§ Order for Second Reading read.4.20 pm
§ The Solicitor-General for Scotland (Mr. Peter Fraser)
I beg to move, That the Bill be now read a Second time.
The Bill reforms and modernises the law on debt enforcement in Scotland. It is the first comprehensive review and reform of the procedures for recovery of unpaid debts since 1838 when the previous Debtors (Scotland) Act became law. The reforms are designed to protect debtors from undue hardship and distress and to provide effective ways in which creditors can obtain payment of the debts due to them. In particular, the most resented aspects of warrant sales are abolished.
On almost every occasion that I have answered questions in the House once a month the reform of warrant sales has invariably been raised. This Second Reading debate is in no sense party political, but I am bound to say that I am a little disappointed that Members, such as the hon. Member for Falkirk, West (Mr. Canavan), who have harangued me month after month about this matter have not thought fit to attend to give even a partial welcome to the changes that are being introduced.
The arrestment of earnings is reformed with the introduction of a new system of arrestment. New court orders are introduced which safeguard debtors by giving them time to pay their debts without the immediate threat of enforcement procedures, and the arrangements for the discipline and control of sheriff officers and messengers-at-arms are improved.
The Bill implements the principal recommendations of the Scottish Law Commission in its report on diligence and debtor protection and I am sure that the House would want us to pay tribute to the detailed consideration given by the commission in producing its most extensive report to date.
Indeed, as I have said over recent years in the House and outside, some criticism has been directed at the commission for the delay in bringing forward the report. However, anyone who has read the two volumes of the report and considered the research and the scholarship required to complete that report will, I am sure, readily appreciate why the work necessarily took so much time.
§ Mr. Gordon Wilson (Dundee, East)
I have been one of those who from time to time have referred to the extraordinary delay in what is a highly complex area. Because the report has been in existence for some time it may not have taken account of the worrying development that, with the use of plastic credit cards, there is an upsurge of debt throughout Scotland. In my constituency work many more debt cases are coming my way. What do the Government wish to do to try to control such credit being given to people who are not able to cope with it and are then placed in a position of misery before moving on to this Bill, which deals with the enforcement of debtor provision in a much more humane fashion, but dealing with many more people than would have been the case one, two or three years ago?
§ The Solicitor-General for Scotland
I readily appreciate the hon. Gentleman's point. All hon. Members will be aware that, with the increase in the opportunities for credit, particularly through the use, as the hon. Gentleman describes it, of plastic money, there is the greater prospect of people bringing together debts which they cannot meet. The hon. Gentleman may have in mind a survey in one Scottish Sunday newspaper which demonstrated that an unemployed 18-year-old could, by a judicious movement around Sauchiehall street and elsewhere in Glasgow, by lunchtime put together credit approaching £2,000. It is not difficult to see that at the end of the day such a person would be unlikely to be able to make a regular payment on those debts, and would accordingly run into difficulties.
However, having said that and acknowledging that some people may have such a problem, it may not agree with the hon. Gentleman's political philosophy, but I should have thought that the rest of us would recognise that it is important to consider credit on a United Kingdom basis rather than an exclusively Scottish one. I think that the hon. Gentleman will appreciate that for the time being. However, he will understand that the Bill is concerned with dealing with debt in Scotland once it has occurred.
I am grateful to the hon. Gentleman for his use of the word "humane". Overall, the arrangements set out are undoubtedly a marked improvement on what at present obtains and they can properly be characterised as humane.
Diligence may be a term unusual or unknown to non-Scots lawyers, and that may include Scottish Members as well as hon. Members from south of the border, but, in essence, it is the definition of the methods of enforcing unpaid debts due usually under decrees of Scottish courts. Once a court has granted a decree for payment of the debt, two commonly used forms of diligence are available to creditors—the diligence of poinding and warrant sale, and the diligence of arrestment, particularly of earnings. It may assist in this complicated matter if I briefly describe each of those diligences.
The first main diligence with which the Bill deals is that of poinding and sale. The word "poinding" means simply the seizing or impounding of the moveable goods of the debtor. The goods are left in the debtor's possession until they are sold but only after the authority of the sheriff has been obtained. The goods are sold by public auction and the proceeds of the sale put forward in satisfaction of the debt. If the goods are not sold because no bids were made above the value set on them at the poinding the goods are handed over to the creditor to the extent necessary to satisfy the debt owed to him. The diligence is carried out by an officer of the court—a messenger-at-arms in the case of a court of session decree or a sheriff officer in the case of a sheriff court decree — and some of the procedures followed are supervised by the sheriff.
The second main diligence with which the Bill is concerned is that of arrestment of earnings. That is the procedure by which a creditor can attach in the hands of the debtor's employer wages due to the debtor on the next pay day. At present, before the money can be released to the creditor, either the debtor must give his consent or the creditor must raise what is described as an action of furthcoming. The problem is that repeated arrestments may be necessary on successive pay days until the creditor has recovered what is due to him since the arrestment will only attach money due to the debtor on the appropriate pay day.
168 I expect that some hon. Members are familiar with the complaints that are made to me about the existing procedure. The debtor employee is deeply concerned that successive arrestments made on his wages each week are cumulative in their effect and believes that after a short period he will be wholly deprived of any income coming in at the end of the week. On the other hand, the debtor's employer is more than a little irritated by the barrage of weekly arrestments that are placed on him. It is not difficult to see that his bookkeeping department or wages clerk eventually becomes snowed under.
§ Dr. Norman A. Godman (Greenock and Port Glasgow)
It is not only that the imposition of the wage arrestment can damage an individual's interests within the work place; such an order may damage the prospects of promotion and advancement in the company. So wage arrestment is a major penalty imposed upon a person.
§ The Solicitor-General for Scotland
I elaborated on two complaints of which I am aware about the existing arrangements for arrestment of earnings and later I will come to the changes and reforms that are to be introduced, which are a significant, possibly underplayed improvement in the legislative proposal. That is part and parcel of what I am saying about the irritation of the employer. He cannot understand why, in connection with someone who might otherwise, so far as he is concerned, be a perfectly satisfactory employee, his wages department is constantly under this barrage of arrestments from a solicitor, or whoever it may be, clogging up the machinery. I think that what we shall be introducing will be something that the hon. Gentleman, and indeed hon. Members generally, will welcome.
The Bill deals with the reform of these two diligences in parts II and III. In doing so, however, the Bill takes account of the fact, pointed out by the Scottish Law Commission in its report, that questions of debt raise social problems as much as or more than legal problems. The commission is to be congratulated on the fact that, having recognised the extent of these social problems, it began its study of diligence by commissioning an extensive programme of research on the nature, scale and social aspects of diligence and debt recovery. It also issued five detailed consultative memoranda, which were widely circulated, in order to ensure that the comments of all interested in these important matters were taken account of by the commission in framing its recommendations. These recommendations were the subjct of a yet further consultation undertaken by my noble and learned Friend the Lord Advocate. The Bill has, I am sure, greatly benefited from this extensive consultation and from the commission's thorough and helpful analysis of the problems which arise.
The commission pointed out in its report that the recovery of debts, especially those due by individuals, falls naturally into three stages. The first stage is that at which the creditor makes informal attempts to collect the debt, such as—some of us will be familiar with this—the issuing of a series of warning letters seeking repayment. The second stage is that which begins when a court action for payment is raised. The third stage is when the court decree for payment is followed by further informal attempts at collection or ultimately the enforcement of the decree by diligence. The protracted process of debt recovery acts as a kind of filter, so that the vast majority 169 of debts are settled in the informal stages and only a very small proportion of debts reach the stage of diligence. Indeed, if there is an underlying and unifying theme in these, as I readily recognise, complicated provisions, it is to improve that filter effect from the time when the informal approaches begin through to the ultimate enforcement processes.
In the case of poinding and warrant sales, only a tiny fraction involve a warrant sale. In 1985, for instance, of some 80,000 debt decrees granted by Scottish courts, 16,500 proceeded to a poinding, 6,000 to a warrant of sale and only 700 to the warrant sale itself. It is right to point out that that figure of 700 includes one third which are commercial sales in shops, offices and so on, as well as household sales. It is important to recognise that these stages of debt recovery are not separate but interrelated. The early stages would be ineffective in eliciting payment if the later stages did not exist. If the earlier stages were ineffective, more cases would, as a consequence, proceed to the later stages. As a result, the commission arrived at the conclusion, with which the Government agree, that the enforcement procedure must retain the ultimate possibility of the warrant sale as a necessary spur to payment in the great majority of cases which are settled at an early stage.
Those consulted by the commision generally agreed that the primary aim of reform should be to introduce new safeguards protecting debtors subject to diligence from undue economic hardship and personal distress and from the continuing threat of diligence even where instalment arrangements have been made.
Looking at the whole complicated matter, the commission considered the possible introduction of a number of different procedures which would involve discretionary control of diligence in order to provide safeguards for debtors. Such safeguards included possible discretionary power to a court to control the enforcement of a debt.
Another possibility was safeguards by operation of law, such as exemptions of particular types of property or categories or levels of income from diligence, or immunity from diligence for particular classes of debtor. However, the commission, at the end of its discussion of the merits of such an approach, rejected those various options. It concluded that the preferred reform was to introduce discretionary control of diligence by the ordinary courts on voluntary application by the debtor.
The first of these reforms—time-to-pay arrangements—is contained in part I of the Bill. This provides important safeguards for debtors who are unable to pay their debts outright. As I have indicated, and as hon. Members will see if they care to look at the commission's report, the evidence which the commission gathered suggested that most debtors subject to diligence are unable rather than unwilling to pay the debt outright and can pay only by instalments. So far as the social aspect of debt in Scotland is concerned, those who are interested might care to look at what is set out in the Law Commission's report beginning at paragraph 263, where it analyses in great detail exactly where the problem lies.
At present, the possibility of the later stages of the diligence of poinding and warrant sale, especially the advertisements of sales in debtors' homes, can sometimes induce debtors to agree to arrangements for payment by instalments at a level which they frankly cannot meet. In addition, only restricted use is apparently made of the right to apply for a summary cause instalment degree and 170 there is at present no means whereby debtors can obtain an extension of time to pay, free from the threat of immediate or further diligence by others.
Part I of the Bill gives effect to the recommendations of the Scottish Law Commission to enable debtors in most cases to have more time to pay their debts free from the threat of diligence. There will be two types of order, and I appreciate that this may be somewhat confusing. The first is a time-to-pay direction, which will be available in both the Court of Session and the sheriff court when the decree is granted. In essence, these orders will replace the existing instalment decree, which, as I have just shown, is at present available only in sheriff court summary causes where the amount involved is less than £1,000.
The second type of order is the time-to-pay order, which will be granted by the court at a later stage in the debt recovery process and will have the effect of converting an existing open decree into one in which the sum due can be paid by instalments or by way of a deferred lump sum.
§ Mr. Wilson
In relation to the proposed instalment decree, will any guidance or direction be given to sheriffs or Court of Session judges in relation to the appropriate instalment to be paid, or will it be left for them to decide at their own discretion? It may well be, of course, that it would be very difficult to get any degree of regularity in payments from one court to another. It may depend, likewise, upon the individual views of individual sheriffs, and that might not be helpful.
§ The Solicitor-General for Scotland
I understand the hon. Gentleman's point. The short answer must be that the individual circumstances will vary so much that it would be very difficult to set out any schedule, as we do, for example, in relation to earnings arrestments and as are contained in the schedule to this Bill. What is important, and what should be recognised by those who possibly have hitherto been attracted by debt arrangement schemes, is that the opportunity is given at both stages—first at the time of decree and subsequently by the sheriff—to look at the means of the debtor, not only at his income but also at his outgoings, and say that payment can be made by instalments within a stated period or that nothing need be paid for the time being but that the debt must be paid later.
It would seem that the arrangement opens up an attractive opportunity. As the evidence of the Scottish Law Commission demonstrates, it is unusual for people to have two decrees coming together at exactly the same moment; they may be a matter of months apart and at different stages. If, in relation to one, there is an instalment decree being met and the debtor is paying that off, it would be open, sensible and desirable for the sheriff to say, "As you have concluded your payments in four months' time, thereafter you will start paying £x a week on the latest decree against you."
