Enterprise and Culture Committee, 24 Jan 2006

Meeting date: Tuesday, January 24, 2006

Official Report 267KB pdf

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Bankruptcy and Diligence etc (Scotland) Bill: Stage 1

Item 2 is a briefing from our adviser, Nicholas Grier, on part 1 of the Bankruptcy and Diligence etc (Scotland) Bill. We first met Nicholas Grier last week. He has circulated two briefing papers to the committee.

I want to make a general comment. I think that we all regard the bill as probably the most technical bill that we have ever dealt with. Technical terms are greatly used in it. If members agree, we can have a lunchtime session with Nicholas Grier on the technical matters in it so that they can ask questions about issues with which they—even those who have been practitioners in the area—are perhaps not fully conversant. That will give us an opportunity to get more familiar with some of the technical terms in particular. We will get briefings from Nicholas anyway, but several members approached me to say that they would like a session that focused on technical terms. Is that agreeable?

Members indicated agreement.

Good afternoon. I hope that you all have the little notes that I have given you. I do not want to go on too long, but I would like to give you a brief outline of bankruptcy in Scotland, which is known as sequestration.

Bankruptcy is when someone's affairs and estate are taken from them. In effect, all a person's belongings, apart from the tools of their trade and things such as their bed and furniture, are taken off them and looked after by a trustee in sequestration—that is one of the ways, anyway. The trustee divides the estate among all the creditors. Typically, the creditors will get about 20p in the pound, if they are lucky.

As we know from last week's meeting, bankruptcy is not a particularly happy process. People who are bankrupt find life difficult. They cannot do various things. For example, they cannot hold certain jobs, stand for public office or be company directors. It is a considerable restraint on their future earning ability.

Someone can be made bankrupt in the various ways that I have outlined in my paper. It is possible for a creditor, who is someone to whom a debtor owes money, to put a person into bankruptcy. A trustee, under a protected trust deed, can put someone into bankruptcy and so can a creditor. Broadly speaking, if someone owes a creditor more than £1,500, the creditor can petition a court for an order putting the debtor into bankruptcy.

A trust deed, particularly a protected trust deed, is a special document whereby someone transfers all their assets into a trust run by a trustee, who looks after the assets. A person would normally put all their assets into a trust deed. Instead of the formal business of going to court and the carry-on that that requires, a trustee just looks after a debtor's affairs and pays their creditors. That is much more informal and discreet and it avoids some of the stigma of bankruptcy. We will talk about that further in future weeks.

A debtor can also choose to put themselves into bankruptcy, if they feel that that is necessary, but it is difficult to do so. They must owe at least £1,500 and must not have been sequestrated within the previous five years. That makes it difficult for bankrupts who may have had problems in the past and want to be bankrupted again in order to have a clean slate. Paragraph 4 of my paper indicates why it is difficult for debtors to petition for their own bankruptcy. Members will see that the Government some years ago decided that too much was being paid to insolvency practitioners to act as trustees. A large number of trustees had been appointed and the Government believed that that was not a good idea. One reason why people were allegedly making themselves bankrupt was because they did not want to have to pay the poll tax—I emphasise "allegedly".

Paragraph 4 also indicates that a debtor can petition for their own bankruptcy if they cannot pay their debts in the ordinary course of business. Of course, not all debtors have a business, so they cannot petition on that ground. The third reason debtors find it difficult to petition for bankruptcy is that they sometimes need the help of creditors, but creditors cannot always be bothered to petition for bankruptcy because it is too much hassle.

That covers many of the first points that I wanted to make. People can take a couple of other actions instead of petitioning for bankruptcy. As well as the protected trust deed, to which I referred, there is the unprotected trust deed, in which someone transfers some of their assets to a trust but not all of them. On an historical note, that is what Sir Walter Scott did. I am sure that members are aware that other methods can be used instead of bankruptcy, such as debt arrangement schemes. They all work reasonably well, but what most have in common is that they do not work well with people who have no income and no assets. Our legislation does not find it easy to deal with people in that position. However, we are not alone in that because the legislation of almost every other country finds it difficult to deal with that position—it is a common problem.

Paragraph 16 of my paper indicates what New Zealand is doing with people who have no income and no assets. In effect it involves writing off debts and having a 12-month period of bankruptcy. That is new legislation and we are waiting to hear what New Zealand creditors in general think about it—probably not a lot. They are also beginning to discuss a similar process in England.

I move on to a separate but connected issue that clearly caused some concern at last week's meeting. Some people were talking about corporations and incorporating businesses. A person can run a business as a sole trader—on their own—or with some friends or family in a partnership. However, under both those arrangements, the person becomes personally liable for their business's debts. If things go wrong, it is the person running the business who is on the line.

Such a business is not an incorporated business. An incorporated business is a limited company, which has to be registered under the Companies Act 1985 and has to follow all the requirements of that act and the Insolvency Act 1986. The bill does not really touch on incorporations; it does not have anything to do with companies, so we do not particularly need to worry about that.

If someone is a sole trader or is in a partnership and it looks as though life might become difficult because they have a risky business, their most sensible action would be to incorporate. That is what any prudent businessman would do. There are inconveniences and expenses involved in incorporation, but it is clearly the most sensible thing to do.

It is not terribly common for sole traders to be running businesses. There are plenty of sole traders, of course, but they tend to be fairly small businesses. Anyone whose business is remotely risky or has the potential for things to go wrong is well advised to incorporate. You might be aware that it looks as though only about 10 per cent of the recent bankrupts in England were small businessmen—that is because small businessmen are all busy incorporating. We hope that the bill will help sole traders to the extent that it can, but most sensible businessmen will incorporate so that it will not be a problem.

However, there is a rider to that. If a businessman incorporates as a company, it is common that before a bank will lend the company money, it will say to the director, "If you want to borrow money, you must give a personal guarantee." Likewise, a landlord to a tenant limited company will say to the director, "If you want this tenancy, you must give a personal guarantee." The effect of that is that the businessman is still on the hook and could become bankrupt. If the businessman's company goes into liquidation and he still owes money to the bank or landlord, they will sequestrate him to get their money. That is a problem, but a prudent businessman can stop the company before things get any worse and thereby avoid the risk of bankruptcy.

That is probably all that I want to say about bankruptcy for the time being. I have other matters to talk about, but perhaps members will have one or two questions to ask.

Why is the lower limit of debt set at £1,500? For how long has £1,500 been the magic figure?

It has been that for at least 10 years. It can be put up from time to time, but that has not been done. There is also a degree of commonality with the English companies legislation. In England, someone can be made bankrupt for £750; up here it is £1,500. It is therefore easier to be made bankrupt in England at the moment, although it is likely that in England the figure will be changed. The people setting the limit had to think of a figure and that is what they chose.

