Economy and Fair Work Committee [Draft]

Meeting date: Wednesday, September 27, 2023

Official Report 735KB pdf

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Bankruptcy and Diligence (Scotland) Bill: Stage 1

We now move to our next item of business. This is our third evidence session on the Bankruptcy and Diligence (Scotland) Bill. Today, we will hear from creditors. I welcome Andrew Fraser, president, and Roderick Macpherson, honorary secretary, at the Society of Messengers-at-Arms and Sheriff Officers; and Cheryl Hynd, council revenues manager, and Elizabeth McCrossan, senior transactions officer, at the City of Edinburgh Council. Questions will be directed to your organisations, so it would be helpful if you could decide among yourselves who will answer.

I will start. One of the proposals in the bill is to require banks and others who are subject to an arrestment request to provide information about why arrestment has been unsuccessful. We have heard some evidence from banks that that would be too onerous a duty to place on them. If there was a requirement for banks to share such information, would that be helpful? I put that to the City of Edinburgh Council first.

I will respond to that from an efficiency of process point of view. I have listened to some of the evidence that was given at previous committee meetings. At the moment, we do not know whether a customer is with a particular bank. Banks might have an order sent to them regarding a person who is not their customer. If we were aware, when an order has failed, that that was because the person was not their customer, our debt partner could streamline its process. At present, it uses something that is almost like an algorithm to gain knowledge of the local area and of the banks that customers in those areas tend to use. That knowledge is built up over time.

From my point of view, that approach would probably be more efficient because you would be asking the appropriate bank. The other side of the coin is that it would streamline the process if we knew that an arrestment had failed because there were no funds in the bank. When knowledge is built up over time, we only ask the banks that we know those customers are members of, not three or four different banks.

Would local authorities tend to put in a lot of requests at the same time? The banks spoke about the volume of work that that would create because they get bulk applications.

We use a debt partner to do arrestments on our behalf. I spoke about its knowledge at the start. It would know that customers in a particular part of Scotland, for instance, tend to use a particular bank and that would be the first bank that it would request the moneys from. I do not know whether that answers your question.

That is helpful. As a supplementary question to that, is going through a collection agency a successful process? If you are dealing with people who have resources in the bank, is it a useful tool?

It is. Our debt partner chooses which form of diligence is most appropriate for a particular customer. The levels of earnings in the bank have increased, so that in itself helps to protect the debtor. Knowing that someone does not have the funds would mean that you would not keep asking the same question and would perhaps use a different diligence route to engage with those customers.

To be clear, we undertake a lot of engagement before we would pass a case to our debt partner. Early engagement is always the first step for us, and making sure that our citizens have access to assistance, so that we can help them with their debt before it gets to that stage. Passing information to our debt partner is quite far down in our process.

I will come to our other witnesses. Do you have any views on what the proposal would result in? Would it lead to additional costs? Do you have any concerns about the proposal?

Thank you for inviting the Society of Messengers-at-Arms and Sheriff Officers. You introduced us as representing creditors, but we do not. We are the officers of court. We have huge experience of creditors, large creditors and party litigants who come to the offices of our members wanting to have documents served or decrees enforced. Some of our members work very closely with councils, such as are represented here, but we do not represent creditors.

Apologies for that inaccurate description.

Thank you.

I had wanted to tell you that I might be one of a small number of people who have given evidence in front of a Scottish parliamentary committee in two different centuries—thank you for inviting us for a very long time—but I discovered by looking at my 25-year diary that I turned up on 11 January 2000. We as a society are very grateful for the involvement that we have had from the very earliest days of the Scottish Parliament.

The Bankruptcy and Diligence etc (Scotland) Act 2007 created a revolution in the law of arrestment. Before then, arrestment was an inchoate diligence; it did not of itself transfer the arrested fund from a debtor to a creditor. However, the work of the Parliament on that legislation created what many of us think was a huge step forward in allowing for the automatic transfer of arrested funds through arrestment.

One of the things that is lacking from the changes that were made in 2007 to the primary statute, the Debtors (Scotland) Act 1997, is that, although arrestees, which are usually banks, have to let the arrester—the creditor—know within three weeks how much has been arrested, they do not have to tell them if nothing has been arrested. Of course, from a creditor’s point of view, they want to know what has been the outcome of that particular arrestment. At the moment, an officer of court will tell them that, if they have not heard within three weeks, nothing has been arrested. I think that many creditors would prefer to be told that nothing has been arrested and to get as much information as the law provides for the arrestee to disclose in those specially privileged circumstances of an arrestment being served lawfully.

