Official Report 237KB pdf
Welcome to this meeting of the Social Justice Committee. I invite Robert Brown to declare an interest.
I mention again my membership of the Law Society of Scotland and my consultancy with Ross Harper solicitors in Glasgow.
Thank you. Linda Fabiani has sent apologies.
If I may, I would like to run through some brief notes. Dundee has high levels of deprivation and we appreciate the opportunity to give our views. Although we realise that the bill demonstrates the Executive's commitment to the provision of a workable alternative to poindings and warrant sales, Dundee City Council has operated the previous system in a humane and considerate manner.
Thanks very much. Does Mr Dorward want to add to that?
We were very pleased with the recent announcement of additional funding for money advice services and we are taking the opportunity to review money advice provision throughout the city. We are bringing together several agencies, including the citizens advice bureaux and the council's welfare rights officers. The council also has 12 liaison staff who visit people in their homes to give advice on benefits. As Councillor Regan said, the benefits system is complex and can contribute to debt through people not being aware that they are due benefits. We will certainly take the opportunity presented by the new funding to review the city's whole debt and money advice service. We welcome that innovation.
How do you enforce the current arrangements for council tax debts with someone who does not want to engage in the process? I assume that the procedure is entirely voluntary.
Yes, it is. Arrangements are usually put in place because people who are trying to get out of a difficult position ask us or the sheriff officers to make an arrangement. If they fall down on that arrangement, we try first of all to take a fairly simple view. We contact them and try to get them back on the scheme. However, if they decide for some reason that they do not want to play ball with us, we have to consider stronger enforcement action.
What would that involve?
It might well involve earnings or bank account arrestments. It could even come down to sequestration and bankruptcy.
So you feel that the bill's proposal is worse than the position we would be in if we did not offer any alternative.
Our concern is the system's potential complexity. It has already been mentioned that more than 60,000 of our accounts involve some sort of arrangement; that figure would need to be multiplied for the whole of Scotland. If one agency has to handle all those accounts, the administration will just get bogged down and eventually grind to a halt. That would leave us in a worse position.
Debtors might think it logical and positive to have a simple system in which they have one arrangement that deals with all their debts. However, you fear that you might not be high enough up the priority list of creditors who have to be paid off.
It is difficult to argue against the ease of living that debtors will get from a single arrangement. We ask the committee to be mindful of the fact that local authorities are in a totally different position from commercial creditors. We cannot withdraw a service. We cannot stop providing credit. Each year, a debt will accrue for rent, council tax or water and sewerage. Direct deductions from income support, which we are encouraged to make, do not cover water and sewerage liability, even taking into account the reduction scheme. Some people have an ever-increasing debt. You are absolutely right if we are talking about commercial debt, but from the point of view of a local authority, there is a grave danger that our financial position will diminish greatly.
You consider the financial position to be more difficult under this proposal than with nothing—which is the alternative, because warrant sales and poindings will go. You are saying that not to put anything in the place of warrant sales and poindings is better than what is being suggested.
We want the Scottish Executive to provide every means of collecting debt. It is up to each local authority to decide whether to use the diligences that are available. That is our council's view. We think that an administrative quagmire could easily occur under the debt arrangement scheme and so we could end up being worse off.
From the evidence that you have given, it seems that Dundee City Council is operating a debt arrangement scheme, is it not? You say that you get advice from the CABx and welfare rights officers.
Yes. That follows on from the convener's point. We believe that the local debt arrangement scheme that the council has for its debtors is far more effective than a national debt arrangement scheme would be. The debtor can come into the local office, sit down with an officer and make an arrangement based on their situation. They can change the arrangement. We make the debt arrangement such that it is affordable for the debtor, so we are fairly confident that the arrangement will continue. If the person's circumstances change and the arrangement is no longer affordable, they can easily visit their local office and adjust it. I am not convinced that that would be the case with a national debt arrangement scheme. I feel less comfortable about the council's debts with a national debt arrangement scheme than with the local arrangement schemes that we have for our debts.
But the distinction is not really between national and local schemes. Whether the scheme is local or national, the individual will make the arrangement locally with local advice people. Your concern is that the arrangement will not necessarily prioritise debt to the council. Somebody in Edinburgh will not decide everybody's debt arrangement schemes. The arrangements will be delivered locally. The problem for you might be that the arrangements would not prioritise local authority debts.
The number of arrangements that we have established indicates that a great number of people who are in debt are prepared to participate in the process. The fact that the arrangement to deal with a personal debt is made face to face and is based on local knowledge is an added advantage. I fear the remoteness of a national scheme not only for its impact on collection of the council's debt. There will be a natural fear among members of the public in dealing with such a remote and large agency. Many complex problems, such as securing benefits, already pressurise people in day-to-day life. I feel that it would be detrimental to debtors as well as to the council if the scheme were to become more distant and it was seen to be necessary to deal with a monolithic agency rather than deal with the problem face to face.
I will ask a brief question, before we move on. We have heard that money for front-line money advice is being channelled to local authorities. Do you believe that the moneys that have been made available are sufficient for the task that you are being presented with? How do you see the local authority money advice service working with local agencies in the voluntary sector that have an interest in the matter?
The welfare rights team in Dundee City Council is in partnership with other agencies within the city to assess how we can make best use of that money. We welcome the money, which will make a difference to the provision of money advice in the city. However, I do not believe that the money is sufficient; it could have been more adequately targeted at areas that have a greater demand for money advice.
I intended to concentrate on part 1 of the bill, which is about the arrangements. I think that we have covered most of that, but I want to clarify a particular point. Dundee City Council supports the concept of giving individuals the right to a debt arrangement scheme, but you are concerned about such a scheme being operated nationally. You support the idea of delivering the scheme locally, which is what you already do. Is that the case?
