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The next item is the Abolition of Poindings and Warrant Sales Bill, which we have been considering for some time. We have speakers from two agencies with us today. I welcome the witnesses from the Department of Social Security. I understand that you have been asked to give a brief introduction. I assure you that we have a range of questions for you.
Thank you for the welcome. I will start by introducing the members of the Department of Social Security team. I am the group director, based in DSS headquarters and responsible for issues relating to pensioners, children and the disabled. On my immediate right is Mike Isaac, who is deputy chief executive of the Child Support Agency. Further to my right is Janice Shersby, who is also based in DSS headquarters in London and is the policy manager for income support issues. On my immediate left is Marion McFarlane, who acts as the DSS policy focal point for links with the Scottish Parliament. She is based in London and Edinburgh and commutes regularly between the two. Further to my left is John Strachan, who is the manager of the Benefits Agency central support unit in Scotland.
It would be helpful if you gave us a general opening statement, because there is a feeling among committee members that we need substantial evidence of your views on this matter. If you can make an introduction, members will then ask you questions.
I will try to make my introduction brief. In early November, the committee received a memorandum from us, giving our summary views on the issue. In spelling that out, it might be helpful to identify the three main areas of the work under the direct control of the department in which the potential use of poindings and warrant sales is of relevance.
Thank you. I am sure that there are a number of issues that we want to explore with you. I will kick off the discussion.
There are a number of points there. As you say, the system is used in only a handful of cases; in the vast majority of cases, we are able to secure compliance through other means.
You have said that the biggest spur to payment is a solicitor's letter that indicates that legal action will be taken, not the threat of poindings and warrant sales, which some would argue is particularly pernicious.
That is correct, but the Benefits Agency was left with 9,000 cases last year in which a letter from a solicitor was not effective.
I understand that, but your figures suggest that the letter is the most effective method.
Mr Gray, do you have explicit ministerial approval for your opposition to the abolition of poindings and warrant sales?
The evidence that we submitted in November was approved by our ministers, who know that we are discussing the matter with you today and are aware of the approach that we are taking.
Would it be fair to say that the ministers in the department oppose the abolition of poindings and warrant sales?
In the event of abolition, ministers want there to be in place an effective alternative mechanism. We are not opposed to abolition as such; we are saying that we must have an effective way to ensure payment. That also seems to be the position expressed in the Scottish Law Commission's report. Every country in the world that has a comparable system has an effective way to ensure payment.
Has the department examined how similar agencies in countries that do not have poindings and warrant sales recover debt?
As the Law Commission report brings out, it is difficult to find an advanced country that does not have some broadly comparable system of attachment of moveable, physical assets as a means of debt recovery. We have examined what other countries do. Their precise legal forms are not necessarily the same as those that we have in Scotland or England—we have broadly comparable but not identical systems—but it is difficult to find any country that does not have a mechanism to secure a charge against moveable, physical assets.
Have any of the five witnesses attended a poinding or warrant sale?
I have not, but my colleagues must speak for themselves.
I suggest that you should; you would maybe change your mind about some aspects of poindings and warrants sales.
I cannot quote figures from substantial research evidence, but we know that the hard core of non-resident parents owing child support maintenance against whom we consider any form of diligence is almost exclusively in the self-employed category. Generally, we are in possession of accounts that suggest that such parents can afford to pay rather than that they are unable to do so. The vast majority of cases in which we have to pursue enforcement of child support debt involve employed people. In such cases, we have administrative powers to impose attachment of earnings orders.
So this problem lies primarily with the self-employed?
In child support, yes.
What percentage of the debt did you recover from the 201 poindings, 20 of which resulted in warrant sales?
Again, we recovered only a fairly small percentage. In six of the eight cases that were successful, we recovered a total of £15,000.
What was the total debt?
I will have to check to be able to give the exact percentage, but I think that the amount that was recovered was about a third of the debt that was owed in those cases.
Once the costs of the poindings and warrant sales are included, what net percentage of the debt did you recover?
The costs of the court services are added to the total debt. We also have the cost of administration in support of the court effort.
Once all the costs are taken into account, what percentage of the original debt do you recover?
That is the percentage that I am quoting off the top of my head, but I will need to confirm those figures to you in writing.
Does the fact that you recover only a third of the debt not suggest to you that the people involved are more unable than unwilling to pay?
That depends on the size of the liability order that we are trying to recover. By the time we have reached the point at which we consider diligence, some orders are very substantial. We do not take such action lightly—we do so only at the end of the process, by which time a debt will have been racked up over many months or even years. As the money that we recover generally goes to the parent with care rather than to the state, even a partial recovery represents success.
It is a distinguishing feature of child support cases that the agency acts essentially as an intermediary between the parents. That is not so in benefit cases, in which the issue is between the Exchequer and the benefit recipient. The obligation on the agency is to seek, on the parent with care's behalf, to secure maintenance. If only a third is secured, the parent with care is that much better off than she would otherwise be in 90-odd per cent of cases.
When someone has gone right through the system of your debt recovery procedures and has arrived at the stage of a poinding and a warrant sale—although, if they have the money to pay, it is not in their interest to get to that stage, as it affects other aspects of their life—do you look into the wider situation? For example, if there is a second family to be maintained do you look into the wider implications of what the procedure entails?
We do indeed, right at the start of the diligence process. We have a requirement to consider the welfare of all children who are involved in our administration of the Child Support Act 1991. The answer to that question is yes, in every case. If there are children in a second family, the way in which we pursue any form of diligence must be carefully considered.
The implications of poinding for the second family could be horrendous.
That is absolutely right. That is why many of the initial poinding actions are not pursued. We find that children in second families would be adversely affected by the poinding of goods.
So you would give a guarantee that, when poindings and warrant sales go ahead, there would be no knock-on effect on the second family?