§ Mr. Wilson
As the hon. and learned Gentleman will appreciate, under the late and much lamented small debt procedure which had the great advantage of flexibility there was a going rate at which sheriffs would tend to grant an instalment decree and refuse a request for an open decree for those representing the creditors. However, would the hon. and learned Gentleman look further at the proposition of the sheriff being able to take into account the outgoings as well as the income? Where does he think the judicial time for this will be found? Would it be possible for the Scottish Courts Administration to set up 171 a unit in each sheriff court that might be able to do that work so that the sheriff gets the information put to him, bearing in mind that the debtor will probably not be represented in court, or could such cases be referred to the citizens advice bureaux which already have a substantial role in giving help to debtors when they face an accumulation of bills coming in at the same time?
§ The Solicitor-General for Scotland
One of the matters not included in the Bill but which is probably desirable—it happens in England—is for the citizens advice bureaux and the Scottish Consumer Council to develop, on a voluntary basis, a debt counselling scheme. If such work were to be done by those bodies — it is an interesting idea—there would certainly be an opportunity not simply to look to the debtor's income, which would be remarkably crude in approach, but to look to the balance of his income and the necessary outgoings.
One thing surprised me about the approach of the hon. Member for Dundee, East (Mr. Wilson). My practice at the Bar did not include debt matters, but it did include consistorial matters. I am sure that the hon. Gentleman will appreciate that when one was arguing before the court trying to arrive at what was an appropriate level of interim aliment to be paid, one looked not simply at the husband's income but at his necessary outgoings. On that basis, it is virtually impossible to arrive at any precise calculation of what should be done.
§ Mr. Wilson
I had some experience of the small debt court. The Solicitor-General has obviously been deprived of such experience. However, does he realise that a big court could take 150 cases in a morning, mostly heard in the absence of the parties? The time available to the sheriffs for that purpose is limited and I cannot imagine them welcoming means tests. It is entirely different from consistorial cases where one will be given an allocation of time before the court. In small debt work, as now under the summary decrees, and so on, many cases go through and, even allowing for the changes in procedures whereby people do not have to be present, judicial time is not available.
§ The Solicitor-General for Scotland
I do not want to protract this matter unduly, but I do not see why within our court system, in the sheriff court, there is not the opportunity to look sensibly at instalments so that those who can pay can come forward and say, "I can afford £5 or £10 a week, broadly speaking, and this is how I get to that figure." That would allow the court to come quickly to a conclusion as to whether that was right. It is important, as I said earlier, that they should not be under any undue pressure to offer too large an instalment fee. However, it would be open to the sheriffs clerk to give some assistance with the application.
While the provision of the time-to-pay arrangements is an important new safeguard, it is of course necessary to consider whether improvements are needed in the diligence procedures themselves to deal with those cases where the debt has to be enforced.
On the matter of diligence of poinding and warrant sale, the commission was strongly urged by some consultees that on social grounds abolition was required rather than reform. The commission rejected the proposal of abolition. It pointed out that some of the demands for 172 abolition were based on misunderstandings. The diligence is not an anachronistic hangover from a harsher, earlier era. It is not peculiar to Scotland, since enforcement against movable property is permissible in every country of whose practice the commission was aware. Indeed, in England creditors rely to a greater extent apparently on enforcement against goods as compared with enforcement against earnings.
Further, the commission recognised that every society which considers that people able to pay their debts should be required to do so must have recourse to modes of enforcement which are necessarily coercive. These are limited to diligence against the debtor's person—that is civil imprisonment, which in large measure, this Bill abolishes—or diligence against the debtor's heritable or movable property or his income. The commission considered that abolition was feasible only if an alternative method of enforcement could be devised which was as effective and more socially acceptable. In paragraph 2.145 the commission concluded:Having considered the matter anxiously and at length, we believe that such an alternative cannot be devised.Having considered the commission's arguments very carefully, the Government are convinced that the right approach must be to retain the diligence of poinding and warrant sale and to adopt the commission's approach. That rejects the introduction of undiscriminating legislation abolishing the diligence or exempting all consumer debtors or all household goods from its operation. However—I stress this—the Bill reforms the diligence so that its impact on debtors is made as humane as is possible consistent with the need to retain the effectiveness of the diligence as a method of eliciting payment from debtors who can but will not pay their debts. The Government consider that the commission has struck a proper balance between the interests of debtors and creditors.
That approach was broadly endorsed by the Scottish Consumer Council, among others, which commented in the consultation undertaken by my noble and learned Friend the Lord Advocate:We have considered the arguments for and against retaining some residual power of enforcement against a debtor's goods. We conclude that it is necessary to have such a residual power to prevent abuses and act as an ultimate sanction to encourage payment.Possibly more surprisingly, but similarly, the Scottish Council for Civil Liberties submitted to the Scottish Law Commission in 1983 its comments on the reform proposed. It said that when it came to consider the detailed legislative proposals it recognisedthe great distinction between ameliorating the worst consequences of civil diligence for those who cannot pay and legislating against poverty itself.The council concluded thatthere was no practical prospect that the abolition of the warrant sale would have a real effect on poverty, except in the context of much wider reforms of a kind not in prospect at this date.The council hadthe gravest doubts about alternative proposals, including the establishment of debt counselling schemes as a method of enforcement.Our objective is to see the creation of a coherent statutory policy towards poinding and arrestment that provides all the protections at present available to those who have access to skilled advice and assistance.
While the Scottish Council for Civil Liberties may not regard it as much of a compliment, I wholly endorse the 173 view expressed in that last passage. It demonstrates an important distinction that it would be proper to maintain both now and later in Committee. There seems to be some confusion of nomenclature in the various stages—debt counselling on an informal voluntary basis, a debt arrangement scheme and debt arbitration as a substitute for all the other enforcement procedures.
One of the main reforms within the existing framework of warrant sales is that exemptions from poinding of household goods are widened. When the Bill was considered in another place, these exemptions were further clarified and widened by, for example, the inclusion of tools needed for the maintenance and repair of the dwelling house and household items. When executing poindings, sheriff officers are not to be allowed to enter a house where there is nobody present, or where only children under the age of 16 are present, without giving four days notice.
Greater opportunities are provided for debtors to redeem goods at their appraised value. This is the price that they would be likely to fetch if sold on the open market. Debtors can apply to the sheriff to release items from the poindings on the ground that their inclusion, on a broad equitable test, is unduly harsh. Sheriffs can recall a poinding on a number of grounds or, at a later stage of the procedure, refuse to grant a warrant for the sale of the poinded goods. A poinding is to last for no longer than one year unless the period is extended to allow the making of payment by instalments. Of particular importance are the changes with regard to the warrant sale.
If there is a matter which has excited anxiety and emotion in this House, it has not been diligence generally but the warrant sale itself. Warrant sales of poinded household goods will in future normally take place in auction rooms without the debtor being publicly identified. The sight of people in Scotland out on the street with a few sticks of their belongings, their circumstances having been widely advertised in their local newspapers, has caused distress. It has attached to our whole system of diligence the description of medieval or barbaric. It is wrong to describe the whole system in that way, but I have no doubt that removing this requirement of sale in a person's own home is an extremely important and humane reform.
A further amendment which the Government brought forward in the other place was to ensure that, where the consent of an occupier is sought to the sale taking place in a dwelling house rather than in a sale room, the consent of every occupier is needed. The Government consider that in total these are substantial reforms which strike the proper balance between the retention of the warrant sale as a spur to payment and the removal of the most resented aspects of the diligence, together with the introduction of new safeguards for the debtor.
I now pass to the question of arrestment of earnings to which the hon. Member for Greenock and Port Glasgow (Dr. Godman) has already referred. It was plain that reform was needed of the system of earnings arrestment and these reforms are contained in part III. That part introduces three new forms of continuous diligence against earnings: earnings arrestments for ordinary debts; current maintenance arrestments for aliment and periodical allowance; and conjoined arrestment orders in cases where two or more creditors wish to arrest a debtor's earnings. The arrestment of funds or property other than earnings is not affected by the Bill. At present, an arrestment of 174 earnings attaches to the debtor's earnings due at the next pay day but does not affect the earnings due on a later pay day. The result is that futher arrestments may be needed to obtain payment of a debt.
Moreover, the proportion of a person's earnings in any pay period which is exempt from earnings for an ordinary debt is too low, being half the balance over £4 per week, and probably does not leave enough in some cases for the debtor to live on. In the case of an arrestment enforcing aliment or rates, the whole pay could be attached, leaving the debtor with nothing.
In the new form of earnings arrestment enforcing ordinary debts, the deductions from earnings are set out in the three tables contained in schedule 2 to the Bill. One of the other two forms of arrestments against earnings is the current maintenance arrestment to recover maintenance as it falls due. Such arrangements will be of considerable assistance to a particularly vulnerable group of creditors in the community—dependent spouses or ex-spouses and their children. These changes will enable this group to enforce payment of the maintenance they require as they require it without, as at present, having to wait for arrears to mount up.
I am sure that I can draw on the experience of hon. Members who are, like me, frequently approached by those who have suddenly built up vast arrears of aliment or maintenance and they cannot see a way of clearing them and the problem gets worse. With this new arrangement I trust that payments will be made contemporaneously without that grim eventually coming about.
There are also detailed arrangements in the Bill to deal with what are described as conjoined arrestment orders. Essentially, this extremely complicated part of the Bill ensures that there should not be what is described as a race for diligence. Where more than one creditor seeks diligence, these arrangements will allow more than one creditor to share simultaneously in the debtor's earnings and, simultaneously, for an orderly payment of his obligations in cases of multiple debt—a condition about which Labour Members have expressed interest.
Under a conjoined arrestment order, the employer will be required to make deductions from earnings computed in accordance with the rules of earnings arrestment and current maintenance arrestments, as the case may he, and to pay them to the sheriff clerk, who will disburse those sums to the competing creditors rateably in proportion to the amount of their debts. Schedule 2 shows what sum is affordable out of it. That is paid out to the sheriff clerk, who then takes over the administration.
§ Mr. Alexander Pollock (Moray)
In that context, what is the role of the Inland Revenue and the priority claims of which it has had the benefit under current legislation? May I take it from what my hon. and learned Friend has said that the Inland Revenue will no longer be able to exercise that right over the priority claim, or does he intend to deal with that elsewhere?
§ The Solicitor-General for Scotland
I wish that my hon. Friend could have drawn that from what I have been saying. I know from correspondence that my hon. Friend had with me last year about a constituent company that he was aware that the Scottish Law Commission had proposed that the Crown's prior claim for arrears of rates and taxes in proceeds of diligence by another creditor should be abolished. The Government agreed that the 175 state of the law was unsatisfactory. The prior claim for rates has been abolished, bringing into line the position on rates on both sides of the border. However, the prior claim for tax was also considered in the context of the Keith report on the enforcement powers of the revenue departments. The report applied to the United Kingdom as a whole. The Government are consulting on the Keith recommendations as a whole and have proposed that the prior claim should be retained but should be restricted to one year's arrears of PAYE.
My noble and learned Friend the Lord Advocate has arranged for all interested parties in Scotland to have an opportunity to comment on the prior claim. In the circumstances, I hope that my hon. Friend the Member for Moray (Mr. Pollock) appreciates that it would be inappropriate to bring forward legislation at this stage. Having offered him that opportunity for comment and consultation, and knowing of his previous interest in this matter, I shall doubtless be hearing from him in the near future.
Part IV contains provisions relating to the diligence and priorities for enforcing rates, taxes and Crown debts. Enforcement of rates and tax debts under summary warrants granted by the sheriff will continue to be undertaken by sheriff officers. Summary warrant poindings and sales will be in the same general form as ordinary poindings and sales but with necessary changes, and the diligence of arrestment is to be available for summary warrants for tax arrears as well as rates arrears. Civil imprisonment for non-payment of tax penalties, rates and most civil fines and penalties due to the Crown is abolished.
Part V introduces reforms of the arrangements for the appointment, training, control and discipline of officers of court. The Government agreed with the commission's recommendation that the present system of independent contractor officers of court should not be replaced by a system of salaried court officials. The Bill provides for the setting up of a new body—the Advisory Council on Messengers-at-Arms and Sheriff Officers—whose duty is to advise the Court of Session on the making of rules with regard to the regulation of organisation, training, conduct, and so on. Sheriffs principal are to have the power to order routine inspection of the work of officers of court.
