Diligence
Good morning. The first item of business is a statement on diligence by the Deputy First Minister. The minister will take questions at the end of his statement, so there should be no interventions.
I am glad to have this opportunity to bring members up to date with the Executive's plans for the law of diligence.
Diligence is the Scots law term for the procedures that enable court orders in civil matters to be enforced, usually for the payment of money. A number of different diligence procedures are available to enforce payment. Poinding and warrant sale is only one type among many. Different measures exist for use against different types of property, such as heritable property—all types of land and buildings—and movable property, including income, money held in different forms and all sorts of goods and assets.
The fundamental tenet that underpins the system of diligence in Scotland—indeed it underpins our society—is that people have responsibilities as well as rights. We come together in civil society on the basis that we honour our responsibilities and expect others to do the same. That expectation and belief is at the heart of every transaction, whether it be between individuals, between individuals and enterprises, or between people or organisations and the state. The payment of debts is one such responsibility. Unfortunately, some people simply refuse to pay their debts until they are forced, even though they are able to do so. In those circumstances, the legal system must have a mechanism that people can use to enforce payment that is due to them. Those who pay their debts should not have to subsidise those who choose not to.
The system must be able to ensure that those who attempt to avoid meeting their liabilities cannot do so. There should be no loopholes for the cheats who can, but do not, pay to sneak through. The system needs to strike a fair balance between effective enforcement and protection of the vulnerable. It must support hard-working families who pay their taxes against those who decide not to bother. It must also free from oppression those who are genuinely unable to pay. To do that the diligence system must be comprehensive—no form of property can be exempted from it. Such an exemption would be exploited by the small number of people who seek any opportunity not to pay.
I will explain the Executive's plans for the law of diligence. I have said on previous occasions that it is essential to consider the law of diligence as a whole because there are many facets to the system, all of which are complementary and interlink to form a complete whole. Improvements to any one part must be considered in light of the impact that they will have on the remainder. A complete set of measures covering all types of property must be available so that all types of creditor, including individuals, local authorities and businesses, can recover all types of debt, and so that reluctant debtors cannot take advantage of gaps or loopholes.
The Executive has planned a review of the law of diligence as a whole for some time and I confirmed to members on 4 May that arrangements for such a review were under way. The review is thorough, wide ranging and, perhaps most important, coherent. All aspects of the diligence system are included. The reform of one part is being assessed to ensure that there are no unintended negative consequences on any other part. Above all, debtor protection and effective enforcement are being carefully balanced.
I will mention some areas of the review in particular. Members will be aware of the research study that was commissioned by the Scottish Office on the operation of the diligence procedures that were introduced by the Debtors (Scotland) Act 1987. That act effected widespread reform of the existing system and introduced new procedures for earnings arrestments and time-to-pay orders and directions.
The research study into the operation of the act was a substantial work of eight reports, which were published in April 1999. Among the conclusions reached by the study was the view that certain new procedures introduced by the 1987 act are not operating properly, particularly in the case of procedures designed to assist those who have difficulty paying their debts or who have multiple debts. We are examining those procedures and will introduce appropriate reforms.
Published Scottish Law Commission reports relating to diligence remain unimplemented, including its "Report on Diligence on the Dependence and Admiralty Arrestments". I expect to receive two further reports from the commission—on diligence against land and on attachment orders and money orders. Those areas are being examined and appropriate reform will be introduced.
Furthermore, the review covers areas of the diligence system that the Executive has identified as requiring further investigation, some of which flow from concerns raised by organisations or individuals. Let me be clear that representations are welcome from anyone with concerns. In any event, the review will involve wide consultation to take into account all interests.
Some of the issues that the review is considering cut across the whole of the diligence system and affect various different types of diligence. For example, the review is considering the arrangements that can best assist both debtors and creditors in managing the very real problem of multiple debt, whether by a debt arrangement scheme or otherwise. Issues identified in the research include debtors' reluctance to use existing protections and the need to improve information and advice to debtors to that end. Another important issue is access to information to enable creditors properly to target the most appropriate form of diligence that should be used in particular circumstances.
We must give careful consideration to these very real and problematic areas, to achieve a solution that genuinely makes a difference. Those key issues are fundamentally important to how the diligence system operates and of course they will be included in the review of the law of diligence. We are considering all aspects of the diligence system and we intend to produce a coherent, systematic and comprehensive package of reform. Legislation to implement the reforms identified by the review will be introduced within the lifetime of this Parliament. That legislation will give us a modern system of diligence in Scotland—not one that is rooted in past centuries.