There is no logic to it.

There probably was at the time, but inflation might well have eroded it.

I am very wary of displaying my ignorance, but I seek clarification. In paragraph 7 of your paper, under the heading "Debt arrangement schemes", the final sentence on the page says:

"This acts as a freeze on further diligence and ensures that creditors get paid something."

Could you define "diligence" in that context?

That means that once someone has entered into a debt arrangement scheme the sheriff officers and messengers-at-arms will not turn up at their door and try to take away their goods, and will not go to their bank account and stop them from taking money out. It is a good thing.

The definition of "diligence" is an order granted by the court that would allow someone to turn up at the door and do what you described.

Generally speaking, yes, although there are other methods.

Members have another paper about the issues that we are discussing today. Do you want to say anything about that?

I thought that you would probably like to hear first what the witnesses have to say. In light of that, you might consider some of the points that I have set out.

I will bring you in during our discussion on bankruptcy—you have licence to come in at any point. I have to make that clear for the record, for some reason. I should also draw to members' attention the Scottish Executive booklet "Dealing with Debt: finding your feet"—that is for midnight reading. It gives advice about dealing with debt. Are there any other questions for Nicholas Grier?

I do not know whether this is the right time to ask this, so by all means tell me that we should explore the matter at a later date. Although you mentioned it today, last week we touched a little on the circumstances in which and the reasons why people may wish to be declared bankrupt. Will you elaborate a little on that? Conversely, will you elaborate on the reasons why someone may wish not to be declared bankrupt? Will you also tell us whether you know of any evidence that discusses the extent to which the threshold for bankruptcy can influence behaviour? By that I mean the behaviour of people going into business or behaviour with regard to the accumulation of personal debts. We touched on that in passing last week as well. It is almost a question about the psychology of bankruptcy, but it relates to the technicalities of our discussion.

I hope that I got all those questions. I certainly got the second one about the problems that arise from being bankrupt, if I understood you correctly. If people are bankrupt, they are prohibited from doing certain things, such as holding public office or being a company director. You may recall last week's witnesses saying that such people may also have a major problem getting credit. It is not that they cannot get it, but it will be provided at a very high interest rate. They will probably not be able to get a credit card. Therefore the practical problem is that bankruptcy is extremely inconvenient. It does not preclude people from holding a job, but the security risk means that a bankrupt is not allowed to hold certain jobs. Notoriously, it is written into the terms of employment of those who work in the defence industry that if they are bankrupt, they must leave. It is considerably inconvenient.

It is difficult to know whether the threat of bankruptcy deters people from setting up businesses. I understand that the committee has been collecting some information about what makes entrepreneurs. By nature, they are more risk friendly than many and are more willing than more cautious souls to take the risk of living with the prospect of bankruptcy. I am sorry, but I did not pick up your first question.

You mentioned previously the reasons why someone would want to be declared bankrupt, so the first question was about that. You also gave the poll tax example, and I asked you to elaborate on that. However, there was also a second part to my last question. I asked whether you are aware of evidence on how the threat of bankruptcy may influence behaviour with regard to personal debt, as opposed to entrepreneurial activities. Perhaps our witnesses will also touch on that point.

People might wish to be made bankrupt for the good reason that, if the process goes well, they can start with a clean slate. They can write off all their debts, somebody else will look after their affairs, the sheriff officers will stop coming to their door and the nasty, threatening recorded delivery letters will go away. From what I understand, that is an immense relief. People like the thought of being able to hand over all their problems to a trustee who is better at dealing with figures. You can imagine how that would make someone's life a great deal better. If the bill is passed, that sort of situation might be permitted. As I indicated, at the moment it is quite difficult for debtors to ask to be put into bankruptcy—they have to fulfil the minimum thresholds.

The evidence of how the threat of bankruptcy alarms people will vary from person to person. I have come across people who have been bankrupted several times. Bankruptcy holds no terrors for serial conmen and the like, whereas it would very much be a worry for those who are in jobs where bankruptcy would be a bar to employment. There are others who would simply prefer not to find themselves in that position. I do not think that one can give a categorical answer to your question, I am afraid.

Thank you. That was very helpful.

For item 3, we have two panels of witnesses, the first of which comprises representatives of Citizens Advice Scotland and Money Advice Scotland. I welcome Susan McPhee and Beccy Reilly from Citizens Advice Scotland; and Yvonne Gallacher and Irene Mungall from Money Advice Scotland.

I take it that Susan McPhee and Yvonne Gallacher will give us some introductory remarks. I thank both organisations for the papers that have been circulated to the committee. I found the executive summary on the front of Citizens Advice Scotland's paper, with its key points, extremely helpful in drawing our attention to the issues that need to be addressed. That bullet-point executive summary was exceptionally helpful and might serve as a good guide for people who are submitting written evidence in future.

We did not prepare introductory remarks, but I will highlight the main points in our executive summary. We welcome many aspects of the Bankruptcy and Diligence etc (Scotland) Bill, including some of the reforms to the law of diligence relating to the debt recovery mechanism and some of the bankruptcy reforms.

There are two key aspects missing from the part of the bill on bankruptcy. The first of those is provision to deal with clients who have no income and no assets; the second is reform of the debt arrangement scheme. I could elaborate on the diligence aspects, but I understand that we are not talking about those today. Is that right?

Yes.

In that case, that is where I will leave it for the moment.

Thank you very much for this opportunity to bring evidence to the Parliament. We share some of the concerns of Citizens Advice Scotland, particularly with regard to people with no income and no assets and to reforms of the debt arrangement scheme. We have serious concerns about land attachment, as we have made clear in our written evidence. Hopefully, we will get an opportunity to talk about that with the committee later. It exercises us quite a lot, in particular when relatively paltry sums of money are involved, that unsecured debts could become secured through land attachment. We are concerned about the impact of that on the economy and on society as a whole. We certainly hope that the Enterprise and Culture Committee will bring the evidence, particularly on land attachments, to the attention of other committees, for example the Communities Committee and one of the justice committees. The same could be said for the whole bill.

As I indicated, we have the same concerns as Citizens Advice Scotland. We need to be creative in our thinking as the bill goes through the Parliament. We should think about its impact on the debt arrangement scheme and about the consultation document on protected trust deeds that has been produced. The approach on the bill should be a lock, stock and barrel approach, and we should take care not to miss anything in the process.

Before we get into the detail of your submissions, do you think that it is right to try to make it easier for debtors to petition for their own sequestration? There might be concerns about the impact on society of encouraging people to avoid their debts and about thrift and forward planning not being encouraged. Is that a good thing, as a matter of principle?

