The next item of business is stage 3 proceedings on the Bankruptcy and Debt Advice (Scotland) Bill. In dealing with the amendments, members should have the bill as amended at stage 2, SP bill 34A; the marshalled list, SP bill 34AML; the correction slip to the marshalled list, SP bill 34AML (correction); and the groupings, SP bill 34AG.
The division bell will sound and proceedings will be suspended for five minutes for the first division of the afternoon. The period of voting for the first division will be 30 seconds. Thereafter, I will allow a voting period of one minute for the first division after a debate. Members who wish to speak in the debate should press their request-to-speak buttons as soon as possible after I call the group.
Section 2—Financial education for debtor
Group 1 is on financial education for debtor. Amendment 3, in the name of Fergus Ewing, the Minister for Energy, Enterprise and Tourism, is the only amendment in the group.
I begin by declaring that I am a non-practising solicitor member of the Law Society of Scotland and a member of the HI-Scot Credit Union.
Almost all the amendments that the Scottish Government has lodged for stage 3 are in response to arguments put by stakeholders that include the Institute of Chartered Accountants of Scotland, Citizens Advice Scotland, the Law Society of Scotland, StepChange Debt Charity and others, as well as to arguments put by MSPs.
Our proposals in the bill in relation to financial education are groundbreaking. They are a step towards a financial national health service for Scotland. As part of our financial health service, the most financially vulnerable will benefit from education designed to build their financial capability and help prevent repeated debt problems. There has been support throughout the bill process for financial education being an integral part of the system. What we have delivered through the bill provides the platform for further action to build the financial capability of individuals and families across Scotland.
Maximising the opportunity for the financial education of our young people is vital if we are to prevent future generations from experiencing problem debt. Initiatives such as Glasgow City Council’s project to commit £10 to a credit union savings account for every secondary 1 pupil are commendable aspirations that are worthy of consideration and something that we want to discuss with credit unions. The importance of encouraging young people to save and to understand the value of money cannot be overstated.
Amendment 3 is fairly minor. It takes up a suggestion from the Institute of Chartered Accountants of Scotland that a trustee in bankruptcy must advise the debtor within six months of the start of their bankruptcy if they are required to undergo a programme of financial education. Providing clarity early in the process will be helpful for the individual. It will ensure that financial rehabilitation is not delayed and that they can benefit from a programme of learning during their bankruptcy. This small change has come about as a result of listening to those with an interest in the matter. I ask that Parliament support the amendment.
I move amendment 3.
Amendment 3 agreed to.
Section 3—Debtor’s contribution: common financial tool
Group 2 is on common financial tool. Amendment 4, in the name of the minister, is grouped with amendments 5 and 7.
The proposal for a common financial tool has been discussed extensively during the Parliament’s consideration of the bill, and rightly so. One of the key principles of the bill is that those who can pay their debts should do so. The assessment of an individual’s ability to pay must therefore be done in a way that is both consistent and fair. To mandate the use of a common financial tool across the money advice and insolvency sector is a significant step forward and one that has been widely supported both across the sector and by the Economy, Energy and Tourism Committee.
On-going discussions with stakeholders have led us to clarify our intentions in relation to the tool, which members will recall will be the common financial statement operated by the Money Advice Trust. Amendments 4, 5 and 7 make minor adjustments in that light.
Amendment 4 responds to stakeholder queries about whether assets or liabilities would be used in setting how much it is appropriate that debtors generally should pay. The amendment makes it clear that the specific power to prescribe a method for assessing the debtor’s assets, income, liabilities and expenditure is aimed at assessing the particular debtor’s financial circumstances. Assets could still be relevant but, for instance, in assessing the debtor’s income as part of their financial circumstances rather than more widely.
Amendment 5 ensures that the regulations that set out the tool will be able to use the common financial statement while any necessary adjustments are made. Likewise, amendment 7 makes it clear that, in setting a debtor contribution order, the Accountant in Bankruptcy must also use the common financial tool. I believe that the amendments in the group bring the necessary clarity, and I therefore ask the Parliament to support them.
I move amendment 4.
Amendment 4 agreed to.
Amendment 5 moved—[Fergus Ewing] and agreed to.
Section 4—Debtor contribution order
Group 3 contains minor and technical amendments. Amendment 6, in the name of the minister, is grouped with amendments 9, 66 and 74 to 82.
The amendments in group 3 make certain technical corrections and improvements to the bill. I am pleased that they include points that were made by stakeholders such as the Scottish Law Commission and StepChange Debt Charity. The amendments ensure that the legislation will read and have effect accurately. I can speak to any of the individual amendments in copious detail if members so desire, but I do not propose to go through each of the minor points at this stage.
I move amendment 6 and invite members to support amendments 6, 9, 66 and 74 to 82.
Amendment 6 agreed to.
Amendment 7 moved—[Fergus Ewing]—and agreed to.
Group 4 is on length of contribution period in respect of debtor’s income and estate. Amendment 1, in the name of Jenny Marra, is grouped with amendment 2.
Amendment 1 will be familiar to members who have followed the debates as the bill has progressed through Parliament. As a corresponding amendment did at stage 2, amendment 1 seeks to reverse the increase from four years to three years in the practical effects of bankruptcy for Scots, thereby maintaining the status quo that Lloyds Bank has described as an “adequate payment period”.
I do not want to go over old ground, so I simply note that Citizens Advice Scotland’s stage 3 briefing refutes the minister’s assertion at stage 2 that the move will not cause undue hardship. Citizens Advice Scotland has stated that
“increasing the payment contribution period by a further year is very likely to cause hardship. Bankruptcy is for those who are in major need of debt relief, an additional year of payments, administration fees and charges will not help them get that relief.”