Debt collection by officers of court is also subject to further regulation by the Bill. Officers are at present prohibited from enforcing debts due to themselves and this prohibition is to be extended to enforcement on behalf of members of their family, business associates and firms or companies in which they have a controlling interest. Officers of court are expressly prohibited from using their official designations when collecting debts before the creditor has obtained a court decree against the debtor. Officers are required to have the authorisation of the sheriff principal before seeking payment of a debt in a private capacity or through a debt collection agency. That issue may not arouse so much emotion as it did eight or nine years ago. Nevertheless, it is an important and worthwhile change.
Part VI contains provisions dealing with warrants for diligence and charges for payment. These are essentially technical provisions.
Part VII contains miscellaneous and general provisions. These include provisions to assist the debtor in 176 proceedings under the Act. No court dues are to be payable to the court by a debtor in connection with proceedings under the Act and, if requested by the debtor, the sheriff clerk is required to provide him with information as to the procedures under the Act. Further, the Bill empowers the Court of Session to make court rules which may provide that a party to the sheriff court proceedings under any provision of the Bill may be represented, in such circumstances as may be specified in the rules, by someone who is neither an advocate nor a solicitor.
Hon. Members will be aware that there has been for a considerable number of years a general desire to reform the law relating to enforcement of debts so as to achieve a proper balance between the interests of debtors and of creditors. The Bill introduces the necessary reforms. They are necessarily complicated and detailed. Nevertheless, I trust that they will be widely welcomed on both sides of the House as achieving a long-desired and necessary reform of the law of Scotland.
§ 5.2 pm
§ Mr. Tom Clarke (Monklands, West)
The Opposition give a general welcome to the Bill, although we should have liked to see more meat on its bones. It is a slightly more tepid piece of drafting than we wanted. The Solicitor-General for Scotland might wish to respond to our regret that the Law Commission's sensible proposals have not been met in full. The hon. and learned Gentleman did not reassure us. It would be interesting if he told us why the Government have decided not to take on board all the Law Commission's proposals, some of which are very important.
My hon. Friends would like to go beyond what the Law Commission suggested on some issues. Some were discussed by Labour Members in another place and will not be new to the Solicitor-General for Scotland who, I am sure, is studying them carefully. I cannot disguise, nor would I wish to hide, the Labour party's distaste for warrant sales in any shape or form. We want them to end. If the Bill is acceptable in the meantime, it is because it has moved just a bit in that direction. The Labour party believes that it has not moved far enough.
The Solicitor-General for Scotland referred to the time-to-pay orders, which we welcome. We recognise that they involve the debtor in finding a solution to his own problem and, in that way, much of the stigma of diligence is thereby removed. But there are two important shortcomings. First, we do not believe that a time-to-pay order should be available only on the specific application of the debtor. Many people who find themselves in severe debt do not have available to them the information or advice to make them aware of their obligations.
Since the Solicitor-General for Scotland has given such weight to some of the other views of the Scottish Consumer Council, perhaps he will bear in mind this comment:It is not clear to us that debtors, who in the main are poor and disadvantaged, will have the necessary information and skills to be able to take this initiative.The Labour party believes that it should be open to the court or even to the creditor to propose the implementation of a time-to-pay order. We urge that on the Government.
177 Secondly, time-to-pay orders are not available, as the Solicitor-General for Scotland has confirmed, for nonpayment of rates and taxes. That is incredible. The Government argue that Government Departments and local authorities are to be trusted to use their powers of enforcement in a reasonable manner. That is a somewhat uncharacteristic, if touching, faith in the goodwill of local authorities, and perhaps even of other Government Departments. I do not share that faith and the report in The Scotsman this morning suggests that many others do not share it either.
I hope that the Solicitor-General for Scotland will not mind if, as a constituency Member. I refer to a case which was drawn to my notice during the summer recess. It contains a number of messages for us as we consider the Bill both now and in Committee. At the beginning of the recess, one of my constituents, who was seriously ill, came to my house and said that she was in considerable distress because her young daughter and her husband had purchased a house on the basis of being owner-occupiers and had become involved in a very heavy mortgage which, in time, they found that they could not meet. They had not been able to resist the blandishments of people selling all kinds of modern wonders, home equipment and the rest. The result was that the young couple went from one credit group to another, from one finance house to another and, like many other young couples in this position, I regret to say, found themselves caught in a spider's web. In due course, they had to leave their owner-occupied house and the local council allocated them a house in an area which is described as "difficult to let".
The mother was concerned because that day a warrant sale was to take place. She posed a fundamental legal question to me which became relevant if we are considering giving so many powers to local authorities and public bodies. She asked whether, after the first warrant sale had taken place, she would be free to use some of her savings—not very much, but the limited amount that she had to ensure that the young couple had enough furniture to keep their home going—as a gift.
She asked, "If I use my money and make a gift to my daughter and my son-in-law, does that mean that there can be yet another warrant sale and that they can take the gift of the goods that I have just given them?" I did not know the answer. With great confidence, I said, "I shall be going to Edinburgh today anyway, so I shall pop into the Crown Office and, no doubt, the officials will tell me."
I popped into the Crown Office and revealed to all the security people I met that I was carrying the Serjeant at Arms' identification card. After a few minutes, I found myself in the main building, which hon. Members would recognise. I was told by a fairly senior civil servant that, notwithstanding the fact that I was showing the Serjeant at Arms' ID card, I had no right to be there. He told me to get out and to leave the precincts.
We must remember that an ordinary person is expected to cope with such treatment. The Government are asking us to have faith in local authorities and public bodies that are said to be sympathetic. I am happy to say that I was rescued by a more senior member of staff, who acted more professionally and arranged for me to be given the advice that I should have been given initially. I drew the matter to the attention of the Lord Advocate, who acted promptly and correctly, for which I thank him.
If it is so difficult for a Member of the House to obtain such information, what makes the Solicitor-General think 178 that ordinary wee folk, who may be terrified of authority, can obtain the information and help from local authorities and public bodies that the Bill suggests? I hope that in Committee the Secretary of State and the Solicitor-General for Scotland will agree to think again.
The Solicitor-General for Scotland referred to poinding and warrant sales. I was grateful to the Law Commission for getting the pronunciation right. I thought that the commission's report was very helpful, although I must say that at a cost of £32, albeit for two documents, we are all paying for our education. Having said that, I withdraw none of the congratulations of myself and my hon. Friends.
The system of poinding and warrant sales is antiquated and humiliating. It is not a reasonable system for collecting debts, and it invites reforms. The Bill suggests reforms, which we welcome and will welcome again in Committee. For instance, a vast extension in the range of goods to be exempt from poinding has been introduced in the Bill as a result of legal action. We are told that children's toys, most items of furniture, essential working tools and so on, will be included. Creditors will no longer be able to force a sale in the debtor's house, and we welcome that as well. It would be churlish to do otherwise. The old system whereby publicity was given in a community was very humiliating and I am happy that that too is being removed. Again, it would be churlish not to welcome that. However we deal with the matter, we must ensure that we remove every obstacle in the way of people's dignity, and any suggestion of humiliation for the person, his family and his neighbourhood.
Given that Opposition policy is the abolition of warrant sales, there are some questions that we should ask. For example, the list of items exempted from poinding prompts the question, "Why should warrant sales be retained at all?" The Government's only argument is that such sales provide the ultimate sanction. In another place, Lord Morton suggested more practical final sanctions. We shall ask the Government to consider such alternatives in Committee.
§ Mr. Barry Henderson (Fife, North-East)
I should not like to misunderstand the hon. Gentleman. What does he suggest as a final sanction?
§ Mr. Clarke
I am not sure whether the hon. Member for Fife, North-East (Mr. Henderson) is offering himself as a member of the Standing Committee on the Bill. If so, I shall be happy to develop that point then. In the meantime, the hon. Gentleman may find time to read the speech of my noble Friend.
We are told that tools of trade are to be exempt from poinding up to a value of £500. In view of modern technology, individual tools of trade may be worth more than that. That is certainly true of computers. Surely the principle of exemption is to avoid depriving the debtor of has ability to earn. If that is to be achieved, the upper value limit of £500 should be at least doubled, and perhaps even trebled. We shall press for that in Committee.
We are told that medical aids and equipment will be exempted only if they are reasonably required. We feel that all medical aids and equipment should be exempt from poinding or sale. Decisions on what is required cannot be left in the hands of a law officer whose expertise arid qualifications do not extend to medical science; nor should he be asked for an opinion on such matters.
179 Creditors can no longer force a sale in a debtor's house, but the procedure will still be permitted if the debtor can be persuaded to agree to it. A debtor might be persuaded to allow a sale in his home so as to leave as large a sum as possible for an outstanding debt. That is an unhealthy aspect of the Bill. The debtor's family might suffer indignity, even if they were occupiers. Children would obviously have little say in the matter. Moreover, the stigma could stick to other members of the family in the community. That is another point that we shall pursue in Committee.
The question of diligence against earnings is a central feature of the Law Commission's report. We welcome the changes made by the Bill, especially the introduction of a system of continuous diligence against earnings, which will avoid the need for continuous arrestment against those earnings. The arrangements for imposing maximum arrestment sums are sensible, and will help the system to work more fairly.
However, our welcome for those proposals is severely dampened by the Government's refusal to accept the Law Commission's proposals for the introduction of a debt arrangement scheme. The suggestion has been backed by the Law Society and the Scottish Consumer Council, and we agree that the proposed scheme would deal sensibly and fairly with the problem of multiple debt.
The Government's cavalier rejection of the scheme is based on the assertion that multiple indebtedness is a minor problem that does not justify the cost of the commission's suggested solution. We strongly dissent from that view. The Government seriously underestimate the level of multiple debt. It is a major and growing problem in Scotland, to which a debt arrangement scheme would offer a workable solution. It is the only practical solution that has been suggested, but, rather than proposing an alternative, the Government are trying to suggest that the problem does not exist. They are wrong, and we shall argue strongly for the introduction of such a scheme, here and in Committee. I therefore ask the Solicitor-General for Scotland to explain his objections in greater depth and to accept the well-meant and seriously researched proposals by the Law Commission, because so far we find the commission's views on these matters more convincing than those of the Government.
It is impossible for the House to consider the Bill without giving thought to the growing problem of debt in our society, which is a much wider issue. I do not believe that we can solve the problem without recognising the influence of that development. Under the present Government, there has been a vast expansion of personal debt. In Scotland, the present Administration have overseen an increase of 30 per cent. per year in the number of severe debt problems.
In Coatbridge, in my constituency, the number of cases made known to the citizens advice bureau in 1986 has increased by 133 per cent. The figures of debt inquiries at the citizens advice bureau in Bath street, in Glasgow, tell a worrying story. In January 1987 that office dealt with personal debt to the value of £250,000. In February, that figure reached £312,000. The average size of personal debt dealt with was £11,000 per person or family. The largest personal debt was an alarming £37,000. On this evidence indebtedness is certainly a growing social problem. The Bill deals with the symptoms, but they are the tip of the 180 iceberg. It has not got to the heart of the matter and we are concerned that it should. There is also the problem of fuel poverty. That problem will remain with us until we properly address ourselves to the serious problems that people endure.
It is impossible to judge the extent to which the difficulties are due to low wages or to the ease with which credit is made available. Moreover, the Paymaster General's solution— if I may refer to it — of reducing wages still more in areas of high unemployment is hardly one that appears to be helpful. In addition Lord Ross of Marnock has rightly warned us that there will be still more difficulties if the community charge is introduced in Scotland.
The fact that the Bill is required emphasises how right the shadow Chancellor is to warn the Government of the dangers of creating the false impression of economic growth based on irresponsible consumer credit arrangements, which the unemployment-stricken people in Scotland simply cannot afford.
It is with all that in mind that we shall closely examine the Bill. We shall examine it constructively and when we are given the opportunity, we shall seek to strengthen it. We shall also monitor it most carefully and earnestly following its enactment.
§ Mrs. Anna McCurley (Renfrew, West and Inverclyde)
Fortunately, I have not been involved with a great number of my constituents facing warrant sales. However, I remember when I was in local government that several people came to me in great distress, sometimes with only 24 hours to go before the sheriff officers were due to enter their houses and attach their possessions prior to warrant sale.
It was not unusual for me to have the diligence procedure postponed to give the debtors more time to sort something out. Once the circumstances were explained to the firm of sheriff officers, the problems seriously considered—incredibly, often for the first time by the debtor — and an explanation given to the creditor, together with some plan of repayments, the worst eventuality was usually staved off.