It depends on the client group. Our client group tends to consist of two streams. One contains people on a very low income, whose debts are debts of poverty. The other is a stream of clients whose income has changed because of a change in circumstances and who have accrued debts as a result. When they first took on a debt, they might have been able to afford it. Then, they might have lost their job, developed an illness or lost opportunities to work overtime, and that could have tripped them into debt.

The circumstances surrounding those clients who have debts of poverty might involve extremely high interest rates being applied to the credit that they have taken on. We regularly receive reports of people having to pay an interest rate of 185 per cent, despite the fact that benefits make up their only income. It is important for those clients to have a route out of the debt situation that they are in. Some clients in such circumstances will be in debt for ever and will never have even the benefit of a basic income on which to live. All that that will do is force them into more of a cycle of debt.

I concur with all that has been said. Different people must have different remedies. Not everyone is the same. Consumers are not homogeneous and they have different problems. That is why I said that we must consider remedies and legislation that will match people's circumstances.

In your experience of advising people who are in debt, do you encounter many serial bankrupts or do you tend to find that once people have been through the process, they make a fresh start?

I will answer that from my experience. I have worked in the advice service for more than 20 years and I have never had a serial bankrupt client.

The national organisation's experience of what is happening at the coalface bears out what Irene Mungall said. Most people, if not all, ask for advice because they are serious about wanting to do something about their problems. In the main, they do not use the advice agencies as a way of getting off paying their debts.

I agree. People in most citizens advice bureaux say that clients want to pay their debts. Sometimes, that is the problem, because clients want to enter into an unrealistic voluntary arrangement. For example, they will want to pay debts over 20 or 25 years, which no one could sustain. If anything, the situation is the reverse—people want to pay.

In the summary on bankruptcy in its submission, Citizens Advice Scotland proposes

"A link between sequestration proceedings and the debt arrangement scheme to include, where applicable, a deferment or sist"—

which I think is an adjournment—

"of sequestration proceedings pending approval of a debt payment programme".

Will you say a word or two more about that?

That relates to an issue from CABx about creditor petitions for bankruptcy. In an annex to the submission, we have given the committee the statistics on bankruptcy, which show that the numbers of creditor petitions are increasing. Our experience is that those creditors are in the main local authorities that are petitioning for council tax debt. A local authority will petition for sequestration because a client has some equity in their house. A debt payment programme might well be the best mechanism for paying council tax debt, but local authorities are not taking the time to consider that; they are simply going straight for sequestration. We want something to delay that, to allow a client to obtain advice on whether a debt payment programme would be the best way forward. That would save the client's house.

It was mentioned last week that a hierarchy should be used before the final resort and that the final resort should not be used first. It was said that that should be built into the bill.

Yes. We would like that to happen, to ensure that clients have explored all options and that the option that they go for is the best for everybody.

One problem with sequestration is that the defences to a creditor petition for sequestration are limited, so a debtor could face losing their home for a relatively small amount of debt, as Susan McPhee said, when a debt payment programme under the debt arrangement scheme would be far more appropriate. If a legislative mechanism allowed the sequestration process to be stayed to enable a formal application for a debt payment programme, when that was appropriate, that would provide security for debtors, for whom that route would be more appropriate.

That would be coupled with the suggested improvements in the debt arrangement scheme.

Absolutely.

Paragraph 20 on page 12 of Citizens Advice Scotland's submission says, as Nicholas Grier mentioned in passing, that

"England and Wales are looking at introducing a new procedure to provide debt relief for people who are not able to access any of the available remedies".

Do you know more about what is being discussed down there?

Not really.

I understand that the proposed system in England and Wales loosely follows the debt arrangement scheme in Scotland and will be facilitated by money advisers and the money advice sector.

Are England and Wales more likely to copy us or could we learn from what they propose?

They will copy us. The proposed English system is also more like the New Zealand one. As far as I understand the proposed system, they are talking about removing debt entirely.

That is more radical.

It is more radical than what we are doing.

It would be helpful to get a briefing from either Nicholas Grier or an appropriate body on the idea that is being explored in New Zealand and in England and Wales. If such a provision is not built into the bill now, the chances of that happening in Scotland in the short term are not high. Now is the time to find out about good ideas from elsewhere and to consider whether we want to incorporate them into the bill.

As far as I know, New Zealand and England are waiting to find out what creditors think about the idea. You can imagine that they may not feel the same about it.

But it would be useful to get a briefing. Can you do that?

Yes.

Scotland already has the working group on debt relief. That group has developed a system, but it is not mentioned in the bill.

In your belief, that system should be incorporated in the bill. We take that point.

Money Advice Scotland makes the point in its submission that the bill makes no reference to the debt relief scheme. The submission also refers to the composition of the Scottish civil enforcement commission; we will ask some questions about that when we come to later sections of the bill.

Paragraph 2.1.4 of your submission, on section 23 of the bill, asks what level of proof will be required to demonstrate that the debt advice and information package has been given. What do you think that the level of proof should be?

Some record should be kept to ensure that there is evidence that that has taken place and that the person has received the advice and information. Evidence shows that lots of debtors receive lots of communications that they never look at. The creditor may well have acted responsibly, done their duty and sent out the information, but how do they know that the debtor has received the information, has read it and will act on it? The main thing is for the debtor to act. In addition, the money advice sector must promote what it is doing much more widely and try to address some of the current issues.

If we built in an early-intervention requirement, I presume that that would help to deal with the problem because it would involve a face-to-face consultation.

Yes. Good record keeping should also be mentioned, so that the information that has been provided could be evidenced at a later date if need be.

Given that creditors are often finance companies that are based quite far away from where the debtor lives, what could they do to improve the situation and make face-to-face or personal contact?

That is a difficult question to answer.

Some creditors already have direct contact. The home credit industry has direct contact with its customers. It is no coincidence that the home credit industry and catalogue companies achieve quicker enforcement of their debts and do not have the same problems. That happens because they have direct contact with the individuals concerned.

A number of other issues arise. We mentioned the difficulties that people have once they are in debt; they receive lots of communications and can end up feeling unwell as a result. A balance needs to be struck between debt collection and assisting people to seek advice. Without that, there will just be more vociferous debt collection, which will be done on the doorstep.

Money Advice Scotland makes the point that its representatives, as advocates for the individual, are prevented from arguing their case in court. Can you say more about that and what might be done to change the situation?

Some of our members can go to court and represent clients; it depends on the level of debt for which the client is being pursued. However, many advisers are not permitted in the court. The convener mentioned learning lessons from other countries. Representation is allowed in other countries, such as England, which allows representation by a McKenzie friend. If a similar situation applied in Scotland, sheriffs would become more attuned to money advisers. The profession is showing that it can be professional, particularly through the new approved advisers, whose status is a demonstration of competence. However, we have some way to go before the ordinary man in the street can be represented by someone who knows what they are talking about, and who is not necessarily a lawyer.

