§ Amendments made: No. 49, in page 29, line 39, column 3, leave out from '23' to end of line 42 and insert 'subsection (4).'
§ No. 50, in page 30, column 3, leave out lines 5 and 6.—[Lord James Douglas-Hamilton.]
§ Order for Third Reading read.7.25 pm
§ Mr. Stewart
I beg to move, That the Bill be now read the Third time.
We have had full discussions of the Bill on the Floor of the House and in Committee. I pay tribute to the hon. Members on both sides who sat on the Committee, for a long time on some occasions, to consider matters of importance to the people of Scotland. The Bill has been improved as a result of that detailed consideration, and I commend it to the House.
§ Mr. Tom Clarke
It is fair to say that the Government can hardly complain about the constructive response from the Opposition this afternoon. Our debate on new clause 3 was especially helpful and many of the issues raised in it will not go away even after the Bill is passed.
It is important to place on the record our concern about the future of legal aid and about the statement by Lord Mackay of Clashfern at the weekend. It would have been helpful if we had known precisely and comprehensively what the Government's thinking on the future of legal aid is. I am sure that I would be supported in that view by the Law Society of Scotland, the Scottish Consumer Council, the citizens advice bureaux and others.
The Bill has certainly been influenced by the considerable increase in the cost of sequestrations. In 1985, there were only 295 sequestrations in Scotland, but by 1991 the number had risen to 7,665, with all the attendant problems for the Government which they have considered during the deliberations on the Bill.
The Minister mentioned that I had taken the trouble to read most of the Committee proceedings. I found them fascinating, as was the response today in the form of various amendments and new clauses.
I am worried about whether those most affected by the Bill will have much say in its impact. The hon. Member for Orkney and Shetland (Mr. Wallace), in a distinguished contribution, mentioned his link with the Institute of Chartered Accountants of Scotland. That is of course important, but I wonder whether the people who may be deterred, as many of them may be, from applying for sequestration as a result of the legislation have been consulted.
Have they been asked their views on means testing in England and what that will mean to Scotland? Do they realise that we are considering the closing off of one bankruptcy option which, for many cases of multiple debt, was the only course open to a large number of people? We owe a great debt of gratitude to those organisations which, 831 as we have seen in the Hansard report of the Committee and as we have heard today, have taken seriously their role in contributing to the legislation. I am sure that the Minister will join the Opposition in thanking all those professional bodies and voluntary groups which gave outstanding assistance and provided research to all hon. Members. Whether they are satisfied with our deliberations is another matter.
During the debate on new clause 3, the Government committed themselves to monitoring. We welcome that. My hon. Friend the Member for Falkirk, East (Mr. Connarty) even got a concession on clause 14 which may hitherto be known as the Connarty clause. We have made not a little progress, although I do not want to be too extravagant in praising the Bill.
I did not take part in Committee proceedings, in which the Opposition were led by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar). I was interested in the contributions by new hon. Members, especially my hon. Friends the Members for Falkirk, East, for Edinburgh, Leith (Mr. Chisholm) and for Dunfermline, West (Ms. Squire). I am sure that they found the Committee a fascinating learning curve. I vividly remember reading the advice offered by the hon. and learned Member for Perth and Kinross (Sir N. Fairbairn) who not only quoted in Latin but offered to send advice in Italian. I do not know whether the Committee benefited greatly from that. One of the Government Whips is indicating assent, so somebody must have been grateful for the classical knowledge.
We are obviously very concerned about the problems that led to the introduction of the Bill. We are concerned about multiple debt and about the evidence of poverty in our society which plainly contributed to the need for such a Bill. However, for the reasons given by me and my hon. Friends, we do not oppose Third Reading. We thank those who contributed towards putting the Bill on the statute book. I am sure that all hon. Members will join me in thanking the Chairman of the Committee, my hon. Friend the Member for Glasgow, Springburn (Mr. Martin) for his good-humoured and diplomatic contributions to the progress of the Bill.
On numerous occasions the Government have spoken about monitoring. I am sure that the Under-Secretaries of State for Scotland, the hon. Members for Eastwood (Mr. Stewart) and for Edinburgh, West (Lord James Douglas-Hamilton) will not be surprised to find us monitoring the progress of the legislation. My hon. Friend the Member for Dundee, East (Mr. McAllion) reminded the House of our commitment to a Scottish Parliament. Before long this legislation will be reviewed not in London but in Edinburgh, and that is absolutely right in the context of the problems that we face in Scotland.