As members are well aware, legislation is already passing through Parliament for the abolition of poinding and warrant sales. Members will recall that the Justice and Home Affairs Committee recognised that that legislation would have to be coupled with an alternative, humane replacement diligence against movable property, which would have to be formulated before the Abolition of Poindings and Warrant Sales Bill is brought into force. The committee recommended a delay between the passing of the bill and its coming into force. The serious consequences that would follow from a failure to do so are abundantly clear, and I am sure that we would not want to create the loophole that would result.
Therefore, the Executive has undertaken to resolve that problem. On 27 April, I said that the Executive would meet the committee's challenge to find a workable and humane alternative and that it would set up a cross-party parliamentary working group to identify the essential elements of an alternative to poinding and sale. I am able to inform members that I have issued invitations to those people whom I would like to join the group, which will be chaired by the Deputy Minister for Justice, Angus MacKay. On the parliamentary side, they include the conveners of the Justice and Home Affairs Committee, the Local Government Committee and the Social Inclusion, Housing and Voluntary Sector Committee, Mr Tommy Sheridan, a representative from the Conservatives and a representative from my own party. Others invited, who can bring the perspectives of both creditor and debtor to the group, include Citizens Advice Scotland, the Scottish Consumer Council, Money Advice Scotland, the Institute of Credit Management, the Convention of Scottish Local Authorities, a business representative and an academic in the field of diligence.
The group will be faced with a challenging but extremely important task and will have to work to a tight time scale. I intend that the group should meet for the first time later this month and regularly after that. Following on from the work of the group, we will introduce legislation no later than the 2001-02 parliamentary year.
In the meantime, I am taking immediate steps, by way of secondary legislation, to extend the list of goods exempt from poinding, largely in line with the recommendations of the Scottish Law Commission in its recent publication, "Report on Poinding and Warrant Sale". New items to be added to the list include televisions, radios, microwave ovens, telephones and computers. I made a commitment in Parliament to put in place that reform before the summer and I confirm that I will lay the regulations before the Parliament next week.
The Executive's position on the proposal for an arrestment bill, which has recently been lodged by Mr Alex Neil, is that we recognise and are sympathetic to the concerns that led him to make that proposal. We are also sympathetic, in principle, to the idea of preserving within bank accounts arrested a basic sum, similar to the protection that already exists when earnings are arrested. We think that the idea is a good starting point for dealing with the problem, but it requires considerably more work to be done on it.
The Executive is willing to take up the idea and to develop it to ensure that those who have their accounts arrested are not left bereft of the wherewithal to live. As the review will consider all types of diligence, it will include a range of issues concerning non-earnings arrestments. We cannot support Alex Neil's bill because of its piecemeal approach. Nevertheless, the comprehensive, systematic and co-ordinated approach of which I have spoken and which my department is taking forward can take account of any impact on other types of diligence and avoid unintended negative consequences. That is better than piecemeal reform.
I welcome this opportunity to set out the Executive's intentions for the reform of the law of diligence. I hope that members will agree that this is a wide-ranging and challenging undertaking.
The minister will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business. It would be helpful if members would press their request-to-speak buttons now.
My button is not lighting up. I will move to the seat behind, if necessary. [Interruption.] I have not got my card in.
I am relieved that, for once, we are dealing with human error and not a technical hitch.
I welcome the minister's statement. I am tempted to ask whether he would have been making it if Parliament had not voted for the Abolition of Poindings and Warrant Sales Bill, but that might be pressing a rather tender spot.
Could the minister be a little more explicit about the time scale for this reform? He said that the Executive intends to introduce legislation in the parliamentary year 2001-02. That can be as soon as May next year and as far away as May the following year, with the resulting act not coming into force until considerably later in 2002. It would be helpful if the minister could give us a better idea of when he wants this legislation to be in operation.
My next point concerns the composition of the working group. It was not until I read the statement at 25 past 9 that I realised that I was getting an invitation to serve on the working group. With my committee convener's hat on, I would like to ask whether committee conveners are the most appropriate persons to serve on the working group, given that the three committees concerned will have to deal with whatever legislation emerges during stage 1 consultation and so on. The Parliament may want to consider whether committee conveners are the right people for this job. Conveners are meant to retain a sense of impartiality in their work, which may be difficult if they have had a hand in producing the legislation.