The debt advice and information package is a key tool for communication with debtors. Are there ways in which its use be improved? I put that to Cheryl Hynd first.

I mentioned early engagement at the start. For us, that is about collaboration among as many agencies as possible, including our advice shop, and about making the website as accessible as possible and arming people with information about what they can do should certain things happen.

Most of our communications, whether via email or letter, have links to those support mechanisms for citizens. Our advice shop—the one that is within the council—and citizens advice bureaux have links to information that we have to support citizens. In addition to the debt advice pack that is provided to people, early engagement means that people get access to as much information as possible, including about benefits that they could potentially access or reliefs and exemptions that they are not claiming that they could be due.

The key message that we want to get across is that we should be assisting people before an issue gets to the stage where it becomes overwhelming, and we should be making sure that everybody speaks to each other in order to get the best for citizens.

We are looking at where there are gaps in that information flow. Where are the gaps? How could the information flow be improved?

The gaps could be if someone is not able to speak to someone. We are talking about early engagement, but maybe people are not in a place to be able to engage. Part of the bill has to do with the mental health moratorium. I guess that the information flow could be improved by talking to other agencies and making sure that, in addition to the particular professional role that they play, they are also signposting folk to the available help in the early stages. To me, it is all about education and making sure that we all have as much information as possible to assist citizens.

I want to get in my head what dimensions we are talking about here. How many arrestments do you deal with in a year, roughly?

I would probably need to get that information directly from our debt partner, but it is a very low number. It did a piece of work for us when the levels changed from £500 and upwards, to see what the implication would be, but arrestment is not the first action that it would go to. In relation to our case load, the percentage of bank arrestments is low.

Roderick Macpherson, do you want to comment?

Perhaps I could suggest that Andy Fraser could.

First and foremost, the information that is contained in the debt advice pack must be improved. Although to you or me it is possibly a small leaflet, getting people who are in debt to read it and to make use of the information in it is a challenge in itself.

We would support people receiving the advice packs at the outset of a court action. It is often the case that they only receive it after a decree has been granted and the die has been cast, as it were, and they are possibly not in a good state of mind to deal with it. Having all the information at the start of an action would be much more useful to them.

You mentioned that it is not a big booklet but that people have a block against reading it.

Yes.

Is there a way past that?

That is above my pay grade. It is my opinion, and the opinion of many officers of court, that the debt advice pack itself has to be improved and has to be more concise.

You said “more concise”. You were talking about a fairly modestly sized leaflet a few minutes ago.

It is.

How can we make it more concise?

I do not have an answer for you about that but, in the real world, getting people to read something like that is sometimes a challenge.

In your experience, that has been a recurring problem.

Yes.

That is interesting.

I will move on to something else. The Scottish Government intends to use regulations to introduce information disclosure orders and to add inhibition to the options that are available under a summary warrant. Do you support the introduction of information disclosure orders? If so, how will they improve the diligence landscape for creditors? I will come back to Cheryl Hynd on that one.

Inhibition is one method of securing funds. In terms of the detail on that, I ask Elizabeth McCrossan to comment. She is one of the technical people in the team and has looked into that in some detail. She also has a law degree. I am very impressed that she knows more about the bill and about inhibition.

09:30  

I cannot speak to the policy journey behind the bill. What I can speak to is the customer-facing interactions that I have every day.

I know that we have moved on from the discussion about the debt advice and information package, but I will just add something on that. It is only a 16-page pamphlet, but nowhere does it mention how a person would go about applying for a moratorium. It does not alert them to the fact that a moratorium exists currently. It is mentioned only briefly on page 15. The wording of the pamphlet could certainly be improved on.

Putting that aside, as far as obtaining a certificate of resources is concerned, I think that that would be very useful to creditors, although we have some measures in place already when we conduct due diligence before deciding what action to take against a debtor. We have resources such as Registers of Scotland and the credit agency reports that we can access. They are not always very thorough in terms of telling us how much somebody has in their bank account, which might certainly be useful because that could be relayed to our sheriff officer partners before they even consider doing a bank arrestment, for example. Why go to the cost of conducting a bank arrestment if there is no money in the bank account? If we know that information ahead of time, that could be very useful.