As CAS also noted, the proposal is intended to do one thing: it is intended to cover the costs of the Accountant in Bankruptcy which, under the bill’s proposals, will take a great swathe of functions that are currently overseen by our courts.
I assure Ms Marra that the intention is most certainly not to recover the Accountant in Bankruptcy’s costs. I also inform her that in a letter that I have from Lloyds Banking Group, Euan McPherson, who is its head of fraud operations, has said:
“As a result of our discussion and the additional assurance provided that the rule would only be applied where there is a proven ability to make payments over the extended time, I believe the bank should be able to support the provision.”
I thank the minister for that assurance. His quotation is not the one that I have from Lloyds. Perhaps we can check that later.
The point that I was making is that the reason for the move is described in the Government’s policy memorandum for the bill, which says:
“It is considered that the courts are under increasing pressure from civil and criminal business. As a result of this, access to justice may take longer than previously anticipated, with sheriffs spending more time dealing with chambers work than with courtroom business.”
Will Jenny Marra take an intervention?
No, thank you.
Not so long ago, I, as a member of the Justice Committee, and members on the Labour benches, in the chamber, argued strongly against the SNP’s decision to close 10 sheriff courts across Scotland on the ground that doing so would increase pressure on the courts. I cannot help believing that if the Government had had the foresight to take our advice, we would not now be passing on the costs of court closures to some of the most vulnerable and financially excluded people. There is no greater iniquity and I believe that the Government will come to regret this.
There was no great support for the change during consultation. That can be made no clearer than in the Accountant in Bankruptcy’s analysis of the consultation, which clearly states:
“The majority of respondents who responded to this felt that this product was not required.”
Will Jenny Marra take an intervention?
No, thank you.
Furthermore, the Law Society and many others have questioned the measure’s effectiveness. For those reasons I ask members to support amendment 1.
Would you like me to continue with amendment 2 now, Presiding Officer?
Yes—please speak to all the amendments in the group.
Amendment 2 seeks to reinstate automatic discharge from bankruptcy. At stage 2 I moved a similar amendment and at stage 1 I spoke against the bill’s proposals to end automatic discharge. I acknowledge that the minister has moved on the matter at stage 2 and again today to clarify the process of discharge and to make it easier.
However, I want to put on record the advice of the European Commission, which says that
“discharge should be as automatic and as reasonably limited in time as possible.”
I wonder whether scrapping automatic discharge will fulfil those criteria. We have heard from the Institute of Chartered Accountants of Scotland that the move could have serious unintended consequences and I stress again, as I did at stage 2, that the provision will be seen as a hindrance and not a help to getting debtors financially active again. I therefore ask members to support amendment 2.
I move amendment 1.
As this is my first contribution to the debate, I declare my interest as a member of the Law Society of Scotland.
I will speak to Jenny Marra’s amendment 1, which seeks to reduce the contribution period that is proposed in the bill from 48 months to 36. As Jenny Marra said, the committee debated the issue at some length at stage 1, when we prepared our report, and it was debated again when an amendment was lodged at stage 2. On both those occasions I, on behalf of my party, reserved our position on it. However, stage 3 is make your mind up time, so I have made up my mind.
I am minded not to support Jenny Marra’s amendment 1—with one caveat, which I will come to in a moment—for two reasons. First, the 48-month period already exists in law in relation to protected trust deeds, and to me it makes sense to have similar provisions in relation to bankruptcy. Secondly, and perhaps more significantly, as a matter of principle debtors should aim to repay as much of the money that is owed to their creditors as they can. To extend the contribution period to 48 months would allow more money to be repaid. I am not convinced that the 12-month extension will cause undue hardship; indeed I suspect that the measure will apply to relatively few cases.
As for the caveat that I wanted to highlight, I note that in its briefing for the debate, the Law Society of Scotland, while not opposing the increase to 48 months, asks for the move “to be closely monitored” and says that
“if problems arise the Scottish Government should act swiftly in order to rectify them.”
The suggestion is eminently sensible, and if the minister is able to give me an undertaking that he will take such action if required, I will be very happy to support the Government’s position and oppose amendment 1.
14:45
I speak in support of amendments 1 and 2. I supported similar amendments at stage 2 and still believe that we should not increase the contribution period.
No one is suggesting that people who can afford to pay their debts should not do so, but as I listened to the evidence, it became clear to me that a very broad spectrum of organisations are against the move to four years. We heard from money advice non-governmental organisations, professional bodies such as R3—the Association of Business Recovery Professionals—and Carrington Dean, and creditors such as Lloyds Banking Group and the Consumer Finance Association, all of which are against the increase. In other words, creditors and debtors oppose the measure—although I acknowledge that the credit unions welcomed it.
David Hill, of ICAS, said:
“I believe that the longer a payment period is, the more likely it is that breakage will come. That is not to say that a payment period of four years will not work, but the longer the period is, the more people’s circumstances change and the more likely it becomes that a breakage will happen.”—[Official Report, Economy, Energy and Tourism Committee, 2 October 2013; c 3370.]
As I have noted in previous conversations on the matter and about the requirement for certainty, which Alison Johnstone has just underpinned, the policy memorandum makes it quite clear that the 48-month period
“can be varied should the debtor’s circumstances change, or in certain circumstances”,
as has been pointed out, it can
“result in a shorter or longer repayment period.”
Does not the member agree with that?
I am minded to listen to the evidence of the many experts who came before the committee and who quite clearly stated that there will be a greater chance of breakage as a result of the increase. Why should we put ourselves in the position of having to deal with such breakages?
Moreover, the Law Society of Scotland
“considers that there is insufficient evidence that a debtor contribution order for four years will improve returns to creditors.”
Surely that is one of the major points in this debate.
