 2 created an unintended consequence, which was not the policy aim. My amendments seek to right that. In doing so, they may reduce the level of sheriff officer fees that are passed on to an individual in debt, ensuring that their already incredibly difficult financial situation is not unnecessarily exasperated by the personal serving of an arrestment when simpler and more cost-effective means are available. I am therefore happy to press amendment 6.

Amendment 6 agreed to.

Amendments 7 to 9 moved—[Colin Smyth]—and agreed to.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Group 6 is on attachment of property or funds. Amendment 17, in the name of Paul O’Kane, is grouped with amendments 10, 19, 22 and 24.

Photo of Paul O'Kane Paul O'Kane Labour

Amendment 17 proposes that the protected minimum amount of bank account arrestment be uprated annually if the Scottish ministers deem it to have materially fallen below the inflation level. The Coronavirus (Recovery and Reform) (Scotland) Act 2022 amended the Debtors (Scotland) Act 1987 to allow the Scottish ministers to vary the minimum protected balances by way of negative procedure. There is an opportunity to strengthen that power in order to provide more protection for vulnerable individuals who are dealing with bank account arrestment proceedings. When that legislation was passed in 2022, I do not think that any of us could have foreseen the huge spikes in inflation that have come our way in the intervening period.

Although I recognise that the existing power allows ministers to deal with sudden changes that will require them to alter minimum protected balances—that regulatory power will remain—my amendment 17 opens up a conversation about whether, in a period of volatile inflation, when the cost of living continues to increase, consideration needs to be given to more regular upratings.

That is not a novel idea. We do that across a number of issues, not least social security payments. We recognise that people who are in receipt of those payments are often vulnerable and need their payments to keep pace with inflation.

Given that, amendment 17 would create a regular requirement for the Scottish ministers to calculate the inflation-adjusted level by the end of each financial year. If they deemed the existing protected balance to be materially below that inflation-adjusted level, they would lay regulations to change the amount. That would ensure that the uprating of vital minimum protected balances would not just be done on an ad hoc basis, as and when ministers were motivated to do that, but that there would be a process for modest but nonetheless important uplifts to those minimum balances on an annual basis, if need be. That would provide greater security and protection to vulnerable individuals who are going through debt collection and who are subjected to bank account arrestment, by ensuring that inflation cannot eat away at the protection that they are already being afforded. That is an important safeguard.

I am pleased that amendment 17 has won the backing of stakeholders. I look forward to hearing the minister’s response, because I know that he has given wider consideration to the issue and I am sure that he will want to comment further.

I will make a brief comment on other amendments in the group. The underlying principle of my amendment 17 is to guarantee more protections for vulnerable debtors, so I welcome amendments from my colleague Colin Smyth and from Maggie Chapman, which run along similar lines. I look forward to hearing from them on the detail of their amendments and on the difference that they will make to people who find themselves in very vulnerable situations.

I move amendment 17.

Photo of Colin Smyth Colin Smyth Labour

Bank arrestments of benefits are illegal. Benefits are statutorily protected; they should not be arrested under any circumstances, but we know that they are. Citizens Advice Scotland rightly described such arrestments as immoral and unduly harsh.

At stage 2, I lodged an amendment with the aim of preventing the arrestment in a bank account of any funds wholly acquired through social security benefits. I did not press the amendment at that stage, given that the then minister made a commitment to work with me on developing a workable solution—a way forward—on the matter. I am grateful to the current minister and his officials for the constructive discussions that we have had.

I believe that there was clear consensus on the policy aim of my amendment at stage 2, so I am reassured that there is a desire to find that way forward. However, I recognise that a number of issues were raised in response to my amendment at stage 2. The first is that the right level of protection should, in theory, be provided to all those who need it, whether their income is solely from welfare benefits, other sources or a mix of the two.

Secondly, banks expressed concerns about the difficulties that they have in identifying the source of funds in an account. Clearly, that needs to be resolved to make any improvement workable.