However, I am a little bit concerned about privacy issues. If a creditor or anybody else has the right to ask how much a person has in their bank account, could a person not raise objections about that being a breach of their human rights, their right to privacy and so on?

It is a good idea and it would be useful for creditors, but I do not think debtors would like it very much.

Do the sheriff officers have a view?

The disclosure of information is the biggest improvement possible in the work of the Parliament so far as the effective use of diligence is concerned. The provision is set out in part 16 of the 2007 act. It was enacted that there would be a system for the disclosure of information in circumstances in which parties who had gone to court and had obtained their decrees wanted information that would allow them to enforce their decrees or their documents of debt. Since 2007, no system has ever been commenced for the disclosure of information.

I mentioned that we are not the creditors’ agents. Officers of court are neutral between the parties, but when a party litigant comes to our office and says, “I have been to court. I have gone through every step in the procedure and the sheriff says I am entitled to be paid this and now you’re telling me that, because I do not know where my debtor has a bank account, because the debtor doesn’t own a house, because the debtor isn’t carrying on business and has no business assets, there’s nothing that you can do at the moment to enforce my decree.” From that point of view, I can certainly say that there is a great longing for a system of disclosure of information because, in the old days when there were only the clearing banks, when people wanted to carry out a bank arrestment, they would ask the sheriff officer to arrest with the main banks.

There are so many banks now that it is impossible to think that people would pay all those different fees for arresting with different banks. If the debtor does not choose to voluntarily make payment, whether a creditor who has obtained a decree will be successful depends on the quality of their information. Therefore, to have a system of controlled access to information about where bank accounts are maintained would be a fundamental step for Parliament to take to allow for the precise enforcement of decrees.

There is one final issue that I want to raise. What impact will the addition of inhibition to the summary warrant options have? Will it make things better or worse for debtors who own their homes?

At the moment, we have inhibitions in place, and we remind citizens that they are in place, because they can choose to pay funds at any stage. Sometimes, people do not pay until they leave a home, which might be in sad circumstances because someone has died and that is when the asset is sold. That is a long, protracted period. For me, it is a case of supporting a person to be able to continue to pay for services and so on. It can be a long time between lodging an inhibition and renewing it, but people in that position are reminded annually that they do not need to pay until the asset is sold.

On balance, we know that there will be funds there, but councils need to collect moneys for services. A balance needs to be struck, because if we do not collect funds, we will not be able to provide other services such as bin collections and so on. We have to strike the right balance between appropriate diligence action and collection. Inhibitions serve a purpose, but they are not a catch-all if someone owns their home.

Personally, I am not very happy with the idea of an inhibition being sought simply on the back of a warranted account. I do not have statistics to hand, but I am sure that we have many thousands of accounts that are currently at the warrant stage, which have been passed to sheriff officers for collection. Seeking an inhibition is like a next step forward. It is usually a warrant that is given within the wording of the decree itself that is awarded to the creditor. Our usual practice is that, once we have a decree, we immediately look to obtain an inhibition, but there is no point in doing that if the person does not own any heritable property. There would be a huge cost in allowing our sheriff officers to make that decision if they were charged with trying to find out whether the debtor owned heritable property that an inhibition would have an effect on. I feel that the warrant stage is a little bit too early in the process for that to happen.

An inhibition is quite an advanced type of diligence. We enter that stage only after we have done due diligence. We check things such as the make-up of the household and whether, for example, there are young children in the home. We would not necessarily want to encourage someone to sell their property in order to settle their debt but, with an inhibition in place, it acts as a form of security, in a way. If the person is financially able to move to a smaller property, say, that inhibition would still have effect, because it is a personal diligence that applies to the individual and not to the property that they currently live in. I am quite actively involved in obtaining inhibitions, but I feel that it is a bit too early in the process to seek an inhibition simply on the back of a warrant. There are other interventions that can be made before we get to the stage of seeking an inhibition.

Perhaps I can ask the sheriff officers if they have a view.

First, you do not require a specific warrant to serve an inhibition—it can be served in any ex facie decree. Inhibitions are not used randomly. Elizabeth McCrossan is quite correct to say that they would not be used in a lot of cases. Many people who owe council tax might be council tenants who do not own any heritable property. However, it is a further way to seek security over a debt. I think that the use of inhibition would be supported across our profession as another option, given how limited our powers are at the moment.