I want now to address some of the more specific issues that the minister raised. In his statement, he did not mention the system of summary warrants. The minister will know from the evidence that all three committees took at stage 1 of the Abolition of Poindings and Warrant Sales Bill that this aspect of current procedure was identified as a major problem area that needed to be overhauled. It does not include, for example, the time-to-pay orders that are popular in other areas of diligence. Can the minister confirm this morning that examination of the summary warrants system will form part of the working group's remit? That will be key to any change in the law of diligence.
I am grateful to Roseanna Cunningham for her general welcome for the statement. A letter of invitation was issued to her yesterday, but it had probably not got through the mail system by today.
I hear what the member says about conveners. The decision to invite them to take part in the working group was based on the fact that the committees have already done some work and are up to speed on these issues. I will not be inflexible about that, but we want to get on with this work very quickly. Two of the conveners I mentioned come from the Labour party, and Ms Cunningham comes from the SNP. We want to ensure that both of those parties are involved, so if the member has an alternative proposal I would be grateful if she could bring it forward quickly. We hope that the working group will meet for the first time later this month and regularly after that. That is indicative of the commitment to press forward.
It is important to make—as my statement did—two distinctions. There is the overall review of diligence, on which we have said that we will introduce legislation before the next parliamentary election. There are also the provisions that the working group will address, which would obviously include summary warrants as they are a key element. The working group will look at the replacement—the humane replacement, as Ms Cunningham's committee described it—of poinding and warrant sales. That will be a separate piece of legislation and I have said that we would want to introduce it no later than the 2001-02 parliamentary year. The greater the progress made by the working group, the better. I cannot put a timetable on the legislation because it will be in the hands of the working group, but it is not our intention that there should be any foot-dragging on this. We want to make progress and I hope that we will.
I thank the minister for the copy of his statement, which I received this morning. I would also like to acknowledge Tommy Sheridan's contribution, which perhaps hastened the statement. I also welcome the minister's comment reinforcing the responsibilities as well as the rights of those who incur debts.
We note the minister's acceptance of the Justice and Home Affairs Committee's recommendation that something must be in place before warrant sales and poindings are abandoned.
I welcome the working party that will be set up. Will the minister accept in good faith our commitment to co-operate with and give full support to that group?
With respect to the extension of the exempted goods list, will there be a limit on the number of televisions, computers and microwaves per household? Given Alex Neil's contribution, will there be a limit on the number of accounts that a debtor has in his or her name?
Finally, sheriff officers are much maligned. Will the minister join me in acknowledging the efforts of sheriff officers who have to do the dirty work of parliamentarians in upholding the law and pursuing the aims of legislation that is already on the statute book?
I thank Mr Gallie for his welcome for the statement and for his positive response to the working group. He asks whether there will be a limit on the number of televisions and microwaves. Yes; the framework in which those additional items are included relates to items that are deemed to be household necessities. In this day and age a microwave and a television are household necessities, but it might be pushing it to say that five televisions in the household are necessary.
Mr Gallie mentioned Mr Alex Neil's bill on multiple accounts. We have seen the terms of Mr Neil's bill, but from what we have read and gleaned, the issue of multiple accounts must be properly and thoroughly examined. It will be taken up in the comprehensive review of diligence.
Sheriff officers are officers of the court and are subject to the control of the court. They have difficult jobs to do and are instructed by clients to do them. Their activities are strictly regulated by statutory instrument and the legislation provides for complaints and disciplinary procedures. Some of the allegations made against them have been unfair. All aspects of diligence will be considered in the review, including the regulations relating to sheriff officers.
I welcome the statement. It is widely agreed that reform is long overdue. Does the minister recognise the role of advice agencies such as Money Advice Scotland and the citizens advice bureaux not only during the consultation period and the passage of the legislation, but afterwards, in handling problems of debt? Is there any plan to consider the resources available to them—particularly capital resources such as computer systems—to facilitate their handling of clients' problems?
Furthermore, how will we involve the Department of Social Security in this process? Many of the problems of multiple debt can be helped by direct payments from benefits, such as the Department of Social Security 519 fuel direct scheme, which assists in the payment of energy bills. It is important to involve the DSS. Are there plans to do that? Will it be given a continuing role after the legislation is passed?
I am grateful to Mr Robson. Money Advice Scotland and Citizens Advice Scotland have been invited to be part of the working group, so they will not simply be consulted but will have direct input into the search for an alternative to poindings and warrant sales. Questions of funding of citizens advice bureaux go beyond the remit of the statement and the review, but the point is noted.
