The next item of business is a members’ business debate on motion S4M-13952, in the name of James Dornan, on StepChange Debt Charity’s action plan on problem debt. The debate will be concluded without any question being put.
Motion debated,
That the Parliament congratulates StepChange Debt Charity on its report, An Action Plan on Problem Debt; understands that this looks at ways to assist people to adjust to the shocks and challenges that can arise from debt without falling into further difficulty and takes a positive approach to dealing with what it considers can be the devastating consequences for people and their families, the wider economy and the public services; notes that the charity provides debt advice to anyone with a debt problem, and notes the view that people in Glasgow Cathcart and across the country who find themselves in this position should approach such organisations as soon as possible in order to resolve their problems.
12:31
I thank colleagues who signed the motion and those who will speak in this important debate on personal debt problems.
I pay tribute to StepChange Debt Charity Scotland for its hugely successful work in the area of personal debt crisis and for its assistance to me in preparing for this debate. I am sure that other members have been beneficiaries of the excellent research provided by the charity’s public affairs officer, Mr James Stewart, and by Gillian Thompson, a trustee, who are both present in the gallery today. I thank them and all their colleagues for the help that they have given us.
StepChange is the largest provider of free independent debt advice and managed debt solutions in the United Kingdom. Last year it helped 16,000 people—the figure has almost doubled since 2012. It boasts the impressive stat that 97 per cent of its clients who enter statutory debt repayment solutions successfully pay off their debt. That is the highest percentage among all debt advice providers in Scotland. That is a commendable feat, which has helped to alleviate untold stress for many families and individuals in all our constituencies. The charity has achieved that by providing its clients with a tailored and detailed financial plan, which reassures both the client and the creditor that the repayments will be affordable and undoubtedly brings hope to those who once felt hopeless.
In cash terms, StepChange helped its clients to pay off £30 million of debt in Scotland last year. I recently visited its headquarters in Bothwell Street and was granted permission from clients to sit in on some telephone consultations. The conversations between clients and advisers raised a number of issues. The first was that despite the Tory Government’s assertion that indebtedness is an issue for, in its words, “the unemployed and the feckless”, StepChange’s research demonstrates clearly that that is not the case. Around one third of its clients are in full-time employment, another 30 per cent are unemployed and the remaining 40 per cent are retired, students, carers or in part-time employment.
The adviser who I was attached to, Michelle Robertson, shared with me two calls that particularly stick in my mind. The first was from two general practitioners who had £36,000 of payday loan debts across 27 individual loans. Those clients are not low-wage earners, unemployed, sick or infirm; they are a well-paid couple who still find themselves dragged into the debt trap. That just highlights how anyone can be caught in this spiral of misery.
The other call that I was told about was much more concerning. A gentleman had taken out a payday loan of £60 over a three-day period. After he missed the first repayment date, interest and charges escalated. By the time he contacted StepChange, his debt was £3,500, and by the time that StepChange was able to put a hold on it, the debt was £5,000. That is wrong—morally and economically. It should be legally wrong to charge such exorbitant levels of interest.
StepChange has conducted research on the effects of the proposed Tory tax credit reforms. It shows that 17 per cent of StepChange’s clients who have three or more children are running a budget deficit. If those horrendous reforms are carried out, the figure would take an astonishing leap to 90 per cent, with an average loss of £231 a month. That clearly demonstrates beyond doubt the importance of tax credits in assisting families simply to make ends meet. I say this without wanting to play political games: the sooner this Parliament has the power to create its own tax credit system, the better it will be for everyone affected.
It is also extremely worrying that StepChange is seeing the make-up of clients’ debt shift from credit card debt to arrears on essential bills. In 2008, the average debt of a StepChange client was £25,000. The good news is that that figure has fallen to £14,000. However—and this applies in both the social rented and private rented sectors—that debt is comprised mainly of rent and council tax arrears and utility bill debt. The reason for accruing debt has moved from people buying things that they would like but could do without to people having to fall into debt in order to stay in their home and keep on their utilities.