That seems a reasonable recommendation.

I would like to hear from the sheriffs. It would be useful to hear why they might be opposed to the proposal.

Okay—do you mean sheriffs as opposed to sheriff officers?

Sheriffs; they were the subject of the discussion.

Okay.

The problem is not the sheriffs in particular. The rules of court, which preclude such representation, say that only a solicitor can represent somebody at certain courts. Someone does not have to have a solicitor at the lower courts, but they have to at other levels. Some rules of court might need to be changed to allow the representation that has been suggested.

We should explore that. The point is reasonable.

The bill could address the issue directly.

Okay.

Part of the problem is that most creditors do not sue—they do not go to court—which means that our clients do not have access to bankruptcy.

I would like to explore the issue further. Let us say that I run Joe Bloggs plc and I have outstanding debts from a couple of hundred people. I pursue those debts in my usual fashion, which is by writing letters—whether they are opened or not—that contain increasing levels of threat. After a while, I can argue to my accountant that the debts are irrecoverable; I can say that because we have had no contact from the client, the debt can be written off. Does that sort of practice go on? Is it not easier to do that, in accounting terms, than it is to actively put money into pursuing a debt?

Creditors tend to sell on the debt. Part of the problem for our clients is that they do not know which debt they are being pursued for. The creditor can sell on the debt or instruct different firms of debt collectors to pursue it. We have had cases in which three or four firms of debt collectors were trying to collect the same debt.

It is not common practice for creditors to write off debts, unless a high proportion of the debt is being paid in full and final settlement. Creditors do not write off debts simply because they see no chance of getting the money back. If someone cannot pay, the only way for them to escape their debts is by accessing debt relief through sequestration.

So, a creditor would never write off a debt as irrecoverable.

It is rare.

Local authorities, which undertake most formal debt collection, collect council tax debt by the mechanism of issuing a summary warrant; such cases do not go to court, therefore the issue of lay representation in court does not arise.

The Citizens Advice Scotland submission refers to research that showed that

"for every £1 of monthly income, clients owed almost £22 of debt".

The chances of someone being able to pay that off are not high.

That is right. We also did a smaller bit of research into our clients who have no income and no assets and found that the two thirds of them whose only income came from benefits had debts of around £9,500. If someone's only income is benefits, they will never be able to repay that level of debt. When interest and charges are taken into account, the debt escalates constantly.

The problem is that people come to you not when the problem arises, but when they have got into terrible debt.

However, when the people who are just at the margin come forward for advice—those who are not in default and who have not missed a payment—creditors do not want to know, because our client is still making payments. Provided that our client is covering the interest on the debt—I am thinking of credit card debt, for example—the creditor will not even deal with them. That is a big issue for the people involved and the money advice agencies.

Christine May asked about debts being written off. We must not forget that the environment that we live in is very competitive, with its plethora of credit card and zero per cent balance transfer offers. There is not the same room for manoeuvre as there was in the past for debt write-off, and the situation will get worse as interest and inflation get higher.

Could you expand on that a little? I am not sure that I quite followed what you said. Take me through it again slowly.

At the moment, we live in a low-interest, low-inflation environment. Once inflation and interest go up, however, the amount that is owed in the economy will have to be brought in and people will start to be pursued vociferously for their debts. At the moment, we have low inflation and low interest, so far more products are available than ever before. This country outstrips anywhere else in Europe in terms of the number and type of products that are available. We also have zero per cent annual percentage rates and balance transfers.

The environment is competitive and companies are operating on very small margins of profit to get a slice of the cake. The smaller the margin of profit, the more vociferously companies will pursue those who are in debt. That is of concern to us.

It sounds as though we need to deal with debt and the causes of debt, to coin a phrase.

Money Advice Scotland's submission highlights

"the importance of understanding discharge from the bankruptcy -v- discharge of responsibility to keep making payments."

Can you elaborate on that? What would be required to get that message across?

The witnesses who gave evidence last week also raised the issue of synchronising the discharge from bankruptcy with the period of one year. Everything needs to be transparent. Debtors may believe that the period of bankruptcy is for one year and that that is what they will get, but the bill does not do what it says on the tin—not if they have to pay beyond one year. Money Advice Scotland is not saying that debtors should not have to pay beyond a year; we are saying that debtors should understand at the time of a contract that they could be discharged from bankruptcy after a year but, equally, they could pay beyond the period of a year if they have the ability to do so.

Other than the penalties that we discussed earlier, what incentive does a debtor have to pay beyond a year if they believe that they will be discharged after a year?

Two points arose last week. The first was whether the discharge period should be reduced from three years to one and the second was whether it should be synchronised with the repayment period. The witnesses from Citizens Advice Scotland said that they did not have a strong position on the length of the discharge period, but there was unanimous agreement on the need to synchronise the discharge period with the repayment period.

Yes, the two should be one.

However, if we introduced synchronisation and reduced the discharge period to one year, we would be asking people to repay within one year rather than three.

Money Advice Scotland is not necessarily saying that the period should be a year. Some people can pay for longer; for example, if someone can pay for three years, the discharge would be at the end of three years.

So the one-year period should be a minimum rather than a standard.

Yes.

Citizens Advice Scotland's view is that the discharge period should be reduced to a year, but that payments should be synchronised with that period. First, that would give us parity with the English system. Secondly, the biggest benefit for debtors' post-sequestration rehabilitation is the release from making continuing payments. There are benefits to the type of restrictions that a bankrupt has to live with in a one-year discharge period. For our client base, one of the key benefits of being free from bankruptcy is the release from continuing payments. There would not be a significant benefit to clients and debtors who had gone through the bankruptcy process if the payment period were to be extended beyond the one-year discharge period.

Two countries that reduced the discharge period—the USA and Australia—have since reversed the legislation. I am told that there has been a 75 per cent increase in the number of bankruptcies in England since the new legislation came into force. Therefore, the prima facie evidence from other countries that have gone through the process and reverted to having longer discharge periods suggests that getting the balance right between creditors and debtors is not as straightforward as it appears to be.

It is probably not as straightforward as it appears to be, but there are issues to do with accessing bankruptcy. Reducing the discharge and repayment periods to one year would not necessarily incentivise bankruptcy, because serious disadvantages go with bankruptcy, as Nicholas Grier pointed out at the outset.

It is important to remember that it is possible, as the Scottish Executive's policy memorandum admits, to gather an estate in a one-year period. If there are significant assets, they will be realised and sold for the benefit of creditors. Much of our client base consists of people with low incomes or no disposable incomes and no assets. In that context, a continued period of payment would be of no benefit to creditors either.