I accept that the Department of Social Security has an important role to play. There are issues of reserved powers, but I have indicated that the consultation will be wide ranging, particularly with regard to the fundamental review of the law of diligence. It is important that the DSS is involved in that consultation, because it has a significant role to play in these matters.
Given that prevention is much better than cure, and taking into account the points made by Mr Robson, I hope the minister will accept that the idea of funding free independent financial advice should become part of the remit of the committee. We have to examine not only what happens when people get into debt but why they get into debt. If we can prevent them getting into debt through advice at an early stage, perhaps we can prevent the use of diligence as a whole.
I have a couple of points on the statement. First, in relation to the involvement of parliamentary committees, would it be better if their members, rather than their conveners, were invited to serve on the working group? Conveners' work load is well known; my concern is that that might affect the number of meetings.
The second point relates to the minister's reference to the Justice and Home Affairs Committee's opinion that the member's bill should be passed immediately and have an implementation date as soon as possible thereafter. An amendment to change the implementation date to April 2001 was lodged yesterday by the sponsors of the member's bill. Does the minister think that that time scale is realistic? The date was chosen—and was mentioned by the Local Government Committee—because it is at the beginning of the next financial year for local authorities.
On the exemptions, Phil Gallie's point may seem trivial, but it is important. The diligence committee report from the Law Society of Scotland made the point that TVs and other goods up to a certain value would be exempt. My worry on reading that was who would determine the value—it is not valuers who go out, but sheriff officers. I would like clarification on what the minister means by the improvement in the exemption.
Is the minister willing to issue some form of statement to the Deputy Minister for Local Government with a view to recognising that, as we speak, sheriff officers throughout Scotland are, in my opinion, trying to squeeze as much blood as possible before the removal of poindings and warrant sales? I do not accept the points that Phil Gallie made about sheriff officers. Poindings and warrant sales are a profitable pursuit for them—£70.15 every poinding, regardless of any money that is raised.
I have evidence in my office, as I am sure do other members, that sheriff officers are increasing the number of poindings in anticipation of them being removed in the near future. Will the minister issue an appeal to local authorities to examine their debt recovery methods with a view to instructing sheriff officers to use other methods than poinding and warrant sales, as is the case in West Dunbartonshire?
We have mentioned the fact that sheriff officers are independent officers of court. Will the overall review of diligence also examine the role of sheriff officers vis-à-vis their involvement in debt recovery as a whole? They are often linked to rich and powerful debt recovery agencies, which are limited companies. I hope that the review will examine that role and decide whether it is acceptable that it should continue.
Mr Sheridan has raised a number of points, which I hope I can cover. As I said in reply to Roseanna Cunningham, we invited conveners to be members of the committee because they are closely involved in the matter. If, for example, she felt that it would be helpful to include another SNP member of the Justice and Home Affairs Committee, I would be happy to talk to her about that. As for the conveners of the other two committees, I have yet to hear their responses—and I had better not prejudge what they will say to me.
Mr Sheridan also mentioned Euan Robson's point about providing advice to prevent people from getting into debt in the first place. That is important, and the problem of multiple debt and debt arrangement schemes should be considered by the committee in its wider review of diligence. That point was well made.
Mr Sheridan asked about the amendment on April 2001 that he and his sponsors have lodged. I repeat that we are committed to the abolition of poinding and warrant sales and to replacing that system with a modern, humane and effective diligence against movable property. It is self-evident that that alternative is not yet available. It is unlikely, if one is being realistic, that it will be available 10 months from now, as the working party will have to conduct the necessary consultation process and the legislation will have to be passed. We will therefore introduce legislation no later than parliamentary year 2001-02. Mr Sheridan's amendment will be debated properly at stage 2 of the bill, but I hope that members will agree that allowing the working party to complete its task is the best way forward. The working party should get under way this month and is expected to meet regularly, so there cannot be any foot-dragging on this matter.
The precision with which the maximum number of television sets or microwaves is decided will be reflected in the regulations and the relevant committees will have an opportunity to consider that.
As I said to Mr Gallie, there are regulations covering sheriff officers. They are officers of court and are subject to control of court and regulated by statutory instrument. All aspects of the diligence system will be considered in the review, including those regulations, and the role of sheriff officers will therefore be addressed.
