Abolition of Poindings and Warrant Sales Bill: Stage 1
Item 3 is consideration of the Abolition of Poindings and Warrant Sales Bill, which is a member's bill. We are still taking evidence at stage 1, on the general principles of the bill. Today we have a number of individuals before us. Peter Beaton, the head of the civil justice and international division of the justice department of the Scottish Executive, is here with some colleagues. Perhaps he could introduce himself and his colleagues, so that we can move straight to hearing evidence from them.
Peter Beaton (Scottish Executive Justice Department):
I am more than happy to do that. I wish members of the committee a happy new year from us all.
Thank you.
As you said, convener, I am the head of the civil justice and international division of the justice department. My responsibilities include policy in relation to the law on procedure of the diligence system in Scotland. I act in that regard on behalf of the Deputy First Minister, who exercises the relevant ministerial functions within the Executive.
On my immediate left is my colleague Bill Howat from the local government and finance division of the development department. He deals chiefly with the recovery of council tax and local government revenue, and will answer questions on those specific issues, if raised. As we know, local authorities are one of the major users of the diligence of poinding and sale.
Our respective colleagues are, on my right, Laura Dollan, who is from my division and deals with diligence, and Frank Duffy, who is Bill's colleague and deals with matters relating to local authority finance.
Convener, I understand that, with your leave, I may make a short opening statement.
As long as you keep it as brief as possible.
I am grateful.
We would like to assist the committee in considering the issues that arise from the bill. At present, we would not put forward specific arguments for or against abolition of the diligence of poinding and warrant sale. The Executive's position is set out in the memorandum that the committee has already received, particularly in paragraph 14.
I would like to sum up one or two things that have happened since the memorandum was submitted. As members will no doubt be aware, there have been significant developments. On 30 November last year, the Scottish Law Commission issued a consultation paper after the Scottish Executive asked it to revisit the conclusion in its 1985 report on diligence and debtor protection that the diligence of poinding and warrant sale should not be abolished. The commission seeks responses by the end of this month. I pay tribute to the commission for the speed and expertise with which it has produced this highly expert document. The document is very comprehensive and detailed, and contains a great deal of information—factual, statistical and of a comparative nature. It would repay in-depth study and I commend it to members of the committee. I am happy to see that copies are available.
On 17 December last year, the development department submitted to ministers the report of a joint working group of the Scottish Executive and the Convention of Scottish Local Authorities entitled "It Pays to Pay". The report contains the recommendations of the working group in relation to the recovery of council tax; Bill Howat chaired the group and I attended its meetings as a member. At that time an important piece of comparative research was also published, which examined the arrangements for collection of council tax in England and Wales and in Scotland respectively. Ministers and COSLA are currently considering the report.
The additional documents that I have mentioned raise issues that are pertinent to the debate on poinding and sale and its place in the diligence system. Members may wish to take them into account fully. The committee may also wish to consider the extent to which it might avail itself of the opportunity to comment on the issues raised, bearing in mind that the report on the recovery of council tax is currently before COSLA and Scottish Executive ministers for consideration.
The diligence of poinding and sale is only one part of a complex system of debt enforcement, the different parts of which complement and depend on each other. The diligence system was last reformed by the Debtors (Scotland) Act 1987, following recommendations made by the Scottish Law Commission in its very thorough report in 1985 on diligence and debtor protection. Those reforms have been in place for 11 years. The aim then was to introduce reforms that would balance debtor protection with effective enforcement, and that remains the basic policy aim today. Subsequent work by the commission, as well as the central research unit's research, which was published in April last year, now enable further reform of the diligence system as a whole to be undertaken.
One issue raised by recent research that is of great concern to us as policy makers is that some of the protections for debtors that were introduced in the 1987 act do not appear to be being used as intended. It is not entirely clear from the research why that is the case, but we want to consider how debtor protection can be improved to reflect the policy intentions behind the 1987 act. Similarly, there is some concern about the way in which procedures are being carried out. Influencing creditor behaviour to take account of the individual circumstances of debtors is the other side of the coin. We are keen to hear views on how that might be achieved.
Convener, we are happy to assist the committee with consideration of those issues and any others that the committee may want to raise with us.
Thank you. We will move straight to questions.
I want to pick up on what Peter Beaton said about debtors not accessing debtor support. Debtors may fill in a form to say that they want time to pay, but they do not fill it in. The Scottish Law Commission tome, which I read last night—I read the beginning and the end and hoped that the middle would take care of itself—said that part of the problem was that people are scared of the courts system and feel that it is far too official. I can imagine that. Any teacher will tell you that there are two or three kids in every class who will be badly organised and who will perhaps not be able to read official language terribly well. That is one area that must be examined.
Peter Beaton also mentioned that voluntary organisations such as the citizens advice bureaux are expert in offering advice to debtors, but need funding to do so. Local authorities can have service level agreements with voluntary organisations that work for them. Is the same possible in the courts system? I do not know what the administrative way round that would be, but would it be possible to allow voluntary organisations to offer advice and to be paid for fulfilling that role? That might be less threatening for people who are in debt, whom we should be supporting rather than penalising.
That raises a complex set of issues, which I will try to deal with one by one. The first point that Maureen Macmillan made was about what I would call the presentational value of the material that was put in place after the 1987 act came into force. At that time, the Sheriff Court Rules Council and those responsible for implementing the act were conscious of the need to produce material that was as accessible as possible to the sector of the population that was most likely to come into contact with the diligence system. That was achieved through comprehensive work on the forms that were produced for use in the courts.
Maureen Macmillan referred to time to pay, which is one of the problems that we want to consider. Research shows that time to pay is not used as extensively as was intended. There are a number of reasons for that, one of which is—as has been borne out by some of the evidence taken on the bill—that people who are in financial difficulty and who have multiple debts often are not capable of thinking positively about what to do. We are very conscious of that fact. When the 1987 act was implemented, a leaflet was produced, which tried to explain in relatively simple language the point of the procedures and what people should do. At the end of the leaflet there is a red box headed "FINALLY". The first sentences in that box say:
"Remember, the worst thing you can do is to ignore any of the steps leading to enforcement of a debt. This will certainly make things worse."
There was, therefore, an attempt at the time—through the language used on the forms and publicity material such as the leaflet—to help people to see that there were ways in which they could cope with their predicament. All the forms for every stage of the diligence process end by calling on people to seek advice. When we come to consider possible reform, we intend to revise, update and review the material, because we believe that it is extremely important that people understand the process and the protections that are available to them.
The question of the advice that is available is a tricky one, which, as Maureen Macmillan has said, raises issues to do with the funding of advice services. With respect, the subject is rather beyond us, although we are actively funding a pilot scheme in Edinburgh sheriff court. One of the tasks of the adviser there is to advise people about matters relating to diligence, which is specifically included within the scope of the scheme. We are also very supportive of the idea, if possible, of a comprehensive network of advice centres. However, that raises all sorts of questions about organisation and resourcing. At some time, although perhaps not in this context, I dare say that we will get into examining policy on that.
We are supportive of the existing system, in that we commend it to people and commend the view that people should think about what they can do when they have multiple debts. We know that citizens advice bureaux are expert at considering how to agree with creditors across the board on behalf of debtors who have multiple debts in an endeavour to ease people out of a critical situation.
I hope that that deals adequately with the questions.