That is what we are required to do. That does not mean that we never pursue poinding where there are children in the second family. A lot depends on what we can establish about the income and resources that are held by the non-resident parent. Sometimes, seizable property does not affect the welfare of the children.
Can you give examples of such property?
The standard hi-fi or computer equipment. In one case, we poinded a boat. So much depends on the individual circumstances of the case. If there is any chance that a child in a second family will be affected, we never pursue such action.
Do you take into account the implications for the second family of its door being battered down by sheriff officers? Do you take account of the psychological effect of poindings and warrant sales on those families?
Anything that affects the welfare of the child must be taken into account.
Is that specifically taken into account?
The broad base requirement is that we must consider everything and anything that potentially affects the welfare—
Answer the question. Is the psychological damage that can be done by a sheriff officer battering in someone's door—something that you have never experienced— specifically taken into account?
Any psychological, emotional or financial factor must be taken into account as it affects the welfare of the child.
What about the welfare of the second spouse?
We have a requirement to consider the welfare of the children.
So you ignore the welfare of the second spouse?
When considering whether to pursue diligence, we would not specifically consider the partner unless goods of court are owned by them.
Do you understand the implication of sheriff officers battering down the door of someone's home to undertake a poinding or a warrant sale? Do you understand the impact that that has on the family unit? You cannot isolate the children from the total family unit. Do you understand the psychological impact that that action has on family life?
Yes, I think I do—and I think that the staff we employ on pursuing diligence understand too. That is why we do not take such actions lightly.
Do they have direct experience of poindings and warrant sales?
I cannot answer how many, if any, attended poindings and warrant sales.
In that case, the previous answer is invalid.
I would dispute that a person necessarily has to be present at such an occurrence to understand what its implications are. We do not pursue such things lightly.
In response to questions from the convener, Mr Gray spoke about the overall effectiveness of poindings and warrant sales and said that the cost to the department of not having poindings and warrant sales would be at least as great as the cost of having them. Are you telling us that if poindings and warrant sales were abolished, there would be no net effect on the cost-effectiveness of the department's methods of recovering debt?
No. I am saying that the actual costs incurred in poindings and warrant sales—taken in the round—are relatively small because so few cases reach that stage. My concern about the overall cost-effectiveness of our procedures is that in the absence of poindings and warrant sales, or some measure of equivalent effect, we would find that a substantial number of cases that are currently settled satisfactorily before we get to the use of poindings and warrant sales would not be satisfactorily settled.
I would like to focus on the Benefit Agency's use of poindings and warrant sales. You said that the two main categories for that were the overpayment of benefits and the non-repayment of social fund loans. You said that in just under 9,000 cases, sheriff officers' letters were sent out threatening poindings and warrant sales. How many of those cases were for social fund loans and how many were for overpayment of benefit? What were the proportions?
Social fund loans make up the greater proportion of the two. I mentioned 25,000 solicitors' letters—
I thought you said 9,000. Can we get this clear: you said that there were 25,000 cases in which there were difficulties, but that in just under 9,000 cases sheriffs officers' letters had been sent out.
I will give you the proportions for both situations, to give you the full picture. The split for the 25,000 solicitors' letters was roughly two thirds to one third—a little over 16,000 letters related to the social fund and 8,500 related to overpayment. In the just under 9,000 sheriff officers' cases, the balance tips the other way—just over 5,000 related to overpayment and about 3,500 related to the social fund.
Would it be fair to say that people who qualify for social fund loans or, indeed, for benefit payments, are among the poorest people in the country?
Yes, it would.
When those people receive a sheriff officer's letter that threatens them with poindings and warrant sales, where do you think they get the money to pay the Department of Social Security?
If they are in receipt of another benefit—which is true in, I think, the majority of cases—we secure recovery in the normal way, by deduction from benefit.
I thought we were dealing with cases in which that did not apply, but you had to threaten poindings and warrant sales before you could recover the money.
As I said in my introduction, we have to take recovery action in cases where we are not able to recover debts from repayments of benefits. By definition, such people are outwith the benefits system, which implies that they have sources of income that take them above benefit thresholds.
So these 9,000 people—
Although those people are not necessarily well-off, they do not fall into the poorest category, and have reached a position where they are receiving a modest income, perhaps by getting back into work. In such cases, we feel that it is reasonable to seek to secure repayment. Although we have taken sheriff officer action in 3,500 social fund cases, we secure repayment in the majority of cases without using that ultimate sanction. In the past two years, we have considered—but have not taken—poinding action for two social fund cases.
Let us be clear, because it is important for the committee to receive the real evidence. Were all of the 9,000 sheriff officers' letters threatening poindings and warrant sales sent out to people who had previously been claimants but were now in employment?
That is right.
Has no benefit claimant ever received a letter from the DSS threatening a poinding or warrant sale?
We would not operate that procedure when we are able to secure repayment through benefit, which—as I said at the beginning—is our preferred method. As the people in the benefits system are our customers, we have a continuing financial relationship with them. For people in employment, we use arrestment of earnings.
Why was not arrestment of earnings used in those 9,000 cases instead of threatening people with poindings and warrant sales?
In the majority of those cases, it is likely that those people were self-employed, which is where the difficulty arises. Whether we are talking about benefits recovery or child support recovery, most of our cases involve the self-employed, because neither of our preferred methods of recovery—the benefits system or attachment of earnings—are open to us or to other creditors.
So have those 9,000 people gone straight from requiring a social fund loan or claiming benefit to being self-employed?
About 2,000 of those 9,000 cases resulted in arrestment of earnings.
So those people were employed.
Yes.
Why was not arrestment of earnings successful?
It was successful.
So why were those people threatened with poindings and warrant sales?
Quite simply because the sheriff officer's charge for payment mentions that failure to repay the debt can result in a number of subsequent actions.
Does that mean that Mr Gray's previous answer about all 9,000 being self-employed was not true? We now know that at least 2,000 of them were employed and had their earnings arrested. What is the DSS's evidence? Can everyone speak with the same voice instead of giving the committee conflicting evidence? We have to be able to understand the situation.