Yes. We currently have 66,000 debt arrangements. We obviously actively support allowing arrangements and giving people every support that we can to eliminate their debt. As you said, our main concern is that a single and more remote system would probably switch off the people who would welcome a debt arrangement. Our figures show that people welcome such arrangements. We feel that debt arrangements are best dealt with locally and we have concerns about arrangements being done nationally.
So you would not necessarily have a difficulty with a national scheme that was operated at a local level, which I think is the intention of the bill. I just wanted to clarify that.
Our view is that the scheme would extend the length and cost of collection procedures. The consultation document, "Enforcement of Civil Obligations in Scotland", suggests that the scheme would cost between 9 and 15 per cent. Our 66,000 arrangements cover approximately £13.5 million. Therefore, a figure of 10 per cent would mean that the local authority would lose £1.5 million in income, which would presumably become a burden on the council tax payer. We have a fair idea about costs. I think that some of the arrangement schemes will be extended.
That leads nicely to my next question. You flagged up a concern about one aspect of the bill. Do you have concerns about other aspects of the bill, which you think must be considered?
One point that we highlighted is that it seems that disputes will be passed to the sheriff courts to handle. We cannot guess how many disputes there will be, but we wonder whether that is the correct place for them. The sheriff courts might get bogged down. We have concerns about the administration of the appeals procedure.
I have questions on part 2 of the bill, on attachment. The report of the working group on a replacement for poinding and warrant sale, which is entitled "Striking the Balance: a new approach to debt management", recommended that commercial and domestic cases should be treated differently. Do you agree?
The short answer is yes. We welcome the additional protection that will be given to goods in dwelling-houses.
So you agree that the method of distinguishing such cases in the bill is correct.
We agree that the sheriff should consider those cases.
We said that we had carried out no warrant sales or poindings, but that was true only of personal debt, not of commercial debt. Those two forms of debt are different and should be treated differently.
Will you comment on your experience of collecting commercial debts and on how the bill might affect the collection of such debts?
I will rely on Trevor Bailey's professional expertise for an answer to that.
It is usual with debt collection for payment to be produced by the threat of an action rather than by the action itself. The perceived wisdom is that one should not threaten to do something unless one can do it. We have begun the process of warrant sales for commercial debt in a relatively small number of cases and we have had to carry out warrant sales in an even smaller number. People realised that we meant business, and that produced the money. For commercial debt, such measures work.
Do you welcome, or are you concerned about, other measures in sections 10 to 44, which is part 2 of the bill?
I am not certain what comes under part 2.
It is the part on attachment.
The service of a charge is mentioned, although I am not sure whether that is in the bill or in the consultation document. At present, local authorities do not have to serve a charge on debtors before they take diligence. We would be concerned that, with our volume of debtors, such a personal service would have high administrative costs. Other options are on the table and we ask that one of them be put in place.
One of your main concerns about the bill as a whole rather than the part that we are discussing is the adverse financial impact that it may have on local authorities. Given that there may be such an impact, would you expect any shortfall to be made up by the Executive?
I would like to answer that, if I may. I hope and expect that the Executive would make up any shortfall.
I want to discuss exceptional attachment but, first, I want to make a general comment. The bill was introduced partly because of the need, in the Executive's view, for a new form of diligence to replace the warrant sale procedure against corporeal moveable property in domestic as well as commercial cases. The feeling was that if a sanction did not exist, there would be a loophole through which people would escape. Do the council representatives agree with that view? Would absence of a diligence lead to enforcement problems for you?
In my opening remarks, I think that I said that our council believes that every opportunity to collect money and every diligence should be made available to it and that it should then have the right to decide what approach to take in each individual case.
I will put my question in a slightly different way. If such a sanction were not available, would the council have problems in recovering council tax, rent and other imposts?
The short answer is yes. There would be more difficulties because if there were no such sanction, the public would realise that it was not there and that there was one less avenue for the council to take if it so wished.
I will move on to the exceptional attachment order. The intention is that the procedure should be exceptional, but it has been said that it would become the norm in certain situations. Is it necessary to have an exceptional attachment against articles that are kept in dwelling-houses? Do you share worries that the procedure will be used in too many cases?
I could be wrong, but I understood from the bill that every time we wished to proceed with an attachment against something in a dwelling-house, we would have to go through that procedure.
Yes—against something that is in the house.
The council has said that it welcomes that as an additional protection to the debtor.
Do you envisage that that procedure will be used by the councils in a significant number of cases or in not many cases, based on what you currently recover under poinding and warrant sales?
Dundee City Council has not used the present warrant system, so one would anticipate very few cases under the new arrangements.
The alternatives that are available to you in respect of enforceable diligences are arrestments and earnings arrestments in suitable instances. I take it that some use of those diligences is made in Dundee.
Extensive use is made of them. We would argue for furtherance and more information having to come from employers and the Inland Revenue to allow us to use those approaches rather than others. We think that they are the most humane means.
Are they the most effective diligences?
Yes.
Do you use bankruptcy proceedings?
Yes. We make extensive use of bankruptcy sequestration.
Is that procedure effective?
Yes. It tends to produce the money.
We are also concerned that the more provisions there are for the protection of the debtor and the more complicated they are, the more expensive procedures can become. Do you have similar concerns? Might procedures be lengthened as a result of the bill?
We have said that costs and longer procedures are both concerns. Trying to get all creditors to agree or an agency to get everybody together will undoubtedly extend the length of procedures. Costs will go up. Where will those fall?
Do you think that that puts any pressure on the council to try to reach the same point in advance of court proceedings? Is that helpful?