The committee received correspondence from a practitioner with more than a decade’s experience in debt advice and personal insolvency, who said:
“If Section Four is implemented as proposed in the Bill, Scotland will have the longest formal bankruptcy period in the UK.”
He also said that, in his 10 years of experience of working in the industry,
“it is usually only the lower income debtors who cannot meet creditor criteria in Protected Trust Deeds who choose sequestration.
To extend the payment period would, therefore, mean it will be the lowest income, poorest Scottish debtors who will pay more. More ... than is expected of them in other parts of the UK.”
The minister has previously stated—Murdo Fraser has also just made the point—that the new debt arrangement scheme, which the committee supports, includes a 48-month period. However, the regulations were introduced before we had the chance to take full evidence on the bill, during which the issue emerged. As we have the opportunity now to get the details right in the primary legislation, we should do so.
I support amendments 1 and 2 in the name of Jenny Marra.
On amendment 1, I believe that the proposed increase was not contained in the original consultation and that, when it was subsequently consulted on, only a minority of respondents supported the Government’s current position. The minister has said that the reason for the move is not that it will cover costs, so I am interested to hear what he has to say in order to find out what the reason is. Murdo Fraser tried to give a reason, but perhaps the minister will help me out now.
Does Mr Chisholm accept that the consultation sought views on the length of a contribution period in a payment product and that a clear majority of respondents, including almost all the credit unions that responded, supported a period of longer than the four-year period that we are now fixing? In fact, it was suggested that the period be five years.
The credit unions have particular reasons for their position. I will look further into the matter, but let me put it this way—the measure was certainly opposed by a very large number of organisations that I would normally pay close attention to. I await the reason; no doubt the minister will provide one in his summing up.
Murdo Fraser attempted to justify the change on the ground that four years is the period that applies to protected trust deeds, but an entirely different category of arrangement applies to them. Jenny Marra gave her main reasons for opposing the change and referred to Citizens Advice Scotland’s briefing, which is an organisation to which I and, I hope, others always pay close attention.
Alison Johnstone mentioned CAS, too. Many people will have to pay more and, as she emphasised, it will be the poorest people who will find it harder to get back on their feet, there will be new opportunities to miss contributions and the bill may result in a growing number of debtors who cannot maintain their contributions, which will, in general, increase hardship.
As Alison Johnstone also said, the bill includes the longest formal bankruptcy period in the UK. My understanding is that that period may well be the longest in the European Union, because three years is the norm throughout the EU. The Law Society of Scotland proposes that the timescale be monitored. If amendment 1 is defeated, that monitoring can and should be asked for. No doubt the issue will come up in the final debate.
Murdo Fraser discussed amendment 1 but not amendment 2, which intrigued me because it was the Economy, Energy and Tourism Committee that was not persuaded about the ending of automatic discharge. His committee said that the change would have unintended consequences and it called on the Scottish Government
“to clarify the circumstances in which a debtor would be assessed as not having ‘co-operated with the trustee’”.
That, too, is a concern of Citizens Advice Scotland, which says that the criterion that the debtor must co-operate is too broad because it does not say what “co-operate” means. Perhaps that will also be clarified by the minister. However, it is of concern that because such matters are not in the bill the policy will be open to a great deal of discretion.
The bill will amend the Bankruptcy (Scotland) Act 1985, which was extremely welcomed when it was introduced. It was—I say with due respect to Murdo Fraser—perhaps one of the few pieces of legislation in the 1980s that was extremely welcomed. Indeed, the Law Society of Scotland said:
“when the Bankruptcy (Scotland) Act 1985 said that people could have automatic discharge ... it was seen as a huge step forward that would stop people ending up in bankruptcy in perpetuity for various reasons”.—[Official Report, Economy, Energy and Tourism Committee, 30 October 2013; c 3489.]
I hope that that gives the minister and his colleagues behind him pause for thought, because when they reflect on this issue, they will realise that they are well to the right of the Conservative Party.
I will deal first with the arguments relating to amendment 2. Perhaps Ms Marra does not appreciate that, in lodging amendment 2, a section that has been included in the bill as a result of stakeholder feedback—that stakeholder was ICAS—would be amended. Therefore, we do not believe that amendment 2 should be supported.
The main issues undoubtedly surround amendment 1 and the length of the contribution period, so I will address that matter. I am grateful for all members’ speeches, to which I have listened carefully, as I listened to the similar arguments at stages 1 and 2.
Let me make it absolutely clear that only people who can afford to pay a contribution to the cost of their bankruptcy will pay. Only one third of people who are bankrupt in Scotland pay such contributions; the remaining two thirds make no contribution payments whatever. We do not expect that proportion to change. The fundamental principle that is recognised in the bill and which this Government supports is that those who are able to pay from their income should contribute, but those who cannot should not. The bill seeks to introduce and apply that principle more fairly and more consistently than has been the case, for reasons that it is incumbent on me to explain.
Before I do so, I point out that those whose sole income comes from benefits would pay no contribution. That should be clearly stated, because the matter has not emerged in the debate. In assessing the amount of contributions, at least three different methods of calculation exist. The first is for people who enter the debt arrangement scheme, the second is for people who enter protected trust deeds and the third is for people who enter sequestration or bankruptcy. There are currently three different systems—three different mechanisms—but there is no consistency. How is that fair?
Setting aside whatever our political perspectives might be, surely we can all agree that, if we have a system in which those who can pay should and do pay, they should pay in accordance with a consistently set and fair formula that is the same for everybody and does not vary in accordance with what form of statutory solution they seek, whether it is debt relief or debt management. The common financial tool will introduce that consistency.