I apologise for misleading the committee on those figures. I want to step back a bit from this. Normally, we would have hoped to establish whether someone was employed before a sheriff officer's letter was sent out and have been able to pursue arrestment of earnings.
Let us be clear. By the time it gets to the stage of sheriff officers pursuing a poinding, they are usually seeking a lump sum to avoid the poinding. That is why it is effective. The debtor must come up with a lump sum to satisfy the sheriff officers. Where do you think people who are not claiming benefit—who, let us be honest, are likely to be on very low incomes whether they are self-employed or working—get the money to settle their debts when they are pressured by the Department of Social Security with the threat of a poinding? The evidence that we have taken from people who work with the poor is that they go to moneylenders. The threat of poinding and warrant sales forces poor people to go to moneylenders to pay off the debt. If that is Government policy—forcing poor people into that situation—it is time it stopped.
That is not correct in terms of child support.
I am talking about the Benefits Agency.
From the perspective of child support, we seek the compliance of the individual debtor, not the recovery of the whole debt in a lump sum. Some of the people with whom we pursue diligence have never co-operated with us even by providing the information to allow us to produce an assessment. We find that, as we pursue the action, more and more people comply so that we can enter into voluntary administrative agreements for repayment of the debt. That is our primary aim—not recovery by lump sum.
I have a real problem with the central basis of your argument, which is that the threat of poinding and warrant sales makes people who do not want to pay, pay up and that otherwise there would be widespread abuse of the system and people would refuse to pay their debts. Local government is by far the biggest user of poindings and warrant sales, yet councils such as West Dunbartonshire have specifically rejected the use of poindings and warrant sales and successfully recovered their debts. Many other councils do not use poindings and warrants sales—although they may not say explicitly that they do not—yet continue to recover their debts as effectively as any other council.
We are examining best practice and, as I have said from the beginning, we view poindings and warrant sales as a last resort. As has been brought out in our evidence already, the system is used in only a handful of the many thousands of cases in which such action is a possibility when the case is first raised. It is our judgment that, in the absence of the spur-to-payment function, it would be more difficult for us to secure compliance at earlier stages of the process.
Creditors across the public and private sectors get by perfectly well without resorting to the use of, or even the threat of using, poindings and warrant sales. Why can Government agencies not do the same?
I am not clear that that is the case in substantial other parts of the public and private sectors.
What about local government? It happens all the time that councils do not resort to poindings and warrant sales. Some do, but many do not and get by perfectly well.
Some do and some do not. Our approach is to use poindings and warrant sales only in the handful of cases in which, having exhausted all other possibilities, we get nowhere. If there is a reasonable prospect of securing a reasonable recovery, we reach a judgment that it is worth triggering the action.
I was particularly interested to see that you indicate in your document that there is a need for poindings and warrant sales because they help to tackle child poverty. I do not think that any member of this committee wants us not to tackle child poverty, but what proportion of the third of the debt that the Child Support Agency is able to recover goes to the parent with care and how much goes to the Treasury? Generally, the parent with care is in receipt of benefits and so is writing off the debt that is owed.
That is not true, although it certainly was when the CSA was set up. Then, a large majority of parents with care received income support, but now 55 per cent of parents with care who we deal with do not receive income support. They choose to use the agency to secure payment of maintenance, so every pound of maintenance that we collect for those parents with care goes straight to them. Even some parents with care who receive income support have asked to receive their child support payments directly and have their income support reduced proportionately. That trend—away from parents with care who receive income support towards more parents enjoying, pound for pound, the benefit of maintenance—is projected to continue over the next few years.
I do not dispute that parents, whether or not they have care, should have responsibility for their children; I am asking whether the money recovered has been handed over to parents. That was not my experience when I worked for an MP for the past seven years and I still see constituents who are experiencing difficulties with the CSA. The use of warrant sales will not help their children in any way. I am not convinced that the money will always go to the parent with care. Did you send giro cheques to every parent in the cases that you pursued?
I have said that the total amount recovered by warrant sales was only £15,000. I do not have a breakdown of how much of that went directly to parents with care and how much went to the Secretary of State for Social Security. Generally speaking, when we pursue diligence it is because the money will go to the parent with care and we are being pressed to recover the money by her, not by the secretary of state in terms of money going back to the department.
You said that you take into account children in second families when you pursue poindings and warrant sales, but you have no responsibility to take into consideration the wife in a second family. Nor, in my understanding, do you take into account other debts that the parent without care may have in that second family. The problem is that that parent may be experiencing financial difficulties, which will be worsened by the legal action that you take, leaving the parent unable to pay other debtors, which they may be attempting to do. To me, such action is not a solution. Do you agree that other ways are available? The deduction of earnings order is more effective—
Yes.
Self-employed people, who quite often abuse the system, are a problem but are there not other methods apart from warrant sales? One possibility is the arrestment of bank accounts.
We certainly do not immediately think in terms of poinding and warrant sales. To recover debts from the self-employed, we consider first the arrestment of bank accounts, as you mentioned, but that is very hit or miss. More often than not, we do not know where the non-resident parent holds funds and I am afraid that, when we are given that information, we find that he is very quick to move the money around. We should not overestimate the positive impact of arrestment in recovering goods.
As I understand it, you justify your stance by your belief that, without the mechanism of poindings and warrant sales, people would be reluctant to pay in many of the 9,000 cases that remain after the issue of the letter. Is that a fair summation of your argument?
Yes.
How much is outstanding in those 9,000 cases? If you cannot give me a total, can you give me an average per case? Are we talking about less than £100, between £200 and £300, or four-figure sums?
I am afraid that we do not have that information, but I can submit written evidence to the committee with our best estimate.
That information is fairly important. For cases that you put into the hands of sheriff officers and which do not result in a poinding, how much money do you spend on sheriff officers' fees without being able to make a recovery?