Dundee City Council tries to make appropriate arrangements all the time. Many of those arrangements—not the majority, by any means—are prior to court action. The council feels strongly that if a debtor comes to us at any point—from the moment that they receive the bill right up to bankruptcy—with an arrangement that is reasonable in terms of their circumstances and the debt, the council will take that on. The council does not take recovery action unnecessarily.
Before granting exceptional attachment orders, a sheriff would have to be fairly confident that they could achieve something from that. What is the current practice of local authorities in considering whether the use of a poinding and warrant sale is worth while?
Most councils would consider exactly what is set out in the bill: how much is likely to be recovered compared to the costs and the debt. I would say that no council would carry out a poinding and warrant sale unless it was confident that a reasonable amount of both the costs and the debt—from memory it is 10 per cent of the debt and the costs—would be recovered. I can speak only for Dundee, but our officers would not propose a poinding and warrant sale just for the sake of it. There would have to be a reasonable chance of a return of both costs and debts. I think that most councils would consider it like that.
Would that continue?
Undoubtedly.
Those are all our questions. Are there any final points that you would like to clarify?
As we have said, we welcome the fact that debt has become an area of concern for the Scottish Executive. We are a city of high deprivation and debt is a feature of the complexity of the benefits system that we operate. We ask you to consider that. We have high water charges and the second highest council tax in Scotland. The impact of high deprivation on the people living in that area is much more significant than it is for someone who stays 50 or 100 miles away. The disparities in the system are detrimental to the population on a geographical basis.
We are concerned about the complexity of the national debt arrangement scheme. Councillor Regan referred to the Child Support Agency and the difficulty it has in getting money from one parent to pay to the parent who is looking after the children. The national debt system will be far more complex than that. There will be many creditors attached to one debtor. I realise that, from a debtor's point of view, it is not an attractive proposal. From a creditor's point of view, our worry is that it becomes very complex for the organisation to operate and disburse the money back to the many creditors.
With that, I thank you for attending. We are grateful that you were able to attend today. If, when you look at the report, you feel that there is anything we have missed out and you want to draw it to our attention, we will be happy to hear from you.
Meeting suspended.
On resuming—
I welcome some special guests who are with us this afternoon. They are women MPs from the Tanzania National Assembly, who are interested in seeing a bit of our business. I hope that they find our deliberations of some interest.
As specialists in enforcement, we are anxious that Scotland should have an exemplary enforcement system that meets all the public's requirements on social justice issues. We look favourably upon the general principles of the bill as a way in which an appropriate balance can be found between the rights of creditors to be paid and of debtors to be protected from undue hardship.
Our position is that the introduction of a debt arrangement scheme is positive and progressive, and we welcome it.
Legal Services Agency Ltd is one of the constituent parts of the Scottish Association of Law Centres. We certainly welcome the bill. We think that it is a positive and progressive move, as Angus McIntosh said. The bill needs critical analysis and some intelligent amendment, but we believe that it will genuinely improve the position of debtors in Scotland.
You will be aware that the Executive highlighted the importance of money advice in the approach that is introduced by the bill. What do you see as the appropriate role for money advisers, whether voluntary or otherwise, and is the bill likely to achieve that? There are issues around the process that has been identified.
I had the opportunity to read the evidence that Alisdair McIntosh gave on 23 May. The anticipated increase in the number of money advisers was 75 for the country. That number seems low, especially when we consider that 23,000 poindings were carried out in 1999, according to the Scottish Law Commission. If we assume that each of those poindings was for a different debtor, 75 extra money advisers for 23,000 people who are in the worst of situations is nowhere near enough.
I support the idea in the bill that the money adviser is the person whom the debtor approaches to set up the debt arrangement scheme. We are perfectly happy with the idea of a national debt arrangement scheme—we do not have a problem with that. We envisage a money adviser as an independent person who acts only on behalf of the debtor. The bill seems to foresee that the money adviser will not only act for the debtor, but will almost be a mediator between debtors and creditors and that there will be a compliance element to the money adviser's role. The bill envisages that the money adviser will have a monitoring function and will report to the Scottish ministers, or to whatever body is set up. We think that there should be a separate person to do that—a compliance officer, for example. The money adviser should be someone who acts only for the debtor and who provides advice only to the debtor. The money adviser should not be someone who acts for both parties.
Although we welcome the prospect of a national debt arrangement scheme, the technicalities of the money advice system go rather beyond the sphere of our professional expertise. The technical points that we want to raise relate to the fact that the enforcement officer must be certain that someone is known to be part of a debt arrangement scheme or is known to have left such a scheme. Our professional concerns would be met if there were a clear way of publishing such details.
We welcome the fact that the consultation document, "Enforcement of Civil Obligations in Scotland", recommends accreditation for money advisers. The situation concerning multiple debtors, for example, requires a money adviser who is of sufficient calibre to understand all aspects of debt advice and information.
Are there any aspects of the bill that might be subject to challenge under the European convention on human rights?
I am perfectly happy to take on that question. The lack of legal aid in the bill would certainly be subject to challenge under ECHR. There are two aspects to that. The bill will deprive people of their possessions, which is automatically a breach of article 1 of protocol 1 of the convention, which allows for the protection of people's personal possessions. It is obviously possible to justify interference with that right.
The Scottish Law Commission's work on poindings and warrant sales showed that a properly regulated system against a debtor's corporeal moveable property is not in itself in any way contrary to the provisions of ECHR. The Law Commission's work raised the possibility that creditors, who also have rights, might have some claim under ECHR, if they were deprived of a legal mechanism for recovering their debts.
I want to pick up on James Bauld's points about human rights. We do not think that the problems would be too difficult to remedy. Although legal aid will not be available, the Executive accepts that legal advice and assistance should be available. Plenty of advice procedures, where legal aid funds are made available to solicitors for certain court representations, can be slightly extended. This is an obvious example of where such measures could be used.