Mr Sheridan will know that the Executive is already pursuing the recommendations of "It Pays to Pay—improving council tax collection in Scotland", which will ensure that people in financial hardship are not subject to poinding and warrant sales. We are trying to develop a new protocol covering working arrangements between councils and sheriff officers, which should be available later this year. It is important that councils gather information on people in debt before instructing diligence and should be in a position to offer debt management and counselling arrangements, including increased use of direct reductions from benefit. We will encourage councils to do that.
I ask members to keep their questions brief or we will run out of time.
If the minister seriously wants to be flexible about the working group, will he accept that no individual can represent a cross-party group and a political party? I am happy to volunteer to represent the Labour party on his working group.
Does the minister accept that the Scottish legal establishment, of which he and the First Minister are prime examples, has been promising a review of diligence for more than a decade—without fruit—and that there is little excuse for further delay on this important matter?
Finally, does the minister accept that the will of this Parliament is to abolish poindings and warrant sales—not to replace them with some sanitised version of the same that suits the Scottish Law Commission?
I note Mr McAllion's generous offer. That is a matter that he might want to sort out with his own party. Invitations have gone out to the conveners of the Social Inclusion, Housing and Voluntary Sector Committee and the Local Government Committee, both of whom are members of the Labour party. Ministers on the committee will be members of the Labour party as well.
The need to make progress on the review of diligence was the thrust of the statement. This has been around for a long time. Some of the Law Commission reports to which I referred have been gathering dust on shelves for some time. The fact that we have now undertaken this review with—as I said in my statement—a view to legislation in the next parliamentary election is indicative of the benefits of having a Scottish Parliament. I do not believe that that would have happened in a Westminster context.
I accept that Parliament is committed to the abolition of poindings and warrant sales. I repeated in my reply to Mr Sheridan that the Executive is likewise committed. Members will recognise that the Justice and Home Affairs Committee said that although there should not be a sanitised version of poindings and warrant sales, there should be a humane and effective diligence against movable property, which exists in 41 other countries that the Law Commission studied in its report.
Mr Wallace said that my bill on arrestments has some flaws, but he has not yet seen it. I suggest that he examine the draft of the bill. He will realise that I deal with a number of the issues that he raises. Bank arrestments, as I am sure he is aware, total about 100,000 a year. This will be a useful measure—to say the least—pending the implementation of wholesale reform. I am willing to accept reasonable amendments from the Executive if it will give some backing to the bill.
My second point is in relation to the remit of the working party. One issue that has not been mentioned by Mr Wallace is loan sharking. I hope that part of the remit of the working party will be to deal firmly with loan sharking, which is a major problem in Scotland.
Thirdly, in addition to the secondary legislation to extend the exemptions, will the minister consider other immediate measures that could be taken, in particular to give a guarantee to local authorities that are not going to use poindings and warrant sales that they will not be penalised?
Will the minister issue guidance on the behaviour of sheriff officers, which is abominable in many parts of Scotland? Will he also issue guidance to all public sector agencies in Scotland that when they try to collect debt they should not send a one-off letter to people, threatening that if they do not pay the whole sum within 10 days they will be taken to court? A more humane way of communicating about debt should be established in the public sector as a matter of priority, given that 80 per cent of poindings and warrant sales are from public sector agencies.
That is a lot of questions; I will try to deal with them all.
I hear what Mr Neil says about his bill. I said that issues of multiple accounts had to be taken account of. Looking at the principles of his bill, parts of it are already in place with regard to releasing arrestments. The point that I will make to him is that to proceed on an ad hoc basis of one bill after another would not necessarily lead to the coherence that we want in a total reform of the law of diligence. Apart from anything else, in a practical sense it diverts time, resources and people from proceeding with a much wider review. For that reason, I wish to take up the important points that he raises in the principles of his bill in the context of the wider review of diligence, on which we have indicated we will wish to legislate before the next parliamentary election.
Mr Neil mentioned giving guidelines to sheriff officers. I repeat that, far from guidelines, sheriff officers are subject to rules of court. Their activities are strictly regulated by statutory instrument. Those ought to be far more demanding than any guidelines, because they have the force of law.
Sending one letter with a 10-day notice is inadequate. We can expect better than that. I dealt with several, more detailed aspects of that matter in my reply to Mr Sheridan.
What about loan sharks?
One of my concerns, which has been reflected in a number of articles, is that if we were simply to abolish poindings and warrant sales without humane and effective diligence against movable property, we would push more people into the hands of loan sharks if they were unable to obtain credit from other, more reputable, providers of credit services. The fact that we have involved creditor interests in the working group indicates that we are conscious of that.