For many people, especially those without the middle-class cachet of overdraft facilities, debt is similar to a vortex that sucks them in, and they lose control. I am inclined to agree with Opposition Members who have discussed the plastic explosion. There are some cases nowadays when people are offered no-deposit credit. If anything, that is the most dangerous form of credit available, and it can cause many problems.
§ Mr. Michael Hirst (Strathkelvin and Bearsden)
Does my hon. Friend agree that the situation is worse than she has described—[Interruption.]
§ Mrs. McCurley
On a point of order, Mr. Deputy Speaker. If my hon. Friend is making a point to me during the course of my speech, is it in order for Opposition Members to try to intervene, thus making it impossible for me to understand what my hon. Friend says?
§ Mr. Deputy Speaker (Mr. Harold Walker)
What the hon. Lady complains about is not in order.
§ Mr. Hirst
I am grateful to my hon. Friend. Does my hon. Friend agree that the situation is worse than she has described, because much of the most available plastic 181 money credit carries annual interest rates of about 35 per cent. compared with the 13 or 14 per cent. that one may pay on a personal overdraft?
§ Mrs. McCurley
I am grateful to my hon. Friend, and I concur heartily with him. My hon. Friend will be aware that in many instances certain types of shops and firms attract particular types of individual. Those are the businesses that charge percentages higher than the average, and that is especially reprehensible.
One of the worst aspects is that many people panic and run away from debt. Often, when debt has been accumulated, it is as long as two or three years before a creditor takes the type of action that leads to a warrant sale. That is a long time. It demonstrates that a warrant sale is a court of last resort.
Not all debtors are victims. We have heard today that in 1975 only 700 decrees out of 80,000 ended in warrant sales. My hon. and learned Friend also point out that firms as well as householders were involved. That suggests that in some instances mistakes, incompetence, quirks of circumstance or downright bloody-mindedness had a part to play, until the heavy warning came at last. In the truly sad cases the relief of the debtor when someone takes over control of his problem, together with the general reasonableness of the creditor, has never ceased to amaze me. Ironically for some, the due process was a relief in itself, albeit humiliating and disastrous. In Committee we should consider debt counselling services and investigate how such services may be implemented. It is important to get that matter right.
I am extremely pleased that the Government have had the good sense to tackle this messy area of law on the excellent advice of the Scottish Law Commission. They have done so in a way that does not afford the debtor the opportunity to escape his responsibility, but holds out hope to both the debtor and creditor.
The two main objectives of the Bill, which are based on the recommendations of the Scottish Law Commission, are effective enforcement, by which creditors can be confident of recovering debt, and debtor protection. No longer will basic household goods that are needed, but are not absolute necessities, such as books or children's toys be held for sale. Instead of appealing to a councillor, a Member of Parliament or a citizens advice bureau to act like the fifth cavalry, a wide-ranging system of applications to the sheriff will be established.
The warrant sale will no longer come out of the blue and shock the debtor. I have seen that happen in many instances. A sale, if it reaches that position, will not be held in the debtor's home. Anonymity should take the Victorian censoriousness out of the system and fend off both prurient press and neighbours.
The more humane system of continuous diligence against earnings will ensure that debtors can, at least financially, survive the ordeal. Likewise, when a married man who is separated gets into a pickle over maintenance or when he is being bolshie over payments, his wife can be assured of continuity of payments through current maintenance arrestment. Therefore, the family is saved from some further agony in an already painful situation. I have never known any sheriff officers to act officiously, but in a potentially explosive situation human failings emerge. Increased control and scrutiny, as described by the Bill, will impose a more professional, if not more humane, outlook on sheriff officers who have transgressed.
182 The Bill may not satisfy the Opposition entirely, but I wish to reinforce the fact that it is necessary to have some ultimate sanction. Debts cannot suddenly evaporate. I am convinced that only the real chronics, as it were, need fear the new legislation. I support the Bill because it reflects a sympathetic and humane approach to those whose lives have deteriorated into a dreadful financial muddle.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
I listened carefully to the considered speech of the hon. Member for Renfrew, West and Inverclyde (Mrs McCurley) and I was pleased that she addressed herself to the increasing problem of plastic credit, which is now so freely available, and said that she is in favour of personal debt arrangement schemes. I follow her in that and I hope that we shall be able to return to that issue when the Bill is considered in Committee and on Report. The argument for such schemes was also advanced eloquently by the hon. Member for Monklands, West (Mr. Clarke).
I wish to add my welcome to this tightly drawn and technical measure. I think that it could more appropriately be called the "Diligence Bill", because the Bill does not begin to address the wide range, panoply and extent of the debt problems that face those of limited means who get themselves into financial difficulties in Scotland. A Bill which addressed debtors' problems would tackle these, but it is of course right that we move on from the provisions of the Debtors (Scotland) Act 1838, which presently governs the process of diligence in Scotland and is now out of date. I for one deeply regret the demise of the Hornings Act 1579. In my previous incarnation, I spent much time tormenting sheriff officers. There was great sport to be had. As I am sure the House, or the Solicitor-General for Scotland, will know, sheriff officers have to be punctilious in following statutory diligence procedures. It was always possible to twist their tail severely if they failed to adhere to those procedures and to report them to the sheriff, using the Hornings Act and the like. That was good sport, but all that is being swept away, probably quite properly, by the provisions of the Bill.
The process of trade, commerce and business, and especially that of the retail sector, has changed radically since 1838. In those days people were much more likely to know personally those with whom they were trading. In the small towns and areas that I represent, for example, there was little chance of anyone being given a higher credit rating than he or she deserved. That was because communities were much smaller and more closely knit. That is no longer the position. Multiple retail stores today take a clinical view of debt. They decide that they can withstand annually say 5 per cent. to 10 per cent. debt write-offs. They adopt a completely dispassionate view and pursue any subsequent debt default ruthlessly. Some of them do so as a matter of principle and without regard to the cost-effectiveness of the action that they are pursuing. That approach, taken together with the iniquities of the warrant sale system, causes a great deal of hardship and distress.
As the Solicitor-General for Scotland has said, the twin objects of the Bill should be rightly and properly the achieving of a good system of enforcing debt by diligence and debtor protection, and it must be tested against those two propositions. That leaves for further and future consideration important areas such as credit provision, the levels of security that should properly be required, 183 provision of debt counselling and small debtors' courts, which continue to form an important part of the wider argument.
These issues are of fundamental importance, especially as the consumer boom develops inexorably and people are taken through the courts with decrees for debt being enforced against them. The Bill is half a loaf; it is better than no bread but there is still the other half of the law relating to these other matters to be tackled at another stage at a future date.
My main concern is the need for continuing debtor protection. It is important in today's retail trading conditions that those who run businesses should understand that they are able to look after themselves and their own commercial interests. I have in mind the simplification of the whole process of diligence and in particular the attachment of earnings provisions that are contained in the Bill. If the process of diligence is made a lot easier, it will tend to be used more often. When I was a practising legal agent before coming to the House I rarely advised clients that the process of wage arrestment should be pursued because of its confounded difficulties. If it is made more efficient and expeditious, legal agents will be saying, "It is such a smooth, streamlined and efficient system that it should be used more readily." That is a potential danger that we should bear in mind.
I wish the House to consider carefully the position of those who cannot pay as opposed to those who will not. Those who will not pay deserve to be taken all the way down the avenue of enforcement that is contained in the Bill. In my view, and in my experience as a constituency Member, there is an increasing debt problem, and especially multiple debt.
The Scottish Law Commission's report perhaps did not address that aspect of the problem with as much energy and vigour as some of us would have wished. I am talking about those who find themselves in difficulty because of fuel debts to the electricity boards or gas boards. There are also those in rent arrears. The problem of mortgage arrears is increasing. There are also those who find themselves in difficulty after having used postal club books and catalogues to equip their households and clothe their families. I have in mind especially those who get into trouble because they are in debt to the extent of about £150. It is almost inevitable that these people find themselves on supplementary benefit, unemployment or sickness benefit, though they might not have been when they took on the debt initially. When they go over the top there is little hope for them.
§ Mr. Hirst
Is it the hon. Gentleman's experience that the voluntary code applied by electricity boards and gas boards works in a fair way and ensures that there are no disconnections, especially during winter months, for certain deserving categories of the public?
§ Mr. Kirkwood
I must concede that it is much better now than it was. There is a long way to go, but the code of practice has improved the situation a great deal. That is a valid point the House should bear in mind.
§ Mr. Wilson
Is the hon. Gentleman aware that the rate of disconnections for short-term debtors has exploded considerably during the past six months, both to electricity 184 boards and to gas boards? I think that there has been about a 40 per cent. increase in the number of those in debt to the electricity boards.
§ Mr. Kirkwood
I recognise that to be true. I understood the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) to be saying, however, that the system is working better than it was. There may be more debtors, but the process and the way in which the electricity boards are approaching the problems of disconnection have improved. That is my experience, but I stand to be corrected by hon. Members who may have had a different experience.
The cost of a poinding includes the cost of a decree and court expenses in addition to the amount of the debt. Account must also be taken of the interest that runs during the course of the repayment of the principal sum, including court expenses. These are all additional expenses and expenditures that go on top of the principal sum. I referred earlier to a debt of £150, and the process means that the final sum to be repaid is significantly higher than the original debt. I hope that further consideration will be given to diligence costs in Committee. I am worried about the imbalance.
I want to return to the argument about debt arrangement schemes. The hon. Member for Monklands, West made his position clear; I support him. We can explore the arguments in further detail in Committee and hear what the Government have to say.
I want assurance from the Government about social fund loan repayments. The Solicitor-General for Scotland may not want to address the point today but I give him notice that I shall raise it in Committee. Under current legislation, if loans made by the social fund are not repaid, do we use the process of diligence? If so, are people subject to civil imprisonment for non-repayment of loans? I do not think that that is likely, but I want to ensure that between now and Committee stage the Government will give thought to the matter because it is important.
The repayment of rates and tax debts by instalments should be permissible. Under clauses 1 and 5 the Government are setting their face against that. The Scottish Consumer Council has commented on it. I think that the Government's position is wrong.
Like the hon. Member for Monklands, West, I think that we should stop completely auction sales in a person's home if he or his family still live there. There is no excuse for that. If furniture is to be taken to auction rooms, auctioneers will charge fees for moving that furniture; sometimes they charge as much as 20 per cent. of the value of the furniture. Again that involves additional costs for the debtor.
§ The Solicitor-General for Scotland
I understand why the hon. Member for Monklands, West (Mr. Clarke), given his constituency, would in 99 cases out of 100, if not in 100, find it impossible to believe that a debtor would want to have the warrant sale in his own home. But the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who represents a rural constituency where auction rooms may be remote from where the property is, might feel that, rather than incurring the additional expense of an auction room sale miles away from the person's home, particularly if the person intends to sever his connection with that part of the world, it would be 185 better value for money to have the sale on the spot. I stress that it is entirely a matter of consent. If the person does not consent, the sale has to take place in an auction room.
§ Mr. Kirkwood
I take that point. I think that there should be a restriction on the fees charged for moving furniture, but I am prepared to discuss that in Committee.
The Scottish Consumer Council is right to ask for the exemption of all medical aids and equipment used by the debtor and his family. The sheriff officer will be put in an impossible position in exercising his discretion under clause 16(1)(c). Clause 16(1)(b) should also be examined again. The exemption of £500 for tools of the trade is too low. We can discuss that too in Committee.
I give the Bill a general welcome. It is technical but it will improve the position. We have to he careful about how the Bill will impact on the small scale debtor who is invariably claiming supplementary or other benefits. That category of person will suffer most if we do not get the Bill's provisions right.
§ Mr. Barry Henderson (Fife, North-East)
It is encouraging that a Bill of such complexity and sensitivity is not politically controversial. I was disappointed that the hon. Member for Monklands, West (Mr. Clarke), who generally presents the acceptable face of the Labour party, said that he would like the Bill to go further in respect of warrant sales but avoided spelling out how that should be done. Since 1968, the Scottish Law Commission has been considering the matter. For many years the Labour party has been pressing for something to be done about humanising—if that is the right word—warrant sales. The Government are now doing something. Unless the Opposition have worked out what they would do differently, it would have been more generous for the hon. Gentleman to give an unqualified welcome to the Bill in that respect.
The Bill removes the unacceptable Dickensian features of warrant sales procedure and gives some rights to debtors. I congratulate the Scottish Law Commission which has worked so long and—if one may be forgiven the pun—so diligently trying to find a solution to the problem. It started the process with a two volume report in 1985, and then there were successive consultations on which the Bill is based.