Incidentally, with the common financial tool, we will encourage in the permitted deductions from income the inclusion of a measure of savings. That has not hitherto automatically been the case. We will come back to Parliament on how the common financial tool and the common financial statements will be calculated. I expect that we will debate those things in the Economy, Energy and Tourism Committee, but the common financial tool will bring consistency and fairness across the board for the very first time, which will end real unfairness to a great number of people who either pay too much or too little. I would have thought that all members could subscribe to that.
Assertions have been made that I cannot see as being—with respect to those who have made and repeated them—correct. It is therefore reasonable for me to rebut them.
First, I think that Malcolm Chisholm, who I know has a long history of taking a very compassionate approach to his politics—that is not in doubt—claimed that we would have the longest period in the UK in which debtors pay a contribution. That is not correct. In England, the individual voluntary arrangements insolvency measure normally involves a payment period of five years. We are not proposing five years, although most credit unions wanted that; we are proposing four years. In England, the period is five years, so with all due respect I am afraid that it appears to me that that needs to be corrected.
Secondly, the payment period for protected trust deeds is to last for four years. We debated that matter in committee, when it was agreed unanimously. If Labour Party members were prepared to accept in committee that four years is a reasonable length of time during which a contribution order should be paid for protected trust deeds, I cannot for the life of me understand how one could construct an argument that it is okay to have four years for protected trust deeds but somehow it is iniquitous, unfair, shocking and causative of undue hardship if the period were more than four years and not three years, as is now being argued. The Scottish Government consulted on those matters, and credit unions made their views very clear.
There are other important arguments. People who enter into debt arrangement schemes choose to pay their debts almost in full. They want to pay their debts, and we should encourage that. Most of us pay our debts, although I am quite sure that there are many people in the country and in the gallery who struggle to pay their debts in these difficult times. They pay their debts, mortgages and rent not for three or four years, but for 20, 25, 30, 40 years or their whole lifetime. We must recognise that not only those who have to face the difficulty of sequestration or protected trust deeds are struggling with debt; the generality of the population are, so we must have a balanced solution. Those who get into difficulty with debt but who wish nonetheless to pay their debt off in full and so enter the debt arrangement scheme pay for an average of six and a half years, which is twice the length of time the Labour Party says would be causative of undue hardship.
I do not think that CAS said that our measures would cause undue hardship, which Jenny Marra imputed to it. I think that it said “hardship”, but perhaps that is a minor criticism. If paying a contribution for four years is causative of hardship, surely those who are paying off their debts under DAS and are paying for six and a half years are in hardship. The argument does not quite seem to be consistent.
15:00In response to Murdo Fraser’s request in relation to the Law Society’s briefing to MSPs, I am happy to confirm that the Accountant in Bankruptcy will closely monitor the extension of the contribution period to 48 months as it proceeds. I assure Mr Fraser that we will, even before we get to that stage, bring to the committee in some shape or form the opportunity to discuss the common financial tool. Regardless of whether we need to do that, I think that we should do it, so I am happy to undertake to do that.
I am slightly surprised that members who have argued against the bill have not mentioned the provisions of the supplementary financial memorandum, paragraphs 36 to 42 of which deal with breakage, to which Alison Johnstone referred. The supplementary financial memorandum calculates a range of estimated likely gross aggregate additional contributions, and none of that has been challenged by any member.
We accept that it is extremely important to allow debtors relief under the bankruptcy and protected trust deed option, but we must provide fairness to creditors, too; they must get a return on their money, if that is reasonable. That includes credit unions. We do not want them to suffer undue bad debt because debtors who can pay do not pay for a period.
We must strike a balance between the creditor and the debtor. We believe that the measures that we have proposed are fair and that, once they are introduced, they will pave the way—for the first time ever in Scotland—for a consistent system across the board. That, in itself, will be worth our while and will be a step forward.
I invite Jenny Marra to wind up and to say whether she intends to press or to withdraw amendment 1.
I will make just a couple of brief remarks. Malcolm Chisholm summed up our position very well.
On the last two points that the minister made, many of those who gave evidence to the committee oppose the extension of the contribution period to four years. The minister cited the credit unions, but he must admit that many other bodies that gave evidence are against the extension to four years, including Citizens Advice Scotland, which both of us have quoted.
The minister mentioned the period for bankruptcy in England, but he was not comparing like with like. He needs to be honest with Parliament about that. The bankruptcy period in England is not four years. He will make Scotland have the longest bankruptcy period in the whole of the UK, which will prevent people from getting back into the economy and being economically active again.
Amendments 1 and 2, which seek to stop the extension of the bankruptcy period to four years and to reinstate automatic discharge, would improve the bill. I press amendment 1.
The question is, that amendment 1 be agreed to. Are we agreed?
Members: No.
There will be a division.
As this is the first division at stage 3, I suspend the meeting for five minutes, after which there will be a 30-second division.
15:03 Meeting suspended.
We move to the division on amendment 1.