I want to concentrate on part 1 of the bill and, in particular, the debt arrangement scheme. How will such a scheme impact on current debt collection practices? How will it affect the levels of debt recovery?
We run our own debt recovery scheme in Castlemilk. The scheme is funded with lottery money and we work with the local credit union and the Castlemilk Economic Development Agency. Under the scheme, a person can have their wages or benefits paid into a client's account. We then give the person advice on money and send off a certain percentage to particular creditors, giving the person the remainder. The scheme is helpful because, when creditors get that money, they tend not to take any further enforcement action. There is therefore a reduction in the amount of diligence.
The Scottish Association of Law Centres is concerned that the exceptional attachment order is not actually exceptional at all. The debt arrangement scheme is aimed at those with earnings or money to pay multiple debts—but what about poor people? As members will know, many people with multiple debts receive benefits or are on very low incomes. Under the bill, any creditor can easily overcome the "exceptional circumstances" or protections that are set out in section 47.
What would be your alternative?
The limits are low and do not suit people with multiple debts who are on low income. That has to be addressed. The current system does not work.
We want to reduce the number of warrant sales and the number of attachments as much as possible. I think that that is Parliament's intention as well. We are going in the same direction, but we must work out how to do it. We have some problems with the bill as it is just now, but we have some suggestions for it.
May I make a comment at this stage? The debt arrangement scheme that is proposed in the bill is laudable. I hope that it is workable. Many of the informal schemes that I have seen put in place for debt arrangements break down frequently and at an early point in the scheme. It will be interesting to see what follow-up steps will be taken and what encouragement will be given to people to help them to stick to the scheme wherever possible. It will also be interesting to see the assistance that people will get from Money Advice Scotland and from other support arrangements that may be put in place. The suggestion that a debt arrangement scheme will solve the problem cannot be taken lightly.
I agree.
The vast majority of my work in my law centre is with people who have housing problems, the majority of which are rent arrears. That said, an increasing number of people are coming to see me with mortgage arrears—thanks to the passing of Cathie Craigie's bill. [Laughter.] I am sorry, I should have said that the people who are coming to see me now with mortgage arrears have a defence, thanks to the passing of Cathie Craigie's bill.
Which we welcome.
I listened with interest to the comments that were made by the witnesses from Dundee City Council, who said that most councils will come to a voluntary arrangement with people with rent arrears. Councils will accept fairly low amounts. My experience in Glasgow is that the Glasgow City Council will accept, without any great problem, £2, £3 or £4 per week towards a rent arrears debt that is in four figures. The difficulty with such arrangements is that most people in those situations have other debts. In Glasgow, people have the Provident debt, catalogue debt, shop card debt and so forth. Eventually, payments of £3 or £4 to rent arrears disappear. That is because the guy from the Provident comes and chaps on the door, says that he wants his tenner and a tenner goes to him. It is also for reasons such as people's kids needing new shoes.
I agree. The only way that we will get people out of poverty and debt is by allowing them to work through their problems and by giving them the help and support that they need to do that. If we simply ensured that they were able to pay one or two of their debts, while at the same time not addressing their underlying problems, we would not solve the difficulties that people face.
If nothing is in place at the moment, and that situation is replaced by a system in which a payment programme is set up over a period of time, that means that a new procedure will be put in place to establish the length of the debt collection period. That system will enable people to pay off debts over a period, which is good.
On the question of saving costs, it is clear to me that the debt arrangement scheme is good, provided that people work with it. In reality, however, people who get into debt bury their heads in the sand. They do not do anything until, suddenly, they have to appear in court, some sort of diligence is taken against them and the sheriff grants a decree. The sheriff can grant time to pay, but that will apply to only one debt. Someone who is in such a position will have multiple debts. They will not be able to go on the debt arrangement scheme. It is likely that the next creditor down the line will then raise an action, as will the next one. The actual cost of court will rise, and the cost to the debtor will keep increasing all the time.
I want to pick up on the point about people having an ostrich mentality. I frequently hear from people only once they have had a visit from my colleagues at the end of the table—the messengers-at-arms and sheriff officers—or when they have received an eviction order. I do not know how the idea of people being given a debt advice and information package, which is provided for under the bill, will work. Will people read it? How will they deal with it? The ultimate sanction needs to be applied before a lot of people even think to pick up the phone or go somewhere to get advice.
If enough was done to raise awareness and persuade people to engage in the process in order to avoid having to appear in court, would that work? People put letters behind the clock because they fear that they will contain bad news, but the package offers people a potential way out. The scheme is currently voluntary, but, from my reading of it, the package would offer people a way out. If so, would they not be more likely to engage in the process?
I would certainly hope so, but it would require a massive publicity effort to tell people what their rights are. That is something that we are fairly bad at in this country: people do not know what their rights are or what the law is. That has to be addressed, possibly through the provision of extra money for money advisers, but there is a question over whether enough money is being provided for that. Dundee City Council said that the money is welcome but not enough—although you might say that that is what we would expect councils to say. I think that the current funding available is £3 million, which is less than £1 per head of population in Scotland. Is that enough? I do not know.
The logic of the other position is that enforcement procedures are made really fierce, and people will be aware that they are really fierce. You are almost saying that the warrant sales mentality worked. That mentality has its downside, but the argument is that, if it is shown that the alternative to settling the debt is really bad, that will concentrate people's minds earlier. The Parliament has clearly taken a different view.
In passing the bill that is now on the statute book to get rid of warrant sales, Parliament has taken a view. Parliament is not bound by that view—it could, in its infinite wisdom, change its mind tomorrow if it wanted to and pass another bill.