I will play devil's advocate. Suppose that we do as the bill suggests and reduce the discharge period to a year, and that we synchronise the repayment period so that it is also a year. The next time that a creditor lends money to someone, will they not be likely to tighten the terms, toughen up the rules, have more up-front charges and increase the interest rate because they will want to try to reduce their exposure? Will there not be a kickback that will make it more difficult or expensive for debtors to borrow money from creditors in the future?

That is a good point. There is always that risk, but there is a counter-argument. The effect that you have outlined may be likely initially, but in the longer term there may be more responsible lending from lenders. There might be a positive kickback in that respect.

But is it not the case that the people at the lower end are often the most exposed and that they will borrow money even if they must pay usurious rates?

They will be in that situation anyway. Anybody who lives in a deprived area must borrow using the most expensive form of credit. There is no choice. If the credit industry had to implement a bit of self-regulation with regard to whom it would lend money to, that might not be a bad thing. People who watch television at night see adverts that say that if they apply to a particular company for a loan, the loan could be agreed by the time that the adverts end. A lot of irresponsible lending goes on.

Will the bill tackle irresponsible lending sufficiently well?

No.

No.

No.

No.

It does not profess to do so.

No, it does not. The matter is probably reserved, but that should not prevent us from commenting on it in our report if we think that action needs to be taken.

Unless the grounds for apparent insolvency are eased, debtors will still not be able to access bankruptcy easily. Even the bill's reducing the discharge period to one year will still not allow debtors to become bankrupt easily. Indeed, from our experience, the majority of debtors do not want to become bankrupt even if they could do so.

Okay.

I would like to clarify something. Sometimes there is confusion between discharge of bankruptcy and discharge of responsibility. I understand that the English position under the Enterprise Act 2002 is that a person can be discharged from bankruptcy within a year, but that does not necessarily mean discharge of responsibility, which normally takes three years. The English are really getting at those bankrupts who are able to get a job and earn a reasonable living and not at the people with no income and no assets, who can probably be dealt with in a year. There is an argument about why the former should not pay their creditors, which is why the discharge of responsibility period continues to three years. It may not be my place to say this, but it would be unusual if the credit industry were to be markedly different on that matter on the two sides of the border. However, that must be decided. Synchronisation is not an absolutely clear-cut issue.

A further issue is that even though someone could have their bankruptcy discharged, there is a proposal to have bankruptcy restrictions orders, which are already used in England and can last for 15 years. The bill includes a proposal to have BROs in Scotland.

Are they for serial bankrupts?

They are for people who happen to have misbehaved, shall we say, in the period leading up to their bankruptcy or who have not been co-operative debtors once they have been bankrupted. For example, if someone had given their friends all their assets before they went bankrupt to avoid repaying their creditors, that would be held against them and they could have a bankruptcy restrictions order placed on them for up to 15 years. The bill mirrors the English legislation in that respect, which may or may not be a good thing.

That is helpful.

I think that Susan McPhee said that she would say more about land attachments. The Citizens Advice Scotland submission says quite a bit about that, but—

We are dealing with the issues in the bill in sections and we will discuss land attachments in a subsequent evidence session.

I beg your pardon. I thought that we were coming on to land attachments now, because it was said that we would deal with the issue later.

It is clear from last week's meeting that land attachments will be a big issue, to which we will devote a fair amount of time.

I thank CAS and MAS for their written evidence, which was comprehensive and straightforward. Representatives of those organisations will be back with us when we deal with matters such as diligence and land attachments. Are there any final points that the witnesses would like to make? I know that Susan McPhee is itching to make a final point.

Earlier, Susan Deacon asked why people would want to go bankrupt. A significant issue for us is the fact that our clients suffer constant harassment by creditors. That harassment can cause illness and depression and can make some people suicidal. It does not take the form only of letters; we have reports of clients who are telephoned continually. If they work, they might be telephoned at work or be sent text messages. They are harassed continually. On average, our clients have about five different debts, so they can be pursued by different creditors all the time. There is no release from that. Unless they have access to sequestration, there is nothing that can stop it.

Does Yvonne Gallacher have any final points?

No. I simply echo what Susan McPhee has said. As has been mentioned, our biggest concern is the recycling of debt through debt collection. We look forward to giving evidence on the new Scottish civil enforcement commission.

Susan McPhee's final point was interesting. If, instead of harassment, those telephone calls could offer advice and help, they might be more effective. The companies that make the calls are making contact, but to the wrong effect. Such calls only entrench people's defence mechanisms. If the companies concerned could somehow be persuaded to turn their approaches into something more supportive, they might get a better result.

I thank the witnesses for their submissions and their oral evidence, both of which have been extremely helpful.

Our second panel is from the Institute of Chartered Accountants of Scotland. I welcome Anne Bryce, who is director of insolvency, and Bruce Cartwright, who is convener of the insolvency committee. Thank you for your written evidence, which received some publicity in The Herald yesterday.

It was not really a lake behind me and I was not fishing.

It was not a bad photo, by the way.

I listened to the evidence of the first panel and I would probably agree with everything that those four ladies said—perhaps we should just sit aside. Seriously, we have a common mission. I disagree with what was said only on some minor technicalities.

The committee has received our submission but, as we represent a body of practitioners, I will outline some key practical issues. It is fair to say that the chestnut of how long the discharge period should be has probably taxed or vexed practitioners for a while now. If 20 of us were in a room, we would probably have 10 answers between us. There is no consensus per se. I will put my cards on the table. I am in favour of the one-year period, but I agree that synchronisation is pretty important. It does not make a lot of sense to me that the discharge period should be one year and the payment period should be three years. Other practitioners would say that a three-year period makes more sense, because it allows the creditor to ingather. However, for many people it is about bringing a lot of misery to an end and giving them an opportunity to restart. I think that that is more important.

I deal more with the 10 per cent of cases that involve businesses and partnerships going bust; I do not see a lot of personal bankruptcy cases, except in a business context. It is possible to have a one-year period—that is a political decision. This weekend the consultation on protected trust deed reform was published. If you decide in favour of a one-year period, the conclusion that there will be a fairly significant rise in the number of bankruptcies is unavoidable. Perhaps it is right that that should happen. It may mean that we are recording better the misery that is out there and allowing people to avoid it. The issue can be approached in two ways. This year the number of bankruptcies has increased from 3,000 to 5,000. If, as a result of shortening the discharge period, that figure increases to 10,000, we may just be recognising some of the misery that exists and allowing people to exit. There is no point in having false statistics that suggest that the figure is only 5,000, when another 5,000 people are caught in a trap. I take the view that the number will be what is right—full stop. We should not get carried away by statistics. However, synchronisation is really important.

I look at the stats from the States. I have not checked them recently, but I believe that one person in 200 in the States goes bankrupt. Here the figure is one in 800 or one in 1,000. If credit is available more easily, there will probably be a big rise in the numbers. Many practitioners will say that it is terrible if the numbers go up, but the misery is out there already. All that we would be doing is recording and dealing with it. Is that not more important? That was probably a political statement, rather than a factual one.