I am afraid that I have not read the Scottish Law Commission tome, but I have acted for creditors and debtors as a litigation lawyer. I have a great deal of sympathy with the evidence given by Tommy Sheridan and the chap from the Govan Law Centre that creditors use diligence as a sword of Damocles. Statistics show that it is local authorities and the Inland Revenue, who do not have to worry about the cost of enforcement when pursuing a debtor, who keep going to the bitter end until payment is made. What are your views on that? An ordinary creditor will stop, knowing the amount of the cost building up on the debtor as the charge goes through the sheriff officer's hands.
You may not be able to answer this, so I will raise it with the sheriff officers too, but I would also like to hear your comments on what Tommy Sheridan has said about the fact that sheriff officers do not adhere to the rules on exempt goods.
Will you also comment on the fact that, for ordinary council taxpayers, diligence is oppressive? Some self-employed people and traders are able to evade poindings and warrant sales by ensuring that goods are not around to be taken, so there are people who can break the system, but the majority of people simply cannot afford to pay.
I work once a week as an unpaid solicitor for Citizens Advice Scotland, whose problem is that it is underfunded. The Executive must consider that problem. The Executive also is not funding debt counselling agencies, to which I used to refer debtor clients. I am in favour of the abolition of warrant sales, but we must consider those other matters: debt counselling, funding of citizens advice bureaux and credit control. I would like your comments on those issues.
Thank you. That is a tall order. I will separate out the issues.
The bill deals with the specificity of the diligence of poinding and sale. However, as Christine Grahame has quite rightly said, that raises all sorts of complex issues, of which we are well aware, about the supply of credit and the way in which the consumer side of the credit industry operates. It also raises difficult issues about the marginalised population.
I, too, have experience as a solicitor in private practice of acting for creditor and debtor interests in relation to debt recovery, albeit some time ago. We should not underestimate the complexity of the problem. It was pointed out in earlier evidence that the abolition of poinding and sale will not solve those problems. It may avoid the perceived problems and injustices on the rare occasions that poindings and sales are used, but it will not go to the heart of solving the difficulties of multiple indebtedness in the marginal sections of society, which is what is desirable.
The regulation of the credit industry is a matter reserved to the United Kingdom Government. However regrettable members may think that is, we, as officials of the Scottish Executive, cannot get into that. The issues go beyond our responsibility for the diligence system within the wider civil justice system.
The diligence system is designed to secure the enforcement of obligations incurred by people in our society and is based on the premise, which we presume is accepted by everybody, that society expects people to fulfil their obligations. It is therefore regrettably necessary to have in place some system whereby people who do not fulfil their obligations have their obligations fulfilled for them, essentially by enabling those in right of the obligation—the creditor interests—to take steps so that that can be achieved.
One of the things that has happened since the 1987 act reforms came into effect is that there has been a big swing in the use of poinding and sale away from private sector creditors to the particular creditors that Christine Grahame mentioned—public sector creditors—and, in particular, the councils. None of us around this table, nor probably in this room, carries any brief for the policies that lead to that; nevertheless it is a fact of life.
There is a big problem with the way in which the local authority creditor system in particular operates. The working group on which Bill Howat and I sat attempted to come to terms with that problem, albeit from a particular perspective. In considering diligence policy, our job—presuming that we must try to secure the enforcement of obligations—is to see how enforcement works on balance. That takes us back to the work that the commission did in 1985 and to the work that it will do now to consider, in the light of everything that has happened, whether the conclusions that were reached in 1985 are still valid.
We believe that the basic premises on which we operate are still valid: that obligations need to be enforced and that there must be a balance between debtor and creditor interests. As I said in my opening statement, we believe that that balance may have been slightly lost.
There are various ways in which to consider the problem. Christine Grahame mentioned the suggestion that sheriff officers are not observing the list of exempt goods when poinding in dwelling-houses. I cannot say whether that is the case, but sheriff officers are a profession regulated under the act and are subject to judicial control. To our knowledge, very few formal complaints have been made to sheriffs principal about the activities of sheriff officers. However, if there is an issue, we will have to examine it.
One way in which to tackle debtor protection is to consider the list of exempt goods. Things have moved on. For example, every household may now need a computer for education, basic communication and other purposes. There is provision under the 1987 act to alter the list of exempt goods, so we do not need new legislation on that. We will examine that issue once the commission has done its work.
On the suggestion that councils and the Inland Revenue should pursue people to the hilt, we must bear in mind the fact that they are supposed to act for the general population. Council tax is supposed to be used for the benefit of communities and—I think that we all assume this—to provide the services that we want. Therefore, in securing payment for those services, they act for the general population. We need to ask whether council tax debt recovery is targeted properly—in other words, whether the councils are taking the right decisions about the diligence methods that they use. There is some evidence to indicate that there are ways in which councils' decisions could be improved, about which Bill Howat may wish to say a word. It is unlikely that the Inland Revenue and the councils would throw good money after bad unless they felt that there was an obligation on them, in the name of the general public, to do so.
I am not sure whether that answers all Christine Grahame's questions. Bill, would you like to come in?
Bill Howat (Scottish Executive Development Department):
As a point of fact, I remind the committee that councils, like the Inland Revenue and other organisations, are under statutory duties to collect money. Unlike councils south of the border, Scottish councils are also subject to a statutory duty to make arrangements to secure value for money, as the Debtors (Scotland) Act 1987 puts it. A balance must be struck between how far a debt is pursued and whether the cost of pursuing it will be more than what will be collected. Councils must judge what the cut-off point should be in the light of their statutory duties and of the views of their auditors. We have addressed that issue in the report "It Pays to Pay", in which we outline views and make a number of recommendations. As Peter Beaton said, research suggests that such areas would be worthy of investigation.
I have many other comments, but on that point, has there been a breakdown on a yearly basis—or whatever—of the cost of pursuing council tax debts and the amount recovered? Has there been any costing of the full legal costs, not just of the court costs? You do not seem to know whether such action is cost effective.
We have no such detailed research, although I am happy to check with my colleagues at the central research unit to see whether such statistics exist.
I would like to see that research.
We have made a number of recommendations to ministers and to the Convention of Scottish Local Authorities on the procedures, some of which would influence councils' decisions. The key issue that I draw to members' attention is that the availability of information is ultimately a matter for a council and its auditors. Is the right balance being struck while achieving value for money? However, I am happy to check the position and I will write to the committee.
Whether councils' money had been spent properly is also a political judgment.
When we consider Tommy Sheridan's bill, we all tend to think that poindings and warrant sales affect domestic situations. However, the bill could also profoundly affect small business, for example. Paragraph 18 of the Scottish Executive's memorandum says:
"The immediate consequence of abolition of poinding and warrant sale would be to create an incentive to debtors to invest in moveable property and therefore escape meeting liabilities."
Would you expand on that, please?
The bill is indiscriminate, as it proposes the abolition of poinding and sale for every type of debt and for every type of creditor and debtor. In his evidence to the committee, Tommy Sheridan takes a principled position on this matter, which must be respected. In the Executive's memorandum, we said the least that we could say. The problem is that we do not have a model on which to work. It is clear from the work of the Law Commission, which considered a comparative study of other legal systems, that almost all legal systems that we know of have some system of attachment or diligence against debtors' movable property.