Surely part of the reason for that is that people fear what they do not know and their perception is often that, having got themselves into a situation as a result of difficulties, they are going to be thrown out. There is no guarantee that advertising and promoting the availability of advice will ensure that everyone takes it up at an early stage. However, we can try. It is not good enough to say that we are not going to do it because people will respond only when they get into the most difficult situations.
I am certainly not saying that the bill should not be passed. I think that it should be passed and that people should be encouraged to seek early advice from CABx, money advisers, law centres, solicitors, sheriff officers, MSPs and so on. However, no matter what legislation we pass, there will be a rump of people who will wear blinkers and pretend that the problem is not happening to them.
I want to offer my support for what has been said, based on my daily practical experience. People tell us that they have received no information and that they have only just become aware of something happening because the truth is that people do not read things that they are given to read, even if, on the surface, it might appear to explain a situation. I am concerned about the fact that the consultative document talks about a bundle of documents. I fear that a bundle of documents that is sent out to a debtor will end up in the bucket. I mean no disrespect by that; I am saying merely that our practical experience is that people do not read things that they are sent.
I would not dispute that. Most of those people do not even open the letters before they stick them behind the mantelpiece clock. If we simply send them another piece of information, they will not look at it. We have to find effective and innovative ways of communicating the advantages of this scheme to them.
We think that disputes that arise should be decided judicially. As Mr Love said earlier, such schemes break down fairly quickly. Disputes will arise if one or two payments are missed or if someone goes on to benefit after losing their job and has to ask for a variation in the payments. The only provision for recourse to the sheriff court appears to be to dispense with creditors' lack of consent to a debt arrangement scheme. However, we think that decisions will be required in many more instances.
I want to rewind to the point that Mr Love made about the bundles of correspondence and the advice package. Would sheriff officers be in a position to explain all that, rather than having people get the bundle of paperwork and stick it behind the clock? Would your job be completely different from the one that you have been portrayed as pursuing previously and might you be going through a makeover and a public relations exercise?
How we go about our job is sometimes misunderstood.
Precisely, but you have the opportunity to correct that.
In practice, despite what might be said, we make every effort, where possible, to try to give people explanations. It is easier for us to explain than it is for us to not explain. We will try to advise those people who will listen to us. Explaining the guidance will not be a new departure for us, because we are well used to explaining and giving advice.
So we can look forward to having friendly sheriff officers.
We would like to be portrayed as firm but polite.
I am tempted to go straight to Mr Bauld and ask for the intelligent amendments, but I shall ask the witnesses questions on part 2 of the bill. Attachment will be used in relation to the corporeal moveable property of a debtor. Does establishing ownership create difficulties for the enforcement measures that target such property, for example when the debtor denies ownership or a third party claims ownership?
Establishing ownership will not create difficulties as the bill stands, because once an attachment order is granted, sheriff officers can immediately take away the property and sell it seven days later. That seems to me to be the biggest deficiency of the bill and the biggest difficulty, because it makes the system much harsher than it is at present.
At the moment it is part of the officer's duty to make inquiries about the ownership of the goods that he finds at the address. It is envisaged in the bill that that will remain part of the officer's official duty.
At present, the debtor also has the opportunity to redeem the goods. Although there is a provision to redeem in the draft bill, that would place the officer in an invidious position as to what value he would place on the goods that are redeemed. That part of the procedure needs to be re-examined. Our solicitor colleagues have made the point well and, in our statement to you, we have highlighted something with which we do not feel comfortable at the outset.
I notice that the statement to the committee from the Society of Messengers-at-Arms and Sheriff Officers states:
In many situations in which an exceptional attachment was granted by the sheriff, the officer and creditor would not know exactly what was likely to be found on the premises, although they would have some idea. Therefore, the arrangement of, for example, transport and locksmiths might be unnecessary and would add unnecessarily to the cost. It could also be unfair to the debtor. For instance, more than one person may live in a debtor's household and they may not know about the situation. An officer who was not valuing would have to make a guesstimate of the value of an object and simply remove it from the premises there and then. From our experience, we know that that would make the situation worse between a debtor and an officer.
Thank you. Section 43 provides that legal aid is not available for proceedings under parts 2 or 3. The Executive has stated that that is because the procedures are designed to be understandable and accessible and because the bill allows lay representatives to assist debtors. We heard one or two comments about that earlier. Do you agree with the restriction on the availability on legal aid and the reasons that have been given for it? Or do you agree with the view that was expressed earlier, that legal aid should be made available?
I am happy to come back in on that. In his evidence to the committee, Alisdair McIntosh apparently said that the procedures—for the exceptional attachment orders, I presume—are designed to be simple, understandable and accessible. The cynical legal practitioner might say that that would be a world first. However, I am not a cynical legal practitioner.
For a second, I thought you were.
There could be some such procedures, obviously. To be blunt, the procedures are designed to be—well, the procedures have not been published yet, so I cannot tell you whether they are simple, understandable and accessible. I have already said that I do not think that the procedures meet the ECHR test. I think that legal aid could be simply done by allowing assistance by way of representation—ABWOR—which has been done.
Do other members of the panel want to comment on that?
As officers of court, we are keen for people to have the best possible advice. It is clear, however, that that there are cost implications and matters of public policy involved in that. That reaffirms points that you have heard all afternoon that in readjusting the balance between creditors and debtors there are clear cost implications that Parliament must consider.
Indeed. There is also the issue that what is understandable and accessible to one individual might not be to another. Are there other areas of part 2 of the bill that the panel are concerned about or, indeed, that are particularly welcome?
Does anyone want to kick off?
Go on. Do not be shy.
We raised a point in our submission about exceptional attachment orders and particularly about section 47.
That is in part 3.
I am sorry.