For
Baker, Claire (Mid Scotland and Fife) (Lab)
Baker, Richard (North East Scotland) (Lab)
Baxter, Jayne (Mid Scotland and Fife) (Lab)
Bibby, Neil (West Scotland) (Lab)
Chisholm, Malcolm (Edinburgh Northern and Leith) (Lab)
Dugdale, Kezia (Lothian) (Lab)
Ferguson, Patricia (Glasgow Maryhill and Springburn) (Lab)
Findlay, Neil (Lothian) (Lab)
Finnie, John (Highlands and Islands) (Ind)
Grant, Rhoda (Highlands and Islands) (Lab)
Gray, Iain (East Lothian) (Lab)
Harvie, Patrick (Glasgow) (Green)
Henry, Hugh (Renfrewshire South) (Lab)
Hilton, Cara (Dunfermline) (Lab)
Hume, Jim (South Scotland) (LD)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Rutherglen) (Lab)
Macdonald, Lewis (North East Scotland) (Lab)
Macintosh, Ken (Eastwood) (Lab)
Malik, Hanzala (Glasgow) (Lab)
Marra, Jenny (North East Scotland) (Lab)
Martin, Paul (Glasgow Provan) (Lab)
McCulloch, Margaret (Central Scotland) (Lab)
McInnes, Alison (North East Scotland) (LD)
McMahon, Michael (Uddingston and Bellshill) (Lab)
McMahon, Siobhan (Central Scotland) (Lab)
McNeil, Duncan (Greenock and Inverclyde) (Lab)
McTaggart, Anne (Glasgow) (Lab)
Murray, Elaine (Dumfriesshire) (Lab)
Pearson, Graeme (South Scotland) (Lab)
Pentland, John (Motherwell and Wishaw) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Simpson, Dr Richard (Mid Scotland and Fife) (Lab)
Smith, Drew (Glasgow) (Lab)
Stewart, David (Highlands and Islands) (Lab)
Against
Adam, George (Paisley) (SNP)
Adamson, Clare (Central Scotland) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Allard, Christian (North East Scotland) (SNP)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Biagi, Marco (Edinburgh Central) (SNP)
Brodie, Chic (South Scotland) (SNP)
Brown, Gavin (Lothian) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Buchanan, Cameron (Lothian) (Con)
Burgess, Margaret (Cunninghame South) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Campbell, Roderick (North East Fife) (SNP)
Carlaw, Jackson (West Scotland) (Con)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Constance, Angela (Almond Valley) (SNP)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Dey, Graeme (Angus South) (SNP)
Don, Nigel (Angus North and Mearns) (SNP)
Doris, Bob (Glasgow) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Eadie, Jim (Edinburgh Southern) (SNP)
Ewing, Annabelle (Mid Scotland and Fife) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fergusson, Alex (Galloway and West Dumfries) (Con)
FitzPatrick, Joe (Dundee City West) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Gibson, Kenneth (Cunninghame North) (SNP)
Gibson, Rob (Caithness, Sutherland and Ross) (SNP)
Goldie, Annabel (West Scotland) (Con)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Ingram, Adam (Carrick, Cumnock and Doon Valley) (SNP)
Johnstone, Alex (North East Scotland) (Con)
Keir, Colin (Edinburgh Western) (SNP)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Lochhead, Richard (Moray) (SNP)
Lyle, Richard (Central Scotland) (SNP)
MacAskill, Kenny (Edinburgh Eastern) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacKenzie, Mike (Highlands and Islands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Maxwell, Stewart (West Scotland) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McGrigor, Jamie (Highlands and Islands) (Con)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McLeod, Aileen (South Scotland) (SNP)
McLeod, Fiona (Strathkelvin and Bearsden) (SNP)
McMillan, Stuart (West Scotland) (SNP)
Milne, Nanette (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Neil, Alex (Airdrie and Shotts) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Robertson, Dennis (Aberdeenshire West) (SNP)
Russell, Michael (Argyll and Bute) (SNP)
Scanlon, Mary (Highlands and Islands) (Con)
Scott, John (Ayr) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Swinney, John (Perthshire North) (SNP)
Thompson, Dave (Skye, Lochaber and Badenoch) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Wilson, John (Central Scotland) (SNP)
Yousaf, Humza (Glasgow) (SNP)
The result of the division is: For 35, Against 76, Abstentions 0.
Amendment 1 disagreed to.
Section 8—Moratorium on diligence
Group 5 is on a moratorium on diligence. Amendment 8, in the name of the minister, is the only amendment in the group. I call the minister to speak to and move the amendment. [Interruption.] I ask for conversations across the chamber to cease, please.
One of the benefits of the bill is that it will deliver, for the first time, a six-week moratorium on diligence across all statutory debt solutions in Scotland. The moratorium will give the debtor a reasonable opportunity to take advice.
Amendment 8 provides that the moratorium protects against diligence against earnings that has not yet begun, but not against that which is already in force. Generally, the moratorium will suspend the execution of continuing diligence, but it is not the Scottish Government’s intention that, for example, current maintenance arrestments that are already in place, which might provide important support for the recipient—in respect of children, for example—should be interrupted just to give the debtor space to decide what to do. I stress that that is distinct from the effect of any subsequent sequestration on those diligences, which is unaffected by the bill.
The amendment guards against unintended consequences and makes it clearer—to the debtor who is protected and the creditor who is prevented from beginning new diligence—how the moratorium will operate in practice and where the cut-off is.
I move amendment 8.
Amendment 8 agreed to.
Section 9—Statement of undertakings
Amendment 9 moved—[Fergus Ewing]—and agreed to.
Section 12—Concurrent proceedings for sequestration: recall
Group 6 is on recording certain documents in the register of inhibitions. Amendment 10, in the name of the minister, is grouped with amendments 65, 69 and 73.
Amendments 10, 65, 69 and 73 are minor but important amendments. They could go in regulations, but we propose to include them here to fit the legislative scheme of the act.
Amendments 10 and 73 relate to the cases where bankruptcy has been recalled. They provide that, on the granting of a recall, a certified copy of the decision is sent to the keeper of the registers of Scotland to be recorded on the register of inhibitions. That ensures that the inhibitive effect of the sequestration of the debtor is lifted, restoring them, so far as practicable, to the position prior to their sequestration.
Amendment 69 deals with matters associated with the bill’s provisions for reappointment of a trustee, where assets are discovered at a later date. It provides that an inhibition can be imposed anew or renewed from the reappointment of the trustee, thereby safeguarding assets that vest in the trustee for the benefit of all creditors.
Finally, amendment 65 provides for notification to the keeper where a matter in the register is affected by an order curing a defect in procedure.