Under the Debtors (Scotland) Act 1987, the expense of sheriff officer action is added to the debt, and we incur no expense.
There must be some cases in which you involve sheriff officers but they take no action except to issue letters. In a case in which you decide to pursue the matter no further, the sheriff officers would presumably seek to recover their costs from your department, as they would not get them from the person who is the subject of the action.
In the majority of cases, a sheriff officer issuing a charge for payment results in one of two situations: either a voluntary agreement is reached or, in cases of people in employment, we move to wages arrestment. The expense of the sheriff officer action is added to the debt and recovered from the debtor. It is true to say that we must bear that cost if we are unsuccessful in recovering the debt.
Can you quantify that?
I am unable to quantify that.
How much debt do you write off annually in Scotland?
I cannot identify that figure for you.
We do not have those figures with us. If the committee wants them—
I think that they are important. If there is a justification for poindings and warrant sales along the lines that you have outlined, we ought to see those figures. It seems to me that an awful lot of money could be spent on pursuing matters, with very little recovery at the end of the day. That is an important issue.
We will return to that later.
We will let the committee have in writing such information as we can provide.
It would be useful to sweep up at the end and give you a list of points on which we would like further information.
I would like to point out that we have no authority at all to write off child support debt.
I appreciate that.
Various actions have been taken in the period to which we have been referring. The amount recovered averages £1 million per annum.
I would like to develop a point raised by Alex Neil's initial question about Government policy. I have seen the letter that Velda Andrews wrote to the Justice and Home Affairs Committee and what you have said today reflects its content. Did your department come up with those ideas and show them to ministers, who endorsed them? I am not aware that there is an official Government policy on the matter, but you said that the views expressed in the letter have been endorsed by the relevant ministers.
The starting position is the current legal system. It is as it is in Scotland and it is as it is in England and Wales.
You are expressing the view that, as things stand, you are not in favour of the bill being passed if there is nothing else to take the place of poindings and warrant sales. Has that view been endorsed by ministers?
Yes.
The letter states:
That is right.
The letter, with rather curious grammar, goes on:
I will answer the committal question first. No cases have gone for committal in Scotland. By comparison, in England and Wales, some 36 cases have gone for committal in the year ending March 1999, and a further 19 so far this year. The number of non-resident parents who have been committed to prison since the agency was established in 1993 is five. The large majority of parents, not surprisingly, pay up when the committal warrant is served. Those are statistics for England and Wales.
So, your recovery rate—your success rate—is more or less the same in England and Wales as in Scotland?
Yes. Having looked at the comparative figures for England and Wales, and Scotland, I can say that they are not disproportionate other than for committal.
I do not have precise figures to give to you. However, in benefit cases, proportionally greater use is made in England and Wales than in Scotland of the equivalent procedure to poindings and warrant sales. Its use is still limited to a small proportion of cases, but that action against movable physical goods is used slightly more often in England and Wales than in Scotland.
I want to ask about bank arrestments. I understand that they would not be particularly effective in the case that Mr Isaac mentioned, in which a self-employed person can have more than one bank account. A person who is on benefits probably has no bank account, and when such people have some resources, bank arrestments cause them more problems than wage attachments. How do you decide whether it is appropriate to use a wage attachment rather than a bank arrestment, bearing in mind that a bank arrestment can get people deeper into difficulties if all their financial resources are frozen?
We would not consider bank arrestments for cases in which we know that a debtor is in paid employment. We have the administrative power to impose a deduction from earnings order, and would always take that course of action. As far as I am aware, bank arrestments have been applied only to recover debt from the self-employed.
My final question deals specifically with CSA issues. People who are required to pay child support do so continuously over a period of time, until the child reaches a certain age. If you have to take action against a recalcitrant parent, do you have greater success in getting that parent to continue making payments—beyond the ones that caused the debt—if you use, or threaten to use, warrant sales than if you use a bank arrestment or a wage attachment? In other words, which action, in the longer term—rather than just for recovering the debt that you are concerned about—is more successful, in your experience?
Our primary aim is on-going compliance with the current maintenance liability. To achieve that, in the case of self-employed people, we sometimes find that we must register a past debt to free up the on-going payment of maintenance. In a hard core of cases, we may never have been given the information, by the non-resident parent, with which to make an accurate assessment. A punitive assessment is put in place, which can be registered as a debt over time. We find that pursuing diligence frees up the information that we need to produce an accurate assessment, which immediately substantially reduces the non-resident parent's debt. In that sense, compliance is improved.
As the threat of poindings and warrant sales is used in only a relatively small proportion of cases, do you get that sort of compliance, in most cases, without having to resort to such action?
Yes, we do.
We have a wee bit more flexibility than I had expected, so I shall let this debate run on, as members want to pursue it.
The two-page letter that we received from the department talked about poindings and warrant sales as a valuable bargaining tool. Later in the letter, the threat of such action is said to be very effective. To return to the convener's earlier question, do you agree that that is a threatening way of dealing with a large number of people, even though very few are taken to the full poinding or warrant sale? Do you agree that you are threatening people who are vulnerable, whether through family breakdown or through getting into difficulties as a result of benefit fraud, and that such action is not effective as it recovers only a small proportion of the debt? Surely an organisation as large as yours should be able to establish a more acceptable method of recovering debt?
That question raises two or three points. Is ours a threatening approach? Well, yes. Anybody who seeks to have a sheriff officer's letter issued could be regarded as threatening in some sense. I have in front of me an example of a sheriff officer's letter that we send out, which makes clear the basis on which the case is being pursued. It says:
Your final sentence leads me to a question that I intended to ask. In your submission, you rely heavily on the evidence that was given in the Scottish Law Commission's report. I take it that that has formed the basis for the department's thinking and for its wish to continue using this method of recovery. Are you aware that, when the Law Commission was questioned by members of the committee, much of its evidence was not substantiated? Its comments were based on its own opinions—when asked, it had no evidence to back those up.