We do not know what would happen if poindings and sales were abolished, so we can only conjecture. First, it would become more difficult for creditors, in certain situations, to obtain payment. Secondly, an undoubted consequence would be the immediate creation of a loophole. The range of diligences available in Scotland serves to attach property in execution of obligations of all kinds, with one notable exception, so there is no way in which those who are minded to evade their obligations can do so. Such people may well be a minority but, in a well-ordered legal system, we must bear in mind the fact that such a minority exists. While it is difficult for us to say whether there would be much evasion if the bill were passed, there is a risk that there would be. The question for this committee, for the Parliament and for us all is: "Is the risk balanced correctly, or is there another way of attacking the issues?"
It is clear from the evidence given to the committee and from Tommy Sheridan's submissions that the main problem is that of poinding and sale used in dwelling-houses. As I said, there are issues about the shift to public sector use, particularly in relation to council taxation. The bill would leave behind the other people who would use this diligence and it could create a loophole in which poindable goods would not be poinded.
Our view is that there may be other ways in which to tackle those problems. As our memorandum says, the bill's sponsors have not made any suggestions about how those difficulties would be overcome. There is no proposal for an alternative diligence to close the loophole that would be created by the removal of the diligence against debtors' movable property. There is no suggestion about how people who use the diligence of poinding and sale as a last resort would be able to secure the fulfilment of the obligation incurred to them. That is a definite gap, but it is possible to envisage other solutions to the undoubted difficulties that have been documented both in evidence to this committee and elsewhere.
If that is the case, why have no such alternative scenarios been worked on and suggested at any stage during the past two or three decades?
With the greatest of respect to you and to your position, convener, one of our concerns is that the protections available under the 1987 act, which has been in force for 11 years, are not being used properly. For example, it is possible to recall a poinding if it is clear that the appraised value of the poinded goods would be insufficient to meet the expenses of further diligence. That can be done by application to the court or at the stage where the warrant for sale is applied for, which is intimated to the debtor.
I appreciate that the current system may contain built-in protections. In the past, say, 10 years, what work has been done to establish why those protections are not being used and how that lack of use could be dealt with? One of the difficulties that the committee has to consider is that, although we are frequently told about such protection, it does not appear to be working. We cannot establish from anyone whether any attempts have been made to make existing practice fairer.
With respect, convener, immediately after the implementation of the 1987 act, my predecessors in what was then the Scottish Courts Administration initiated a research programme to evaluate the reforms introduced in the act against the objectives set out in the Law Commission's report. I believe that members are aware of that comprehensive piece of research, which was published in April 1999 and which includes seven separate papers, an overview and a lot of detailed material.
The intention of the Scottish Executive justice department was to use that research and the further work of the Scottish Law Commission—some of which has already been published in a report on diligence on the dependence and Admiralty arrestments and some of which, on attachments of land and other matters, is awaited—as the basis for proposals for policy that we would put before ministers. That remains our intention; I hope that that answers your question, convener.
Whether we deal with poindings and sale separately from the rest of the diligence system remains a live question, because Tommy Sheridan introduced his bill. Obviously, poinding and sale has been a controversial matter for centuries—it is a diligence of long standing in all legal systems. We propose to examine the diligence system across the board, taking into account what has happened since 1987, the work of the Law Commission and other research. We will have the benefit of the Law Commission's report that follows on from the discussion paper published last year.
It seems that a lot of research has been done on how to make poindings and warrant sales more acceptable—how to make them work better. What work has been done in the department on alternative forms of debt recovery? As you rightly say, for many years poindings and warrant sales have been considered a rather draconian form of diligence. What effort has been made to examine what the energy industry did to reduce disconnections, where there are clear parallels?
The diligence of poinding and warrant sale is used in almost every case as a last resort. The number of warrant sales is very small relative to the number of liabilities incurred annually in Scotland.
Mr Robson raises a pertinent point. We must remember that the 1987 act introduced new forms of diligence, such as earnings arrestments, which, for people who are employed and earning, is almost invariably the first diligence to be used. The figures show—this is borne out by the recent comparative exercise on council tax collection—that arrestment, and earnings arrestment in particular, is used far more in Scotland than in England. In England, seizure of goods remains the standard method of enforcement and the protection available to debtors in England is much less than the protection available in Scotland. Work has been done in Scotland, in the 1985 report and in the 1987 act, and the Law Commission will undertake further work to examine other types of diligence, particularly in terms of diligence against movable property. I cannot say what the commission will recommend, but we will, of course, study its conclusions with great care.
An extremely important question is creditor behaviour. I sympathise with Mr Robson's point about disconnections. When I was a lawyer in Berwickshire, one of my clients in Coldstream was frequently the subject of disconnection—it happened with awful regularity—and I often had to advise her what to do.
However, creditor behaviour is to do less with the functioning of the diligence system than with the operational and practical arrangements that creditors make. In our view, diligence policy should be about proper targeting by creditors of the means of securing the fulfilment of obligations. As has been demonstrated in certain areas, formal diligence does not necessarily have to be used—there are other ways in which to secure payment. However, those ways are outside the diligence system and are not for us to regulate. We can consider whether any of the protections that we perceive are manifestly not functioning satisfactorily under the 1987 act should be reformed to encourage creditors to use methods of securing payment other than formal diligence where it appears that informal methods may be more efficacious.
You have already referred to the fact that the control of creditors is reserved to Westminster.
I am sorry, convener. I did not make myself entirely clear. What I meant was that, before deciding about the methods—informal methods or formal diligence—to seek recovery of payment, all creditors must take certain steps. As Christine Grahame will know, there are various steps that private sector creditors always take as a precursor in trying to secure payment by correspondence in some informal way.
We are all aware of that, especially if we have received red bills from Scottish Power or British Telecom. The steps toward recovering debt that you are talking about are equivalent to those letters, and more such steps can be built into debt-recovery procedures, can they not?
In the normal diligence system—not summary warrant diligence—the first step that a creditor with a decree of payment in his or her favour must take is to serve a charge for payment. The charge for payment proceeds on a notice period of 14 days and effectively warns the debtor to pay up or risk diligence. That is the first step after all the steps involved in securing payment decrees have been taken.
In summary diligence, certainly in relation to council tax, many steps are taken before summary warrant is sought. Bill Howat may want to comment on that. The number of summary warrants sought is relatively small compared with the number of people who are liable to pay council tax, and various notices are served. Some of the material in the working group's report relates to the way in which the process should work. On Euan Robson's point, we are conscious of the fact that practical and operational things can be done to target resources more accurately. We would commend that to all creditor interests.
I have a couple of short questions. I welcome Peter Beaton's refreshing honesty. I am glad that he used the word conjecture, because much of the evidence that has been brought against the bill has been, in my opinion, conjecture. I am glad that he recognises that. He mentioned some proposals to avoid the abolition of poindings and warrant sales but to improve the system. For instance, computers have been mentioned as an example of exempted goods. Would Peter Beaton care to conjecture whether televisions are an educational tool?
I hope that Tommy Sheridan is not characterising my interventions as being against his bill. I made it clear that we are adopting a neutral position at this stage.
There is a lot of room for considering the list of exempt goods. The Scottish Law Commission's discussion paper contains a number of interesting comparative studies. Some legal systems, such as Australia's, go even further than ours does, while ours goes a good deal further than some others, including England's. The question of television sets is an interesting one. In Germany, officers are allowed to substitute a black and white television for a colour set. I am not sure whether that is the way in which we should go, but we should certainly examine the exemptions list.
Existing protections are not being pursued by debtors—debtors are not taking advantage of the rights that they already have, both in ordinary diligence and in summary warrant diligence. That is a matter for concern, because it was one of the balancing factors that lay behind the commission's 1985 report.