We will come on to part 3 in a minute.
We are trying to do this on a part-by-part basis for the ease of the Parliament.
There is another minor point. Section 41 sets out how the sums recovered by attachment will be ascribed. Sums recovered will first pay expenses and interest before they touch the deck. I do not know whether that is entirely in the wrong order. My fellow witnesses might disagree, but that might need consideration.
That follows the present practice, which derives from schedule 5 to the Debtors (Scotland) Act 1987, whose intention was to eliminate the practice whereby prior to 1987—my fellow witnesses will correct me if am wrong—there was a system that fell into disrepute. Fortunately, the sheriff officers were absolved from that one. People were being resued because a decree was exhausted.
Are there any other points on part 2?
The general comment that our society would want to make about part 2 of the bill and the institution of a system of attachment is that that would give effect to the things that the Scottish Law Commission and the parliamentary working group have so clearly established. That is that all legal systems of which they are aware have a provision to make corporeal moveable property available to the lawful claims of creditors, subject to various degrees of debtor protection.
For the avoidance of doubt, I would like Angus McIntosh to clarify that when he talked about the lack of a gap between the attachment stage and taking the assets away, he was referring only to exceptional attachment orders, under sections 46 and 47, and not to ordinary orders.
Yes.
The Society of Messengers-at-Arms and Sheriff Officers referred to the advantages of having a charge for payment in all cases, including specifically council tax claims. There is some merit in that. Bearing in mind what has been said about the difficulty of getting debtors to do anything about the problem, would there be any merit in enhancing the charge for payment, perhaps by including requirements to give advice at that point, or other measures, beyond what is called for in the bill? I would be interested to know if the sheriff officers in particular think there is any merit in doing something at the charge-for-payment stage.
We feel particularly strongly about this, because in many ways having the sheriff officer on the doorstep affords an important opportunity in the enforcement process. As we have heard from other experts, the sheriff officer is the personal and official representative of the court. He is there not just to carry out lawful instructions, but to help people through the enforcement process.
When the sheriff officers serve the charge at a house or commercial premises, do they simply stick it through the door or do they usually make contact with the debtor?
Every effort will be made to speak personally with and give advice to the debtor. That is the absolute objective of any court officer appearing at an address. However, if the debtor is not there, it is permissible by ordinary modes of citation to leave notice of the charge with someone else at the premises or to put it through the letterbox. It is important to remember that one of the officer's functions is to carry out diligent inquiries to ensure that he can give a full report of the situation on the ground to the instructing creditor. Clearly, whether an address is both a place of business and a dwelling should and would be established.
I follow that. From their slightly different experience, do the other witnesses have any views on the potential for the charge to act as more of a lever point than it does at the moment?
The bill suggests that attachments and pursuance of summary warrants can be carried out without serving a charge. However, charges are important, because they represent the last stage at which people have the chance to bring something back to court through an appeal, a minute for recall or a procedure called reponing.
It is also worth while taking this opportunity to modernise the text of the charge itself, because it is drafted in very arcane language and is all done by regulation. Sheriff officers usually serve people a dense paragraph of text, and most people do not have a clue what it means. It would improve matters if it were set out better.
That is a valid point.
I am in favour of that sort of thing. Section 47 as it stands would make it quite easy for a creditor to establish that an exceptional attachment order should be granted. In relation to section 47(1)(a), in most cases creditors send letters to debtors and, as we heard, debtors often stick their heads in the sand, so creditors could get over that fairly easily. Subparagraph (b) would not apply to anyone without a job or substantial property and the threshold in subparagraph (c) is far too low. It would improve matters if there were ways in which debtors could challenge some of those provisions.
Do you share the view of the sheriff officers that a separation between the attachment and the removal would be sensible?
Yes. That is all in the Debtors (Scotland) Act 1987. If those provisions could be re-enacted with the change that the application for an attachment order should be granted before any action, that would be an improvement.
If I understand you correctly, Mr Brown, you are asking how the sheriff knows when he is about to grant the exceptional attachment order that there is reasonable prospect of finding stuff in the house, given that no one has gone to the house first.
Yes.
There is provision in the bill for the sheriff, before making the attachment order, to order a visit to the debtor by someone to give them money advice or such other order as the sheriff thinks fit. Perhaps the sheriff would order someone to inspect the house and carry out a valuation. However, the idea that that assists the process, speeds it up and makes it simple, accessible and understandable is somewhat worrying.
Perhaps the sheriff officers can give us guidance relating to their practical experience.
That is one of the reasons why we have suggested that a charge be served in relation to summary warrant. A charge is served in all other cases. One of the services that the officer provides is to give a report as he sees the situation at the time that the charge is served. Perhaps that can strike the balance—it is for the creditor too. In many cases, the officer can write the report before he arrives at a door, but in other circumstances he can take a helpful overview on what he has seen and heard and report back to the creditor or instructing agent for them to make a considered decision whether to instruct further inquiries before presenting the case to a sheriff. We can provide a useful part in the process by reporting to the creditor what we see when we visit premises. That is why we have emphasised the need for a charge before any further enforcement of the decree.
The Society of Messengers-at-Arms and Sheriff Officers offered to come back to us on the technical aspects of the bill. All the experts who have given evidence today have a lot to offer, particularly on some of the practical issues that we have been trying to get a handle on.
We will raise a number of issues with you. For example, the bill contains provisions on attachment and on goods being sold at auction rooms, but it would not be appropriate to use those provisions on every occasion. Where goods are eventually exposed for sale should be at the discretion of the sheriff. Other provisions also need to be examined and further amplified. The society will submit our views on those matters before the deadline expires.