If I may, I would like to come back to the question about information disclosure orders. Roddy Macpherson mentioned the fact that, with the powers that we have at the moment, we have reached a position where there is no longer access to justice for creditors. That has become more and more apparent, given the implementation of the simple procedure rules, wherein more and more party litigants are raising their own court actions. They no longer have a solicitor to guide them and they often do not seek any help from Money Advice Scotland or a citizens advice bureau. They go through the courts and arrive at our doors. We go through the process and help them as much as we can. I can assure you that dealing with somebody who has no idea or perception of legal process is extremely time-consuming. As Roddy Macpherson said, we are the first people to tell them, “Without a bank account or employment details, we can’t recover your debt.”

I ask members to walk a mile in another man’s shoes and put themselves in the position in which they have a decree against somebody. In this country, we have reached a stage where, without information disclosure orders, decrees from our courts are unenforceable because of lack of information. If information disclosure orders are introduced, the next step has to be for HM Revenue and Customs to be accountable when it comes to obtaining people’s employment details. As far as we are aware, there is no other country in Europe where a court decree after a hearing is unenforceable.

Good morning. I want to ask about other aspects of reform. This is a very narrowly focused bill, so there are issues that are perhaps not covered by the bill that we have heard raised by other witnesses. Specifically, we have heard calls in relation to minimal asset process bankruptcy. At the moment, individuals can apply for minimal asset process bankruptcy only once every 10 years. Calls have been made for that period to be reduced, perhaps to five years, or for the time limit to be removed altogether. Does anybody have a view on that as a potential addition to the bill? If you have no view, that is absolutely fine.

Our society has no view on that.

Perhaps I could add my personal point of view on that. I would be concerned about allowing someone to apply for a minimal asset process bankruptcy every five years. I do not mean this condescendingly, but we all know that there are people in the world who have never learned how to deal with their financial affairs. It might be an educational thing or it might be to do with their upbringing or whatever. There are certain people who will apply for a minimal asset process bankruptcy and simply run up new debt. They would be able to run up new debt very quickly to quite a high level within five years, and they could then apply again.

09:45  

How many times would they be allowed to do that? For every application that is made, that is debt that is written off. For a local authority that is very reliant on recovering debt income as much as possible, that would be a huge loss when there are other measures that might help, such as encouraging the person to make a payment arrangement. I think that every five years is a bit too—

Thank you. That is very helpful. Are there any other areas of bankruptcy reform, whether within or outwith the bill, that you think should be highlighted? I am sorry—I realise that that is a very open question.

In our submission, our society has mentioned a very narrow aspect. However, it is a very practical point because, with a bankruptcy action, it is necessary to serve the document on the person personally—at least, under the first deliverance of the accord, only personal service is acceptable. At present, the law provides a very narrow window for the service of a bankruptcy petition—it must be served no more than 14 days before the hearing and no fewer than six days before the hearing. I think that most sheriff officers find that quite an extraordinary position to be in. We can understand that, for such an important appointment as a bankruptcy hearing in court, the person receiving the document should have plenty of time. Therefore, we can understand there being a minimum period of six days. However, why should there be a requirement that the person is not given too much time? I do not think that there is any other circumstance in which we are in a position in which we are unable to serve a document until a certain date has arrived.

Our submission mentions the difficulties of covering rural areas and the islands of Scotland and of having to arrange a visit that fits within a period of eight days, given that the journey can often be followed by the news that the person is on holiday and will not be back for another week. That makes us suggest to the committee that it might look to widen the period in which it is competent for a bankruptcy petition to be served.

That is a very practical point—thank you for raising it. Do our witnesses from the City of Edinburgh Council have anything to add?

No.

No.

That is fine.

Good morning to the panel. Can I raise a number of questions about the mental health moratorium working group? The working group has recommended that only those in compulsory treatment should be able to access a mental health moratorium, which is quite a narrow criterion. It is narrower than the definition in England and Wales. Does any of the panel have a view on that approach that they would like to share with the committee?

We will come to the City of Edinburgh Council first. In replying to Mr Smyth’s question, could you address how you would deal with a debtor who had mental health problems at the moment?

There is a moratorium that people can access at the moment, regardless of whether they have mental health issues; it covers everybody. I am aware that the mental health moratorium is narrower and is for a particular group of people. I am not in a position to comment on the criteria, because I am not a mental health professional, but for us, once a decision has been made, it is about the support that is in place for those citizens and our other citizens so that they can access information and make choices. Sorry—I have lost the thread of what you asked there, Colin.