The Economy and Fair Work Committee received representations from academics at the University of Aberdeen who suggested that we should consider an alternative approach, to achieve the same outcome, through amendment of the unduly harsh test. The test is currently seen as a barrier, because the debtor must apply to the sheriff court and, because of their circumstances, they may well be reluctant to incur the cost of the test. However, there may be other ways to address that through an administrative procedure.

In discussion with the minister and his officials, they expressed their view that, given that my amendment dealt with social security benefits, it is important to make absolutely sure that any changes that are made fully respect the devolved settlement. I have therefore lodged amendment 10 to commit the Government to carrying out a consultation on the most appropriate solution, together with an enabling power to lay regulations that will be subject to affirmative procedure. The aim is to ensure that any proposals that are brought forward are properly tested and that all the relevant stakeholders are given the opportunity to have input.

I am clear, and I ask the minister to assure Parliament, that such a solution could be brought forward within the timescales that my amendments set. Parliament would be given the opportunity to consider the matter, given that we all want a workable solution.

Amendment 19, in my name, would enable an individual to make an application to their creditor to vary a wage arrestment due to their circumstances and household composition. It would allow creditors to replace the specified amounts in the tables that are detailed in amendment 22 with a lower percentage amount above the protected minimum amount where the circumstances of a household require it. Individuals who are in debt would be able to request such a variation from their creditor once every six months, and the creditor would be required to consider it.

I believe that section 50, as currently drafted, is wide enough to allow someone in debt to request a review from the court when there is a dispute as to whether the decision to refuse a request is reasonable. People with local authority creditors would also have the option of using their council’s complaints procedure if they disagree with a decision, and people with consumer credit lenders could use a firm’s complaints procedure to request a review. Concerns have been raised that applications for variation could occur too frequently, which is why a limit on making an application only once in any six-month period is included.

I understand that of the seven different earnings arrestments available in Scotland, variations are currently possible for five of them, which would include arrestments of funds for payments in a trust deed and sequestration, including variations by the Accountant in Bankruptcy.

I note that Citizens Advice Scotland supports the proposal. It says that it would still allow individuals to make a payment to their debts but at a more affordable and sustainable amount that does not cause financial distress and takes account of their individual circumstances. It also says that having the flexibility to apply directly to the creditor for consideration would remove the need for court involvement except where there is a dispute, freeing up court time and allowing greater communication between the parties involved. Moreover, it highlights that the restriction of being able to make the application only once every six months would ensure that it is not abused or overused but would be a genuine vehicle for flexibility.

Amendment 22, in my name, would introduce a new earnings arrestment model, which is effectively a protected minimum balance of £1,000, similar to that for bank arrestments. I proposed that revision to the model at stage 2. It is designed to address concerns that were raised about the cost to creditors, primarily local authorities. It has been brought to my attention that there is a minor drafting error in the tables that are provided along with my amendment, but those would be likely to have minimal impact. Amendment 22 is primarily a probing amendment.

My revised amendments would mean that the protected minimum amount would be increased to £1,000 for net monthly salaries, with no deduction being taken from net salaries below that amount. It would introduce a new threshold for calculation of deductions, and would change the current thresholds. No one earning less than £1,500 monthly would pay more than they currently do, and those who earn £1,500 each month would pay more, but only slightly more, with the increased amount increasing as net salaries increased. However, I am keen to hear what plans the Government has on that matter. As I indicated earlier, amendment 22 primarily a probing amendment.

Photo of Maggie Chapman Maggie Chapman Green 3:30, 6 June 2024

We need a clear statement in law that arrestment of benefits is not competent. I hope that I am not the only member who believes that it should not be possible to take away from people child or adult disability payments, Scottish child payments or any other benefits to which they are entitled.

My amendment 24 seeks to make that clear in the bill because, as Colin Smyth has already stated, that practice still happens. In earlier discussions, a similar proposal was criticised because it might be difficult for banks to know which money is which. However, that is addressed in amendment 24, with instructions to the court when an action under section 73M of the Debtors (Scotland) Act 1987 is raised.