We all agree that we want the bill to introduce a mechanism by which we can collect and recover debts from those who can pay and assist those who are poor and in difficulty. In cases in which debtors were able but unwilling to repay debts, how effective was the use of poinding and warrant sale? Is attachment likely to be an effective enforcement measure, or will it allow debtors to organise their affairs around it in order to avoid paying?
Our advice to the Justice and Home Affairs Committee, when it dealt with the Abolition of Poindings and Warrant Sales Bill, was that a system of enforcement against corporeal moveable property—whatever you may wish to call it—is absolutely necessary. The cases that you highlight, in which people have assets and could pay, but wilfully refuse to pay, present the clearest proof of the truth of the observation that the law must provide a mechanism that covers all categories of property in order to avoid a loophole in the law.
There is an indication that the existing system works to an extent. The Scottish Law Commission's figures show that there are 23,000 poindings a year, but only around 300 non-commercial warrant sales, so something must be happening in between. It seems that a lot of people who can pay are paying. In addition, where people are simply too poor to pay, the creditors accept that and give up. The fact that there are only 300 warrant sales is quite a good thing, when one compares that to the amount of enforcement that is taking place.
Does John Flanagan wish to comment?
No.
Will the witnesses comment on earnings arrestment as compared with poinding and warrant sale as an effective means of collecting debts?
The existing system seems to be quite positive. When I advise clients who have a job, I tend to look at the amounts that could be taken off their wages. I explain the amount that they could expect to pay if an earnings arrestment were granted. Usually, the amount is around 10 or 12 per cent; it may be more than that for people who are on higher earnings. I explain that they could gauge their total offer to creditors on that amount, because that is the most that creditors would get if they arrested the client's earnings. We do not generally take a hard line or say that clients will not pay anything unless an earnings arrestment is granted. Instead, we encourage them to gauge the amount that they would have to pay if an arrestment were granted. That approach is quite helpful.
It was significant that the director of finance of Dundee City Council said that earnings arrestment was the most effective diligence that the council uses. It is clearly something that works. The amount that can be taken is governed by the Debtors (Scotland) Act 1987, under which there is a sliding scale based on people's earnings. Earnings arrestment is clearly effective.
Since the 1987 act came into operation, creditors have adopted a policy that we think is responsible. The figures in "Civil Judicial Statistics Scotland 1996-98", which were produced by the Scottish Office, reveal that earnings arrestment was the most significant diligence for recovery by creditors. There were more than 85,000 earnings arrestments in 1998 compared to 23,000 poindings and, for some reason, there were more earnings arrestments in 1997. The strategy that creditors adopted was not necessarily against corporeal movable property, but they took the responsible attitude that if the appropriate information was available, they would use earnings arrestment, bank arrestment or arrestment in execution as a first option.
What impact will part 3 of the bill have on courts' work loads and what impact will the costs of collecting debt have on court resources?
That depends on how many orders are sought. If there are as many applications for exceptional attachment orders as there are for poinding and warrant sales, there will be more than 20,000 applications, which is a substantial impact on courts' work load. Sheriff clerks and sheriffs are already busy. The question is whether the courts have the resources to cope with that extra work load. I know from my practice, which is exclusively in the civil field, that delays are already a feature of court processes. There is a lack of court time and a lack of sheriffs to hear cases, which means that cases are adjourned or postponed because of a lack of resources. The extra work load is a matter that must be dealt with. The impact will depend on how exceptional the exceptional attachment order is.
I have a round-robin question for all the witnesses. Are there any other aspects of part 3 that they want to highlight? I know that the Scottish Association of Law Centres raised some issues in its written submission. This is the time for the witnesses to make their case.
I am heartened by the comments of Mr Macpherson and Mr Love that the sheriff officers do not like the idea of taking goods away on the first visit. That idea worries us greatly. Both sides of the fence are unanimous. I hate to use the phrase "both sides of the fence" because I do not regard sheriff officers as enemies. It is heartening to hear that sheriff officers are also worried that they will have to go to homes and start removing goods. That provision must be amended and should not form part of the bill when it is enacted.
The valuing of goods, which fits in with our discussion, is an important aspect of the Scottish tradition of enforcement. In our discussion on debtor protection, we mentioned that the process of valuation gives a remarkable degree of debtor protection. It is a degree of debtor protection that does not exist in many other jurisdictions, where a principle operates that goods are taken under a court warrant and they are sold, and the amount for which they are sold is the amount that reduces the debt. In Scotland, the tradition has been that the officer or valuator puts a value on the items. It is enshrined in the 1987 act that the debtor will be given the credit for whichever is the higher, the sale price or the appraised value.
I have a final comment about exceptional attachment orders—it is something that I included in our submission to the committee. We think that the exceptional attachment orders clause should be amended to include a requirement for a sheriff to refuse an exceptional attachment order if certain conditions are met. We are suggesting that if debtors are in receipt of one of three or four specified benefits, particularly income support or income-based jobseekers allowance, which shows that they are among the most disadvantaged and are at the lowest level of income, they should be protected from exceptional attachment orders. There should be an automatic requirement on the sheriff to refuse an exceptional attachment order if it could be shown that the person is in receipt of that level of income.
I want to make a more general point. There have been many reports on the bill in the press, some of which are suggesting that it is just a con, that it is introducing poindings and warrant sales in another form, and that poor people in the community are still going to suffer and be humiliated by the processes contained in the bill. Do any of you have an opinion on that?
Legal Services Agency Ltd would disassociate itself from some things that have been said publicly. We truly believe that the Parliament is making a real effort to humanise the whole process of debt collection. Apart from noting that the devil is in the detail, we strongly support what the Parliament is trying to do.
If there are only 300 warrant sales, that is quite a low number, but that is probably still 300 too many. The difficulty is in knowing what else to do in place of warrant sales.