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) made a distinction between people who will not pay and people who cannot pay their debts. It is a fundamentally important distinction. We should make it clear to all our constituents that the law will still come down hard on people who will not pay, as distinct from those who cannot, for one reason or another, legitimately fulfil their obligations. In this respect it would help if, from the earliest age and throughout their growing years, children were reminded of their duties and obligations, as well as of their rights.
Unlike the hon. Member, I am not familiar with these procedures so I was interested to read the Poinding Act 1661 which noted that if promises, pactions, obligements and debts were not faithfully performed and satisfied, there could be no trust and consequently no social intercourse and commerce at home. That is true. We must get it across to people that if they do not fulfil their obligations there will be serious consequences for all of us.
In opening the debate, my hon. and learned Friend the Solicitor-General for Scotland gave some figures. I did not 186 catch all of them so perhaps he will come back to them in his reply. I understood him to say that there were in Scotland about 80,000 cases, of which 700 involved warrant sales. In the debate in another place, Lord Ross of Marnock referred to 38,000 cases in one year in Strathclyde, of which only seven involved warrant sales. If one of those sets of figures is not wrong, there seems to be a great disparity between what has happened in Strathclyde and elsewhere in Scotland.
§ The Solicitor-General for Scotland
The figures I gave were 80,000 debt decrees granted by Scottish courts. As I recollect, Lord Ross of Marnock was referring specifically to decrees involving rates, of which only seven eventually finished up as warrant sales.
§ Mr. Henderson
I am grateful to my hon. and learned Friend for clarifying that.
If those who are less well off are to get fair terms and conditions for credit sensibly taken, it is important that society as a whole does not allow people to get away with not paying the dues for which they make themselves liable. Therefore, we have to strike the proper balance between encouraging people to fulfil their obligations and not being inhuman in the application of the law.
As I said earlier, the Labour party has long talked about doing something about warrant sales. I am delighted that it is this Government who have taken action. I particularly congratulate my hon. and learned Friend because he has taken a special interest in the matter since he came into the House, even before he reached his present high office. Apart from the weight of the Bill, it will be very important. On present form, it seems that such Bills last for about 150 years before they are changed.
My hon. Friend the Member for Renfrew, West and Inverclyde (Mrs. McCurley) made an important point about avoiding debt. The Scottish Consumer Council has been helpful to hon. Members by looking closely at the legislation and making a number of suggestions.
In a letter that I believe was circulated to all hon. Members on 5 March, the Scottish Consumer Council complained in the nicest possible way that the Bill, although making many improvements, did not deal with, for instance,controls of the informal debt recovery process such as the operation of debt collection agencies, other sanctions for debt such as disconnection of fuel services or evictions or the scope for money advice services. Therfore, the Bill's proposals concentrate on improving court processes and can certainly not be regarded as the 'solution' to the problems of consumer debt".It would be interesting, on another occasion, to consider the sort of problems that would remain once the Bill was on the statute book.
It is important to recognise that easier credit is no kindness to anyone, least of all the less well off. Anyone who is involved in providing credit should concern himself not only with the possibility of the person repaying, but with his capacity to do so in a reasonable way. It is not just a question of assets.
I particularly welcome clause 18, under which sheriff officers will not be allowed to enter premises if children under 16 are alone in the house. That is most desirable.
The Scottish Consumer Council mentioned that it wants medical aids or equipment to be exempt, and the hon. Member for Monklands, West referred to that. I am not convinced by the case advanced by the council. Under the Bill, such aids will be exempt only if the court officer 187 executing the poinding considers that they are reasonably required for the use of the debtor or his family. If they are not reasonably required, why should they be exempt?
§ Mr. Kirkwood
That is a medical judgment.
§ Mr. Henderson
The hon. Gentleman says that it is a medical judgment. Let me give an example in which it is not. A bath chair—a relic from the turn of the century—might be regarded as a medical aid. Other hon. Members could give examples. Some medical aids or equipment may have no conceivable connection with anyone in a given household. Should they be exempt simply because they are medical aids? A house might contain objects, such as an antique stethoscope, which might be regarded as having value as an asset.
It is too quick and easy to say that medical aids and equipment should be exempt. What if one of the problems of the household is drug addiction? I am not a sheriff's officer, but I would not know the difference between a "druggies'" equipment and medical aids or equipment. We should look further into this question and I am not yet convinced that we should change the wording of the Bill.
I am more sympathetic towards the point made by the Scottish Consumer Council on the £500 ceiling on exemption for tools of trade. There is a case for making that figure higher. I do not know what provision would be made for indexing that figure and perhaps my hon. and learned Friend the Solicitor-General for Scotland will clarify that.
I declare an interest as a member of the British Computer Society. I notice that the council uses computers as an example in which the ceiling might be more than £1,000. I am not sure whether that is important. The price of computers is falling and one can buy a sizeable computer for under £500 nowadays. There are many other tools of trade of which a modest range might easily add up to £1,000.
§ Dr. Godman
Shipwrighting, for instance.
§ Mr. Henderson
People in trades such as shipwrighting must have their own tools because they are not provided by their employer.
The Scottish Consumer Council also said that it was disappointed that the Bill did not allow instalment orders for arrears of rates and taxes to be made. I hope that my hon. and learned Friend will take note of what the hon. Member for Monklands, West said about that, as he is an ex-president of the Convention of Scottish Local Authorities. The hon. Member for Monklands, West did not accept—nor did the Scottish Consumer Council—that local and central Government are always as sympathetic to debtors as are ordinary creditors.
Less secrecy about the way in which the high street banks calculate interest and bank charges might also help those who come within the ambit of the Bill. Not long ago one of my constituents had an argument with his bank about the calculation of interest on his account. Eventually, the bank said, "OK, we have done you for too much, but we won't tell you how we have calculated that. However, we will let you have a near £10,000 reduction in your interest bill." My constituent was not likely to have to have a warrant sale, but it is not untypical for a farmer to carry a substantial overdraft.
§ Dr. Godman
Or a fisherman.
§ Mr. Henderson
If people with overdrafts cannot work out what the interest payments on their accounts are at any given time, it ill behoves the banks to say, "You must pay so-and-so."
The banks have been less than honourable in withholding from their customers information to which they are legitimately entitled. If anyone is asked to pay a bill, he should be given full and explicit details of why. I do not understand how the banks have got away for so long with not spelling out exactly how the interest on accounts is calculated or how bank charges are accumulated.
If the banks do not put their house in order themselves, I trust that this House will put it in order for them before long. I appreciate that the Bill would not be the best instrument to do that, but I hope that there will be an opportunity to take up the matter in the House soon.
As my hon. Friend the Member for Renfrew, West and Inverclyde said, one of the most important ways to keep people out of the sort of problems that we are addressing is to get them to face up to the problem of debt as soon as it is identified. When someone is in trouble he should never go on worrying. He should seek advice at the earliest possible moment either from the person to whom he owes money or from other sources, such as a citizens advice bureau. People must face their problems as soon as they are identified so that they can be helped to resolve them in a rational way, rather than under the anxiety and pressure that people often experience when they are in debt. If they deal with their problems in a rational and sensible way, they will not need to be worried by the Bill's provisions.
Mr. Bruce Milian (Glasgow, Govan)
The Bill deserves a general welcome. Most of the points that need to be made about it have been made. I shall simply emphasise a number of points already made by hon. Members, and especially by my hon. Friend the Member for Monklands, West (Mr. Clarke).
In some cases credit is all too easily available, and that is a problem. Anyone with a bank card is inundated with letters offering more and more money on easy credit. Unfortunately, many people who are not very wealthy, and some who are in poor circumstances, become involved in excessive credit. The poorer the person, the more such money costs. The better off one is, the easier it is to get credit at reasonable rates. There is a problem there, but the Bill does not pretend to get rid of it: it deals with its consequences. However, as I have said, the Bill is generally welcome.
I share the view expressed by other hon. Members that there seems to be no justification, either in principle or in practice, for the exclusions in clause 1 which deals with payment by instalments. I am not sure about the reference to the Inland Revenue regarding paymentas if it were tax".Presumably that relates to national insurance contributions as well as tax. I should be grateful if the Minister could clarify that point in clause 1(5)(d).
On taxation generally, some of the VAT practices are damaging, especially to business. Obviously there has been a tidying up of VAT procedures, but there is no reason why firms that are able to pay their VAT on time should get extended credit, while other firms in similar circumstances pay their bills on time. The Inland Revenue 189 and Customs and Excise have everything in their favour. In this case they will be excluded from the instalment procedures and they have preference in insolvency and bankruptcy legislation. The Solicitor-General for Scotland will recall that we had arguments about the extent of the preference that they ought to have during the progress of the Bankruptcy (Scotland) Act 1985.
The Inland Revenue and Customs and Excise are well protected in terms of debts, and I see no reason in principle or in practice for excluding them from the instalment system under clause 1. I have had one or two constituency experiences of Customs and Excise vigorously pursuing debts. No doubt the authorities were acting under instructions, as they are at the moment, in view of the general determination of the Government to tighten VAT procedures. However, this pursuit has been carried out. Other creditors were being supportive of small firms while Government agencies were driving them into liquidation. That is undesirable. It is another example of making special rules for the Inland Revenue and Customs and Excise. I do not like that, and I hope that it can be amended in Committee.
Payment by instalments should not be on the application of the debtor, as is provided for in clause 1. Such a system sounds simple and perhaps even desirable, but in many cases the debtor is not sufficiently aware of it to make the application. I see no reason why that restriction should appear in the Bill. There is no reason why the court should not decide to make an order for payment by instalments, even if there is no specific application by the debtor. Again, I hope that that will be amended in Committee.
I agree with those who say that we should ban warrant sales in the debtor's home. The Bill goes a long way towards that, but it is unrealistic in some cases to look upon the debtor and creditor as being equally able to take decisions. In such situations one of the parties is under much pressure and sometimes suffers from a great deal of emotional stress. Therefore, he is not able to make sensible or rational decisions. I, and I think many hon. Members, would prefer to see the complete exclusion of warrant sales taking place in a debtor's home. I hope that the Government will not stick to the Bill's provisions. If we are to reduce the possibility of such sales to a small minority of cases, it is far better to abolish the provision for them. I am sure that all hon. Members would agree with that.
There has been some discussion about the poinding exclusions in clause 16. The exclusions in clause 16 make it difficult to see what is left—except perhaps a motor, car, television set, a radio or a video. It would be desirable if legislation could be drafted to provide a list of the things that could be poinded, rather than a list of the exclusions. Of course we are talking about dwelling houses, not business premises. There is perhaps some difficulty about drafting such legislation, but if we consider the list of exclusions and take account of expenses and the difficulty of getting reasonable sums at auction for some of the goods taken from debtors' homes—unless one seizes a motor car or perhaps an expensive motor cycle or a television set—we see that it is not worth going through the trouble of poinding arrangements, the warrant sale, and so on.
Unfortunately, because of the way the Bill is drafted and the judgment of the value of items being in the hands of the sheriff officer, it will still be possible to take from domestic premises lots of things which at the end of the 190 day will realise very little at auction. However, their seizure can cause considerable hardship to the debtor, even if he does not come within the strict definitions and exclusions of clause 16. Perhaps that matter can be examined in Committee.
It would be much better if, in practice, whatever the definitions of the legislation, only substantial items were subject to poinding, and only in cases where one could not really argue that one was dealing with an essential item of equipment. If we are to have warrant sales at all, that would be the best solution. Most hon. Members would like to abolish warrant sales altogether. However, there is a difficulty about the debtor who deliberately refuses to pay, even when he may be able to do so and where, for one reason or another, the earnings arrestment arrangement cannot be implemented. The easier earnings arrestment arrangements in the Bill should be an incentive to avoid the poinding and warrant sale procedure—certainly in the case of anyone who is in work.
Rightly, one has always tended to emphasise the humiliation involved in selling off a debtor's furniture in his own home, but there is also considerable humiliation in the arrestment of earnings. As my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) said in an intervention, it does not do a person any good with his employer to have an arrestment put on his wages. The employer may not be able directly to punish an employee by dismissal, but we all know that in many cases, when faced with this kind of situation, an employer may decide that he has a troublesome and undesirable employee. In practice, many people must have lost jobs because of an arrestment of earnings. That is by no means an easy option compared with poinding and warrant sales. The Bill makes the process easier and puts an effective weapon into creditors' hands. It is a sanction that in many cases will make debtors, who are able to pay their bills but are perhaps reluctant to do so, think again. Many such matters should be pursued in Committee.