Synchronisation has not been introduced in England, but that is not necessarily right. We are keen to sort out the definition. As a practitioner, I would struggle to keep someone on the hook for three years, so that he continues to pay me, if he is off the hook in his mind and technically with me after a year. It seems slightly bizarre that someone who has more ability to pay should be on the hook for longer. I can argue the point all day with myself.

The causes of debt are more important than the issues with which the bill deals. I am frustrated by the way in which people are able to get into debt, although that is not a matter for us to debate today. There must be personal responsibility, but the causes of debt must be examined. Those causes, rather than the legislation, are the prime driver.

The bill gives us a great opportunity to look at the whole problem in a joined-up manner and to examine sequestrations, protected trust deeds and DAS together. We must get the problem sorted out for the next 20 years, for the sake of practitioners, debtors and the public. We have a great opportunity to consider all the issues together and to get the system right.

Bruce Cartwright made the point that the bill will not achieve ministers' stated aim of encouraging an entrepreneurial culture in which people are willing to try it again. In my view, he is probably right. I was involved in enterprise development for 20 years, and I have never seen the bankruptcy system as a major deterrent to enterprise. Could the bill do something that it is not doing to encourage such an entrepreneurial culture?

My biggest frustration when I read that the aim is to deal with the entrepreneurial issue is that we are not really dealing with an entrepreneurial problem. From our members' stats, we are clear that 90 per cent of cases involve what we would call consumer debt. One could argue that things are being made easier for the 10 per cent of the 5,000 cases that involve businesses. The number is smaller, but it may still be right for us to address the issue. However, to be honest, most of the corporate cases involve limited companies and, therefore, liquidation. I could bore members silly about the number of ways in which it is possible to go into liquidation, to come back as a phoenix company and to be quietly ignored.

I do not think that the system is a major problem on the personal front—the issue that Nicholas Grier raised. Anybody with a bit of nous is probably incorporated and will be subject to different legislation. They will be in the territory of liquidation and the question whether an official receiver should be appointed. That is another subject.

You asked how the bill could be improved. We are talking about only a small group of people, but the bill will help them because they will be able to come back from bankruptcy more quickly. I was not at last week's meeting, but I read the Official Report and I noted the former bankrupts' comments on their position. It seems to me that, if one has been bankrupt, it is difficult to come back. For example, they talked about their difficulty with opening bank accounts. I do not think that banks can be forced by legislation to give people bank accounts, although perhaps they can be—I do not know. However, the main thing that affects people who seek to come back from bankruptcy is other people's attitudes and they are not caught by the bill.

I return to the point about the discharge period being reduced from three years to one year. The new legislation in England has been in force for a limited time. Have your members identified any trends south of the border as a result of the change?

There has already been a significant increase in the number of bankruptcies. I do not have the figure to hand, but I think that it has just passed 50,000 per year. I can get the information for you, but I think that there has been a rapid increase from, on average, about 30,000 bankruptcies per year to about 50,000 per year.

I think that there has been a 75 per cent increase.

In any event, there is a continuing increase in sequestrations north of the border. Could that increase be part of a wider trend?

It could be. In each of the past eight years or so there were about 3,000 to 3,200 sequestrations in Scotland. After nine months of 2005, there were 3,600, so we are probably on target for 5,000 sequestrations in 2005. There has been a 50 per cent increase with no change in legislation. I do not know whether that is due to people being more honest in dealing with things. I cannot explain the increase, except to say that consumer debt has increased immeasurably.

That is interesting.

I have another question on the same matter. I presume that your members make money out of bankruptcies. On what basis do they charge fees?

It is probably best for Anne Bryce to answer that question, because she is closer to it, but they do so either on a timeline or through the Accountant in Bankruptcy.

The Accountant in Bankruptcy considers the fees, but in insolvency scenarios various fees also have to be approved by creditors committees. The creditors take an interest in and approve the insolvency practitioner's fee.

If the discharge period is reduced from three years to one year, will that have an impact on the fees that your members charge?

I do not think so. I listened to the argument about that at last week's meeting. IPs will simply get new cases on a yearly basis, rather than on a three-yearly basis.

The key part of the work involves sorting out the assets, and that is done during the initial period.

The fee is front loaded.

So there is not much work to be done in years two and three.

To be honest, I suppose that if someone is discharged after a year, but they make income contributions for three years, the IP will do the same work that they do in the current system. However, there will be a reduction in administration if the IP does not receive income contributions in the second and third years. The issue was raised by a bankrupt at last week's meeting, but it has not been raised by IPs. IPs are not worried that they will lose income. In fact, to be cynical, they will have more bankruptcies to deal with.

For the record, we should say that an IP is an insolvency practitioner.

There seems to be an inherent unfairness in the bill. We heard that incorporated companies are not covered by the bill, but when an incorporated company goes into liquidation and discharges its workforce, its workers can become bankrupt, because they can no longer pay their debts, given that people work out their debts on the basis of their income. However, the owners of the company, having protected themselves, can retain their assets, such as their homes. I feel that we are missing something.

Nicholas Grier can brief you on this independently. We are into the territory of the corporate veil of a limited entity. Legislation provides that a limited company is recognised as a separate individual, for want of a better phrase.

The impact that such companies have on personal debt is not recognised.

On no income, no asset status for individuals, if an incorporated company had no assets, it probably would not even go into liquidation, but would disappear quietly. There would be no Government agency to deal with it in Scotland, whereas there would be in England. That is a major difference. If someone wanted to disappear quietly, having taken the money of a limited entity, they would have to ensure that no assets were left. No one would look after the case. There would be no directors disqualification. That is a major difference between us and England.

On directors' responsibilities, often they have to sign a personal guarantee for the bank to get funding to keep their company going. In many cases that we come across, all directors have signed on the line to get the funding for their company. They are responsible in many cases.

And they will have personal income tied up.

The point that you raise was addressed by the UK Enterprise Act 2002. When a company gets into financial difficulties, a sum is set aside specifically for all the unsecured creditors, of which, commonly, the employees form the largest part. Unfortunately, that sum is only £600,000 at the very most; for a small company it can be as little as £10,000. However, it is a step in the direction that has been talked about. As Bruce Cartwright indicated, that is the way the cookie crumbles. With limited liability companies, somebody loses out. Quite often, throughout the world as well as in the UK, employees suffer. There is no easy answer to that.

That is why we have limited liability companies.

To promote enterprise.

There is no way that I can pursue the subject further. We have been at the receiving end of the situations that have been described, which seem grossly unfair. I was hoping that the bill would address that, but I see that it is unable to.

I presume that companies limited by guarantee come into the same category as companies limited by liability.