I hope that our discussion will take the form of short questions followed by short answers. Peter Beaton has illustrated the difficulty of anyone understanding the exempt list or the legislation. Computers should already be exempt, because the existing legislation states quite clearly that items used for education should be exempt. Most people consider televisions to be educational items, but sheriff officers do not and regularly poind them.
Time-to-pay orders have been mentioned. Are you suggesting that greater use of time-to-pay orders would offer effective protection to debtors facing poindings and warrant sales?
That was the intention of the policy.
I ask because you will be aware that, of the 23,000 poindings last year, 16,000 were carried out by local authorities. Those 16,000 debtors do not even have the right to a time-to-pay order.
That point has been noted by a number of people, including ourselves, and is well taken.
Phil Gallie suggested that the abolition of poindings and warrant sales across the board would have a profound effect on small businesses. Your reply was that you did not know what would happen—again, I respect your honesty. What do you think would happen to the credit and debt-recovery system in Scotland if poindings and warrant sales were suddenly no longer accessible?
It is impossible to say; any comment would be purely speculative. The most that we could say is that there would be an immediate loophole, whereby movable property in the hands of debtors could not be obtained other than by sequestration. Whether it is satisfactory in terms of social policy to encourage more sequestration of property from people who may already be in difficult circumstances is a matter for discussion. I would rather see properly targeted diligence properly executed.
I take the point about the clarity of language, which we are considering for the reason that I have already mentioned—that we are aware that the existing protections are not working properly.
Thank you.
I have a final question. You referred to an upcoming or on-going review of the whole question of diligence in Scotland, and you expressed concerns about examining aspects of the system in isolation. What is the time scale for the study of diligence? Are we looking at another 10 years?
I cannot give precise details, because the speed at which things should go is a ministerial decision. As departmental officials charged with the responsibility for diligence policy, we plan to produce a series of comprehensive proposals to put to ministers with a view to inviting them to bring a bill to the Parliament.
Is that a five-year plan or a 10-year plan? Can we have some indication of the time scale?
We are ever optimistic that we will have the capacity to fulfil our obligations to our ministers, convener. Our optimism leads us to hope that we may even be able to produce something during the current Parliament. If so, we will be extremely pleased, because there is a lot of work to do.
We are waiting for one final report from the Scottish Law Commission. In my earlier responses, I mentioned the fact that the one item of property that cannot be attached at the moment is cash in the hands of the debtor. That is something that the commission is consulting on; its report should be available in the second half of this year. That is the final piece of the picture as far as we are concerned. If we have support, we will continue this work and will, I hope, complete it within the time scale that I have indicated.
I have a quick question, which I hope will receive a quick answer. You mentioned Germany's system of sequestration, which we tend to view as outdated. What other European countries use similar systems?
I refer members of the committee to the excellent memorandum produced by the Scottish Law Commission and also to the discussion paper. We have not found any system in Europe that does not have a diligence against movable property.
Thank you very much. That concludes the evidence from the Scottish Executive team. Thank you for coming along this morning.
Our next witnesses come from the Scottish Consumer Council. Martyn Evans, the director, sends his apologies. I understand that he has broken his leg, so Gordon Jackson will no doubt sympathise with him.
That is no reason not to be here. [Laughter.]
It depends, I suppose, on how recently he broke it, Gordon.
I ask the remaining witnesses from the Scottish Consumer Council to introduce themselves.
Deirdre Hutton (Scottish Consumer Council):
Thank you, convener. I am Deirdre Hutton and I chair the Scottish Consumer Council. On my right is Sarah O'Neill, the legal advisory officer. I apologise for Martyn's absence. His remedy for avoiding the committee meeting seems rather desperate. This morning he tried to persuade the hospital to let him attend, but to no avail.
We are running a little behind, so I shall ask members to begin their questions. We have all seen the written evidence that the Scottish Consumer Council submitted. It is fair to say at the outset that we were all rather surprised at your view, so there may be questions about that. Tommy Sheridan, Phil Gallie and Christine Grahame want to ask questions.
Roseanna said that members would want to ask you about the view that the Scottish Consumer Council has taken on this matter. Can you clarify that view? You have said that you would like the abolition of poindings and warrant sales to be part of an overall overhaul of the debt-recovery system. If nothing else was available, would the Scottish Consumer Council still support abolition? Am I right in saying that, in the absence of an immediate overhaul, you support the abolition of this form of debt recovery because of the humiliation and fear caused by its use?
I am glad to have the opportunity to clarify our position. There have been some misunderstandings, partly brought about by our having to produce the evidence very quickly.
We agree that the current practice of debt recovery through poindings and warrant sales cannot be defended. There is compelling evidence that the procedure is needlessly distressing and increases the indebtedness of very-low income households. If absolutely nothing else were available, we would probably support the bill. Having said that, we are worried about some of the bill's unintended consequences, which have not been explored because of lack of time.
Our long-standing view is that part of the problem with the civil justice system in Scotland is that it has been reformed on a piecemeal basis. Those piecemeal reforms have led to unintended consequences. It would be better if legislation to abolish poindings and warrant sales were included as part of a formal, wide-ranging review of the civil justice system.
I am grateful for that clarification. It seems that the Scottish Consumer Council fears that, if poindings and warrant sales were not available, there would be increased use of other diligence, in particular bank account arrestments. Given that bank account arrestments are not co-ordinated and regulated to the same extent as wage arrestments, would you regret such increased use? Do you accept—as all the evidence suggests—that the people who are being poinded and subjected to warrant sales are generally those who do not have a bank account anyway?
I do not have a huge amount of faith in the way in which banks deal with customers in hardship. Our research suggests that banks' policies for dealing with such customers are variable and, sometimes, deeply unsympathetic. I therefore do not see the banks' involvement as the solution.
Low-income consumers rely heavily on credit—they have to; they have no other way of buying the things that they need. Credit is very expensive for low-income consumers, but we are concerned that the absence of an ability to attach possessions may lead to credit becoming even more expensive.
Like many others, we do not know what the consequences of the abolition of poindings and warrant sales would be. In the interests of consumers as a whole, we have tried to work out some of the unintended consequences for other low-income consumers.
This issue is generally seen as one in which consumer debtors are jumped upon by business creditors, but we are also concerned about the interests of consumers who might need to use diligence to pursue, for example, small businesses that owe them money. How are they to do that in a way that gets them the resources that they need? Very often, such people are also people on a low income who really need the money that is owed to them.
I have one last question. Given that the overwhelming majority of poindings in Scotland are carried out by local authorities or by those with the ability to use summary warrant—such as the Inland Revenue or the Department of Social Security—do you have any evidence to suggest that creditors would make credit more difficult to obtain if poindings and warrant sales were not available?
To ensure that the proper systems of protection for debtors are in place, nobody should be allowed to use any process of attachment without having to go through the courts. We think that it is quite wrong that local authorities, and the other agencies that you mentioned, should be able to do that.
We have no evidence of the kind that you mentioned. We are aware of how difficult it can be for people on low income to get credit, and we are worried about the consequences for them, but we have not had time to get evidence.
You have demonstrated, once again, that thinking on this issue tends to focus on people on low income in domestic circumstances, but small businesses are also affected. What are your views on the way in which businesses will be affected?
I accept Tommy's comments on the number of local authorities that use poindings and warrant sales. When considering exemptions from that process, can you see any benefit in splitting up domestic and business consumers?
We accept that such a split is possible, and that poindings could be abolished for domestic consumers but retained for use against businesses. We could support that.