Although there is clearly still a huge debt problem in Scotland, it is widely recognised that the Scottish Government’s efforts have assisted in helping those with debts. Scotland has the only statutory debt arrangement scheme in the United Kingdom. The six-week breathing space that freezes interest rates and charges to allow a manageable and sensible debt repayment schedule is not available to clients in any other part of the United Kingdom. We should be proud that we are leading the way.
I not only commend StepChange’s sterling work, but acknowledge the many successful outcomes that James and his colleagues have reached for their clients. The action plan outlines how this Parliament can help to ensure that Scotland continues to help those with debt problems, and I would recommend that all members in the chamber read it. I would also urge all members to contact StepChange to see how it can help them in their constituencies. Its research is thorough and detailed to constituency level, which is helpful in getting a feel for the local situation.
None of our constituencies is free from personal debt. StepChange reaches out into all our communities and provides vital help. For that, it should be strongly commended and supported.
12:37
I thank my colleague James Dornan for securing today’s debate at a particularly timely moment. In the run-up to Christmas, many of us, including many families, should be looking forward with a sense of anticipation and excitement, but the gross materialism that is so typical of Christmas these days means that it is a time of anxiety and dread. Many families will be asking themselves simply, “How do I get through this? How will I survive Christmas?” We know the answer: they will turn to loans, debt, credit cards and anything else that is available, which increases the problem.
I, too, thank StepChange not just for providing a briefing and help for the debate, but for its work in helping people across Scotland and the UK. I had cause to refer three constituents from the same family to StepChange just two weeks ago. The family—a mother and two young adults in their 20s—are all of working age. The mother has a permanent job, which is low paid, while the two sons have been in and out of work. One of the sons had two part-time jobs but, in the past couple of months, had lost them both. The other son had lost his part-time job. The effect on the family was catastrophic.
The family had been in and out of work for several years. In 2010, they fell into council tax debt, and they have been in and out of that and other debts for five years. They have been constantly threatened with court action. They then breach the arrangement schemes.
The family were faced with a court action only this week. The council is in the middle of rearranging a payment plan, but what often happens in such situations is that the plan is unaffordable, so it is not managed well, which creates another crisis.
There is no doubt that those are very difficult issues, but it points to the help that StepChange highlights in its action plan—that people need very small savings so that they have the resilience to survive, plus financial advice and support to see them through.
I am not sure how typical that family is, but I do not think that their situation is untypical. As James Dornan said, the people involved are not unemployed or feckless and irresponsible; often, they are families. I do not want to replay the tax credits argument, but I make the point that we have the powers in this place to make a difference, and we should use them to help some of these people.
The growing problem of debt is a generational issue, as many of these people are young. More than three quarters of those aged between 25 and 35 are anxious about their current debt, in comparison with about a third of those over 65.
I will focus on my constituency for a moment. StepChange sent me some statistics on my area and they are quite worrying. Eastwood clients had the highest average debt—£23,500 per person—in Scotland. More than a third of clients were in arrears with their council tax—like the constituents I saw—and 15 per cent had a payday loan with an average balance of just under £2,000; I notice that that figure has been growing every single year. In addition, a quarter of clients were in rent arrears.
We can only surmise why that might be the case. I imagine that it is linked to the fact that Eastwood is a relatively prosperous area, and people with higher incomes can borrow more money so they get into deeper debt. It shows that the problem exists across the board.
I will turn briefly to some of the things that we can do. One in five people cannot even read a bank statement, so financial education is vital. Social advertising from the Government may also help—I admit that it is difficult, as we can spend only thousands or tens of thousands of pounds whereas Wonga is spending millions and tens of millions, but it is something that we can do.
The Government has introduced a breathing space. Earlier this year I asked the minister, Fergus Ewing, what his position is on extending the six-week breathing space—the moratorium on diligence—under the debt arrangement scheme. At the time he said that the period can currently be extended in prescribed circumstances, but that there are no plans to extend it further. I ask him again whether he is looking at that, because it is clearly very helpful to lift the threat from people in their moment of crisis.