Following up on that point, you talk about the standard moratorium that is in place at the moment. That provides a six-month window, which has increased from the six weeks that it was previously. There is a big debate as to what that timeline should be now. Is six months an appropriate period for the second phase of the mental health moratorium, which our witnesses last week said should be the case? In the work that you do, do you detect that that period of time is sufficient?

Because I was coming here today, I had a meeting with colleagues from our advice shop to see how often they have recommended a moratorium for our citizens over the past year. The time that they recommend that someone go for a moratorium is when there is diligence action on the horizon, rather than automatically at the beginning. I know that some agencies automatically apply for the moratorium for a citizen, but it is not necessarily the case that they need it at the beginning, so that would probably eat into some of their time for making an appropriate decision on their direction of travel.

Is six months a long enough period of time? Having listened to the evidence at some of the previous committee meetings, I wonder whether, if someone is in a mental health crisis, they are even in a position at that time to be able to listen to the information that is given to them and to then start the timeline. Without statistics to be able to back that up, I am loth to say anecdotally. I think that there needs to be evidence to say, “This is why and here is the access,” and lots of other channels need to be looked at to see whether there is a blocker in a particular advice sector or whether it is because they are not able to access appropriate services in the national health service that will get them into a place where they are able to speak about things.

That is a bit of a non-answer, because I think that it needs to have facts around it to allow us to make effective suggestions for people.

I realise that the moratorium that is currently available is designed to serve a particular group of people, who are mostly people who are not in any mental health crisis but who are just unable to deal with their debt. The six-month moratorium gives them a period to consider what statutory debt solutions they might choose to follow, such as entering a debt arrangement scheme or signing a trust deed. That six-month period is to give them time to consider all those options.

The new moratorium is based on a completely different premise. It is for people who are unable mentally to deal with their debt. As we all know, there is a huge range of conditions that could be considered mental illness, from basic anxiety to depression to all-out psychosis. A period of six months to help somebody to deal with those issues may seem rather short because, in my own experience of dealing with mentally ill patients, it can take an awful lot longer than six months to resolve some of these anxiety issues. Some of them may even last a lifetime.

In England, there is the extra provision of a 30-day breathing space at the end of the moratorium period. To my mind, that would not work, because the initial phase of the moratorium of six months is to help somebody seek medical assistance to get over their mental health issues, if they ever do. The idea of adding on 30 days in England was that, once people have been removed from the moratorium, they will have time to get their financial affairs in order. If you have built up debt over 10 years, for example, you will not be able to get your financial affairs in order in 30 days, so I do not think that that extension is very useful.

It would be much better, in my view, to have people in the background during the moratorium period who can assist with the financial aspects of the person’s difficulties while they are receiving treatment. It could be as simple as perhaps increasing powers of attorney. It would be great if somebody could have power of attorney to handle the person’s financial affairs. I realise that a person has to have the mental capacity to grant a power of attorney in the first place, but many people will have that capacity if they have not quite reached a severe level of mental distress. The two aspects can then be dealt with at the same time during the moratorium.

I also have a bit of an issue with the compulsory treatment order being a requirement to access the moratorium. I try to put myself in the shoes of a person in this situation: I would perhaps consider it humiliating or insulting. It smacks a little bit of the sentences that are handed out in some criminal cases where people are subject to drug rehabilitation orders, for example. It smacks of a coercive system that may not always be appropriate. Most of our debtors are decent people who are very keen to pay all their bills and pay their council tax. They might just have come across a brief period of instability; perhaps they have had a bereavement in the family or they have been ill. The last thing that that person would want is to be subject to a compulsory treatment order. It smacks of somebody being sectioned and detained in a mental institution for a period. I just have a bit of a problem with that whole concept.

Somebody in that circumstance would be in phase 1, which would last as long as the compulsory treatment, but somebody who has not had a compulsory treatment order would have only the six-month period. Is your concern that that six-month period may not be long enough for somebody with a mental health problem to deal with their debt?

That is true. When people are receiving treatment for mental health issues, I believe that it can take an awful lot longer than six months to resolve those issues. It might even take a lifetime. Perhaps there is an option to extend the moratorium period to allow them to continue with their treatment but only while there is provision in the background, say, for somebody with power of attorney to keep their financial affairs running while they are receiving the treatment.