In response to your first comment, we are, after all, the—
I am sorry—I cannot hear. Could you speak a little bit louder please?
I am sorry—my voice is not terrific this morning. We are, after all, the Scottish Consumer Council, and we are here to represent the interests of consumers and not necessarily small businesses. I fully accept that we are partial—that is our job.
But consumers are obviously affected by the success or otherwise of small businesses—consumers depend upon them. You mentioned credit facilities. I suggest that, if small businesses were to lose those facilities, that would have an adverse affect on the people Tommy cares about so much.
That question is difficult to answer because we are not in that position, and most jurisdictions have some ability to attach possessions. To some extent, we are venturing into unknown territory. When he gave evidence, Mike Dailly talked about winners and losers, but we have no quantification of whom they might be.
Your submission says that your purpose
"is to promote the interests of Scottish consumers, with particular regard to those people who experience disadvantage in society."
From the evidence that we have received, it is apparent that the majority of poindings and warrant sales—although the process tends not to go as far as that—are carried out by local authorities and the Inland Revenue, for council tax and revenue debts, rather than by shops.
The major shops do not sue people for debt. In most cases, shops such as Marks and Spencer and British Home Stores come to an arrangement with the debtor, because they regard going through the courts as a most inefficient way of getting payment. Do you agree with that, and that the kind of person they are chasing for a debt usually has a multiplicity of debts?
Yes. It is also important to remember that 92.5 per cent of credit agreements are honoured. We must not think that there are a hell of a lot of people who are not paying their debts; people on low income really struggle to pay their debts, and they do it.
So we are looking at switching this so that the legislation is operated by the state against individuals, and not by retailers.
That appears to be the case, according to the evidence. We must then consider whether having the legislation as—to use a phrase that I think was used before—a Damoclean sword is useful.
Do you agree that it is a great pity that resources are not being put into debt counselling agencies and citizens advice bureaux to assist people who have a multiplicity of debts and are in circumstances where they cannot begin to organise and structure their repayments?
I entirely agree with you. One of the things that we have done with funding from the Scottish Executive is to establish a pilot advisory service in the Edinburgh courts. That has been extremely successful. The evidence is that people who are faced with a summons to court do not even go, and that the provisions put in place by the Debtors (Scotland) Act 1987 that have to be initiated by the debtor are simply not being used. They are not being used because people do not understand the words and the forms, and because they find the whole system intimidating. When they get to the court, it is deeply confusing. Nobody gives them advice on how the procedure works, where they can go and what they can do. That is what our in-court advice service tries to do.
We would like the pilot to be extended throughout Scotland. We also believe—and this was included in our evidence in 1986 to the Law Commission—that there should be a debt arbitration service. That could be a way of putting in place something other than poindings and warrant sales. It could ensure that debts were paid wherever possible, without the unattractiveness of the present system.
I agree. The pilot scheme in Edinburgh is fine, but it assists people when litigation has already started. I was thinking of something in advance of court. Most retailers do not have the time to raise small claims proceedings, and do not want the trouble. If the abolition of poindings and warrant sales goes through, what we really want—in tandem with schemes such as the Edinburgh pilot—are properly funded debt counselling services and CABs to deal with problems at street level. People should not have to go to court, but should be able to get advice on structured repayment schemes on their own high street. Do you agree?
Absolutely. We were instrumental in the setting up of the Money Advice Service. This may be going off on a tangent, but one of the failures of that service is that it has been unable to persuade the credit industry that it should fund the service sufficiently to make it universal.
I agree with Deirdre that the advisory service in the sheriff court pilot is immensely important. I also agree with Christine Grahame that personal contact in resolving debt issues is the way forward. The experience in the energy industry is that without contact, there tends to be a disconnection, but that when contact is made—especially personal contact—disconnection is usually avoided.
Do you think that alternatives to the last resort of poinding and warrant sales could be developed? I have in mind alternatives such as the fuel direct scheme, in which structured deductions are made from benefit—deductions that are not excessive, but are sustainable given the level of benefit. Do we have enough experience to develop such alternatives?
I am sure that alternatives could be developed. I do not have any in mind at the moment, and I do not think that enough thought has been given to what they might be. We believe that some form of attachment has to be found, because, on the whole, it is in the interests of society that debts are paid. Other jurisdictions may have experience that could be considered. If jurisdictions exist that do not have attachment to possessions—although we have not yet identified one—it would be interesting to know how they handle the question.
It is interesting to reflect that, in England, it was thought for years that it was absolutely essential for the water industry to retain the power to disconnect, whereas in Scotland we had not had that power for years, and yet seemed to be able to manage. There are clearly other ways of handling debt and its repayment. Much more thought has to be given to the alternatives to poindings and warrant sales. That is why we want to consider the proposed legislation in a broader context and not just as a one-off.
The water industry is an example in which the prophecies of doom and gloom turned out not to be justified. Is it possible that the prophecies of the horrors that might happen if warrant sales were abolished may also turn out to be unjustified?
That is certainly possible, but it would be responsible to give more thought to the way in which debt would be handled if poindings and warrant sales were abolished.
I noted the interesting—
I am sorry to interrupt, but could people at the sides speak very clearly into their microphones. For some reason, the sound system is very bad today and it can be difficult to hear.
Of course. I noted the interesting statistic that 92.5 per cent of credit agreements are honoured. That is an important premise to start from.
Another important premise is that most people who get into debt difficulties want to pay their debt. It is only the minority who refuse to pay.
You have been questioned this morning on court procedures and so on, but I want to talk about what happens prior to any formal procedures. I feel that there are not enough steps that people can take when they know that they have lost the place, are in debt and cannot manage. Crossing the threshold of a citizens advice bureau is a big step for most people. They have to queue up and admit that they have lost the place. Can provision be made to look at what steps can be taken—through either public support or diligence provision? I am thinking particularly of when someone has a debt and wants to pay a small part of it, but is not allowed to. It seems to be all or nothing in some cases. Have you had any thoughts on that?
Sarah O’Neill (Scottish Consumer Council):
We would much prefer creditors to take a small amount than to take nothing—I know that evidence on that point has been given to the committee. We are in favour of allowing people to pay the small amounts that they can afford, and are against the all-or-nothing approach. Everybody loses if matters are taken to court and decrees are issued against people, as there is more expense for them and the creditors.
What Pauline McNeill says about CABs is true: it is difficult for people to go to them. Generally, there needs to be much more information for debtors at every stage of the process. People should be more aware, even before they get into debt, of the provision that is available to deal with debt. That is part of the whole review that needs to be carried out into the debt and court collection system. As we have said, many issues are at stake.
I did not know that it was so difficult for people to go to CABs, but if it is, it might be worth considering a debt hotline—I know that that is the current thing. People could take the first step anonymously and be put in touch with various agencies, if a strategy were in place to manage debts against a background of removing the punitive Damoclean threat of a poinding and warrant sale. What are your views on that?
That is an interesting idea, which would be worth trying.
I guess that being in debt is like being addicted to drugs: the most difficult thing is to admit that one is in trouble. If people find CABs intimidating, it will also be the case that they find it difficult to go to some official body. The emphasis should probably be on systems that are seen to be in, and of, the community, rather than on doing something official—I suspect that that would not be a good use of public money. Supporting CABs and the sort of debt hotline that Christine Grahame suggested might be a good way of dealing with the problem.
It is important that people get help earlier, but the experience of debt workers is that people tend to leave things to the very last minute. That is why the in-court advice project is so important. However, we would prefer that people sought advice before matters reached the court.