The StepChange report’s most important recommendation is that £1,000 in savings would protect 50,000 households in Scotland from problem debt and offer just that little bit of resilience. There are so many things that we are currently doing that we could build on.
I draw the minister’s attention to the iSave credit union in Renfrewshire, the savvy savers project in South Lanarkshire and the future savers scheme in Glasgow. Those schemes are all based on credit unions and are all supported by our councils, which give pupils—usually those in secondary 1—£10 as part of a starter scheme to get them into the good habit of saving, it is hoped, for the rest of their lives. That sort of initiative can really make a difference and is something that the Government could support, perhaps by underwriting the loan guarantee scheme. I ask the Government to look at that, and I congratulate James Dornan yet again on bringing this important debate to the chamber.
12:42
I congratulate James Dornan on bringing the debate to the chamber to raise an important issue, and on highlighting the excellent report by StepChange.
I say at the outset that if we are serious about doing something to help families across the country, our time is far better served in discussing that excellent report than in making partisan and political remarks. I hope that the minister will focus his speech on the report and what we can do, rather than on making partisan remarks.
The report covers a range of areas and comes up with six excellent solutions, all of which require further investigation and two of which I will focus on today. Ken Macintosh is right to say that this time of year is a particular challenge for families. No time of year is easy, of course, but Christmas presents a particular challenge, which is a good reason for having the debate now.
The problem is already widespread, with 3 million people in debt across the UK, and that figure could potentially grow as the years go by given the challenges that we face in the global economy and the fact that the euro difficulties are being delayed but not resolved.
The biggest challenge of all, which I genuinely fear, is that at some point—whether that is next year, the year after or the year after that—interest rates will go up. Interest rates can hardly come down—they have become, in effect, normalised at 0.5 per cent—and when they go up, whether to 1 per cent or 2 per cent, that will cause a whole new generation of problems for tens of thousands of families throughout the country. Now is the time to put in the hard yards and the effort on a cross-party, cross-national basis to ensure that we get on the right path as soon as we possibly can.
I will focus on two issues in particular. One of the solutions that StepChange focuses on, primarily on pages 10 and 11 of the report, involves calling for a review of affordable credit to seek far better alternatives to the high-interest credit that those on low incomes generally face. We read in a previous StepChange report that 29 per cent of total debt is on credit cards, which have some of the highest annual percentage rates.
That review will not be an easy challenge. Typically, the more money somebody has, the better their prospect of getting lower credit terms; and those with less money, but particularly those who need money most, get the highest and most challenging credit terms. It will not be easy to address that.
However, I was particularly impressed by what I read in the report of the Good Shepherd microfinance programme in Australia, which
“pools a range of charitable, government and financial services support and funding, provides ... different low income loans and grants to suit different circumstances, and provides access via mainstream banks and high street outlets locally.”
That programme appears to have been a big success in Australia. I know little about it other than what is in the report, but it strikes me that it might be a very good starting point in trying to help people not only in Scotland but across the UK.
The second particularly strong idea in the report is that we need a pretty big expansion of free debt advice. There are very good charities out there—StepChange does a particularly good job—and there are Government schemes, but with 3 million people across the UK in serious debt problems at the moment, we need to do much more. The people who we are currently reaching are those who are best placed to sort out their problems; the ones I worry about the most are those who do not come to debt charities. Such people often put their heads in their hands and allow their stress to grow; then they find that for every week or month that passes, it becomes more difficult to resolve their problems and their debts rack up in a sometimes frightening way, as James Dornan indicated in the second example that he described. Therefore, we need to look urgently at finding more innovative ways of giving debt advice in order to reach the people who currently are quite simply not being reached.
I ask the minister in his closing remarks to address both the points that I have raised, should he have the time to do so.
12:47
I, too, thank James Dornan for bringing the issue to the chamber.