§ Mrs. Ewing
Before commenting generally on the Bill, I should like to raise a specific point with the Minister. He will recall that on Tuesday 14 July in the Committee's afternoon session I spoke about the possibility of looking at exempted assets. He undertook to consult ministerial colleagues on the issue of whether personal injury awards as a source of income would be carefully examined for consideration as an exempted asset. The speed of the 832 legislation may not have enabled the Minister to respond to that issue, but I should like to have some comment on it. I would settle for a letter if the Minister wishes to write to me in greater detail. It is an important issue, which was pressed by me and by other members of the Committee, and it would be a shame to let it go adrift.
I am not sure why the Government suddenly produced this interesting legislation. I repeat my original contention that, as there was a need to look at the laws of diligence as they affected people facing bankruptcy in Scotland, the opportunity should have been taken for a wide-ranging inquiry. That could have taken account of the needs of the debtor and the creditor and looked at examples in other countries. In Committee I gave effective examples of what happens in other countries. The inquiry could have taken evidence from advice centres, the citizens advice bureaux and the legal and insolvency practitioners.
We should have taken the opportunity to discover why so many people in Scotland are affected by the likelihood of bankruptcy. There is little doubt in anyone's mind that it is the result of the credit boom in the 1980s. At that time, credit was encouraged and, as the recession began to bite, people were faced with bankruptcy. The Government produced the Bill in great haste and may have to repent at leisure, because I am not convinced that the legislation is the correct way to address the issues that face us in Scotland.
The Government should have looked at warrant sales in Scotland—that law which still pertains in our country and which affects so many of the poorest sections of our society. Those people have no assets and no money and cannot possibly meet the debts into which they have been pushed. We have missed a great opportunity. I am not convinced that the Government have fully assessed the costs or the implications of the legislation. We have not yet been afforded the full details of the legal aid costs that will be involved. If more time had been taken before the Bill was printed, we could have resolved some of the details in advance and made the legislation much more effective.
Like the official Opposition, we shall not oppose Third Reading, but I give due warning that I shall carefully monitor the Bill's progress in the same way as I monitored the effects of the Bankruptcy (Scotland) Act 1985. I suspect that the issue will again be debated on many future occasions.
§ Mr. Connarty
I join the hon. Member for Moray (Mrs. Ewing) in expressing regret at the fact that no opportunity was taken to look seriously at the problem caused by warrant sales in bankruptcy cases. The Government will regret that, because their reputations will not be enhanced in Scotland or elsewhere as they continue to use a greatly outmoded system of diligence.
I regret the final form of the Bill. I compliment the civil servants who adeptly sieved the submissions from people who perhaps could not see the target for the Government's smoke. A Special Standing Committee would have been able to take evidence in the way in which it was meant to be submitted, rather than in the way in which Government procedures allowed it to be submitted.
The Bill's main omission is that the House made no attempt to change the way of looking at debt and debtors. A reading of the Bill and the Bankruptcy (Scotland) Act 1985 clearly shows that they are founded on Acts drawn up centuries ago. The legislation is penal. It sees debtors as 833 bad people who should be dealt with by way of quasi-criminal proceedings. The Bill makes no attempt to look at people who are led into money problems because of Government policies.
This Government freed up credit so much that I recently heard of a case of a 14-year-old girl being sent a letter by a bank asking her whether she would like to open a bank account. She placed £20 in the account arid was given a bank card which allowed her to draw out £50. Unfortunately, she did. When the mother tried to find out what was going on, she was told that she could not be given her daughter's personal details. That is ridiculous.
§ Dr. John Reid (Motherwell, North)
My hon. Friend may wish to recall that such behaviour was not just espoused but encouraged by members of the last Conservative Government, in particular the present Lord Ridley, who went out of his way to say that children, of any age, with substantial means should be allowed to use credit cards.
