I am pleased to have the opportunity to appear before the committee to discuss the issues and the concerns that have been raised in connection with the common financial tool, as applied to Scotland’s statutory debt solutions.
I recognise that I have twice withdrawn the regulations, and I accept that that is unusual. I want to be clear that I do not intend to make that a habit when it comes to bringing secondary legislation to the committee. The first time that the regulations were withdrawn, it was done in response to stakeholder feedback, as we had been told that people needed some more time to get ready for the regulations coming into force. The second time that the regulations were withdrawn was due to the concerns that this committee had heard, which I wanted to explore further.
I am aware that the committee has already taken evidence from two panels of witnesses on the adoption of the standard financial statement. I welcome the fact that the committee has written to me following the evidence sessions to set out some of the concerns that have been identified. As you will have noted from the letters that Richard Dennis and I have sent to the committee since those evidence sessions, I am still of the view that we should move to adopt the SFS, but I recognise that the concerns that have been expressed need to be discussed and addressed. The letters that have been sent set out my position in relation to the concerns, so I do not propose to go into that in detail just now. I am, of course, happy to explore those matters during today’s session.
My overriding concern is that the continued use of the common financial statement, which is, of course, the tool that is currently used even over the short term, could be detrimental to people in Scotland who are faced with problem debt. That will be the outcome if the current regulations remain in force.
The committee has taken evidence to the effect that there should be consideration of an entirely new way of assessing contributions that are made in insolvency, and the experience of other countries and the models that are used elsewhere have been highlighted. That opens up a debate that is welcome, because we should always look to learn from others and improve the regulatory landscape in Scotland.
That would require consultation and a far more detailed assessment of the wider impact of such a change. I am happy to have those discussions, and plans are already in place to consult on the reforms that were introduced in 2015. However, the legislative process will be slightly more longer term.
We have a decision before us in the simplest terms. The choice at present is straightforward: we either remain with the status quo and use the CFS, or we switch to adopting the SFS as the common financial tool. For the reasons that I have set out, I remain of the view that the adoption of the SFS provides advantages for those who are dealing with debt, which is critical.
As the committee will know, I met stakeholders last week to find out at first hand the practical issues that have arisen in relation to the common financial tool and its application. I invited all those who had provided evidence to the committee, and many of them attended. The discussion was enormously helpful, and it revealed to me that the concerns from the advice community are predominantly about the application of the common financial tool, either under its current guise, the CFS, or under the proposed SFS, rather than about the tools themselves. That brought into sharp focus the need for ever closer collaboration between the Accountant in Bankruptcy and the advice community in order to develop and agree guidance that affords the flexibility and pragmatism that are required.
I think that everybody around the table agreed that we desire a system that serves to protect those who are in a financially vulnerable position, and one that does not create an unnecessary administrative burden for all those who are involved. That aspect is critical, and it is a priority that the work on revised and agreed guidance progresses apace.
The meeting also touched on a more general debate about the other models. As I have made clear, that is open for discussion through the planned policy review of the reforms that were introduced in 2015.
My next proposed steps are that we engage quickly with stakeholders. The standing working group that looks at the common financial tool will meet tomorrow to discuss the guidance that should accompany any new regulations, and the concerns about the burden of evidence that is required through either mechanism. Those whom I met last week, many of whom were already on the working group, will be involved in the process. That will ensure that we have revised clear guidance for the operation of the common financial tool when it is in place, and that we secure buy-in to the process. I am very keen for the committee to be part of the process, too.
Once the guidance is in place, I plan to provide the revised guidance alongside regulations to introduce the SFS, which, at present, I plan to lay before Parliament in the new year. I look forward to discussing the issue with the committee this morning.