There are no further questions. I thank the witnesses from the Scottish Consumer Council. We are a long way from concluding stage 1, especially as we are not the only committee involved, so I cannot say when there will be a report on stage 1. You may wish to comment later.
The next witnesses are Hugh Love and Roderick Macpherson, from the Society of Messengers-at-Arms and Sheriff Officers. A paper from the society was circulated some time ago. Other members may be in the same position as I am: it is difficult to go trailing back to discover papers that might have been sent out a month or six weeks ago, but we must all get into the habit of doing that.
We do not have much time, but you may wish to take two quick minutes to outline your organisation's position on this issue. A written submission has been received, which, as usual, some members but not others will have with them.
Roderick Macpherson (Society of Messengers-at-Arms and Sheriff Officers):
Good morning. I am Roderick Macpherson, a messenger-at-arms in Glasgow, and my colleague is Hugh Love, a messenger-at-arms in Edinburgh. We are both past presidents of the society and bring additional experience that, we hope, will be useful for your discussion. Mr Love is a member of the committee of examiners of the society, which is the body statutorily authorised to admit all entrants to our profession. He is also a member of the advisory council on messengers-at-arms and sheriff officers, which was established by the Debtors (Scotland) Act 1987. I am one of the Scottish representatives on the permanent council of the Union Internationale des Huissiers de Justice et Officiers Judiciaires.
As Mr Beaton told you, there have been important developments since we made our submissions, with the publication of discussion paper 110 by the Scottish Law Commission, and of "It Pays to Pay". We believe that the detailed factual information provided by those documents reinforces many of the points that we made in our submission.
In light of those and other reports, we maintain our view that the committee should recommend to the Parliament that the general principles of the bill to abolish poindings and warrant sales be rejected. We fully recognise that in debating the principles of the bill the committee will want to consider the balance between protecting the most vulnerable members of society and the importance of giving creditors effective remedies to recover debts that are lawfully due to them. Against that background, I will give three reasons why the general principles of the bill should be rejected.
First, Scotland should not be out of step with the international community. Other legal systems provide for the attachment of movable property. The Scottish Law Commission has given details of its research into 41 other European and Commonwealth jurisdictions. The commission's conclusion is:
"The proposition that moveable goods as a class should not be attachable by creditors outside insolvency proceedings is not precedented in any other modern legal system of which we are aware."
Secondly, the ability to attach movable property is an essential component of any effective system regulating the rights of creditors and debtors. That is perhaps best recognised by the Law Commission's discussion paper, which states:
"We take it to be evident, and we hope it is agreed on all sides, that none of the other diligences (as distinct from insolvency proceedings) could perform the realisation, identification, and deterrent roles of poindings and sale."
It has to be recognised that without an effective sanction such as that provided by the poinding procedure, more people would not pay their debts.
Thirdly, the interests of vulnerable members of society should, and could, be protected without the abolition of the poinding and warrant sale procedure. The Parliament could reduce substantially the number of summary warrant poindings that are carried out by extending the protection that local authority debtors currently receive under the 1987 act and by implementing procedures that were identified by the Law Commission. Section 25 of the Law Commission's memorandum states:
"The method adopted by modern legal systems to protect debtors from the harsh consequences of attachment and sale of articles of moveable property is invariably by providing exemptions from that form of enforcement rather than by its abolition."
I will be delighted to answer any questions.
Do you have personal experience of carrying out poindings?
Yes.
While you were an acting sheriff officer, roughly how many poindings do you estimate that you carried out?
In terms of personally executing poindings, I should say that I have been a partner in my firm for a good many years and therefore would not present my experience as that of a sheriff officer daily on the road.
How many poindings have you been involved in?
I could not tell you how many poindings I have been involved in. I have been a sheriff officer since 1986 and, as messenger-at-arms, an officer of the Court of Session since 1987. Notwithstanding the limits of my experience of being out poinding, I will have completed quite a few, but I cannot tell you how many.
I have probably stopped more than you have completed.
One of the complaints that I often hear from sheriff officers is that there are very few items that can be poinded, but you seem to suggest that the list of exempted goods should be extended. Do you think, for instance, that a three-piece suite in someone's home is a reasonably necessary item of furniture?
With regard to the general principles of the bill, the statement that there are insufficient items to poind requires us to divide the subject up. The question of carrying out poindings in dwelling-houses, which may involve people who are vulnerable and poor and who may be can't-pay or won't-pay debtors, is not the same as the question of the diligence of poinding against commercial debtors or, indeed, against individual debtors with substantial and valuable articles that could be poinded.
In 1985 the Law Commission made the interesting point that the abolition of the diligence of poinding against commercial debtors had never been raised as an issue. Interestingly enough, the research by the central research unit into poindings and warrant sales, to which Mr Beaton referred, showed few people would dispute the argument that debtors who can pay and have property should be liable to poinding. The difficulties in striking the balance between a system that is effective for creditors, but that includes a proper amount of debtor protection, arise in the third category, which is largely the dwelling-houses of people who may be vulnerable and may not have very much property.
You asked whether I thought that a three-piece suite should be poinded. Section 16 of the 1987 act, which gives the list of exempt items, is complicated: subsection (1) gives a list of all items that should be exempt, but subsection (2) gives a list of items that should be exempt if they are reasonably required. The test of what is reasonably required is difficult. In its discussion paper, the Law Commission points out that there is limited reported case history. I believe that there was a case where parts of a three-piece suite were poinded, but one chair was not. On that occasion, the sheriff was persuaded that the test of reasonable requirement had been satisfied.
I cannot give you a blanket answer on whether a three-piece suite is always required, as it depends completely on the circumstances.
Your second stated reason why warrant sales should be retained is:
"It has to be recognised that without an effective sanction such as that provided by poinding procedure, more people would not pay their debts."
What is the basis of that statement?
The Scottish Law Commission's discussion paper makes the point, which, I think, is widely recognised throughout the country, that common experience shows that debt recovery cannot be left to debtors' consciences. In our paper we point out that the majority of people scrupulously pay their debts, but we all know that there are some people—albeit a minority—who require to know that a sanction exists if the debt is not paid. Of course, that is a matter of long experience.
If it were the case that the diligence of poinding allowed one to recover little or nothing from the process, the general principle of the bill would have strength, but research shows that poinding and warrant sale continues to be a highly effective remedy in certain circumstances. The Institute of Revenues Rating and Valuation report states that in Scotland, from the information given, local authorities with a higher level of poindings and warrant sales have a significantly higher level of collection overall.
Also, the Scottish Law Commission's discussion paper says that it was informed by the Board of Inland Revenue and the board of Customs and Excise that poinding and sale is an effective—indeed, an essential—means of enforcement, on which they rely heavily.
In "It Pays to Pay" we are told that one of the key points to note is that the abolition of poinding and warrant sales would have a major effect on council tax collection levels, and therefore council services, unless an equally effective mechanism could be substituted.
I am grateful for your references to the other documents. I believe that they are conjecture, and that your statement is conjecture, because you do not have statistics or facts to prove that the number of people who would not pay their debts would increase greatly. However, in respect of the process of poindings and warrant sales, I have a letter from the chair of Citizens Advice Scotland, an organisation which deals with hundreds of thousands of people who are in debt, as you are aware. It states:
"It is our experience that poinding and threatened poindings mainly affect the poorest clients who are either not working or do not have bank accounts."
Do you think that that is an accurate statement?