The Bill is generally to be welcomed, but it suffers from a number of defects. Some could easily be put right by simple amendments. I hope that hon. Members who serve on the Committee—I do not apply for such service—will endeavour to put matters right so that we shall have a worthwhile piece of legislation.
§ Mr. Michael Hirst (Strathkelvin and Bearsden)
I believe that the House will gibe a warm welcome to the Bill and congratulate the Government on implementing the report of the Scottish Law Commission on diligence. I have heard frequent references in the debate to the worthy document that the commission has produced, but, as a non-lawyer, I must say that I like the executive summary of the report's findings rather than its meat. The Bill will probably be thought of in Scotland as the one that brings to an end the indignity of warrant sales in debtors' homes. It is important that we should recognise that other worthy advances are contained in the Bill.
I must confess that I have had no experience of a warrant sale, but I certainly have experienced constituents coming to me in great distress, and normally only a few hours before a warrant sale is due to take place. Anyone who regularly combs through his or her local newspaper must see the pathetic little notices that advise that a warrant sale will take place at the home of a certain person, with the address clearly shown. Such notices heap 191 misery and indignity on someone who has had the misfortune to get into debt and have a court decree made against them in respect of the non-payment of debt.
§ Dr. Godman
The position could be even worse for the person concerned. I know of a poor person in my constituency who was caught up in such a predicament. He experienced his neighbours coming to see him because they had been leafletted as if it were some kind of general election campaign. The situation can be much worse than the hon. Gentleman suggests.
§ Mr. Hirst
The hon. Gentleman has rightly drawn attention to a practice which I understand is carried on by people who are known as ghouls. They move in not just to see goods sold at fairly low prices but to be general spectators at a grisly process. There is a supreme indignity in one's neighbours being leafletted about an auction of one's household items.
I believe—this point has been made by one of my constituents with great passion — that a ring operates among traders who customarily attend warrant sales. By consensus, they keep prices down and, in some way, make matters even worse for the debtor in that he or she does not receive full and fair value for the goods sold. Therefore, I welcome the provision in the Bill that ensures that the debtor can receive a fair market value for his or her goods.
The House would make a mistake if it did not recognise that the warrant sale procedure has been an effective tool in the system of diligence. I understand that, in 1985, some 80,000 decrees for debt were awarded by the courts, only 700 of which resulted in warrant sales. As the debate has focused quite reasonably and sensibly on the importance of recognising the existence of a debt and the need for it to be satisfied, we must accept that the warrant sale procedure is effective. Nevertheless, I am delighted to see that the Bill ends what I consider to be the appalling system of holding a sale in a debtor's home. If a debtor wants to have a warrant sale in his or her home, that is all well and good, but, frankly, I believe that it is important—
§ Mr. Kirkwood
Are there any circumstances in which a debtor would actively seek a warrant sale at home?
§ Mr. Hirst
Some debtors may be prepared to go through that stigma and misery, but they should have the option of adopting the anonymous process that is identified in the Bill and the various protections that it is able to give them.
The hon. Member for Dundee, East (Mr. Wilson) was right to draw attention to the phenomenal growth in credit use and the ease with which people can obtain it, often with little evidence of earnings to sustain capital and interest payments or, indeed, the existence of a job. My hon. and learned Friend the Solicitor-General for Scotland mentioned a report in a Scottish Sunday newspaper stating that a young girl, who I believe was unemployed, had managed to go up and down high streets and obtain credit arrangements amounting to a considerable sum of money.
My experience with the availability of credit was brought home with a vengeance when my wife and I went to buy some new kitchen furniture. Having found some good, solid bits of furniture that looked as though they 192 could withstand my children's depredations for the next 20 years, we proceeded to purchase it. I offered a cheque to the large store, but it was spurned. I offered an endless array of the plastic money that I have in my wallet, and each was politely refused. I was invited to apply for a credit card at the store. When I said that I did not need any more credit cards, and nor did my wife, I was told that, if I were to buy their card, there would be a discount and a special surprise gift, both of which were acceptable. We got a rather expensive electric coffee maker and another plastic card for my wallet.
§ The Solicitor-General for Scotland
Which shop was that?
§ Mr. Hirst
It would be rather injudicious to mention store names for fear that they instantly terminate the credit arrangements upon which my wife may well depend.
It struck me that the young man was more interested in getting me to take out a plastic card for his store's credit scheme than in selling the goods. I noticed with some interest that, after the plastic card arrived and after I had received the free booty and the discount that was offered, which apparently was not available on payment with a cheque, I noticed that the annual rate of interest—the APR—was about 38.9 per cent. I am happy to say that that store will never get interest at such a usurious rate from me.
Hon. Members have been right to draw attention to the ease with which credit can be obtained and the corresponding problems that occur when people —particularly young people—run into debt. Sadly, if my constituents' experience is anything to go by, when debtors talk about one debt, it turns out that they have multiple debts to many people. In fact, the £51.84 for which bank managers harry them is normally the smallest of the debts that they are trying to pay off.
We should pay tribute to the efforts that are made by the citizens advice bureaux to institute some form of debt counselling. It is particularly welcome. The CAB network has done a powerful job in trying to help people who have got into debt problems. I pay tribute also to the electricity and gas boards. The number of disconections that take place is minuscule compared with the number of customers that they have. The voluntary arrangements to guard against disconnections in special cases of need and hardship are worthwhile and we should recognise them as such.
I accept that debt counselling will not always be appropriate. Whenever there is evidence of a relaxation of a scheme, there are bound to be people who will try to take advantage of it. The House has a duty to protect not only the debtor who gets into a mess but the interests of the person who, for one reason or another, provides credit. I accept that creditors may be pushed into taking legal action simply because a debtor has either dishonoured a voluntary rescheduling of a debt arrangement or has persistently refused to settle a debt.
I am pleased that there is to be an end to imprisonment for non-payment of tax penalties and rates. That was an undesirable legacy of the past which it is impossible to justify in relation to many other debts. It cannot be right that somebody who has defaulted on the payment of his or her rates should take up an expensive place in gaol.
I believe that there will be a general welcome by the House for the arrangements in part I for time-to-pay 193 directions and time-to-pay orders. If they are used sensibly by the courts, they will be a powerful weapon in their hands—not just so that people avoid getting into worse debt but so that they may he helped through this difficult period on a sensible basis that does not undermine the stability of the family by having all the creditors piling in simultaneously and driving the unfortunate person into personal bankruptcy, with all that that entails.
There can be no benefit to society in a system that allows a court order to be taken against a person if effectively it deprives him or her of the wherewithal to live. Normally the debtor is the bread winner of the family. It would be foolish if the breadwinner were to be stripped of all the money on which his family ought to be living to pay off one debt, thereby incurring future debt in order to stay alive. The present arrangements are onerous, and I am pleased that they are to he relaxed.
The House should welcome the new arrangements for arrestment. I am sure that all hon. Members know of sad cases of a wife or an ex-wife and her children discovering that her husband or former husband has defaulted on maintenance payments, which leads to sadness, worry and difficulty for the woman and her family. It is definitely preferable to have the arrangements set out in the Bill rather than the hit-or-miss arrangements that have existed until now, which mean that if the man defaults on his maintenance payments the woman is put to the inconvenience, worry and cost of going to a lawyer and obtaining a court order. It may lead to a wonderful amount of work for the legal profession, but it is not a civilised way of enforcing debt arrangements.
I am also pleased about the arrangements for conjoined arrestments. There is evidence that those who get into debt with one company, firm or organisation will probably have a series of other debts and that in some cases they juggle the debts between one company and another to obtain a breathing space. A conjoined arrestment has the merit of ensuring that no one creditor will pile in so strongly that that creditor obtains an unreasonable or an unfair preference over the other creditors. Therefore, we should welcome the intention to introduce conjoined arrestment.
I am aware that the hon. Member for Greenock and Port Glasgow (Dr. Godman) wishes to contribute to this debate, and I do not wish to prolong my speech unreasonably. Nevertheless, I think it is fair to say that while I have been a Member of this House I have heard a great deal from two hon. Members who are not here this afternoon and whose contributions I should have thought the House would have especially liked to hear. I refer to the hon. Members for Falkirk, West (Mr. Canavan) and for Carrick, Cumnock and Doon Valley (Mr. Foulkes).
I recall the trenchant observations that have been made on past occasions by the hon. Member for Falkirk, West. He has railed the Government for perpetuating the system of warrant sales in debtors' homes because it has brought so much misery and indignity to those unfortunate people. Moreover, not long after I was elected I well remember the hon. Member for Falkirk, West saying that warrant sales were a blight on the face of this Government and emphasised the harsh and uncaring nature of the Government. Therefore, I am sorry that the hon. Gentleman is not in the Chamber to make a contribution to this debate. Then he would have recognised that, 194 although he and some members of his party prefer to wear their hearts on their sleeves, we on this side of the House intend to take action.
No doubt my hon. Friends the Members for Falkirk, West (Mr. Canavan) and for Carrick, Cumnock and Doon Valley (Mr. Foulkes) have good reason for not being here today. May I mention that my right hon. Friend the Member for Glasgow, Rutherglen (Mr. MacKenzie) very much regrets that he is unable to be here today. He is not very well. It is nothing serious, but my right hon. Friend would very much have liked to participate in this debate, because he has taken a considerable interest in this question over many years.
§ Mr. Hirst
I am grateful to the right hon. Gentleman for his intervention. The whole House pays tribute to the distinguished way in which the right hon. Member for Glasgow, Rutherglen (Mr. MacKenzie) has pursued this point. He has rightly emphasised in the House over many years, including the time when I was not a Member of Parliament, his distaste of warrant sales and his resolve to bring about a far more civilised arrangement for protecting both the debtor and the creditor. I know that the House would have been all the better for the distinguished contribution that we might have expected from him. I know, too, that the House hopes that lie will recover quickly from the indisposition from which he is currently suffering.
§ Mr. Michael Forsyth (Stirling)
In view of the obvious disappointment of the hon. Member for Falkirk, West (Mr. Canavan) at not being included as a member of the Standing Committee that considered this matter on the last Scottish measure, may I suggest that he should play his part on the Committee that is to consider this Bill?
§ Mr. Hirst
I expect that there will be discussions between the usual channels. I make the confident prediction that if the hon. Member for Falkirk, West is included as a member of the Standing Committee the Committee will be all the better for it and that we can look forward to vigorous points being made by him.
§ Dr. Godman
§ Mr. Hirst
I do not know whether the hon. Gentleman wants to intervene. I shall allow him to do so, but after that I must press on.
§ Dr. Godman
I am grateful to the hon. Gentleman for giving way. My hon. Friend the Member for Kilmarnock and Loudoun (Mr. McKelvey) has also been a fierce critic of warrant sales, but unfortunately he has been ill for some time. Nevertheless, I am happy to point out to the hon. Gentleman and to the House that he is well on the way to recovery.
§ Mr. Hirst
Whatever the Opposition may lack in numbers, they make up for in those who will stand up and cite the roll of honour of their absent colleagues who have done well over the years in highlighting the indignity of warrant sales in the home and their desire that that system should be changed.
Before I gave way to the right hon. Member for Glasgow, Govan (Mr. Milian), I was saying that I believe that this Government are to be commended for being prepared to enact the report of the Scottish Law Commission. I give the Bill a very warm welcome. I hope that those who are so quick to accuse the Government of 195 being hard-nosed and uncaring will find that this Bill gives them plenty to chew on and that they will recognise that it shows a most caring attitude on the part of the Government.
§ Dr. Norman A. Godman (Greenock and Port Glasgow)
The Bill deserves a positive, if constructively critical, response. I share the natural modesty displayed by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan). I, too, am not volunteering for duty on this Committee, but if press-ganged into doing so I shall. The Opposition Chief Whip is heading my way. That is why I said that.
Indebtedness is a major social problem that afflicts the lives not only of many poor citizens, but of those on low incomes. In many communities in the west of Scotland indebtedness takes the form of that parasitic pest, the moneylender. I regret to say that my constituency is not free of that pestilential nuisance. The poorly paid, the unemployed and single-parent families are often offered by moneylenders what appears to be easy credit. However, there is a sharp sting in this kind of credit because of the huge rates of interest that are demanded by such parasites.