Courts understand what is or is not a benefit payment. Bank statements can be used to confirm that. Therefore, I am not asking banks to determine what would or would not be competent. That is completely in line with what the courts held in North Lanarkshire Council v Crossan and Airdrie Savings Bank in 2008 and in McKenzie v City of Edinburgh Council in 2023.

Amendment 24 would put the issue beyond doubt. Because it also has an express waiver in it to prevent banks from being held liable, it gives them protections that they currently do not have. I believe that it would also reduce the need for the use of notices of objection. Currently, in many cases, the courts have held that, where funds are benefits, they are protected. However, because the decision of one sheriff is not binding on other sheriffs, the practice continues of taking benefit money, even when it has shown that it is benefit money.

Added to that, many people would not feel able to challenge such arrestments, as they do not want to go to court or are scared of doing so. I hope that the amendment will avoid their having to do that.

As we look ahead to changes in how social security in Scotland functions, thinking specifically about the forced migration of universal credit being rolled out, more people will likely have more than £1,000 in their bank account at certain points in the month, as their housing costs and support for their children will be getting paid with their universal credit. Scottish child payments will add further to the amounts of money that people might have in their bank account at any one time, so it is possible that the protected minimum balance of £1,000 will not be enough to help people.

Another criticism of the proposal is that it is not clear how the ban would interact with that protected minimum balance. My answer is that it is quite clear that it does not. If the arrestment is incompetent or void, the funds must be released in full and the protected minimum balance is not activated.

The situation is different when wages and benefits are mixed together. Then, the protected minimum balance is activated, but the arrestment of the benefit section is not competent, although the wage section is. It is then appropriate, under section 73Q of the Debtors (Scotland) Act 1987, for the court to decide on how much to release.

I ask that members across the chamber support amendment 24, as I believe that it gives people protection of the benefits to which they are entitled. I confirm that we will also support Colin Smyth’s amendments in the group.

Photo of Ivan McKee Ivan McKee Scottish National Party

As Mr O’Kane set out, amendment 17 proposes to create a requirement for ministers to annually review the protected minimum balance when bank account arrestments are executed and uprate the figure if it is materially lower than the inflation-adjusted figure, and to amend it through affirmative regulations.

The protected minimum balance is an important protection for individuals, so only funds above the minimum in a bank account can be attached by a creditor. The figure for the protected minimum balance was increased to £1,000 as recently as November 2022, following changes made by 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 was done 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 gave ministers the power to further vary the figure by negative procedure regulations. The power is there already. I believe that the existing power, which was approved just two years ago, is the appropriate method to change the figures. I do not think that we need the confusion of an additional power and an annual statutory obligation. The additional power that is proposed by amendment 17 also itself leaves some questions unanswered, such as what inflation measures should be used and when the figure should be measured in order to have regulations ready for the new financial year. For those reasons, the Government cannot support it.

I turn to amendment 10. At stage 2 of the bill, Colin Smyth lodged an amendment to clarify whether social security benefits can be attached by a bank account arrestment. The aim of that amendment was to protect funds wholly deriving from social security payments automatically and without the need for any challenge by a debtor. I agree with the intent of the amendment that was lodged at stage 2. Welfare payments should be protected for the purpose for which they are paid. I also agree that the issue needs some clarity.

However, there are some practical concerns that need to be considered, and we need to have an opportunity to consult with stakeholders on how best to address those matters. I have had the opportunity to speak to Mr Smyth about his previous amendment, and I am grateful to him for working constructively with the Government to find a workable solution on the issue, which we are happy to support.

Amendment 10 does two things. First, it requires the Government to consult on these issues. It seems entirely appropriate that that consultation should also address the correct mechanism and timing for the future regular uprating of bank arrestment thresholds. On the back of that commitment, I ask Paul O’Kane not to press amendment 17.