It is the case that when Parliament sought to revise the diligence in 1987, it was on the basis that there would be a balance between what has always been recognised as the obligation on those who have lawful debts to discharge them and the need for effective debtor protection, which is in line with the social policy of the country.
The principle of the bill is a simple one: it is to abolish poinding; it is not to abolish poverty. Although it has the laudable aim, which we recognise, of extending what Parliament may think is much-needed debtor protection to the poorest and most vulnerable, the bill is still to abolish poinding. The Society of Messengers-at-Arms and Sheriff Officers was involved closely with the Scottish Law Commission during the 13-year period of its researches, which led to the publication of its "Report on Diligence and Debtor Protection" in 1985. We have worked to develop a system of debtor protection. The Society of Messengers-at-Arms and Sheriff Officers and its members daily provide a level of debtor protection.
Mr Beaton was telling you that those elements of the act that rely upon the proactive attempts of the debtor to avail himself of the measures of debtor protection have not worked as well as Parliament had hoped. The fact remains—and it is a matter of fact, not a matter of conjecture—that between 1987 and 1998, the number of poindings carried out on court decrees has declined by 44 per cent.
Thank you for that figure, because it illustrates that in the commercial sector the use of poinding and warrant sales is on the decline, whereas in the local authority sector it is on the increase. From my experience, Roderick, I have never viewed sheriff officers as debtor protectors. Credit enforcers would be a more appropriate description. How much money does a sheriff officer make from the process of poinding?
To answer your first point, that you were under the impression that we are in some way an arm of the creditor, it is important to realise the nature of our appointment, which is a public one. We are officers of the sheriff, bound to uphold the law without fear or favour, and to give effect to the warrants of the court. To that extent, the perception of us being on the side of the creditor is not fair. We have to strike a balance and operate the Debtors (Scotland) Act 1987, which has the aim of giving debtor protection, through our daily practice.
Sheriff officers have often been described as rottweilers in suits. The question I asked was how much money you make from the process.
The basic poinding fee is £63.25.
Do you agree that the process of poinding and warrant sale is a profitable one for sheriff officers?
There are several points to make about cost. Whether value for money is obtained from the diligence system has already been raised. There will still require to be a remedy if the bill is accepted, and if the remedy is to be sequestration, the Law Commission has shown that the cost to the public purse will increase considerably. It has been suggested that the existing alternative modes of diligence, such as earnings arrestments and the use of inhibition, would be sufficient to resolve the absence of poinding. However, the cost of the number of arrestments that would be required to gain the equivalent level of protection for a creditor would be considerably more expensive to him than proceeding with a poinding. A prescribed fee is allowed in the Act of Sederunt for poinding, and it is obvious that the only people who can poind are sheriff officers; therefore of course there is a level of income associated with poinding.
But your evidence to us today is that even if this bill went through, we would not see sheriff officers signing on the dole the following month.
It is no part of our evidence to seek any level of sympathy from you, convener.
But I was intrigued by the final paragraphs of your written evidence about the cost of abolition. While you talk about a number of organisations, you do not talk about the cost of abolition to your organisation, although as Tommy said, you make a living out of poinding and warrant sales, as well as being officers of the court. You are saying that regardless of whether this legislation comes into force, it will not have an effect on your position. You are not arguing from the point of view of job losses or anything like that.
Hugh Love (Society of Messengers-at-Arms and Sheriff Officers):
It is up to this Parliament to consider the value or otherwise that the country receives from sheriff officers. At this time, we have no public support for the service that we provide. Generally, we do not derive our income wholly from poinding and warrant sale. That is merely a part of our duty. Our scope in service of citation and diligence is widespread.
You misunderstand me. I am saying that it cannot be suggested that your evidence is biased because you make money from this procedure, as you are saying that you would continue to make money from whatever procedure was in place.
Yes, assuming that there was an alternative to poinding and warrant sale, which presumably there would be.
Perhaps I could clarify that our visit here is to address the general principles of the bill, which we urge you to reject. It is not for us to make any special pleading about the effect that the bill will have on our profession.
We call to your attention the fact that a vital remedy, as we regard it, that has always been available to holders of court decrees in Scotland, will be removed. We are concerned about the effect that that may have, because the Law Commission report indicated that certain categories of debt, which at present might only be recoverable on the basis of movable property, will only be recoverable through sequestration or liquidation, and that certain values of debt—those of less than £1,500—will become irrecoverable. We perceive that the bill will cause a mischief to creditors in this country. That is the basis of our approach to the general principles of the bill.
I have quite a list of people who have piled in at the last possible minute and who want to ask questions at the point when matters ought to be coming to a close. I ask members to keep their questions brief and confine themselves to one or two questions at most.
I come from a background of more than a decade in litigation. I have instructed HM Love & Co and Rutherford & Macpherson, so you can take as read my background to this subject. You say poinding and warrant sales are a highly effective remedy. You and I know that ordinary creditors would not use it as a diligence, so it is not a highly effective remedy for them. You and I also know—please stop me if you disagree—that anyone who is determined to avoid diligence, and who knows how to do it, can do so, and they can avoid poindings and warrant sales. We are looking at a regime that generally is used by statutory bodies such as the Inland Revenue and local authorities. Is that correct?
I cannot accept your comments in their entirety, because it cannot simply be accepted that poinding and sale is not an efficient remedy on court decrees. There may be certain categories for which it is not the appropriate diligence to choose, but it can be useful. The central research unit's overview tells us about those cases that fall out of the filter system, which means that once the stage of diligence is carried out, many fewer cases require to go on to the next stage. Although occasionally the statistics point in different directions, the unit said:
"Such information is not readily available from statistics and it is therefore necessary to look beyond the figures at the views and experiences of creditors and their agents."
The CRU carried out detailed research on this matter. In its survey of poindings, it said:
"On a case by case basis, business poindings were estimated to recover all expenses and some of the principal sum in 96% of business poindings compared to 76% in domestic poindings."
We have to accept that if poinding is being used as a last resort, there are still cases where creditors on court decrees feel that it is a necessary remedy.
I accept that, but my point is that if I were a solicitor pursuing a debt for an ordinary creditor, generally I would not select poinding and warrant sale as my first port of call. I would look for arrestment of bank accounts, inhibitions or some other means.
You say that poinding and warrant sale is cost-effective. We heard evidence this morning from the Executive that it does not know that cost of taking out summary warrants and proceeding through diligence or poindings or whatever stage you stop at along what I see as a bullying road—which I have used myself in some circumstances as a sword of Damocles against debtors. The Executive has not costed the process. I do not mean the cost of court proceedings, but all the costs that are involved, for example, the cost of administration, from opening the file at the beginning to getting some of the council tax or tax arrears back. In that case, how can you say that the process is effective?
My point regarding ordinary creditors was that they choose to follow that line and meet the necessary costs, and in 96 per cent of business poindings they get a result. In terms of the question of public bodies, it is a matter for them to satisfy the committee on any issues of public expenditure connected with their employment of messengers-at-arms and sheriff officers. We all know, because it is in the public domain, that the Accounts Commission called attention to the disparity in collection rates between Scotland and England, and we know that in many ways that was the catalyst that led to the report "It Pays to Pay".
I have heard that.
One of the many pieces of advice in the report is that in some ways, poindings and warrant sales are not being used enough in the local government sector. The Accounts Commission will be in a better position to tell you whether the public is getting value for money out of the system. The Inland Revenue will tell you whether the payments are satisfactory.