The hon. Member for Fife, North-East (Mr. Henderson) said that it is important that people recognise the dangers of slipping into debt. Some communities are reacting to the problem in a positive manner. Occasionally we hear of working-class communities fighting back and creating their own community-based banks with deposit accounts and loan facilities for depositors.
In my constituency, there is a fine example of such a community bank, situated in an area that is susceptible to debt—the Greenock East Credit Union Ltd., which held its first annual general meeting on Sunday. It now has more than 700 members and continues to grow month by month. The member depositors of that community elect the board of directors and, as depositors, they can obtain loans for sums ranging from £75 to £300. Many of those people subsist on low incomes, and, by way of the community bank, they can avoid credit with high interest rates. We have a community bank of fine repute, under the guidance, hard work and encouragement of Miss Marian Wilson and the Rev. Iain Fraser and their colleagues. That is a fine example of the role that a community can perform in dealing with debt. Such examples can also be found elsewhere.
I should like to see credit unions multiplying in number so that, among other things, people can escape the threat and humiliation of multiple debt and the fear of that harshest of sanctions—the warrant sale. That fear is present in many such communities.
In the main, people slip into debt not because of dishonesty or fecklessness, but because of a worsening in their personal economic circumstances. I share the deep disappointment of my hon. Friends at the Government's insensitive refusal to abandon warrant sales in the Bill. Although warrant sales have involved hundreds, not thousands, of citizens in the past two or three years, they nevertheless inflict humiliation and despair upon those who are affected.
I welcome the innovation of placing warrant sales in local sales rooms, but I do not believe that that is an effective solution, because only paltry sums of money will 196 be realised by auction. Such items for sale will, in most cases, be puchased by those grubby dealers who hand around or frequent sale rooms in our cities and towns. I have no hard evidence — perhaps the Solicitor-General will correct me if I go badly astray — but I genuinely believe that those dealers organise rings in sales rooms so that they can obtain items for auction at the cheapest possible rate. Therefore, I do not believe that the sale room solution will be effective.
I offer a somewhat qualified welcome to the Bill. It certainly needs amendments to transform it into what could be a fine piece of legislation.
In a brief sent to Scottish Members, the Scottish Consumer Council outlined some of its reservations about the Bill. Perhaps those matters would be better considered in Committee. However, I support the hon. Member for Fife, North-East in saying that the ceiling of £500 for tools of trade is somewhat low. One need not be referring to someone whose tools of trade are, say, a computer and associated facilities; it could be someone who works in a manual trade, albeit of a highly skilled nature, whose tools vastly exceed £500 in value. In a sedentary intervention, I offered the example of a shipwright. However, there are other highly skilled manual workers who possess tools that have cost them much more than £500.
There is an alternative to the warrant sale, whether it is held in the debtor's home or in the local sale room. I support the reservations on that matter expressed by my right hon. Friend the Member for Govan. If the arrestment of wages sanction were developed in Committee, by way of amendments, could bring about the eventual elimination of warrant sales.
Therefore, this is very much a qualified welcome for the Bill, which I sincerely hope will be subjected to amendment in Committee.
§ Mr. Michael Forsyth (Stirling)
I should like to give a brief welcome to the Bill. It is difficult to disagree with what it purports to do. I am rather surprised that it will take 109 clauses and eight schedules to achieve its aims, but I am at a disadvantage in not being a lawyer.
I should like to make just one point. As I sat here, contemplating what I was going to say, I became convinced that it would be a remarkable point for me to make, and my hon. and learned Friend the Solicitor-General will perhaps be slightly surprised to hear it coming from me. The Bill tilts the balance in favour of those who provide credit because it enables them, through arrestment of wages, to recover debts more easily than has been possible in the past. I am sure that that is a proper thing to do in balancing the provisions of the Bill, which also mitigates the burden of debt on individuals, but I am not certain that one would be happy for it to be easier for some people to collect debts, given the way in which the credit market is developing, especially for private individuals.
I refer not only to the individuals about whom the hon. Member for Monklands, West (Mr. Clarke) spoke. He concentrated on people with low incomes in Scotland. However, he knows very well that Scotland has the second highest per capita income of any part of the United Kingdom. The problem of debt is not confined to those who are poor. Of course we have our fair share of people who are hard up, just as we have people in Scotland who are well-to-do. The problem of debt cuts right across the 197 board. It is a function of the development of plastic money and credit and the incidence of low inflation and high interest rates in the market place.
We have all experienced what happens when an account comes in from Access. Instead of encouraging us to pay it off at the end of the month to avoid paying a penal rate of interest, it asks, "Have you thought of extending your credit limit? Fill in the attached slip and send it off. Your credit limit will be increased by 50 per cent." No effort is made to find out whether, in the meantime, one has taken out other credit cards. If one has done so, one finds, of course, that they send out the same message.
Creditors can do that because they are charging penal and excessive rates of interest. As my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) said, interest rates of 32, 38 or 42 per cent. are obscene. I have little sympathy with the people responsible for that when they try to recover debts from individuals who, perhaps from feeble-mindedness or irresponsibility, get themselves into a desperate financial situation.
The reason why I say to my hon. and learned Friend the Solicitor-General that perhaps we should think how we can encourage people in the private market place to be more responsible in dishing out credit is that those people make a commercial judgment. They decide that on a 38 per cent. return they can afford to write off a large proportion of the debt, so they can afford to extend the volume of credit even further, thereby encouraging people who do not realise what they are taking on or understand the real cost of the debt to get themselves into deeper problems.
§ Mr. Hirst
Does my hon. Friend agree that a most unfortunate practice by some people who push credit hard is that they describe the interest rate as so much per month? While 3 per cent. per month does not sound much, the APR on 3 per cent. per month is approaching 40 per cent. per annum. Does he agree that while that is a matter for consumer credit and is not the responsibility of the Solicitor-General, something needs to be done to highlight better the precise rate of interest that will be paid by someone who enters such a credit sale agreement?
§ Mr. Forsyth
I agree with my hon. Friend. That is why I am asking the Solicitor-General whether it is possible to make provision in the Bill so that these debt recovery procedures may not be open to those who do not draw clearly to the attention of the borrower exactly what he is embarking on. I realise that my hon. and learned Friend will say that that is unsound and would represent an intervention in the market place, which would be intolerable, and that it is a surprising request from this quarter, but it is a genuine problem.
The problem is not confined to Access cardholders and the plastic money brigade. I am delighted to say that I have been able to find out from my hon. Friend the Member for Strathkelvin and Bearsden the name of the store that is giving away coffee machines in return for accepting its plastic card. The tragedy is that not everyone is as well educated as my hon. Friend or able to take the coffee machine and pay the debt immediately.
§ Mr. Kirkwood
Did the shop consider the hon. Gentleman's job secure enough to justify any credit?
§ Mr. Forsyth
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is not in a position, this week of all weeks, to talk about job security. 198 [Interruption.] I was making the same distinction between the Liberal party and the alliance as the right hon. Member for Plymouth, Devonport (Dr. Owen) made yesterday.
This genuine problem is not confined to credit card companies; it extends to banks. Banks are falling over themselves to encourage people to extend their mortgages. The other day I was astonished to receive a letter from my bank inviting me to borrow more money and extend my mortgage, and saying, "All you have to do is fill in this form and you can borrow and extra £5,000, £10,000 or £20,000." Banks are equally irresponsible. The extent to which they check the evidence of income seems to be limited and they make little effort to check what other obligations people may have.
Such an invitation is tempting. One has only to talk to one's local citizens advice bureau, as we all have done, to see the extent of the temptation to buy today what one would otherwise have to wait some time to acquire. Some credit companies sell their services with advertising, saying, "Why wait? Buy it tomorrow and use your whatever card." Banks, building societies and other credit companies are all on the same kick.
I am a little worried about making it easier for those who are so irresponsible about dishing out credit to recover debts. People who get themselves into debt are among the most vulnerable. Sometimes they are irresponsible. At other times they simply do not know what they are taking on. It is only when the bills start coming in and they find themselves in difficulty — in other words, when it is too late—that they realise the extent of their problems.
I welcome the provision that warrant sales can he held only if the person concerned wishes them to be held in his home and the ending of the practice of putting the name of the person in the local newspaper. That is a tremendous step forward. The whole procedure smacked of the old Calvinist tradition of the cutty-stool. That does not help the debtor to get a grip on his problems and to establish a new basis for advancement.
This is a good measure. I confess that I have not studied every one of the 109 clauses. I shall happily volunteer to serve on the Committee, if only to remind my hon. and learned Friend between now and then to think about ways in which we could put some sanction on those people and give the courts discretion. The hon. Member for Greenock and Port Glasgow (Dr. Godman) spoke of moneylenders who also charge penal rates of interest, sometimes outwith the law and sometimes within it.
§ Dr. Godman
May I point out that those of my constituents who, regrettably, have fallen into the hands of those parasites and money lenders are not necessarily feeble-minded or irresponsible? Often they have no choice but to go to such people, and that is a matter for serious regret.
§ Mr. Forsyth
I shall not argue with the hon. Gentleman about specific cases or fall into the trap of arguing whether people who are put in the position of having no choice are doing the right thing in going to such people. I believe that there is choice, although I accept that people may not be aware of the alternatives or may have made a wrong choice in the first place, getting themselves into debt. However, the hon. Gentleman is certainly right to point out that there are some unpleasant individuals around who exploit the difficulties and miseries of others, but it was ever thus.
199 I ask my hon. and learned Friend to consider whether it is possible to remove from such people the ability to recover debts more easily, which the Bill provides. He may well have some difficulty in doing so, but I have great faith in the market place. If the credit card companies, the building societies and others who advance credit irresponsibly believed that it would be harder for them to recover debts or that their costs would be increased in so doing, they might stop and think twice. On the other hand, they may simply increase the APR even higher than it is at present, because that has been their strategy to date.
I welcome the Bill and look forward to serving on the Committee, should the powers that be so decide.
§ Mr. Tom Clarke
The hon. Member for Stirling (Mr. Forsyth) made a number of interesting points—
§ Mr. Deputy Speaker (Sir Paul Dean)
Order. The hon. Gentleman needs the leave of the House to speak again.
§ Mr. Clarke
With the leave of the House, may I say that if the hon. Member for Stirling is on the Committee, I hope that we can progress from what he has been saying, and perhaps I shall be able to make a better impression on him than I did, for example, on Gartcosh. I live in hope.
I shall not join in the discussion about absent friends or hon. Members. At one point, I thought that some hon. Members who had spoken earlier in the debate had disappeared and left me to reply in their absence. I am pleased that the hon. Member for Fife, North-East (Mr. Henderson) has returned. Some of his comments — although he may not have meant this — were helpful. For example, when he flattered me with a certain description, which I shall not repeat because it is on record, I took it as a double compliment, because he referred to Strathclyde region and to the comments of Lord Ross of Marnock in another place.
The hon. Member for Fife, North-East posed the question, and I take it to myself, what is the alternative to warrant sales? In many ways the alternatives are contained in the figures that he gave the House. He talked about the 20,000 people in Strathclyde who were responsible for non-payment of rates. He said that only seven of them had been the subject of warrant sales. I suggest that that means that 19,993 people had been persuaded in other ways to meet their debts. Perhaps that is what this discussion is all about. Most hon. Members made a genuine attempt, on the basis of the report—
§ Mr. Henderson
§ Mr. Clarke
I cannot give way; this is meant to be a brief speech.
Most hon. Members made a genuine attempt, on the basis of the report from the Scottish Law Commission, to find a balance between the debtor and the creditor. We are making an attempt to do that, given the demands of a modern society. We have heard a lot about credit being available — the plastic card society and the rest. The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) made a point about interest rates, as did the hon. Member for Stirling, which we appreciate. My right hon. Friend the Member for Glasgow, Govan (Mr. Millan) and my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) made solid points about the social fabric of our 200 society. I hope that they will serve on the Committee, because I am sure that it would be delighted to hear more from them, especially as it would be based on their experience.
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), in an interesting speech which was based on his experiences in court dealing with sheriff officers and others—
§ Mr. Kirkwood
As a lawyer.