It comes down to dignity. If I was that person, I would feel ashamed and humiliated if I thought that my debt was left sitting untouched for six months. If the moratorium period was extended, that debt would still be sitting there—it would not be going anywhere. However, if there was somebody else in the background, through the money adviser system perhaps, who could take over the role of making a payment arrangement, for example, or applying for direct deductions from benefit if the person was entitled to benefit, at least the debt would be being addressed. That is all to the benefit of the debtor who is going through this crisis and who needs somebody to be taking care of their financial affairs on their behalf.

10:00  

Good morning to the panel. Thank you for joining us this morning.

I want to continue Colin Smyth’s line of questioning about the mental health moratorium. Earlier, Cheryl Hynd highlighted the importance of early engagement with the debtor and of the people the debtor speaks to being able to signpost them to appropriate information.

Given what we have heard—and Elizabeth McCrossan’s comments were helpful—how do we make sure that you have the tools that you need to support the people who are at crisis point, whether it is in the pre-moratorium phase or in the moratorium phase itself? What are you looking for in this legislation to enable you in terms of information, powers or capacity for direct engagement with the debtor and the creditor, which might be the council or might be someone else?

For me, it is about education, and you cannot put that into a bill. It is about making sure that people have the information and—it might seem small—that we have appropriate processes to efficiently use the resources that we have to support these citizens and that everybody does it in a collaborative joined-up way.

I know that I talked about early engagement. As a council, we have lots of touch points with our citizens daily. We work closely with our advice shop and we will put a referral through if we need to for one of our citizens. The advice shop will then take them through the appropriate support that is there for them. We also have a collaborative group with our Citizens Advice Scotland colleagues that makes sure that we do things in a joined-up way. Also, it is a subject that the Institute of Revenues Rating and Valuation, which we are part of, talks about. The Improvement Service is there as well, making sure that all 32 councils talk about and support and do it in a joined-up way.

It is about as many people as possible have conversations. You do not necessarily need to put something in legislation. It is about education and making sure that the information is clear and concise—to go back to Andrew Fraser’s point about the debt pack. Also, there are different media. When we are doing training, it could be through a video, because a lot of folk access information in that way rather than having to read it. It is about making sure that folk have access to information in a way that they understand and, if they are not able to do that, that the support is there for them.

Thanks—that is helpful. The mental health moratorium working group has recommended that the six-month moratorium period could kick in after some of the medical treatment for crisis care, but that would involve stopping debt enforcement, freezing interest and stopping creditor contact. How would that affect your current engagement with debtors? What would change in how you are able to interact with them?

It is about having appropriate systems to record that information. We are not in a place to decide whether someone fits into the criteria, so we would be part of the process. I assume that we would receive some form of notification to say that a citizen is experiencing this and that they are in the mental health period. We would then have systems in place that would hold any contact with that citizen for a set period.

Thanks. Roderick Macpherson, how would the moratorium, and the timing of it, affect the people you interact with, whether they are in arrears or creditors?

Our profession is sensitive to and supportive of the work of the Government in looking to create a mental health moratorium. In our submission, we briefly said that you need to create a system that works in practice. It needs to be clear for the officers of court, so that we understand exactly the situations in which people find themselves. It also needs to be equitable among the different stakeholders.

I would make one little point. A person with a mental ill health diagnosis who, from a certain way of looking at what the mental health moratorium should involve, would certainly qualify, may have granted a power of attorney or they might have a guardian or business advisers who can assist, or they might possess great wealth. In terms of being fair to all the stakeholders, we present this point: if a party has the power of attorney, the attorney’s job is to ensure that the assets of that hypothetical person are dealt with as that person would have wished to have dealt with them, and that debts are paid as that person would have wished debts to be paid.

Therefore, if a system were to miscarry to such an extent that it could be said that the debtor has £1 million on deposit at the bank and the creditor happens to be a small tradesperson who has been through court and has a decree for £500 and that creditor is prevented, because of the moratorium, from ever being paid, that would be far from equitable. There are some grey issues to be considered about what is fair between the different stakeholders. However, we are mindful of and appreciate the stress that a person may end up feeling in a debt situation.

We also call to your attention the fact that different stress levels are involved in the different diligences that the law has provided. The most stressful of all would be the execution of an exceptional attachment order, which was made law in 2002 and would involve, if necessary, the forcing open of a dwelling house and the officer of court going in and valuing and removing assets from the house. These procedures are so rare that I can say that, in all the time since 2002, I have never carried through an exceptional attachment order—they really are exceptional. Nevertheless, the fact is that, if someone is anxious about what might happen if sheriff officers come to call—this is all part of the reason for having the mental health moratorium—the exceptional attachment order is definitely at one extreme on the spectrum of intrusiveness.