It was the Law Society, not the Law Commission.
I am sorry.
I have quoted the Law Commission report once or twice, but only because I thought that, by using terms that are in common use following that consultation exercise, I would make it clear that we were talking about the same things. Our view on this issue predates the Law Commission consultation document, which came out only towards the end of last year. The letter that we sent in was dated 4 November.
In reply to Mr Neil's points, Mr Isaac said that three factors—psychological, emotional and financial—were considered when judging whether debt should be pursued. One of those can be assessed fairly objectively, but the other two are very subjective. I would like to go into that briefly, if I may—the shorter the answer the better, as I have two other questions.
The legal requirement to consider the welfare of the child is just that. There is no detail in the Child Support Act 1991—
I am not concerned about acts.
I was going on to say—
I want to cut to the quick on this. I am interested not in legislation, but in your procedures in the department. Can you tell me succinctly what they are?
Because there is no legal detail, we provide staff with guidance on the issues that they should consider. That guidance can only be indicative, rather than exhaustive. Some subjective judgment is inevitably used when applying the criteria, which relate to emotional, psychological and health factors. Officers have to take into account any piece of information that is brought to their attention and has a bearing on the welfare of the child. How do we ensure that it is taken into account? All the work that we do is subjected to a percentage check by supervisors and managers.
Fine. It would be helpful if the committee could have a copy of that guidance.
The guidance that we issue is pretty comprehensive and we check that it is applied. We can do that by seeing in what cases that are brought to our attention we are accused of not having regard to the welfare of the child. Over the years, the CSA has attracted far more criticism than most agencies, but I can say to you truthfully that we have not been accused of not having proper regard to the welfare of the child in particular circumstances.
We will shortly be taking evidence from Citizens Advice Scotland. Many of the people who are involved in your cases may not think of going to a citizens advice bureau—an excellent institution—and getting real help and back-up when putting their case.
I can address that point more easily. Our staff are not trained to deal exclusively with the financial aspects of child support. All too often, other problems are brought to the attention of staff, particularly early on in the case. They might be access problems or contact problems. We make extensive use of the voluntary sector when referring those problems on. We have both national and local consultation with all the key representative groups, to ensure that that happens smoothly.
I have one final point. In your brief—not to say slightly flimsy—written evidence, you refer to recovering debts resulting from overpayments of social security benefits. As briefly as possible, can you give us a list of where overpayments occur, other than through fraud? What I want to know is to what extent overpayments of benefits for council tax and so on are the result of administrative error on your part. In those circumstances, to what extent do you change your tune when it comes to pursuing those who have been overpaid?
There is a range of different circumstances. I am afraid that I cannot give you a precise answer. Some of the cases will be cases of fraud, while others will be cases of official error.
Your error?
Our error.
Good.
Others will be cases in which the claimant has made an error, but we reach a judgment that that was a mistake on their part. Claimants make mistakes, just as we do. Not all the mistakes that they make are fraud. There is a spectrum of circumstances. I cannot give you a precise breakdown of how those categories map on to the cases that we are talking about.
So if it is your error, you accept that and you are more lenient and understanding.
Yes.
You are kidding.
The next person on my list is Tommy Sheridan. Robert Brown and Lloyd Quinan are keen to come in as well, but I think that I will take Tommy now because of his interest in this bill, if that is okay with the other members. We have some, but not complete, flexibility, so I ask members to focus on issues that have not been asked about already.
I will be as brief as possible. Paul, do you agree that the support that you and the department are giving to the retention of poindings and warrant sales is based on entirely subjective evidence?
It is not entirely subjective. Clearly, it involves an element of judgment about the effectiveness of procedures, but I would regard it as a mixture of judgment and firm facts—some of which we sought to bring out in the evidence. At the end of the day, judgments tend to be judgments.
Can I deal with your firm facts? Over the past two and a half years, you have identified 25,000 cases. You send a solicitor's letter to 25,000 people informing them that there is debt of some sort. Following that, 9,000 people are still refusing or are unable to pay. I take it that, through a summary warrant procedure, you then ask the sheriff officer to contact the debtor on your behalf.
No. The procedures vary. The department does not use the summary warrant procedure. In the case of child support and social fund loan recoveries, we have to go through the full court procedures. We must apply to the court, giving notice to the debtor that we are doing so, and go through the full procedure. In cases of benefit overpayment, we make use of what used to be called adjudication officers—following the recent decision-making and appeals reforms, they are now called decision takers—who have statutory powers under UK law and whose decisions have a legal force.
I am sorry to interrupt but, although your evidence is succinct, it is not relevant to the point that I was making. I want to establish whether sheriff officers sent out 9,000 letters. Is that correct?
The letters are sent out by sheriff officers, but not under the summary warrant procedure.
We have established that. I am glad to see that you have a copy of the letter that is sent out. Would you mind repeating the threats that are made in that letter?
The letter from the sheriff officer?
Yes.
The key paragraph says:
The point that I wanted to establish, convener, is that a range of threats is mentioned in that letter, including earnings arrestment and sequestration, which is a particularly frightening word for many people.
It is difficult to give a definitive answer about what would happen in other circumstances. I am offering a judgment from our experience of operating the system, but it is difficult for anybody to say whether the hard facts of the argument are on one side or the other.
Thank you. You have said that it is a judgment—I am saying that it is subjective and that if the DSS did not have the use of poinding and warrant sale at its disposal, its ability to recover debts would not collapse. It would be able to recover debts just as effectively, if not more so.
There are different categories of cases. The reason that we see a case for retaining some form of action against movable assets, as well as the ability to move against people's financial assets, is the same judgment that has been reached in England, Wales and—as I said in earlier evidence—all other countries. Some form of action against physical assets is a necessary part of the armoury. If it were not available, people would be able to move their assets from a financial form into a physical form and so become exempt from creditor procedures. The reason for mentioning the portfolio is that it covers all forms of assets; there is no mechanism for switching assets between categories.