§ Mr. Clarke
I am sure that the House will bear that in mind. The hon. Gentleman brought out a point which we are bound to pursue. When we were protesting that warrant sales will still take place in houses, albeit with the agreement of the owner, he said that there might be a difference between people living in rural areas and those who live in constituencies such as mine. I have given fair notice to the Solicitor-General that that point, as well as other points, will be pursued in Committee.
A number of points have been made by hon. Members. The Solicitor-General cannot be expected to reply to all of them tonight, although no doubt he will respond. I look forward to the Committee proceedings and the constructive discussion—[Interruption.] I hope that even the hon. Member for Roxburgh and Berwickshire will agree and change the habits of a lifetime.
Despite our reservations, we welcome the Bill. We shall continue to express our reservations and, hopefully, we shall persuade the Solicitor-General and the Government when we debate these matters further.
§ The Solicitor-General for Scotland
With the leave of the House, Mr. Deputy Speaker, I shall reply to a number of the points that have been made in the debate.
First, I say to a number of my hon. Friends that the Opposition are correct in jumping to their feet to ensure that proper commendation is given to hon. Members, such as the right hon. Member for Glasgow, Rutherglen, (Mr. MacKenzie) who, as a Minister and as a Back Bencher, has pursued this matter with great vigour and is responsible for some reform prior to the introduction of the Bill. That could similarly be said of the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey).
The strictures that were placed on the hon. Member for Falkirk, West (Mr. Canavan) were properly imposed. For a long time, he has attempted to suggest that he is the only person who has been bothered about this matter. When we get down to the nitty-gritty, it is unfortunate that he is not here to consider it.
The debate has proceeded on two bases. One has been an interesting debate about the problems of the availability and accessibility to credit in our society. As was made clear on both sides of the House, that can give rise to acute social problems. None of us, as constituency Members, can fail to recognise that.
The right hon. Member for Glasgow, Govan (Mr. Milian) appreciated that that did not fall within the ambit of the Bill. Nor, indeed, can we sensibly hope to contain it within a purely Scottish measure. For every one of those who obtain credit, whether it is by plastic money or other means, there are those who in their Sunday newspapers can send off, readily and easily, to mail order firms south of the border. If the matter of credit—which has clearly 201 raised some concern in the debate—is to be pursued, the argument should be addressed on a United Kingdom basis.
Some consideration has been given to whether the Bill is balanced—whether it now gives greater advantage to the creditor as opposed to the debtor, or vice versa. I would argue, have argued and shall continue to argue that there is a balance—that there is an improvement in the procedures from which both sides benefit. It may be said that earnings arrestment procedures are easier for the creditor, who only needs to seek that order once. At the same time, as I pointed out in opening the debate, under the present arrangements, it may be that the whole of the earnings of the debtor would be taken up. That cannot happen now. Furthermore, as to poindings and warrant sales, the debtor is given an opportunity, for the first time, to go to the court and say, "To continue with this poinding, to continue with this warrant sale, is unduly harsh and it ought to be brought to an end." That is a humane and sensible manner in which to approach these problems in the future.
The connecting point between the broader argument about credit and particular provisions of the Bill is debt counselling. There cannot be any dispute that the sooner people understand the problems that they are accumulating for themselves in taking on board too much debt, the better. If it is through the offices of the citizens advice bureau or the Scottish Consumer Council that such schemes are to be set up, they are to be welcomed and encouraged.
Going beyond that into the more detailed provisions of what might be included, I am bound to say to the hon. Member for Monklands, West (Mr. Clarke) that I am not entirely clear what the position of the official Opposition is with regard to warrant sales.
In the report of the Scottish Law Commission, at page 38, the commission, fully and in some detail, set out the concept of the debt arbitration service which was developed by the Scottish council of the Labour party, among others. At the bottom of page 38, commenting on the scheme, it says:It would appear that poindings and warrant sales would not be permitted, though this is not entirely clear.That comment by the Scottish Law Commission, which was made some time ago, would now seem to be an accurate reflection of the exact position. Nevertheless, I am grateful to the hon. Gentleman and his hon. Friends for the welcome that they have given in the main to the changes that we are introducing.
In particular, the hon. Gentleman criticised the Government for their failure to introduce, as the Scottish Law Commission suggested, a debt arrangement scheme. I think that he will be aware from the consultation that, while some were in favour of it, other interested groups and bodies are nothing like as enthusiastic as he might be or as the noble Lord Morton of Shuna appeared to be in the other place. I suspect that we shall consider the matter in detail in Committee, but it is not a provision to be overstated. First, the Law Commission, and the amendment tabled in the other place, suggested that such a scheme would have to be voluntary. It is interesting that the noble Lord Morton of Shuna concentrated on the debt situation of someone who was earning rather than seeing such a scheme as an opportunity for debt enforcement or debt arrangement across the board. Evidence from comparable although not exactly the same schemes south 202 of the border shows about a 40 per cent. fall out in the first year. The opportunity to provide a satisfactory scheme needs to be examined carefully in Committee.
The hon. Gentleman made several detailed points, one of which was his complaint that debtors would have to apply for time to pay orders. There will obviously be some publicity about this. All the forms will tell the debtor the procedures available and, as I have said, the sheriff clerk will have an interest and will be bound to offer assistance.
The exemptions that are provided in clause 16 in relation to warrant sales was also mentioned. The comments that have been made today have been prompted by the observations which help fully arrived from the Scottish Consumer Council late last night or early this morning. If hon. Members look at that clause, they will find that the Government have already improved upon what was provided by the Scottish Law Commission. It was prepared to exclude only one refrigerator, whereas the Government have been prepared to extend that to "refrigerators" in the plural in the Bill.
A more serious point concerns medical aids or equipment that can reasonably be required for the use of the debtor. I do not find that issue as complicated as the Scottish Consumer Council and hon. Members seem to find it. Having had considerable contact with the Scottish Consumer Council, I am disappointed by its approach. For example, in its letter received by all Members of Parliament it asks whether an elderly person who could walk, but with difficulty, would reasonably require a wheelchair. The image created is that sheriff officers will burst into a house, shove grannies out of their wheelchairs and go out of the door with those wheelchairs. That is a short-circuiting of the procedures, and it is unfair arid untrue.
First, there is the poinding process. Before poinding any goods the sheriff officer must prepare a schedule. If the debtor takes exception to that, he has not one, not two, but three opportunities to object to the sale of a particular item.
Odder still is that the Scottish Consumer Council in its press release went on to say:no medical item should be able to be sold to pay off debts, if it is used by the debtor or his family.The qualifications in the Bill—reasonably required for the use of the debtor or any member of his household"—is simply a variation on exactly the same theme. Unlike the Scottish Consumer Council, I do not consider that to be a major flaw in the Bill.
§ Mr. Tom Clarke
The Minister seems to be missing the point that the Scottish Consumer Council was making, and he is also selective in his points. He disagrees with some and accepts others, but does not give the council much credibility on those points where it seems to disagree with him. The council's point is that a sheriff officer, or a person whom he sends, will not necessarily be qualified on medical matters and will not be in a position to decide whether somebody's bath chair, crutches or other piece of medical equipment is not required by him.
§ The Solicitor-General for Scotland
I understand that. Let us take the ludicrous example of a sheriff officer deciding that granny's wheelchair is not reasonably required by her. In those circumstances there is the opportunity to go to the court and say that that item should not be poinded either on that basis or because to do so would be unduly harsh.
203 The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) was, I understand, at one time a pharmacist. Someone like him might have a considerable quantity of medical supplies in a cupboard which were not being used by the family. It would be absurd that they should be excluded from the possibility of being poinded. The test being applied here relates not just to medical aids and equipment, but to books and tools of trade.
§ Mr. Hirst
Has my hon. and learned Friend any observation to make on the third point in the Scottish Consumer Council's letter about Crown preference in the case of rates and taxes? Is it reasonable that Crown preference should be perpetuated and that time to pay or instalment orders for arrears of rates and taxes should not properly be extended in this case?
§ The Solicitor-General for Scotland
I shall come to that. The right hon. Member for Govan raised the same point.
Hon. Members have said that the figure of £500 is too low. I do not accept that, but, as is set out in the clause, that figure can be adjusted by the Lord Advocate in regulations.
I am grateful to my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) for being the only Member to mention the abolition of civil imprisonment. I am surprised that the extent of the abolition of civil imprisonment has not been more widely welcomed. If there is something medieval or anachronistic in the existing law, it is the continuation of that. It is highly desirable that it should be abolished. The courts would then have the opportunity to imprison only for deliberate failure to pay maintenance or a fine imposed for contempt of court in civil proceedings—a much more limited set of circumstances.
The right hon. Member for Govan was the first to ask why the time-to-pay arrangements are not applied to certain tax debts, and that matter has now been raised again. As the right hon. Gentleman may be aware, during the Bill's passage in the other place it was made clear that one of the differences is that in these circumstances most rates or tax debtors have a continuing liability to pay, so time-to-pay arrangements, say, for one month's PAYE or VAT, would quickly become mixed up with subsequent payments and arrears could mount. In other cases, the tax debtor is merely acting as a collecting agent for the revenue departments and has no entitlement to the money that he has failed to pass on to them. Indeed, as I recollect, and as the right hon. Gentleman reminded me, he participated in the work of the Committee on the Bankruptcy (Scotland) Bill and indicated then that he accepted that there was something of a distinction. Talking about value added tax and PAYE, he said:It is a different kind of debt, because the debt it collected on the part of the debtor for the Government, and deductions for PAYE have been made from employees' wages, and must be paid over to the Inland Revenue. Similarly, VAT is passed on".—[Official Report, First Scottish Standing Committee, 18 June 1985; c. 86.]So, while there might be arguments about some types of tax, there is, generally speaking, a distinction which the right hon. Gentleman, at any rate individually, has recognised. In those circumstances, in my view that the distinction should be maintained, for the same reason.
Finally, considerable time to pay is already built into rates and taxes collection and the recovery system. 204 Instalment arrangements are available for the payment of rates and a delay of many months can arise between tax default and summary warrant procedures. However, again I anticipate, having followed the proceedings in another place, that this is likely to be a matter that the right hon. Gentleman will want to explore further in Committee.
I will deal very briefly with a matter that was raised by the hon. Member for Greenock and Port Glasgow (Dr. Godman) relating to the ring of dealers and the way that the value of items, even in an auction room, might be depressed by such a ring. We need to understand the details of this scheme. As part of the poinding procedure there is a requirement upon the sheriff officer to value those goods. In terms of clause 20(4), he has to value the poinded goods. The test is that it must beaccording to the price which they would be likely to fetch if sold on the open market",but there is a further provision:unless he considers that the articles are such that a valuation by a professional valuer or other suitably skilled person is advisable, in which case he may arrange for such a valuation.Therefore, I want to make it clear that, because the goods are taken to the sale room, it does not mean that they are simply knocked down at a price which a ring of dealers has agreed should be paid. If the goods did not meet the appraised value, they would not be knocked down.
§ Dr. Godman
Is it not the case that in auctions the autioneer, or the person giving the valuation, offers an anticipated price, which is what he offers to a would-be seller? It may be the same here. That is why he may not be able to give any kind of guarantee. He simply says that it is likely that the goods will raise a certain amount of money. However, we know that when the dealers get together the goods often do not get anywhere near the anticipated price.
§ The Solicitor-General for Scotland
As I have been trying to indicate, if that happens the goods will not be knocked down at that price. Obviously, I cannot say whether in every case the sheriff officer accurately appraises the open market value of goods, but that is what we would be requiring of him as a test should the Bill become law.
I am very grateful to hon. Members generally, and particularly to my hon. Friends, who have seen the importance of ensuring that we do not have warrant sales in their present form. As my hon. Friend the Member for Renfrew, West and Inverclyde (Mrs. McCurley) pointed out, time and again this has been held up as being a matter in which we have shown inhumanity and an unfair attitude by allowing warrant sales to continue in their present form. That is not the case. We are going to bring about a substantial change. Even if there are those who would like to see warrant sales disappear altogether, the changes that we are introducing are very worth while. There are undoubtedly complicated matters still to be discussed in Committee, and I welcome the enthusiasm of my hon. Friend the Member for Stirling (Mr. Forsyth) regarding a place on the Committee. I think it is not unrelated to the fact that he expects the Criminal Justice Bill, which follows it, might be somewhat longer. Nevertheless, he will be very welcome on the Committee.
The provisions of the Bill are humane and sensible. I commend the Bill to the House.
§ Question put and agreed to.205
§ Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).