There is no doubt—as we have seen from the evidence in the briefing papers that we have been given, and as we have heard from members in their speeches—that people are finding it increasingly difficult to manage financially. As Ken Macintosh said, it is particularly difficult for such people during the Christmas period, when there are huge advertising campaigns aimed at parents for their children. People obviously get into debt over Christmas and find it very difficult to get back out of it. I congratulate StepChange and the other organisations that provide help and advice during what is a very difficult period for many people.
Like James Dornan, I have visited StepChange, which is located in my constituency in Glasgow city centre. I was very impressed by how things are handled there. I have visited twice and have spoken to the staff. I am always conscious that the issue for such staff is often how many calls they take and how quickly they can deal with them. However, I was really impressed by the fact that the StepChange staff take their time over the calls. I was allowed to listen in to some calls, at the behest of clients, to hear what issues were being raised. A particular case sticks in my mind. A staff member phoned a person back who had to go out to get their mobile phone topped up. The staff member phoned the person while they were out with their mobile phone in order to give them advice as quickly as possible—just like that—so that they could go somewhere to sort something out. I was very impressed by what StepChange offers and hope that it continues to provide such advice.
As Ken Macintosh said about his constituency, many people believe that my constituency—Glasgow Kelvin—is very affluent. Obviously, certain parts of it are affluent, but we also have problems. I will give members some figures about the Glasgow Kelvin constituency that will probably surprise them. More than one third of my constituents have been in arrears with their rent, 17 per cent have had electricity bill arrears, 41 per cent have had council tax arrears, and 16 per cent have had a payday loan, with the average balance being £1,560. As Ken Macintosh and Gavin Brown said, if people have more money, they can often afford to have more credit cards and so on.
This debate is important, and it is important that we have organisations such as StepChange. It is important for Parliament and for members to ensure that people know that they exist. It is a big problem if they do not. Ken Macintosh mentioned that people bury their heads in the sand, but if people were more aware that help is out there—it is our job and the job of others, including the Government, to make them aware—they might contact the organisations more timeously. That would allow them to have the breathing space period.
We in Scotland are very lucky, as James Dornan and Ken Macintosh said, in that we have an advantage over other parts of the UK in respect of the breathing space period. However, it is only six weeks. Sometimes when people take the big step to contact an organisation, they are already three or four weeks in arrears. Interest on their debts mounts up over the time that they take to put together their papers and contact various people, so I ask the minister to say whether there is any way to extend the period to nine or 12 weeks, or maybe even beyond that. People tend to bury their heads in the sand and it is a great worry that people do not contact organisations straight away.
James Dornan mentioned the situation with tax credits at Westminster, which we cannot hide from. I say to Gavin Brown that it is not being political to mention that. We must all work together in this chamber to ensure that people are aware that help is out there for them, regardless of the political situation. We all agree that the organisations do a great job. We must highlight and publicise them more, and perhaps we could extend the breathing space period a wee bit. I look forward to the minister’s reply when he sums up.
12:51
I am delighted that James Dornan has given us the opportunity to debate the excellent work that the charity StepChange performs for people in Scotland and throughout the UK. Reference was made to the fact that Gillian Thompson of StepChange is listening to the debate. She is the former Accountant in Bankruptcy, with whom I worked for many years. Sharon Bell, who also works with StepChange, used to be an advisor to the Scottish Government and would sit in the seats up at the back of the chamber during debates such as this one, which I have spoken in since 2007.
I will focus on StepChange’s work and its report, “An Action Plan on Problem Debt”, which is one of the best reports that I have seen for a long time. It focuses on practical solutions to what is one of the most deep-seated problems in Britain, which is so often hidden from view.
StepChange points out:
“In the UK over 2.4 million dependent children live in indebted households. These children suffer hardship and mental distress ... More than half of children aged 10-17 in families with problem debt are embarrassed because they lack the things that their peers have, and nearly one in ?ve have been bullied as a result.”
StepChange also points out that
“Personal consumer debt in the UK stands at £168 billion”.