You have no evidence to back up that judgment?
That is the judgment that I am offering.
How often has the Benefits Agency reviewed the procedure of poindings and warrant sales?
As such, we have not reviewed it. We utilise the facilities that are open to us in Scotland to recover debt, as laid out in the Debtors (Scotland) Act 1987.
There is a distinction between reviewing the procedure in terms of the legal framework in which we operate—I do think that it is our role to review that framework—and what we do. I assume that your question—
My question was quite straightforward. How often have you reviewed the use of the procedure of warrant sales and poindings as a means of debt recovery?
Its effectiveness is kept under review by considering the matter case by case, rather than by asking whether or not we should use the procedure. I cannot give you dates and times of when we have sat down and questioned whether we should continue to use that procedure. The progressive judgment from our use of the mechanism has been that there are some cases—a very limited number—in which it is sensible to pursue the debt to the final point.
Are you saying that despite the proposals to abolish poindings and warrant sales in Scotland you have not considered other recovery methods?
In 99 per cent of cases, we use other methods, as our evidence has shown. We use poindings and warrant sales as a last resort. We operate within a legal framework in Scotland and in a broadly comparable way with what happens in England and Wales. Given the statutory responsibilities under which we operate, we must consider the use of the various mechanisms that are open to us. That is the current state of the law in Scotland. There are a small number of cases in which, having tried absolutely everything else, we reach the judgment that it is right to make use of the legal power that is open to us as a creditor.
Is it the case that, since you were made aware that the bill would go before the Parliament, you have not considered other methods that you might need to use in the event of the abolition of poindings and warrant sales?
We have given some thought to whether there is another mechanism at our disposal that we could use to move against physical assets.
In your opening evidence, you referred to the use of similar methods in other countries. The impression that you gave was that you had been examining possible changes or the use of other methods. I now have the feeling that you have not considered other methods of recovery.
In the absence of some other legal framework for taking action against moveable physical assets—whether in Scotland or in England and Wales—we use the framework that is available. From time to time we have contact with our counterparts in other countries and we compare notes on the ways in which we administer systems.
As you might be aware from the green and white papers on the reform of the Child Support Agency, the Government has examined further punitive means to enforce payment of child support. The white paper discusses the possible use of withdrawal of driving licences, which is very much a punitive lever.
My question related specifically to the Benefits Agency and not to the CSA.
I am sorry, but we are short of time, and the question was quite specific.
What agencies or professional bodies—if any—did you consult before giving evidence here?
Professional bodies?
What Government agencies or professional bodies did you consult?
I do not think that we consulted any.
Your reference to the Law Commission report arises, therefore, purely from reading it.
Yes.
How many benefit deductions or arrestments are being carried out by the Benefits Agency in Scotland?
We have consistently spoken about the figures over the past two and a half years. In that period we have effected 3,220 earnings arrestments.
I asked about benefit deductions.
I deal specifically with the recovery of debt from people who are not in receipt of benefit.
We will try to give you a precise figure for benefit deductions, but we will be talking about many thousands of cases.
My supplementary question is; how many of those deductions are based on non-summary warrants—cases in which you recover debt on behalf of local authorities?
I cannot give you an answer off the top of my head, but we will try to provide a figure in writing.
I declare my membership of the Law Society of Scotland and my association with Ross Harper and Murphy. I do not think that any issues arise because of that, but I thought that I should mention it.
They have not paid up to that point.
I am not clear about the reduction from 25,000 cases to 9,000. It is evident that court procedures will be involved for many people as that number is reduced. Do some people pay when a court action is raised, or during the early stages of court action?
In Scotland, when there were 25,000 cases, the solicitor for the Department of Social Security issued letters that made it clear that they had been instructed to seek recovery of the debt and made a final, rather legal-sounding request for payment. I think that I am right in saying that there was no formal court action at that stage. Roughly two thirds of cases were then resolved somehow or other, before any further action was taken.
The further action that can be taken is the issuing of charges, which presumably takes place only after a court decree has been issued.
There are two separate procedures. As we sought to explain earlier, in cases of overpayment a decision by the adjudication officer under section 71 of the Social Security Act 1992 has the legal effect of a decree. We can refer those cases directly to the sheriff officer for the issue of a charge for payment. The procedure is different in social fund cases, as we have to go to court to obtain a decree for recovery. The evidence that we have suggests that when we notify people of a hearing date—after the initial solicitor's letter has been sent—some 60 per cent of them come to a voluntary agreement.
Is it correct to say that some fraud cases are dealt with by criminal prosecution, and that people are prosecuted from time to time for DSS fraud?
Yes.
In practice, that is part of the armoury for recovery of debt, because deferred sentences and so on allow for repayment.
The prosecution of fraud cases and the pursual of recovery of benefit are totally separate. People are prosecuted because we have evidence that they have committed fraud and they are then sentenced.
However, such people appear in your figures.
Yes, if those people have been overpaid, recovery of benefit will be pursued in the usual way in which over-payment cases are pursued—the procedures will be the same.
I find it difficult to get a handle on the overall figures. Most Government departments use targets and so on. How much money is involved in the 25,000 cases?
We do not have figures with us for the total outstanding amount of overpayments.
You are right to say that we operate on the basis of targets. The initial responsibility for the recovery of debt for the Benefits Agency rests with the central recovery group, which is based in Manchester. The group takes normal action to seek recovery on a voluntary basis. Cases in which the group has been unsuccessful are referred to my unit in Scotland because of the differences in Scottish law. The arrangement between us and the central recovery group is that we operate on a target basis. In round terms the annual target for recovery of overpayments is £500,000 and there is a similar target for social fund cases.