Second, amendment 10 creates an enabling power to introduce changes through regulation on the basis of that consultation. That enabling power is sufficiently broad to allow a range of solutions to meet the overriding aim on which we agree, depending on what is going to work best: either by stopping prescribed methods of funds in a bank account from being attached; by providing a simpler administrative process to get those funds released if they are attached; or, alternatively, by exploring other solutions that might come out of the consultation.

An enabling power will give us time to get to a solution that will work. Given that we are at stage 3 of the bill, that is better than putting measures on the face of the bill that might then not work in practice. That seems a reasonable approach, given that we are in agreement with the outcome that we want to achieve, and the debate is about how best to get there. As a safeguard, given that that is a broad delegated power, amendment 10 requires the Government to make a statement to Parliament giving details of the responses to the consultation, what specific changes it proposes as a result of the consultation and its reasoning.

Colin Smyth has also lodged amendment 19, which would introduce a new process into earnings arrestments, allowing a debtor to apply to their creditor to amend the amount of earnings that are arrested, to take account of their household circumstances. I understand that, during the Economy and Fair Work Committee’s evidence session on the bill, it heard from stakeholders who drew attention to cases of debtors struggling as a result of a deduction from their earnings. It was pointed out that, too often, a debtor seeks advice and support only after an arrestment of earnings has been imposed and, as a result, has missed their opportunity to engage with their creditor and agree the terms of repayment on a voluntary basis.

However, I have some difficulties with amendment 19, which mean that I cannot support it. It is not clear how it would work in practice, and there does not appear to be any consequence for a creditor who refuses to agree to a request or who simply ignores it. Meanwhile, the statutory obligations that it would impose on creditors are unclear. How is a compliant creditor to assess what is reasonable for an individual, and how are they to assess the accuracy of the information that the individual has provided? The answer, surely, is for the Parliament to set the right level once, for everyone, rather than ask every small business to have to assess what is reasonable for a family to live on.

I am sympathetic to amendment 19’s aim of making sure that earnings arrestments do not put individuals into unacceptable financial difficulties, but there has been no consultation with any of those creditors who would have to put its provisions into effect, nor with employers who would have to deal with a stream of requests to amend salary deductions.

As I will explain in a moment, I am committed to consulting on a different approach to the bandings for earnings arrestments, to reduce their impact on those who earn least. It strikes me that that will be a fairer and more effective way of addressing the issue.

Colin Smyth’s final amendment in the group—amendment 22—increases the monetary threshold above which an earnings arrestment can take effect. It would reduce the amount that a creditor can recover each pay period to repay the debt and, if a person earns less than £1,000 per month, it would remove altogether the ability to recover the debt through an earnings arrestment.

More than 90 per cent of earnings arrestments are served by local authorities seeking to recover unpaid council tax. They have found that diligence to be the most effective means of recovering debt. I have heard concerns from COSLA, and I understand that it has also written to the committee to outline concerns about changes to the current system of earnings arrestments and the potential impact that that would have on councils’ ability to deliver services to their communities. If amendment 22 were passed, the amount of council tax that is collected could be reduced by potentially up to £20 million a year. COSLA has also made it clear that local authorities use earnings arrestments only as a last resort, when someone has refused to engage with them over the debt.

Earnings arrestments are also a very valuable tool for the enforcement of court fines, and I am sure that none of us would want to make it easier for individuals to avoid paying fines of that nature. We need to strike the balance between protecting those who cannot pay and ensuring efficient enforcement against those who will not pay.

I am very aware that we are still emerging from a period of high inflation and that many families are still struggling with the impacts of the cost crisis, so I accept that we need to do more. I commit now to bringing forward to 1 April next year—two years earlier than would normally be the case—the next increase in earnings arrestment thresholds, and I will shortly launch a consultation to look at the bandings of earnings arrestments. My aim will be to ensure that those who earn less than £1,000 a month will see at least a 50 per cent reduction in the payments that they face, while councils and other creditors’ finances are protected by our asking those who earn more to pay more. On the back of those commitments, I ask Colin Smyth not to move amendment 22.