However, I ask you to consider the effect of the bank arrestment. It involves no visit to the person’s house; rather, it involves a visit by the sheriff officer to the bank and a letter from the bank to the person, reporting that an arrestment has been carried out and that a certain sum of money has been attached. You know, of course, that Parliament has set a level of deductions that can be taken: there needs to be a protected minimum balance of £1,000 in a bank account that is not being operated for business purposes.

In my extreme scenario of the debtor with mental health issues who has £1 million in the bank, the act of an arrestment to allow the tradesperson to be paid the £500 out of that sum on deposit is on a completely different level of stress from the prospect of a sheriff officer coming with the power of entry and going into a house in the exceptional circumstances provided by the law since 2002 for exceptional attachment orders. To be fair to all the stakeholders, I am sure the committee will bear this in mind.

Thank you; that is useful. You started your comments by saying that the system has to work in practice. If we were to have gradations of levels of fairness within the mental health moratorium, it might become unwieldy. I am also mindful of those extremely hard cases not necessarily being a baseline for how we make our laws.

I have one final question around that process of interaction between money advisers and debtors and creditors, which might best be answered by Cheryl Hynd or Elizabeth McCrossan. Will the level of debt repayment necessarily change as a consequence of the mental health moratorium delaying payments? Will that be the consequence?

The level of engagement will not change, because, at the moment, we work effectively with our citizens, in my opinion and also in our advice shop’s opinion. Taking a joined-up approach and making sure that people, regardless of what stage they are at, have access to information is the key. It would not delay anything, because people are supported effectively at the moment. There are early-warning signs before someone’s debt reaches a certain point, so there will have been lots of interactions with us and they will have received support, possibly from key workers.

Good morning. Thank you for being here. I have been listening intently to the answers that you have given to my colleagues. I want to ask about the mental health moratorium working group’s recommendation that a mental health moratorium would be applied for via a money adviser.

It struck me that what we do not talk about is the creditor, and, in certain circumstances, the creditor may be the one who is perhaps being hard done by. In the scenario that Mr Macpherson set out, about somebody sitting with £1 million in the bank and a tradesperson looking for £500, which happens often, it strikes me that it is hugely unlikely that that person would seek a money adviser. I am not quite sure that that scenario would arise.

My concern is around the fact that the moratorium has to be applied for through a money adviser. Does the money adviser sector have the capacity to deal with that? Do the advisers have the necessary skill set? Are they trained with the ability to recognise people in a poor mental health situation and to access mental health services?

We are making laws and regulations based on ideal situations, and this is far from an ideal situation. Cheryl Hynd, in practical terms, does the sector have that capacity?

Having spoken to my colleague yesterday, I can say that the issue is whether the staff have the experience from a professional point of view to identify set criteria for the moratorium. That group of staff would need to be comfortable with their skill set and their training if they were to be able to make appropriate decisions and effectively assist these citizens. In my opinion, it would be a mental health professional who would decide whether a given person met the criteria and say where to go from there. Not every person in a mental health crisis has debt. I suggest that the situation would be dealt with on a case-by-case basis.

10:15  

I asked my colleague yesterday how many referrals she had made in the last year for the normal moratorium—that would include folks who are potentially suffering a mental health crisis. She said that the number was fewer than 10. I know that, in evidence that you heard in your meeting of 13 September, a colleague mentioned that, in England, the figure for mental health moratorium applications was 2 per cent of the entire moratorium applications.

I cannot comment on whether the capacity exists, because that depends on the size of the case load. The issue is mainly around the training that is required to ensure that they and whether they are in a position to identify those citizens as meeting those criteria. However, at the moment, everyone receives assistance, regardless of their mental health.

Thank you; that is helpful. My concern is that mental health is such a sliding scale. We have a significant rise in poor mental health. In my experience, people with poor mental health can be good at hiding it. People go to college or university for three or four years to be able to recognise people with poor mental health. My concern is that we are saying that money advisers will be charged with recognising that—that is the point that I am trying to push here. Should they have the ability to call in mental health experts? Where do we sit with comfort on that particular issue?

I think that the proposal is that someone would have to be in receipt of treatment. That is why the choice is whether to restrict access to the moratorium, because of the difficulty of defining who should get it.