I will stop you there. The point is that we do not know the cost to the public purse of pursuing that route. Do you agree that on many occasions, poindings, warrant sales, charges and the various stages through diligence are used as threats, in the hope that at some point the debtor will cave in and make a payment? In most circumstances, it is obvious that the recoverable assets, if put on the market, would not be equal to the debts and the expense that has mounted.
Even in cases where substantial assets can be found, creditors will do anything to avoid the necessity of completing the next stage of the diligence. You used the word "threat", which has the same origin as "urge" and "entreaty". In certain cases, however, in spite of entreaties being made, the diligence has to be completed. It is evident that if it were not possible to complete the diligence—by the use of the ultimate sanction of a warrant sale—the service of a charge threatening a poinding would lose its efficacy in the filtering process that I spoke about earlier.
Christine, I would like to bring this to a close.
The point is that, during that filtering process, the amount owed by the debtor increases all the time. Someone who starts off genuinely unable to make a payment ends up with a much more substantial debt at the end—a debt that will not be covered by the proceeds of a warrant sale.
The costs of litigation are regarded as a cause for concern in many sectors. Access to our justice system is often dependent on the ability to pay to make good one's remedy. Anything that makes it more expensive for creditors to enforce their lawful debts is a matter of concern.
Do you agree that the deterrent factor of poindings could be an invisible cost benefit?
The IRRV report confirms that. It points out that areas that have an effective use of warrant sales have higher collection rates.
Could we persuade your society to give approval to the bill if the domestic element were separated from the business element and it included a guard against transference of assets?
While Mr Beaton earlier expressed a neutral position, we ask you to reject the general principles of the bill. Our reading of the bill is that it has one purpose: to abolish poinding and warrant sales. We are not in favour of the loss of that remedy.
We have said that we are committed to debtor protection and we want a system that has widespread public approval and will allow debts to be recovered within the court system. Mr Beaton told the committee that the 1987 act means that the list of items that are exempt from poinding can be varied. The discussion paper—
We are going over old ground. You say that you want the most vulnerable members of society to be protected. If the domestic side of the poindings and warrant sales procedure were separated from the business side, would you support Mr Sheridan's bill?
I will answer as briefly as I can, Mr Gallie.
We agree that greater debtor protection might be desirable. It could be achieved within the regulations of the 1987 act: the Scottish Law Commission has said that extending the rights of the debtor and the list of exempt items would be tantamount to abolition of warrant sales in certain sectors of society.
It would not be possible to separate the issue of commercial debt from that of private debt. While some companies—
I said that there should be a guard against transfer of assets.
A fundamental difficulty is that some commercial debt relates to limited companies and other commercial debt relates to partnerships. It would be difficult to categorise those two items. The Law Commission suggests that exemptions should be extended to focus the remedy on the most vulnerable and disadvantaged in society.
Of the actions that are taken by Customs and Excise, how many occur in the domestic community as opposed to the business community?
I do not think that we have figures for that. The tables that were contained in the memorandum from the Scottish Law Commission made no distinction between the two areas. In our experience, the majority of poindings that were carried out are against business premises, although a number are against small traders, in which circumstance the poinding is extended to their dwellings.
I do not know whether you have already given the information that I want. If you have, I apologise for not picking it up. How many poindings result in warrant sales in domestic circumstances?
The Law Commission has published a huge amount of data on that. However, the number that are to do only with dwellings is not expressly stated.
Does your question relate to warrant sales?
I want to know how many domestic poindings result in a warrant sale.
Figures are available regarding the number of warrant sales. The Law Commission gave estimates of the number of sales against private individuals. I doubt that we would be able to relate those figures to the original poindings.
I was not happy with the answer that you gave to Christine Grahame's question. She said that she believed that poindings were a form of threat. Earlier, you said that they had a role as a deterrent, which implies an element of threat. In answer to Christine's question, you said that poindings were an entreaty to come to terms. That sounds pleasant but I do not think that it is true.
Most people on whom poindings are carried out do not have assets available but manage to find money to pay their debt because of the intimidation that they feel. Do you believe that poindings are a form of intimidation, particularly in domestic situations?
The Social Inclusion, Housing and Voluntary Sector Committee took evidence from debtors about their experiences. We acknowledge that people occasionally feel traumatised by the process. As the Law Commission has said, the procedure is necessarily coercive.
Technically, "coercive" means to confine together. The goods are confined together for the security of the creditor. The process impinges on the privacy of the home and initial statements that were made about the procedure's being in breach of the European convention on human rights will have caused much concern.
It is therefore reassuring that the Scottish Law Commission has demonstrated that, if properly executed, poindings and warrant sales are not in breach of the convention.
Those who genuinely cannot pay must be able to take advantage of the many remedies that are available to them under the 1987 act. However, it is widely acknowledged that, were the final sanction of poindings and warrant sales not available, some people who can pay and who have assets would seek to evade their bills.
Would you say that that includes the majority of people on whom poindings are carried out?
In 1985, the Law Commission said that it found it impossible to establish a system that could distinguish, at the start of the procedure, between those who can pay and those who will not pay. The enforcement review of the Lord Chancellor's department in May 1999 said the same. The problem is that means inquiries would lead to non-attendance in court and an apprehension to appear there.
It is not possible to say at the outset who can and who cannot pay. The filter effect means that many people who are served with a charge come to terms. We do not know whether people who are poinded can pay, but if they cannot, they can seek advice and challenge the poinding.
Common sense suggests that most people would not go through the trauma of having their belongings poinded if they could pay.
Parliament must accept that the won't-pays will not pay until some action is taken, be it a poinding, an arrestment of wages or some other form of pressure. The procedure is coercive; that is its purpose. A great majority of people will not pay until action is taken against them. Creditors must be able to take action to enforce a court decree.
Maureen Macmillan, do you have a quick question?
It has been said that people avoid warrant sales by getting into debt elsewhere. Do you have any statistics that show how many people are threatened with poinding again and again because they cannot stop robbing Peter to pay Paul?
We cannot give those statistics, but the subject has been discussed in the review. We are considering debt arrangement schemes that will allow people who cannot get out of that trap to seek assistance. We have experience of dealing with people in that situation and we try to help them, despite what might be said about us.
It is important to remember that we have been instructed to enforce warrants by creditors and that it is not for us to question the instructions, provided that they are lawful.
Do you have any statistics or percentages for that?
Not for multiple debtors, I am afraid.
Thank you very much. That concludes this part of the committee's proceedings. I thank the witnesses for coming. They will, no doubt, follow the remainder of the bill's progress with interest. I remind them that that process involves two other committees—the Local Government Committee and the Social Inclusion, Housing and Voluntary Sector Committee.
Thank you very much, convener.
Before we move on to the next agenda item, I remind members that those two other committees are involved in taking evidence at stage 1 of this bill. The Local Government Committee will meet on 18 January to hear evidence from both the Scottish Law Commission and the Federation of Small Businesses.
I encourage members of this committee to attend those other committee meetings and to take part in the debates on the bill. If Justice and Home Affairs Committee members do so, they should let the other committees' clerks know that they want to attend. That will help the clerks to plan in advance.
I hoped that we would have time for a five-minute break, but we are already running half an hour behind schedule. Members may have a five-minute break if they agree to stay in the committee until about 1 o'clock. That is how long it will take us to get through the agenda. Are members agreed?
Members indicated agreement.
We will take a break for five minutes and no longer.
Meeting suspended.
On resuming—