Maggie Chapman’s amendment 24 deals with an issue that was considered by the committee at stage 2 when it dealt with an amendment that was lodged by Colin Smyth. However, it takes a different approach to achieving the intended outcome and proposes some protection for debtors who might be excluded by a rule that requires that funds come wholly from social security benefits by discounting small amounts of payments of other specific kinds.

The amendment inserts new provisions into section 73M of the 1987 act, which sets out the process by which a debtor may object to the automatic release of arrested funds to a creditor. The grounds of objection that are available to a debtor include that the arrestment has been executed incompetently or irregularly. Amendment 24 would provide that an arrestment has been executed incompetently if it attaches funds that are derived wholly from social security benefits. It may not be the intention of amendment 24, but that approach seems to restrict any other reasons from being used to suggest that an arrestment has been executed incompetently.

Other than that, my concern is the same as with the original amendment at stage 2. I agree with the aim, but I believe that we need to engage with stakeholders in order to make sure that we achieve it in the best possible way. Therefore, although I am sympathetic to amendment 24, I urge Maggie Chapman not to move it on the basis that the alternative amendment 10 will ultimately be more effective in achieving the substance of what she wants to achieve.

The Government asks members to reject amendments 17, 19, 22 and 24, but to support Colin Smyth’s amendment 10 as the best way to progress further reform.

Photo of Paul O'Kane Paul O'Kane Labour

We have had a particularly constructive and helpful debate on the group of amendments and the issues that are raised therein. The minister perhaps summed it up when he spoke about the pressures that still exist given the volatile period that we have had with inflation and the uncertainty for people across the country in dealing with the cost of living. The amendments in the group seek to ensure that those who are in debt and are being pursued for that debt are given the right support to protect their incomes and the balances in their accounts, particularly where they are in receipt of social security.

I heard what the minister said about his view and the Government’s view of the provisions in the Coronavirus (Recovery and Reform) (Scotland) Act 2022 and the work that has already been done to increase the minimum balance. I recognise his view that there is a provision in that act that will enable him and the Government to vary that as required. On that basis and given the assurance from the minister, I will not press amendment 17.

We have also had an important discussion about Colin Smyth’s amendments in the group, which seek to ensure that there is more detail on protecting those balances. I welcome the minister’s interaction and collaboration with Colin Smyth in relation to amendment 10, which will require the Scottish ministers to fully consult on and test the principles, as Colin Smyth outlined. I also welcome the commitment that the minister made today to bring forward by two years the earnings arrestment levels, to look at them in far more detail far sooner than would otherwise have been the case, and to do that in the constructive way that he set out to Parliament.

On Maggie Chapman’s amendment 24, again, we understand and respect the principle and where it comes from. We would point to Colin Smyth’s work on amendment 10, but also to some of the concerns that have been expressed about devolved competence and the adverse effect that there might be if the restrictions were added to the 1987 act. Although I understand the principle and would support it, we have to be a little careful there.

It was important to have the debate on the group so that we can move forward in a constructive way with the Government, which I hope we will when we vote on the amendments.

Amendment 17, by agreement, withdrawn.

Photo of Liam McArthur Liam McArthur Liberal Democrat

Group 7 is entitled “Arrestment: duty of disclosure”. Amendment 18, in the name of Murdo Fraser, is grouped with amendments 20 and 21.

Photo of Murdo Fraser Murdo Fraser Conservative

My amendments 18, 20 and 21 address points that are discussed in paragraphs 127 to 134 of the committee’s stage 1 report. Sections 6 and 7 of the bill will introduce a new duty of disclosure on the arrestee. The arrestee—that is, the person who is in possession of the assets belonging to the debtor, which is usually a bank or other financial institution—will be required to tell the creditor when diligence has been unsuccessful. That is a new requirement that has been introduced. The arrestee must tell the creditor whether the arrestment has been successful within a specified time period of 21 days.

As the committee heard in evidence, the issue is that that would have a significant resource implication for banks and other financial institutions. The NatWest Group said in its submission to the committee that it would have to respond to approximately 70,000 arrestment requests every year, and that there would be no particular purpose in telling creditors that such requests had been unsuccessful. Currently, if they are successful, they are required to report, but if they are unsuccessful, they are not.