Debt is not a problem in itself when it is managed, controlled, affordable and repaid. It is necessary for many purposes—for example, buying a house or a car. However, when it becomes a problem, I am afraid that things become very different indeed.
The problem is very often not triggered by fault or by profligacy, but by things that occur in life—losing a job through being made redundant, illness in the family or relationship breakdown. That became evident to me in the somewhat distant past, when I ran a small legal practice, where I routinely acted for the debtor and specialised in trying to preserve the family home. That experience left its mark on me and gave me an insight into the human cost—the human misery—of debt problems.
What does StepChange recommend in its report? Its first recommendation is that every family should have
“£1,000 in savings to cover a sudden cost or income shock”.
There are many shocks for people who have no spare cash. The washing machine may break down. If people have children, they need a washing machine, but going out and buying one with a payday loan can be the start of the problems. Mr Dornan gave an example of a payday loan.
It sounds like an ambitious policy, but the recommendations in the StepChange report go some way towards showing how it could be made to work through nudging and changing behaviour—for example, through deductions and links to the automatic payroll pension. That would not deal with self-employed people or people who have incomes below £10,000, but members should read the report because it sets out a fascinating proposal. I hope that it will receive the attention that it deserves across the parties.
The second recommendation is that we
“Ensure all low income households can access low cost credit products”.
As James Dornan pointed out, StepChange advises an enormous number of people in Scotland and the UK, and in a great number of cases its advice is efficacious. In other words, it works. Of course, not everybody takes advice, as I well remember. Many people choose to ignore it. However, many people take it and benefit therefrom, and their lives change substantially for the better.
The third recommendation is that we
“Scale up free debt advice so that it reaches the 1.4 million people who urgently need advice”.
We want to do that, and that is why among the reforms that we have made is making debt advice mandatory in certain circumstances. That has led, in turn, to greater uptake of advice.
The fourth recommendation is that we
“Ensure everyone dealing with their problem debt gets the protection against interest, charges, enforcement and collections they need”.
In Scotland, we have taken forward the debt arrangement scheme proposal—I am not sure that there is a counterpart in England—and it works well, providing a diligence stopper. The fear of debt action being taken and sheriff officers coming to the door is huge. Unless people have been in that situation or spoken directly to people who have, it is difficult for them to understand that. In our comfortable lives, we can be unaware of the pressures.
DAS’s diligence stopper of six weeks provides a breathing space. Three members said that the period should perhaps be extended. I confirm that we will undertake a policy review of all the BADAS—that is a piece of legislation, Presiding Officer—reforms, including the moratorium period, next year. I say for the uninitiated that BADAS is the Bankruptcy and Debt Advice (Scotland) Act 2014. It trips off the tongue, does it not?
The fifth recommendation is that we
“Protect children and families from the harm of aggressive debt collection practices”.
I am pleased that payday loans are now subject to caps of £15 default fees and 100 per cent interest but—goodness me—is a cap at 100 per cent interest right? I do not think so. The first members’ business debate that we had in the current session of Parliament was on that topic, and I have pressed the UK Government on it time and again. First, it said, “We are not doing anything about it.” Latterly, it did something, but I do not think that it or the Financial Conduct Authority have gone far enough.
I see that I am into my last minute. If StepChange did not exist, we would have to invent it. It is a great charity that does terrific work. Mr Macintosh’s practice of referring constituents to StepChange is one that we can emulate. Maybe we can encourage MSPs and MPs to do that, because their constituents will receive good advice.
We are doing a lot on education. We have a financial health service policy that 35,000 people have benefited from and we are working on credit union availability, about which I have 18 seconds left to impart information. That is not enough—perhaps I can do it on another day.
In Scotland, there is a broad consensus that the recommendations from StepChange in its excellent report “An Action Plan on Problem Debt” are things that we want to do and that we want to happen. If we do them even only partly, we will make a tremendous difference to the lives of many people in this country—lives that are scarred by the misery of problem debt.
12:59 Meeting suspended.