I am astonished by how small the figures are. I was conscious of that when you mentioned £1 million in a slightly different context earlier. Five hundred thousand pounds seems to be a very small amount to be recovered by your section from the whole of Scotland. Am I missing something?
You are not missing anything. That amount represents a proportion of the overall UK target, which figure I do not have with me.
The target relates to the point in the procedure at which normal day-to-day mechanisms have not worked and cases have been handed over to John Strachan's section.
It looks like a very small figure vis-à-vis the 25,000 cases to which, presumably, it somehow relates.
Yes, but that is the target for recovery. It recognises partly that we are not successful in recovery in all cases.
Can you provide us with more comprehensive figures on how much you seek to recover, how much you recover, the write-off and so on?
We will do our best to provide that information.
I wish to ask about your knowledge of debtors. I think that some of our questions assume that you know where people work and where their bank accounts are. Do you have such knowledge from liaison with other departments and so on?
The information that we have on debtors varies. John Strachan can, perhaps, give the committee a feel for how much is known about debtors when cases are passed to his section.
We do not have access to information from any other Government department. If we know that somebody has gone into employment and we know who the employer is, action will be taken. If people have moved on to different employers, the process of earnings arrestment becomes more difficult until we can establish that they are in paid employment.
There is, however, no statutory requirement for people to give you that sort of information. You have to rely on information that you have picked up in another context.
That is correct.
Do you get involved in referrals to citizens advice bureaux or money advice centres to help in sorting out people's problems?
Yes. The letter from the sheriff officer that has been widely quoted this morning suggests that debtors should consult a solicitor or citizens advice bureau.
I am trying to ask a more fundamental question. We have heard from other witnesses that people often do not pay attention to such advice in letters, as it appears to them to be legal jargon. Do your advisers have a policy of referring people to citizens advice bureaux and the like?
We do not have that much face-to-face contact in the context that we are discussing. We try to reach voluntary agreements that are satisfactory to the debtor and to us.
Do you think that it would be helpful if you tried to develop a more generalised approach to people's debt problems through the assistance of outside advisers?
I am not sure what we could do apart from advising people to contact those bodies, which we already do.
Many of the people with whom you deal have multiple debts. Clearly, a regularised recovery procedure should include a weekly payment that would go to all of the creditors and would help debtors to make their affairs more satisfactory. There is surely a case for more proactive working. It would be useful to encourage debtors to go to citizens advice bureaux or money advice centres. Do you have, for example, any exchange liaisons with local voluntary organisations?
There is no standard or national pattern for that. It is left to the discretion of the managers of Benefit Agency offices and there are local liaison arrangements.
Many outstanding issues need to be pulled together. I am sure that members have many questions to ask that will assist them in drawing up the committee's report on the bill. Martin Verity, the clerk, has drawn up a number of questions, which he will present to you in the form of a very tight letter. We will get that to you as soon as possible as our report is due at the end of January. I would like members to get questions to Martin this afternoon.
Each of us had prepared statements to give. I was going to talk about the work that we do. I will do that, if you think that it will be useful.
As long as it is brief. Often, such points come out in questioning anyway.
Mary, would you like to give your statement?
My name is Mary Prior. I am the manager of Lochaber citizens advice bureau. I have been involved in the citizens advice bureau movement for 11 years, initially as a money adviser and as a housing aid worker for Shelter. I have had a lot of hands-on experience with clients for whom the threat of poinding and warrant sale is an immediate reality.
I want to say how pleased I am to have the opportunity to reflect the experience of debt of clients of the Easterhouse CAB—we see such clients daily.
I am sorry—could you repeat those figures, as I do not think that everyone heard them?
They will be in the record.
I know that, but for today's meeting—
I see—you want them now.
The figures were 280 in 1997-98. That number increased by about 99 per cent to 557 in the following year. From April to December 1999, we saw 510 cases.
Thank you. I will move straight to questions.
First, I thank the witnesses for their written evidence. In particular, the case studies will be helpful in giving us a feel for the issue.
Almost all the threats of poinding that we deal with are related to community charge or council tax. What may explain the increase is that, in the years that I was at Glasgow City Council, we usually dealt with one sheriff officer; all of a sudden we were dealing with three sheriff officers, who were collecting for different years.
There is obviously a more aggressive pursuit of community charge arrears by councils. There is an imperative to deal with warrant sales, as a momentum is building up because of the pursuit of community charge arrears.
I am glad that you raise that point, as I recently saw figures that showed that, for example, Glasgow City Council's collection rate had gone down this year. That does not surprise me, because the pressure that is put on people to pay arrears means that they cannot pay their present council tax. If they are being pursued for two or three years, they do not pay for the current year when they start to pay the arrears. The sheriff officers, who are collecting the arrears, are not concerned about the current year, because that is not their remit; it could be argued that, for them, that is next year's work. That is a continuing concern. In addition, when creditors threaten a warrant sale, people immediately pay at levels that they cannot afford, which means that they cannot pay other debts—the cycle becomes chaotic.
The case evidence in the briefing shows that there are different ways of enforcing payment of debts when clients are pursued for council tax and community charge. Clients may face a bank or earnings arrestment and a poinding on the debt from one year while a second set of sheriff officers may be carrying out another poinding for debt from another year. Our clients may have to deal with three different debt collections at once.
They have to deal with different years, different sheriff officers and different forms of enforcement?
Yes, but from the same income.
I, too, thank you for your written evidence—it is substantial compared to that of the previous group—and for the helpful case studies.
I conducted a six-month trawl covering the change of financial year, which I thought might be helpful in showing whether there was an increase in debt. During the six months from January 1 1999, Lochaber—a small rural bureau, although we deal with 6,000 client contacts a year—dealt with 110 debt cases, which involved £400,000 of debt. I have to take out of that figure more than £100,000, which was the amount of debt of three self-employed clients. The idea that self-employed people have income somewhere is not necessarily true—self-employed people are often in deep debt. Of the remaining £300,000 of debt, more than £70,000 of it was at summary warrant.