The bill is a good improvement and we are moving in the right direction. However, I am concerned that the exceptional attachments are still a threat to the very poor. The people whom I come across daily would be at risk if warrant sales were to continue because the limits are low and it is easy to get across the hurdles. However, overall we are moving in the right direction.
Do you agree that the key charge against the warrant sales system was that it was used against the poorest to persuade people with the capacity to pay their debt to pay it and that because the proposed system would oblige creditors to negotiate, the poorest would come out of the system?
I do not know. If that is the intention behind the bill, it would be warmly welcomed and supported by everyone, but the proof of the pudding is in the eating. I do not think that anyone could say that what you describe will happen.
The bill rewards the willingness of the creditor and the debtor to negotiate positively.
Debtors and creditors can negotiate at the moment. The difference is that the bill will create a discretionary, semi-compulsory scheme to bring them together. The question is whether that will meet the target of taking out of the equation people who genuinely cannot pay and of allowing enforcement against those who genuinely can pay. If that is the intention behind the bill and that is how the bill works, that will be superb and more than welcome.
The bill strikes the balance for the creditor and the debtor. As we said in our submission to the Justice and Home Affairs Committee on the Abolition of Poindings and Warrant Sales Bill, a fair proportion of debtors do not pay voluntarily, so the enforcement process that is at the disposal of the creditor through the decree that is granted must give authority, eventually, to use the final sanction. The bill goes a long way towards achieving that.
I take an optimistic approach. If a debtor has a limited amount of money and a debt arrangement scheme is not suitable because they can afford only £5 or £10 a week towards fairly substantial debts, what does a creditor do? The creditor has two options: giving up and saying, "That money is lost. It's a bad debt that I will write off," or saying, "What else can I do to get my money?" That is the crux of the matter. The creditor must decide whether going ahead is financially worth while. If the risk of losing out in sheriff officers' expenses is worth it for the additional sums that are due from the debt, the creditor will go ahead. Only when the risk is high will a creditor say that sheriff officers' expenses are not worth it and decide not to go ahead. That is when the number of attachment orders and sales will reduce.
Obviously, the point of the bill is to assist poor people to pay their debts. I would hate the bill to cause difficulty for those who are on low incomes but who are able to take on credit and pay it off. I would hate anything to be introduced that would make it more difficult for those on low incomes to buy a new television, for example, in a high-street shop. Does the bill contain any measures that will make accessing credit more difficult for those on low incomes?
That is difficult to say. If the debt arrangement schemes work, creditors will get more money and there will not be a problem. If creditors find that their bad debts increase, they will simply increase their interest rates and make it harder to get credit.
The underlying premise of your question is exactly right. There is a strong connection between availability and affordability of credit on one hand and the existence of an effective court system for the recovery of debts on the other. The balance must be found so that creditors' rights and debtors' rights are respected.
Part 4 of the bill provides for the repeal of the Abolition of Poindings and Warrant Sales Act 2001. When we questioned the solicitors from the Scottish Executive, their line was that it was necessary to repeal the 2001 act and that, if we did not repeal it, it would only clutter up the statute book. Do you have any views on that?
That view is probably correct. If we are not going to bring the 2001 act into force and are going to pass another act to supersede it, we might as well de-clutter the statute book. I am sure that the lawyers who are giving evidence and on the committee agree that the statute book is cluttered enough. Perhaps we could do with getting rid of a few more pieces of statute. If the intention is that the bill should supersede the 2001 act, I see no reason why it should not repeal that act. I saw the comments from the Scottish Executive, which seemed perfectly straightforward and reasonable.
Will the bill take effect and repeal the 2001 act immediately or will there be a two or three-month gap? It looks like the regulations to set up the new system might not be in place until January or February, two or three months after the act is repealed.
You will need to ask a lawyer.
I would think that the 2001 act could not be repealed until the bill was enacted. If the bill was not in place, warrant sales would have been abolished and there would be nothing in their place.
The bill is due to come into force on 30 December 2002, which is the day before the 2001 act is due to come into force.
We will not have lawyers arguing on the head of a pin about that. It is probably not the most crucial element of the bill. I was interested to know whether any other act had every been repealed in the same way since the Parliament came into being, but I have not had an answer to that yet.
I can confirm, as I am qualified in law, that whole shelves full of statutes have been passed, most of which have probably fallen into disuse. I would find it helpful to have an idea of the cost that would be imposed on a particular debt by the different stages of the new process compared with the cost, right through to a warrant sale, under the old process. I do not have a handle on that. I know that those costs are not entirely comparable because of the minimum percentage that an attachment would have to raise, for example. Perhaps the Society of Messengers-at-Arms and Sheriff Officers or somebody else could provide a comparison. Can any meaningful information about that be given to us? Do you follow my point?
My understanding is that sheriff officers' fees are regulated by acts of sederunt, which are acts passed by the Court of Session under delegated powers. Those acts state that sheriff officers are allowed to charge £X to serve a charge and £X to serve a writ. I presume that the same would be needed for serving an attachment or carrying out an exceptional attachment order. I do not know what the exact figures would be. That is a matter for the legislators.
Perhaps the question should be different: has the Society of Messengers-at-Arms and Sheriff Officers had any discussions yet about levels of fees for the new procedures, or is it thought that they will be similar to the old procedures?
We have not yet entered into any discussion with the Lord President's office, with which we currently deal on those matters. However, the society will have to consider it. The bill contains procedures that appear to be cut short. That will mean that the serving of certain notices or other applications may not be necessary, but that depends on what comes out in the rules and regulations.
I thank the witnesses for attending and answering our questions. I should also have thanked them at the beginning for the written submissions that they provided. We look forward to any further written evidence that they might send to the committee.
Meeting closed at 16:12.