Chamber and committees

Yes, I am happy to confirm that we are considering the system that is provided for in the regulations in England, which is why I accept that a fully public register might not be the answer. However, it would be better for the bill not to restrict the options that are available for the recording of, and access to, information relating to a mental health moratorium, so that we avoid any unintended consequences of restricting what we can do in the regulations that would be consistent with addressing the concerns that the committee has expressed.

I thank members for their amendments in this group.

The amendments would amend the Debtors (Scotland) Act 1987, affecting the powers that allow creditors to obtain repayment of debts by arresting earnings from an employer or attaching funds deposited in a bank account. They are all intended to place some limitations on the use of those powers to protect debtors who are struggling to pay their debts. I ask the committee not to support the amendments at this stage, and I will explain my reasons for doing so. However, I hope to work with members and others to identify a way forward to deliver at least some of the intent of the amendments before stage 3.

I agree, in principle, that diligence needs to include sufficient protections for debtors from undue hardship. Those matters need careful consideration to ensure a balance between the interests of debtors and creditors and the impact on the employers and banks that are also affected by those changes of their application in practice.

I do not believe that the changes that the amendments propose and their consequences have been sufficiently considered. As we have heard, amendment 12 would increase the monetary threshold at which an earnings arrestment can take effect. When a person earns less than £1,000 per month, amendment 12 would remove the ability to recover the debt through an earnings arrestment altogether; for those people earning above the threshold, it would reduce the amount that a creditor can recover each pay period to repay the debt. That concern has been raised on several occasions, and I appreciate that the committee included a recommendation in its stage 1 report that the Scottish Government consider such a change. I reassure the committee that I have been exploring the issue and gathering information to allow me to assess the potential impact that such a change would have.

Ministers already have the power to change the earnings arrestment figure through negative procedure regulations, and that has been the method considered appropriate for the figure to be updated. The Scottish Government has reviewed the earnings arrestment tables in schedule 2 of the 1987 act every three years, with the exception of last year, when we brought forward the review, as we recognised the pressures that the cost of living crisis and high inflation were putting on families. That approach has sought to maintain the correct balance between protecting both those people who are in debt and subject to an earnings arrestment and the creditors seeking to recover the debt.

More than 90 per cent of earnings arrestments are served by local authorities seeking to recover unpaid council tax. Those local authorities have found diligence to be the most effective means of recovering debt. I have heard concerns from COSLA—I understand that it has written to the committee to outline them—about changes to the current system of earnings arrestment and the potential impact that those changes would have on the councils’ ability to deliver services to their communities. Local authorities are clear that they use earnings arrestment as a last resort when someone has refused to engage with them over the debt.

The Institute of Revenues Rating and Valuation has written to me to advise that around £30 million was collected from 34,000 successful wage arrestments last year. Although data is limited, if we assume that each of those arrestments affected an individual earning at least £1,000 a month—I offer this purely for illustrative purposes—the potential loss to local authorities could be around £26.5 million. That is an alarming amount, and very much a worst-case scenario, but the cost is substantial even with more cautious estimates.

We also know that the Scottish Courts and Tribunals Service is a major user of earnings arrestment for the pursuit of unpaid court fines, with 838 arrestments issued in the last quarter for which figures have been published—that is, from October to December 2022. The Society of Messengers-at-Arms and Sheriff Officers, when giving evidence, also raised concerns about the lack of evidence to support an increase of the monthly threshold of £1,000.

I hope that the committee will appreciate that I cannot simply ignore those representations, in the same way that I cannot ignore the call that earnings arrestments are too harsh. I need to find a good balance in this. If we make earnings arrestments ineffective, there is a risk that creditors will simply resort to pursuing bankruptcy more often, which is something that I would like to avoid—I think that we would all agree on that.

I have not yet found a solution, but I continue to look into it. This is an area that can be addressed through existing powers under the 1987 act, and regulations have regularly been made to increase the thresholds and bands. I would like more time to reflect on the matter and to bring forward any considered and appropriate proposals at a later date through regulations.

I have seen the recent letter from Dr MacPherson and Professor McKenzie Skene, which sets out some ideas that seem to me to be worthy of consideration.

I am not aware that that was the case specifically. I would have to go back and check the Official Report of the Parliament’s deliberations to see what was discussed regarding the landfill tax and the land and buildings transaction tax, and whether that issue was raised then. I apologise, but I cannot give the rationale that was set out historically, which set the precedent that has informed the change that is being made.

I cannot speak to the specific cost of doing that by truck. There can be other means of transport, such as by sea and by rail.

We will engage constructively with HMRC. I will invite Jon Waite to comment, but in terms of the engagement that we have had—

Mr Waite touched on a particular point. If the committee has views regarding the need for additional legislative provisions to provide additional support for Revenue Scotland, or if there is anything in the bill that would inhibit Revenue Scotland from carrying out its duties, we would want to be made aware of that. Our position and our understanding is that what we have provided for will allow Revenue Scotland to discharge its responsibilities as a tax authority, which include compliance issues.

If there is a willingness in the committee to start engaging in that work, I am more than happy to pick that up.

It is certainly a commitment. If the committee would like any additional assurance on the matter, I am happy to consider that.

I recognise those points. Either the changes are minor or consistent with the way in which UK taxes currently operate in Scotland, or they will be the subject of regulations, and there will be an opportunity for detailed engagement and consultation on any regulations that are enacted. I am conscious of the committee’s particular interest in the provision on automation. I also note that the opportunities that we have to introduce primary legislation on tax are infrequent. As such, when an opportunity does arise, it is important that we respond constructively to suggestions from Revenue Scotland. I am conscious that, in raising that point, I have inevitably precipitated questions on a finance bill, which I would be more than happy to respond to should the committee wish to ask about it.

I certainly want to do all that I can to raise awareness of the tax system in Scotland, and I appreciate the exchanges on the issue in the previous evidence session. I recognise that many people will engage with the tax system only when it bites them. The tax system is like many areas of regulation and policy in that, a bit like gravity, we do not really notice it until we have a stumble or, for some reason, we are reminded of it. It is understandable that, for many reasons, people do not have a requirement to engage with it in their day-to-day lives, so it is not a priority for them.

We have touched previously on broader issues around transparency and the information that is provided. I want to ensure that, as a Parliament and certainly as a Government, we communicate about tax in as clear and transparent a way as possible. I recognise that there is always a balance to be struck. Not providing enough detail and pursuing simplicity can mean that information is not fully understood. Providing too much detail can create complexity and some of the salient points can be lost. Therefore, on that broader question, I am always happy to engage with the committee. We have done various bits of work on social media and audiovisual packages, which have been shared, to highlight how the tax system operates in Scotland.

Revenue Scotland touched on the fact that it will be doing a lot of work around engagement with the sector prior to the tax going live. That reflects what happens routinely in the work of Revenue Scotland. For example, in an earlier evidence session, we touched on changes to LBTT and the work that Revenue Scotland is doing to engage with stakeholders, recognising that that is often quite specialist engagement with those who are actively involved, professionally, in the administration of taxes and the provision of advice on them. Revenue Scotland does an excellent job.

With regard to suggestions about how the Government can more effectively communicate changes around taxes and increase public understanding of the tax landscape across the UK and how it applies in Scotland between devolved, reserved and local matters, that is a conversation that I am always up for having.