The proposal in the bill puts an unduly onerous requirement on financial institutions, so amendments 18, 20 and 21 propose a halfway house. The amendments do not entirely remove the obligation for disclosure, but they try to qualify that requirement and make it less onerous for financial institutions.

Amendment 18 relates to cases in which the arrestee must disclose information about bank arrestments that have been unsuccessful. It provides that the arrestee need disclose information to the creditor only when the creditor requests that information when it was not “under summary warrant procedure” and that that information should be provided

“as soon as reasonably practicable”.

Amendment 20 amends section 7 of the bill to say that a person should respond only to a specific request that has been made and amendment 21 says that a person needs to respond

“as soon as is reasonably practicable following receipt of the request”

rather than within 21 days. To my mind, those amendments strike a reasonable balance.

As it stands, the bill proposes a new and onerous requirement on arrestees to report. The cost of doing so may well be significant. I do not know if the minister has looked at the likely costs, but the banks tell us that they could be substantial. My amendments are not about completely removing the requirement to report; they are about trying to qualify it and to strike a balance between the interests of the creditor and of the arrestee.

The amendments seem to be a reasonable set of proposals. I submitted the same amendments at stage 2, when we debated the issue. The amendments were defeated by five votes to four on division. I hope that the minister has had time to reflect and will recognise the good sense of what I propose.

I move amendment 18.

Photo of Ivan McKee Ivan McKee Scottish National Party

The Scottish Government thanks Murdo Fraser for his amendments 18, 20 and 21. As we have heard, those amendments would remove the requirement for the arrestee—often a bank or employer—to notify the creditor in all instances when no property has been attached or when an earnings arrestment has been unsuccessful and would replace that with a requirement to notify a creditor only where that creditor specifically requests confirmation. The amendments would also remove the requirement for the notification to be sent within a defined period of 21 days of the arrestment schedule being sent, replacing that with a duty to respond

“as soon as is reasonably practicable following receipt of the request”

from a creditor.

Amendment 18 goes further because it prevents those who use summary warrants—including local authorities and His Majesty’s Revenue and Customs—from being able to request that information and it would, in fact, exclude the vast majority of arrestments from that duty.

The proposals in the bill come from the report by the diligence working group, which included representatives of the Committee of Scottish Bankers, HMRC, the Society of Messengers-at-Arms and Sheriff Officers, ICAS and debt advice charities. When we consulted on the recommendations in 2022, more than 90 per cent of respondents supported those moves, with those supporters including sheriff officers and creditor representatives such as the Association of British Credit Unions, which said that notification from the banks that arrestment has been unsuccessful will be essential to future decision making.

We agree that we do not want to put an unnecessary burden on the banks and we will, of course, have the flexibility to determine when those sections of the bill will come into force. That will give us time to work with banks, employers and sheriff officers to ensure that the reporting burden is kept to an absolute minimum.

Something strange is going on in the world of bank arrestments. Although around 200,000 are served every year, the latest figures from SMASO show that only around 2 per cent result in any money being returned to creditors. That suggests that everyone in the system is having to do a great deal of potentially unnecessary work. We will not be able to understand why that is happening or to put things right until we know more about what is happening in every case.

The amendments were considered and rejected by the committee at stage 2. As my predecessor did then, I again urge members not to agree to them because they have the potential to prevent or delay creditors receiving important information and will leave us without the evidence that we need in order to determine how to improve the process. For those reasons, the Government does not support amendments 18, 20 and 21 and I ask Murdo Fraser not to press them.

Photo of Liam McArthur Liam McArthur Liberal Democrat

I call Murdo Fraser to wind up and to press or withdraw amendment 18.

Photo of Murdo Fraser Murdo Fraser Conservative

I did not hear the minister say whether he had looked at the likely cost to the banks of introducing this new measure. If he would like to intervene on me, I am happy to give way.