Yes. I did not want to get into all the finer points. All registered companies are limited companies; there are one or two other sorts of unlimited companies. If a company is registered, the Companies Acts apply, and it has its own separate personality. Partnerships are like groups of sole traders, and they can be made personally bankrupt, but a company cannot be made bankrupt.

Unless the partnership is a new type of partnership that is incorporated.

Which is a limited liability partnership. You can see why I did not want to get into that.

Absolutely.

I want to pursue further the point that Murdo Fraser made. You said that none of your members had come to you concerned that they would lose money. To turn that on its head, do your members anticipate that they will have access to greater opportunities, and therefore more money as a result of the bill?

The bill is not an opportunity for a revenue stream. It has to be joined up with the trust deeds and debt arrangement scheme. There is an overlap between the work of private businesses and partnerships and Government agencies.

There is no major concern about sequestration. There might be more sequestrations—more might be done by the Accountant in Bankruptcy. The trust deed consultation that came out on Friday causes more concern about where that market is going. Discussions around sequestration have been about the principles of society's view of bankruptcy rather than the self-interest of where we get our fee from. There has been no discussion around the fee, which might surprise you, given that we are a bunch of accountants.

I want to pick up on the debt arrangement scheme. You suggest in your evidence that there is little appetite for it so far. It would be helpful if you could expand on why that is the case.

We have observed that, since the system came into being at the end of November last year, fewer than 200 debt payment programmes have been taken up. Far fewer debt advisers than the Executive anticipated are being properly trained and are able to deal with debt payment programmes. The system has been a bit of a disappointment, given the money that was thrown into it to train money advisers—apparently, £5 million has been spent, and there is an on-going cost of £2 million to £3 million. It is an expensive beast.

Why has there been a limited uptake?

The scheme does not give the debtor or the money adviser much. In contrast to being relieved of his debts in a year, which is the situation in the current proposals, the debtor might have to pay the full amount of his debt—plus interest, perhaps—over 15 years. What would you do if you were a debtor with debt problems? There is a great chasm between the two options.

The money advisers have been trained, but they receive no fee from the scheme and have no motivation to become involved in it. The process is supposed to be paperless, but administratively it is quite tricky. We do not have first-hand information about this—the previous witnesses do—but we are aware that the system is not working well.

In your submission, you suggested that, if the debt arrangement scheme was able to obtain debt write-off, that would basically be the same as a trust deed.

Or similar to that, yes.

However, you also have a problem with the fact that, unlike the situation with trust deeds, the work would be

"undertaken by unqualified and less regulated personnel".

Can you expand on what you mean by that?

In our body, to be an insolvency practitioner you have to be a chartered accountant first, and then get an insolvency permit. To do that, you have to sit difficult exams. You also have to get two levels of insurance. You have to get an enabling certificate for insurance—an enabling bond—and you have to insure every case. There is a raft of exams, money, insurance subscriptions and so on. Further, you are monitored by our institute monitors every two or three years to ensure that you are doing things properly. There is a lot of training and expense for IPs.

So should we just get rid of the debt arrangement scheme?

It is not for me to say that.

I am just asking for your opinion.

I think that it needs to be changed.

Yes. Obviously, it is not working as it is.

The evidence that it is hardly being used suggests that it is not working. If someone has a choice between paying their debt plus interest in full over a certain period and paying only a percentage, and there is no difference in the honourability of either option, it is not difficult to see what they will do. If someone can pay the debt over time, they will probably do so without going through any arrangement. However, the trust deed allows a more flexible exit.

You say that the bill's proposal to allow non-Scottish advisers to handle debtors north of the border

"could open the floodgates in Scotland to unregulated debt consolidators".

Can you expand on that? What could we do to stop that—

Invasion.

That is one of your ideas, Michael.

It is awfully difficult not to come across as parochial when we talk about the situation, but it is important that local people deal with local problems, even if the simple objective is to raise assets and identify the right values of properties. Anne Bryce is quite a follower of the debt consolidation position. We have seen it in England and we see it creeping north. Is that fair?

That is fair. Usually, members of the trading standards profession are regulated by the trading standards body, but it does not have the set-up to monitor those other debt consolidators.

I do not want to use the word cowboys, but do you suggest that that is what those people are? I see you nodding.

They might appear in a western—how about that?

Although some of them are cowboys, some are fine.

My point is, should the bill include additional provision for regulation? These days, we are always being told that there is too much regulation, but is there a need for slightly more regulation in this area? Is that the job of the bill or of institutes such as yours?

I am not sure how one would legislate for that. The problem is that the institute could not regulate such operators, because it can regulate only its members; we are talking about people who are outside institute control. I am trying to think about how one would regulate them.

It is a trading standards problem—

It is a consumer credit problem.

Perhaps you could comment on—

We can comment on it, but not do anything about it.

Okay, but you suggest that it is a worrying development.

I want to pick up on something that Michael Matheson asked about. You said that it seems as though the Executive wants to phase out trust deeds, and that it feels that the DAS is the way to go instead. That is despite the fact that the nearest equivalent to a trust deed in England—the individual voluntary arrangement—is being pushed hard by the Government down there as a more effective and cheaper remedy than anything else. Will you expand on that, please?

The situation has probably become a little clearer since we submitted our evidence, because the consultation on protected trust deed reform was published late on Friday.

The system has three tiers at the moment: sequestration, trust deeds and the DAS. Currently, the sequestration approach is to pull down the wall, sell the assets and realise a dividend from them. Trust deeds provide the middle ground of an informal arrangement with creditors. The DAS is a version of trust deeds, but it implies full repayment, so it is at the top end.

There has been a lot of debate in the past about the level of dividend that a trust deed should anticipate paying. The argument is that if it pays nothing, what is the point of it, except to absolve a creditor? ICAS has a strong view that every trust deed should pay a dividend. In fact, that is included in our self-regulation arrangements.

I understand from the proposals that were published on Friday that we are talking about a dividend of 20p to 30p. I do not have a problem with the logic of paying more than a sequestration, which averages roughly a 20p dividend at the moment.

Given that the DAS is dealt with separately, and if, at the top end, it means that people do not have to pay debt relief; and given that the consultation document suggests that only 10 per cent of trust deeds pay more than 30p, that leaves less than 10 per cent in the middle, and it is a small area. However, it is clear that there will be a lot more sequestrations and more onus on the Accountant in Bankruptcy, who undoubtedly will have to gear up. There is a question about the public purse as well. I can argue that two ways—if the assets are there anyway, they will fund part of the public purse, but I imagine that the Accountant in Bankruptcy will have to increase her staff significantly.

Are you saying that the English system is better?