I move amendment 10.
Amendment 10 agreed to.
Section 13—Submission of claims to trustee
Group 7 is on submission of claims to trustee. Amendment 11, in the name of the minister, is the only amendment in the group.
I am grateful to the Institute of Chartered Accountants of Scotland for suggesting this improvement.
Amendment 11 tightens the requirement on creditors to submit their claims for the amount that they are owed in a bankruptcy to the trustee in 120 days or less. Claims need to be submitted so that the amount that the debtor owes is clear and the rest of the process can begin. As it stands, the bill requires creditors to submit their claims by that deadline or provide a reasonable explanation why they could not. Instead, ICAS has suggested that creditors should be required to justify late submission on the basis of exceptional circumstances, as a stricter test. I think that that is useful, in that it will help with the smooth running of the process.
I move amendment 11.
Amendment 11 agreed to.
Section 15—Vesting of estate after sequestration
Amendment 2 moved—[Jenny Marra].
The question is, that amendment 2 be agreed to. Are we agreed?
Members: No.
There will be a one-minute division.
For
Baker, Claire (Mid Scotland and Fife) (Lab)
Baker, Richard (North East Scotland) (Lab)
Baxter, Jayne (Mid Scotland and Fife) (Lab)
Bibby, Neil (West Scotland) (Lab)
Chisholm, Malcolm (Edinburgh Northern and Leith) (Lab)
Dugdale, Kezia (Lothian) (Lab)
Ferguson, Patricia (Glasgow Maryhill and Springburn) (Lab)
Findlay, Neil (Lothian) (Lab)
Finnie, John (Highlands and Islands) (Ind)
Grant, Rhoda (Highlands and Islands) (Lab)
Gray, Iain (East Lothian) (Lab)
Harvie, Patrick (Glasgow) (Green)
Henry, Hugh (Renfrewshire South) (Lab)
Hilton, Cara (Dunfermline) (Lab)
Hume, Jim (South Scotland) (LD)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Rutherglen) (Lab)
Macdonald, Lewis (North East Scotland) (Lab)
Macintosh, Ken (Eastwood) (Lab)
Malik, Hanzala (Glasgow) (Lab)
Marra, Jenny (North East Scotland) (Lab)
Martin, Paul (Glasgow Provan) (Lab)
McArthur, Liam (Orkney Islands) (LD)
McCulloch, Margaret (Central Scotland) (Lab)
McInnes, Alison (North East Scotland) (LD)
McMahon, Michael (Uddingston and Bellshill) (Lab)
McMahon, Siobhan (Central Scotland) (Lab)
McNeil, Duncan (Greenock and Inverclyde) (Lab)
McTaggart, Anne (Glasgow) (Lab)
Murray, Elaine (Dumfriesshire) (Lab)
Pearson, Graeme (South Scotland) (Lab)
Pentland, John (Motherwell and Wishaw) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Simpson, Dr Richard (Mid Scotland and Fife) (Lab)
Smith, Drew (Glasgow) (Lab)
Stewart, David (Highlands and Islands) (Lab)
Against
Adam, George (Paisley) (SNP)
Adamson, Clare (Central Scotland) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Allard, Christian (North East Scotland) (SNP)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Biagi, Marco (Edinburgh Central) (SNP)
Brown, Gavin (Lothian) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Burgess, Margaret (Cunninghame South) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Campbell, Roderick (North East Fife) (SNP)
Carlaw, Jackson (West Scotland) (Con)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Constance, Angela (Almond Valley) (SNP)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Dey, Graeme (Angus South) (SNP)
Don, Nigel (Angus North and Mearns) (SNP)
Doris, Bob (Glasgow) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Eadie, Jim (Edinburgh Southern) (SNP)
Ewing, Annabelle (Mid Scotland and Fife) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fergusson, Alex (Galloway and West Dumfries) (Con)
FitzPatrick, Joe (Dundee City West) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Gibson, Kenneth (Cunninghame North) (SNP)
Gibson, Rob (Caithness, Sutherland and Ross) (SNP)
Goldie, Annabel (West Scotland) (Con)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Ingram, Adam (Carrick, Cumnock and Doon Valley) (SNP)
Johnstone, Alex (North East Scotland) (Con)
Keir, Colin (Edinburgh Western) (SNP)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Lochhead, Richard (Moray) (SNP)
Lyle, Richard (Central Scotland) (SNP)
MacAskill, Kenny (Edinburgh Eastern) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacKenzie, Mike (Highlands and Islands) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Maxwell, Stewart (West Scotland) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McGrigor, Jamie (Highlands and Islands) (Con)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McLeod, Aileen (South Scotland) (SNP)
McLeod, Fiona (Strathkelvin and Bearsden) (SNP)
McMillan, Stuart (West Scotland) (SNP)
Milne, Nanette (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Neil, Alex (Airdrie and Shotts) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Robertson, Dennis (Aberdeenshire West) (SNP)
Russell, Michael (Argyll and Bute) (SNP)
Scanlon, Mary (Highlands and Islands) (Con)
Scott, John (Ayr) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Swinney, John (Perthshire North) (SNP)
Thompson, Dave (Skye, Lochaber and Badenoch) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Wilson, John (Central Scotland) (SNP)
Yousaf, Humza (Glasgow) (SNP)
The result of the division is For 36, Against 74, Abstentions 0.
Amendment 2 disagreed to.
Section 16—Discharge of debtor
Group 8 is on discharge of debtor. Amendment 12, in the name of the minister, is grouped with amendments 13, 14 and 70.
This group of amendments deals, in different ways, with the discharge of the debtor. Amendments 12, 13 and 14 make changes to the discharge process in full administration bankruptcy. Again, I am grateful to the stakeholders who have provided feedback and who have helped to shape the changes.