Photo of Ivan McKee Ivan McKee Scottish National Party

As I indicated in my remarks, we are very keen to engage with the banking sector to understand this process and the burden that it places on the sector; to work with it on the automation of solutions to make the process as easy as possible to implement; and to take evidence from it on potential costs that might be incurred as a consequence, which we would do in advance of setting the date—in consultation with the sector—for when the measures would come into force.

Photo of Murdo Fraser Murdo Fraser Conservative

I thank the minister for that clarification. I am aware that he has been engaging with the financial services sector on these matters. In light of the assurances that he has given us, I am happy not to press or move the amendments. I withdraw amendment 18.

Amendment 18, by agreement, withdrawn.

After section 6

Amendment 10 moved—[Colin Smyth]—and agreed to.

Section 7—Diligence against earnings

Amendment 19 not moved.

Amendments 11 to 14 moved—[Colin Smyth]—and agreed to.

Amendments 20 and 21 not moved.

After section 7

Amendment 22 not moved.

Amendment 24 moved—[Maggie Chapman].

Photo of Liam McArthur Liam McArthur Liberal Democrat

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



Photo of Liam McArthur Liam McArthur Liberal Democrat

There will be a division. Members should cast their vote now.

The vote is now closed.

Photo of Craig Hoy Craig Hoy Conservative

On a point of order, Presiding Officer. My app either froze or something odd happened to the screen. I would have voted no, although I note that it might have been recorded.

Photo of Liam McArthur Liam McArthur Liberal Democrat

I assure you that your vote was recorded, Mr Hoy.

Photo of Richard Leonard Richard Leonard Labour

On a point of order, Presiding Officer. My app locked me out. If it had not, I would have abstained.

Photo of Liam McArthur Liam McArthur Liberal Democrat

Thank you, Mr Leonard. I will ensure that that vote is recorded.

Photo of Monica Lennon Monica Lennon Labour

On a point of order, Presiding Officer. I could not connect—I am still trying to connect. I would have abstained.

Photo of Liam McArthur Liam McArthur Liberal Democrat

Thank you, Ms Lennon. I will ensure that that vote is recorded.

Division number 5 Bankruptcy and Diligence (Scotland) Bill: Stage 3

Aye: 10 MSPs

No: 83 MSPs

Aye: A-Z by last name

No: A-Z by last name

Abstained: 21 MSPs

Photo of Liam McArthur Liam McArthur Liberal Democrat 3:45, 6 June 2024

The result of the division is: For 10, Against 83, Abstentions 21.

Amendment 24 disagreed to.

After section 8

Amendment 25 moved—[Maggie Chapman].

Photo of Liam McArthur Liam McArthur Liberal Democrat

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



Photo of Liam McArthur Liam McArthur Liberal Democrat

There will be a division.

The vote is closed.

Photo of Clare Haughey Clare Haughey Scottish National Party

On a point of order, Presiding Officer. I was unable to connect. I would have voted no.

Photo of Liam McArthur Liam McArthur Liberal Democrat

Thank you, Ms Haughey. I will ensure that that vote is recorded.

Division number 6 Bankruptcy and Diligence (Scotland) Bill: Stage 3

Aye: 32 MSPs

No: 83 MSPs

No: A-Z by last name

Photo of Liam McArthur Liam McArthur Liberal Democrat 3:45, 6 June 2024

The result of the division is: For 32, Against 83, Abstentions 0.

Amendment 25 disagreed to.

Photo of Liam McArthur Liam McArthur Liberal Democrat

That ends consideration of amendments.

As members will be aware, at this point in the proceedings, the Presiding Officer is required under standing orders to decide whether, in her view, any provision of the bill relates to a protected subject matter—that is, whether it modifies the electoral system and franchise for Scottish parliamentary elections. In the Presiding Officer’s view, no provision of the Bankruptcy and Diligence (Scotland) Bill relates to a protected subject matter. Therefore, the bill does not require a supermajority to be passed at stage 3.