I am a bit puzzled about why the individual voluntary arrangement in England is proving increasingly popular and seems to work. I know from speaking to some of my English colleagues that creditors in England, and even what were formerly the Crown creditors who dealt with value-added tax and pay as you earn, seem to take more interest. I cannot put my finger on why that is the case. There seems to be a fair amount of apathy from creditors towards trust deeds in Scotland.

That seems to emphasise the point that was made last week that we need to take evidence on how the English system works. It is clear that we could learn a lot from that.

The other point to make about IVAs in England is that they last for five years.

And once they are finished, that is it.

Yes, that is it, and people can start again.

You make the point that the bill is silent on four crucial topics, some of which we have discussed. Could you follow up your excellent submission with more on your views on those four topics? You have covered some of them, but I want to ensure that we cover them all and that we hear what you think the bill should be saying.

Probably the most significant topic—which has been discussed in the committee today and previously—is apparent insolvency. We agree with everything that we have heard. You asked, "Why £1,500?" No one can quite pin it down. It looks as if England said, "It sounds too high. We'll divide it by two." It seems odd that someone who is in the misery of debt cannot escape into bankruptcy because they cannot prove that they meet the requirements of apparent insolvency. Why that number? To be cynical, if I dialled the right phone number one weekend and left my phone off the hook, I would probably run up a bill of £1,500. There does not seem to be any logic to that figure.

Can you suggest a logical position?

We could argue for a number, but we have had a debate with our members about other practical ways to define apparent insolvency, as opposed to a monetary definition.

At the moment, one of the most popular ways of defining apparent insolvency is if 14 days have expired after receiving a statutory demand for payment. You could, perhaps, relax that by having apparent insolvency kick in with just a summary warrant or a court action.

And of course there is special significance in that figure, because under the land attachment scheme in the bill, when it becomes £1,501 one can, in theory, lose one's house.

Do you want me to cover the other three points?

I was going to ask you whether you would give us that additional information in writing, if that is okay. Although we have covered the basics that we need to cover today, it is clear from the discussion that you have a lot more to say. It would be useful to get that in writing. You will no doubt be coming back to discuss diligence and other items—we can explore those in more detail.

That is not such a strong subject.

There are no further questions, so I thank you for attending. Both the written and the oral evidence were extremely helpful.

I suggest a five-minute break. I do not know about members, but my head is becoming numb.

Meeting suspended.

On resuming—

We will now discuss the issues that emerged from the previous evidence-taking session. Both today and last week, I was struck by the fact that there is almost unanimity on a number of points. There is absolute unanimity on synchronisation of the discharge period with the payment period. I cannot think of anyone who dissented from that last week or this week. There is general agreement that no one is overly concerned by the reduction of the discharge period from three years to one year. The matter does not seem to be particularly controversial either for the Institute of Chartered Accountants of Scotland or, at the other end of the scale, for Citizens Advice Scotland. Synchronising the two periods seems to be more important.

There is clearly consensus on some of the issues about which the bill is silent, such as the debt arrangement scheme. There are also concerns about the future of trust deeds. Nicholas Grier has been taking notes. There seems to be an emerging consensus on possible improvements that could be made to the bill.

You are absolutely right, convener.

Would you like to expand on any of the issues?

Although there is a good deal of consensus, we must never forget that there is similar legislation in England. As I may have indicated before, it is obviously open to the Parliament to step out of line. However, we must be aware of the fact that, if we make it easier for either creditors or debtors, that may have a bearing on people's ability to get finance. If we make it considerably easier for debtors, lenders may ask themselves whether it is a good idea for them to lend to Scottish debtors. If the period for discharge of payments is reduced from three years to one year, lenders may consider not lending in Scotland to the same extent. That is a matter for them to decide.

There is a good deal of doubt about the issues that have been raised in respect of protected trust deeds. It may be necessary for us to ask the Executive to indicate what is so wrong with the protected trust deed as it stands that it needs the degree of regulation that has been suggested. The accountants seem to think that the current protected trust deed is not too bad. However, there is agreement that the debt arrangement scheme needs tweaking.

The need for us to pick up on what has been happening in other countries—Australia, the US and New Zealand, in particular—and south of the border has been highlighted. I suggest that we ask the clerks, along with Nicholas Grier, to produce a small paper on how we should go about taking evidence on what is happening in England. The more I hear, the more I think we need to take into consideration some aspects of the English legislation. To whom should we be talking?

We are covering more than one element of the bill, so when we come to take evidence on what is happening south of the border we will need to take evidence that relates to all four elements. That may involve our making one or two trips down south to talk to people. It would be sensible for us to do that. Indeed, it would be daft for us not to take into consideration what is happening south of the border. That may involve visits, inviting people up to give evidence or, probably, a mixture of the two.

The evidence that we are hearing just now is geared towards the first element of the bill— bankruptcy—and we will have another two evidence sessions on it. Since there is so much information to absorb on each element, I suggest that we ask the Executive to come in and talk about each element as we consider it, rather than at the end. We might have a round-up of evidence at the end, but this element of the bill, as well as that on diligence, is chunky enough to justify asking for that. If we are going to do justice to the bill, that seems to be a sensible way to approach it. Let us ask the Executive whether that is okay.

If you recall, the Executive briefed us on its approach to the bill and what it considered when drafting it. I distinctly remember feeling, at the end of that briefing, almost shell-shocked at the amount of information I was trying to absorb. If the Executive can come to the committee at the end of our evidence taking on each element of the bill, we will find it easier to see the links between the various elements. I also hope that our level of comprehension will increase to the extent that we will be able to ask sensible questions.

You mentioned several areas on which there is consensus, but there is another on which there is almost consensus: the intention that the bill should support entrepreneurship. That case has not necessarily been made yet. We would like to see whether the bill will do what it says it will.

There is not, however, consensus on money advisers and the scheme that has been arranged. And there is the issue of repaying the debt over 15 years or taking the option of getting out of it all in three. Some of that needs to be explored further.

We are also dealing with a fairly dynamic situation. For example, the discussion paper that was published on Friday, which will clearly have some impact on the bill, has been mentioned. Perhaps we can ask Nicholas Grier to give us a summary of that paper as it might affect the bill, or what is not in the bill but evidence suggests should be. Although I did not read the paper over the weekend, it seems that there is enough in it for us to consider whether it will affect our deliberations.

Are there any other points?

The only other point is the work that is being done in New Zealand on people with no income and no assets. It would be helpful to get more detail about what is happening there when we are looking at international behaviour.

And that south of the border.

Yes, you mentioned that.

It seems to be very much under discussion. What I found out I got from websites. It might be that the point is still being discussed and that there is no final view, but it is still worth hearing about.

Is everyone happy with that? Murdo, are we on track?

I seem to have become the resident expert and I am not sure how qualified I am to take that mantle. I am sure that we are making excellent progress.