Amendment 12 extends the deadline for making representations in relation to discharge from 14 to 28 days. [Interruption.] That applies to all, but it will be of particular benefit to the debtor in obtaining the benefit of advice before any appeal. I am grateful to Citizens Advice Scotland for suggesting the improvement.
Amendments 13 and 14 slightly alter the process by which a replacement trustee is appointed when a debtor cannot be traced by moving the task of notifying creditors about the appointment of a replacement trustee to the Accountant in Bankruptcy. That sensible, practical step, which was suggested by ICAS, also reflects the Accountant in Bankruptcy’s continuing role.
Amendment 70 deals with the debtor’s discharge from the minimal asset process. We know that the MAP will deliver accessible debt relief to those who need it most and that debtors will be charged less than half of what they are currently charged. They are currently charged £200 and, under the MAP, the charge will be reduced to £100. In order for the MAP to deliver that saving, we need it to be a modern, streamlined system. Amendment 70 helps with that streamlining, as it removes some of the bureaucracy that would otherwise have to be undertaken at the point at which the debtor receives their discharge. That bureaucracy is not necessary because the MAP results in automatic discharge and will be a more automated process for cases in which there are no assets.
I move amendment 12 and invite members to support all the amendments in the group.
I remind members to ensure that electronic devices are switched off in the chamber. I also invite members who wish to have conversations to have them outwith the chamber.
Amendment 12 agreed to.
Section 18—Deferral of discharge where debtor cannot be traced
Amendments 13 and 14 moved—[Fergus Ewing]—and agreed to.
Section 20—Assets discovered after trustee discharge: appointment of trustee
Group 9 is on assets discovered after discharge of trustee. Amendment 15, in the name of the minister, is grouped with amendments 16 to 19.
Amendments 15 to 19 deal with circumstances in which the trustee becomes aware of assets after the debtor has been given their discharge. There have been quite a number of cases in which that sort of thing has happened recently as a result of payment protection insurance payouts.
Amendments 15 and 17 allow that, if the asset is worth less than £1,000, no further action needs to be taken by the former trustee. There would be no point in pursuing a relatively small sum if the cost of recovering the asset was likely to be greater than the value of the asset itself.
Amendments 18 and 19 place certain requirements on the former trustee. By this stage, the trustee, as well as the debtor, is likely to have received their discharge. The former trustee will therefore have the choice either to seek reappointment and realise the value of the assets themselves or to leave it to the Accountant in Bankruptcy to appoint a new trustee.
Amendments 18 and 19 specify that, if the trustee decides not to seek reappointment, he or she must provide the AIB with certain information including the estimated value of the newly discovered asset and some of its history, why it should be included as part of the debtor’s estate and why it was not recovered in the first place.
The amendments in the group represent sensible improvements to the process and were all lodged following meetings with ICAS, which is the recognised body for insolvency practitioners. I invite members to support them.
I move amendment 15.
Amendment 15 agreed to.
Amendments 16 to 19 moved—[Fergus Ewing]—and agreed to.
Section 25—Recall of sequestration by sheriff
Group 10 is on recall of sequestration. Amendment 20, in the name of the minister, is grouped with amendments 21 to 42 and 71.
Concern was expressed about our proposals for what is referred to in the bill as “interim recall”. In its written evidence to the committee, the Law Society of Scotland said:
“interim recall is ... flawed. We consider that there can be no middle ground—either a debtor is sequestrated or he is not.”
As I said in response to Hanzala Malik’s amendments at stage 2, there are practical operational matters to consider. My officials and I have had helpful discussions with the Law Society since then—indeed, I spoke to Michael Clancy just last week—and we are happy to propose amendments that deliver on my commitment at stage 2 to remove the concept of interim recall from the bill.
I have a great deal more in my notes but, in the absence of clamant demand from members to hear it, I invite members to support the amendments in the group.
I move amendment 20.
Amendment 20 agreed to.
Amendment 21 moved—[Fergus Ewing]—and agreed to.
Section 26—Recall of sequestration by Accountant in Bankruptcy
Amendments 22 to 42 moved—[Fergus Ewing]—and agreed to.
Section 28—Replacement of trustee acting in more than one sequestration
Group 11 is on replacement of trustee and removal of trustees and commissioners. Amendment 43, in the name of the minister, is grouped with amendments 44 to 53.
Amendments 43 and 44 will amend section 28 to enable, with more ease, a block transfer of cases from one trustee to another. The bill currently provides for such a block transfer, but only in line with the existing provision in the 1985 act for where a trustee is deceased or ceases to be qualified to act as a trustee.
ICAS pointed out that the usual circumstances that would give rise to the need for a block transfer would be when a trustee has changed firms and gone to work for a new firm of insolvency practitioners, and is unable to take their cases with them. Amendment 43 will therefore widen the circumstances in which a block transfer is allowed to include cases in which there is a conflict of interest or a change in the trustee’s personal circumstances that prevents them from carrying out their duties.
Amendment 45 provides that a block transfer may be carried out either on the application of any interested party or at the AIB’s own accord. In either case, the amendment requires that interested parties should be notified and given the right to make representations.
Amendment 47 will place a duty on the new trustee, where the new trustee is not the Accountant in Bankruptcy, to notify all creditors in the cases to which they have been appointed, so that creditors are kept aware of and up to date on developments.
This group of amendments also deals with the removal of trustees and commissioners. Amendments 50 to 52 will allow debtors, as well as commissioners and creditors, to apply for a declaration that the office of trustee is vacant on the basis that the existing trustee is unable to act or should not, on the basis of conduct, continue to act. That is a helpful improvement, which was suggested by the Law Society.