The largest area of inquiries is not debt, but benefits, which make up just under a third of our inquiries. Nationally, out of about 450,000 inquiries, we dealt with about 56,000 new debt cases. On top of that, there are continuing cases; 65,000 continuing cases is an underestimation. We cannot break that down into what is council tax debt, as we do not collect the statistics in that way, but we can say that consumer debt was the largest single increase last year.
In paragraph 5 on page 2 of your evidence, you state that £144 million of council tax income was outstanding at the end of 1997-98. Is that figure cumulative or is it for one year?
I am not sure. I think that it was for the one year.
Those figures are a snapshot. What would be more interesting from our point of view is how much is still owed from when the council tax started. It would be interesting to see the annual figures, as council tax debt is such an important part of this issue—I might make up part of that £144 million if I forgot to pay it for a month.
We got that figure from the Accounts Commission.
We can perhaps find out the annual figures.
No, it is not. The gap is geographical; proportionately, we are as well represented in Scotland as we are in England and Wales. There are 55 CABs, but about 150 outlets, throughout Scotland.
In the introduction to your briefing, you state:
We have not worked out any detailed schemes. We have made a comparison with England and Wales. I know that there are problems with the English and Welsh system but we know from our sister organisation—the National Association of Citizens Advice Bureaux—that such schemes seem to provide a way forward for some debtors.
Thank you. The quality and passion of your evidence is very different from what we received from the DSS. One wonders which organisation is well funded and which survives sometimes on a shoestring.
If the bill is all that we are going to get, we will support it, because all our case evidence shows that poindings and warrant sales are detrimental to our clients. In our submissions, we tried to highlight the other problems. We are worried about bank arrestments, because our clients who are on benefits and have bank accounts are increasingly having their benefits arrested. We recently discussed how clients who do not earn enough to have their wages arrested have their bank accounts arrested instead. Those issues need to be addressed urgently.
I manage a bureau. My position is clear, and I am sure it is shared by many bureaux. I agree with Susan. Other matters need to be looked at, but poindings and warrant sales are the worst form of diligence—in Easterhouse, we support their abolition. We can examine other issues, such as the fact that, as Susan said, people on low incomes are having their wages and bank accounts arrested.
I am grateful that you raised those points, Loretta, because the DSS gave evidence about the similarities between the recovery procedures in different countries, and the point needs to be made that Scotland is the only country where a home can be forcibly entered. You cannot forcibly enter a home in England for a walk-in possession order, which is the nearest equivalent there to poindings and warrant sales.
Absolutely. As sheriff officers are charged to get as much as they can, they will try to obtain the lump sum. Often, people do not come for advice and, even when they do, they have often paid the lump sum. We are concerned about how people obtain the lump sum. Moneylenders are one possibility.
I was interested in your figures on the increase in the use of the threat of poindings, but I was not sure whether they were for Glasgow or just for Easterhouse.
They were for Easterhouse.
I was also interested in the fact that you linked the figures to Glasgow City Council's appointment of sheriff officers to pursue different years' arrears, with the result that the amount of current council tax collected went down.
Our experience is that when people are threatened to such an extent and forced to pay for arrears, they do not pay their current bill. Assisting people to claim benefits and to negotiate debts would be more positive and have a better outcome.
Would it be possible for other CABs across Scotland to provide the kind of figures on the change in the use of poindings that you provided for Easterhouse?
That would be difficult for them, because they would have to trawl through all their cases.
It would be useful if they did, because we could compare the figures with what is happening at the council level and see whether there is any correlation.
We should look at whether there is a substantive difference in debt collection rates between those local authorities that emphasise a rights-based approach to benefit and income maximisation and those that do not—that is relevant.
That makes the point very graphically.
You said that most of your work was on benefits cases. The citizens advice bureau in Airdrie has just received money from the national lottery to fund a money advice worker. The people who work for that CAB in Lanarkshire tell me—and I wonder whether this is true across the country—that people are often embarrassed and sometimes very ashamed to have got themselves into a difficult situation. They tell me that although more people are coming to ask for help, many people are reluctant to do so.
I am a member of one of the most recently started Scottish credit unions, the Lochaber Credit Union, which is a geographically based credit union. Because Lochaber has vast landward regions, we decided that—rather than centring on Fort William, which is the main population area—we would take the credit union out to the communities that produced the volunteers to run it. We now have four collection points throughout Lochaber, and we intend to open another three. In rural communities, that will be a very effective way for people to get financial services of which they are often deprived. It will also be an effective way for them to avoid debt management, because the basis of a credit union is, obviously, that you have to save in order to borrow. Credit unions are a positive way forward.
Depending on the communities that they serve, different bureaux have different experiences. In the community that I serve in Easterhouse, the difficulty in being able to help is that people generally have inadequate incomes to live on. They have to get into debt just to pay for very basic household goods, clothing or whatever. I can help them negotiate with creditors over budgets, but I have to admit that many of the people I serve could show me how to budget. They budget so well on so little money that it is quite amazing.
I can give a simple figure to support what Loretta said. If we break down our financial statement for debtors, as we often have to do, the money allowed for housekeeping works out at 95p per meal. When you are having lunch, you might want to reflect on what that would buy.
As was mentioned at the Justice and Home Affairs Committee yesterday, we are joint managers of the Edinburgh in-court adviser project. Because that comes in at a much later stage, it reaches debt clients that the CABs do not reach. One way forward would be to develop in-court advisers throughout the country. I think that that would help.
Thank you very much indeed, Susan, Mary and Loretta. I know Loretta very well. I am sorry that we did not have more time, and that we kept you waiting for so long. If there is anything else that you would like to draw to our attention later, it would be gratefully received. Your evidence has been very interesting, and I am sure that we will pay great attention to it. Thank you for an excellent presentation.
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