Roderick Macpherson, do you want to add anything?

Briefly, Mr Whittle is right about my example about a person with £1 million in the bank—that is an extravagant figure to mention. However, I would think that people with substantial amounts on deposit would still look for a money adviser, particularly when the money is spoken for—for example, when it has perhaps been earmarked for dealing with funding for a care home. People with a largish amount on deposit are still mindful of the money running out in all sorts of situations.

Getting back to the previously mentioned example of the decree granted for a payment of £500, we need to think about what is equitable if the consequence of there being a mental health moratorium means that it is impossible to proceed with asking for that £500 to be paid.

Thank you. I will be brief, convener. Ms Hynd and Ms McCrossan, I am pleased to hear you use the term “citizens” rather than “customers” because it annoys me when councils refer to citizens as customers.

My question is about front-line staff, who are immensely important in terms of picking up difficulties. Are your front-line staff in Edinburgh trauma informed? Have they had trauma-informed practice training? That can often be immensely useful for picking up mental health difficulties that folks may have.

It is certainly one of the tools in our box. We have an extensive training programme for our staff to be able to recognise issues, regardless of the point of contact, whether it be face-to-face or on the phone. For example, our staff undergo training on Alzheimer’s. We have an annual training programme that gets added to, depending on the feedback: we may feel that we are not getting there on a particular aspect or something new may come through telling us to support our citizens more effectively. One size does not fit all. You have to use different skill sets, depending on whether the contact is front facing or over the phone. Yes, we take that forward as part of our training.

Brian Whittle, did you have another brief question?

Yes. I have a quick one, if I could. The financial memorandum to the bill argues that there will be no significant costs to local authorities as a result of a mental health moratorium. I can see hidden costs there. I wonder what your consideration is of the bill’s potential cost to councils.

From a council point of view, being able to effectively collect and spend funds is key. As I said previously, there needs to be a balance between collection and taking into account individuals’ circumstances and their ability to pay.

The hidden costs, I guess, are unknown at this time. Perhaps this is my lack of knowledge on the state or the maturity of this—those costs could start to unravel. Budget-wise, the council needs to be mindful that we are spending public funds, so we have to consider what the impact would be of supporting citizens effectively and delivering the proposals for them. I cannot nreally comment on what potential hidden costs could be. Sorry, I cannot answer that.

Thank you. Murdo Fraser mentioned minimal asset process bankruptcy and the reduction in the time limit for that as another policy area we may want to explore. Another area that has been raised with the committee is bank arrestments. The protected balance for bank arrestments went up to £1,000. It is proposed that the protected balance for wage arrestments should also go up to £1,000. Does Edinburgh want to comment on the impact that the changes to the bank arrestment made and whether, if there is a case that wage arrestments should be increased to £1,000 you would support that?

I do not have an opinion on that one.

The sheriff officers use a schedule to determine how much can be taken from someone’s earnings based on their earning level. I do not have the figures to hand, but I am sure that consideration could be given to what that person’s income supports. Does it support only them? Does it support their household or their family? Do they have young children? I do not know whether there is room there for flexibility in how much is arrested or whether they have to stick to the strict figures that are on the schedule. I am not quite sure who produces that schedule, but it is a certain percentage of earnings.

I do not know whether the sheriff officers have a view on that. I understand that around £550 is protected for wages arrestment. For banks, it is £1,000.

It is certainly £1,000 for banks. Although that was put forward and it is a nice round figure, I certainly have not seen any statistical evidence to say that that is the correct figure. It may well be the correct figure but, to our knowledge, no statistical evidence supports that £1,000 figure and, therefore, whether it should be the same for earnings arrestment. Is it the right figure? Who knows? Certainly, it seemed to run through that £1,000 was accepted.

Talking about whether earnings arrestments can be varied is complicating matters. You can say, “Yes, I am a married man and I support two or three children and a wife and a house and, therefore, I should have £X allowed to take home in my pay and only a smaller amount arrested.” What happens if you are not married but you support kids outwith your family home? What happens if both of you work, or if you work and your partner, wife or husband has a larger income? Rather than dictating and trying to work out how to vary an earnings arrestment, there certainly has to be one figure. That is the only workable answer in that respect. Whether that is £1,000 is an enormous debate that was not properly had at the time that the bank arrestment was changed.

Thank you very much to the witnesses. I will briefly suspend the meeting while we change over the panel.

10:25 Meeting suspended.  

10:31 On resuming—