Likewise, amendment 53 is not a major amendment but one suggested by a stakeholder, this time ICAS, and one which we think improves the bill. It provides a new power for the sheriff to remove from office a commissioner in the circumstances where the commissioner is no longer acting in the interests of the efficient conduct of the sequestration. The current practice of calling a creditors meeting might not always meet the needs of the relevant parties, and it is expected that amendment 53 will provide for a more satisfactory process in some circumstances.
I move amendment 43.
Amendment 43 agreed to.
Amendments 44 to 49 moved—[Fergus Ewing]—and agreed to.
Section 29—Removal of trustee and trustee not acting
Amendments 50 to 52 moved—[Fergus Ewing]—and agreed to.
After section 29
Amendment 53 moved—[Fergus Ewing]—and agreed to.
Section 31—Bankruptcy restrictions order
Group 12 is on bankruptcy restrictions orders. Amendment 54, in the name of the minister, is grouped with amendments 55 to 64.
A bankruptcy restriction order—BRO—is a mechanism for ensuring that people who abuse the bankruptcy process, for example by failing to provide information on assets or disposing of assets, have a restriction on their activities after their bankruptcy has ended. It is currently a sheriff who decides on BRO applications made by the Accountant in Bankruptcy. The bill has proposed that decisions on BROs, among other things, should pass from the sheriff court to the AIB. At stages 1 and 2, I listened to representations from stakeholders, most recently in a meeting I had with the Sheriffs Association, which has concerns about the proposals for BROs.
The law currently allows BROs to be made for between two and 15 years. It has been highlighted to me that, when a BRO is required for five years, it generally deals with cases of a more serious or complex nature that have a significant impact on the life of the individual. As such, we have reconsidered that more serious cases of this nature would benefit from a judicial view. I am pleased therefore to bring forward amendments 54 to 64, which provide that the AIB will have responsibility for making BROs of between two and five years but that the sheriff will retain responsibility for BROs of between five and 15 years.
Provision of fair and just process remains central to our proposals. As an officer of the court, the AIB is well placed to make decisions in relation to BROs. The staff of the AIB have been preparing applications for BROs for a number of years now. They do that in a rigorous and careful fashion, which is evidenced by the fact that every single application to a sheriff has been approved.
It is important that there is a right of appeal to the sheriff, and the bill retains that protection for all cases. Any BRO will be challengeable at any time before its expiry.
I believe that the amendments provide a better balance. They ensure that the AIB can deal efficiently with BROs in more straightforward cases, minimising the burden on the court. More complex cases will benefit from scrutiny by the court. The right of challenge will exist for the duration of any BRO.
I hope that Parliament will be supportive of these amendments, which address the concerns of valued stakeholders.
I move amendment 54.
Amendment 54 agreed to.
Amendments 55 to 64 moved—[Fergus Ewing]—and agreed to.
Section 33—Power to cure defects in procedure
Amendment 65 moved—[Fergus Ewing]—and agreed to.
Section 40—Review of decision about discharge of trustee
Amendment 66 moved—[Fergus Ewing]—and agreed to.
After section 40
Group 13 is on appeals against review decisions of the Accountant in Bankruptcy. Amendment 67, in the name of the minister, is the only amendment in the group.
15:30
Amendment 67 is a lengthy but minor amendment that clarifies that appeal to the sheriff from a review carried out by the AIB is a full rehearing of the matter. The new power of review by AIB is designed to ensure that there is an opportunity for mistakes to be corrected and for earlier decisions to be challenged without the need to go to court, so that people have access to justice and decision making at the right level.
That said, the right to appeal those decisions in court is also a very important aspect of the bill. The bill was consistent with existing provisions of the Bankruptcy (Scotland) Act 1985, but amendment 67—which responds to points made by the Sheriffs Association—puts beyond doubt the position already in the bill that such an appeal could be on a matter of fact, a point of law or the merits of the case. It does not affect any other avenue of court review under the 1985 act. I invite members to support the amendment.
I move amendment 67.
Amendment 67 agreed to.
Before section 41
That brings us to group 14, which is on representation in the sheriff court. Amendment 68, in the name of the minister, is grouped with amendment 72.
Amendments 68 and 72 provide for parties to be represented by persons other than solicitors in some cases in the sheriff court.
Amendment 68 ensures that a person authorised by the AIB can conduct civil proceedings in the sheriff court in relation to the accountant’s functions. The administration of bankruptcy cases requires the accountant to carry out functions that range from administrative to quasi-judicial. The accountant is an officer of court for that purpose. It follows that the AIB’s staff or associated agents should equally be able to carry out functions across the same spectrum, including representation in court.
Amendment 72 ensures that the current arrangements for the sheriff to allow lay representation, for instance by a citizens advice bureau, in relation to the award of sequestration can be replicated for discharge appeals under the bill.
In due course, wider powers in the Courts Reform (Scotland) Bill will replace those powers of the courts to allow lay representation. I ask members to support the amendments.
I move amendment 68.
Amendment 68 agreed to.
Section 44—Effect of sequestration: renewal of period of inhibition etc
Amendment 69 moved—[Fergus Ewing]—and agreed to.
Schedule 1—Schedule A1 to the 1985 Act
Amendment 70 moved—[Fergus Ewing]—and agreed to.
Schedule 2—Information to be included in the sederunt book
Amendment 71 moved—[Fergus Ewing]—and agreed to.
Schedule 3—Minor and consequential amendments
Amendments 72 to 76 moved—[Fergus Ewing]—and agreed to.
Schedule 4—Repeals
Amendments 77 to 82 moved—[Fergus Ewing]—and agreed to.
That ends consideration of amendments. I will allow members a few moments to reorganise themselves for the debate on the bill.
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