I know that my hon. Friend cut his parliamentary teeth on the Bill and is much more experienced than I am on the cases affected by it. However, a constituent recently approached me and said that in 1983–84 she became bankrupt over a debt of £3,500 to a bank. By 1990, that case had not been solved. By that time, because of high interest rates, she and her husband owed over £9,000. In that year, she was told by the appointed receiver to borrow £14,000 through remortgaging her house. Two years later, she still has not seen any of that money and nor have any of her creditors. The receiver told her that it is none of her business and that £14,000 still sits with him. Is that not typical of the cases that my hon. Friend—
§ Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)
Order. this is supposed to be an intervention.
§ Mr. Connarty
I am grateful for that intervention. I recommend that my hon. Friend reads the Official Report of today's debate. He will find references from the hon. Member for Moray (Mrs. Ewing) to the fact that creditors get little of the money realised through this procedure, but the Government have not tackled this problem.
Unfortunately, the debtor is treated as a bad person and is partly criminalised, and the Bill will not change that. I was surprised that the Government did not take the trouble to investigate the procedures used in other countries, particularly in the United States. In a number of states, people are allowed to keep their homes, which is an important factor. In some they are allowed to retain their vehicle, if they have one, because it is necessary to use it to seek, or to remain in, gainful employment. The Government have not considered any of those procedures. Instead, they have brought in an amending Bill that apologises for previous draconian Acts. I regret that the Government have done nothing to move bankruptcy proceedings into the 21st century.
I shall return to the point made by my hon. Friend the Member for Motherwell, North (Dr. Reid). Again and again we were shown that the creditor gains little from the bankruptcy proceedings. The Bill will not improve that. Much of the time and energy of professional accountants and people in the courts are spent on paying money into the accounts of accountants and the accountant in bankruptcy. The Government should have used this time to bring in a Bill that gave more money and resources to conciliation and 834 reparation and that ensured that the creditor would get something back from someone who had fallen on hard times or who had over-extended himself in debt.
§ Mr. Bill Walker
On a point of order, Mr. Deputy Speaker. Can you confirm that the Third Reading debate is about what is in the Bill rather than what is not in the Bill?
§ Mr. Deputy Speaker
I have no difficulty in confirming that.
§ Mr. Connarty
I am grateful to the hon. Member for Tayside, North (Mr. Walker), who wishes us to deal only with matters in the Bill.
Clause 6 deals with the new procedures. A great deal of concern has been expressed about the difficulty that people will find in using the new summary procedures, particularly with the loss of advice that will result from the change in remuneration. We predict that, regrettably, this will make accountants less likely to give advice as insolvency practitioners.
Two legal aid questions remain unanswered. The first is whether people will get sufficient legal aid support to obtain advice from lawyers. The second is whether solicitors will be available to take up legal aid money and offer advice. Another question that has been asked repeatedly arose from Lord Mackay's statement that there will be means testing in England. That gives the Opposition cause for concern. We feel that the Bill will not be implemented in the way that it is written and that people will not be able to use the new summary procedures.
I regret that the Government have not addressed these issues. If the point of Third Reading is to talk about the Bill, I can only say what I have said before—this is a cheap Bill that cheapens the cost of bankruptcy procedures in Scotland. It is a shoddy patchwork and not a real attempt to deal with bankruptcy in Scotland.
§ Mr. Wallace
Our wide-ranging debate on new clause 3 may allow us to keep our remarks on Third Reading relatively brief. I, too, will not divide the House, but there are still so many shortcomings in the content of the Bill that we cannot be confident that it will remain on the statute book unamended for some time to come. We have been asked to accept that the detail of legal aid will be worked out. I do not doubt the sincerity with which the detailed negotiations will be conducted, but we are being asked to give a Third Reading to a Bill of which an important part is incomplete.
We have not had adequate answers to the questions about advice, which will no longer be available to people facing bankruptcy and serious problems of debt. In earlier exchanges, it was calculated that 333 of those recommended to insolvency practitioners by citizens advice bureaux were turned away from the courts and sequestration. The hon. Member for Cunninghame, North (Mr. Wilson) calculated a further 888, in an impressive display of mental arithmetic on his feet. My calculation is that, if the two are added together, and we multiply the result by £300 per sequestration, the rough cost of the Government's proposed scheme, that is £366,000 which may not be saved because the Government have taken away an important element of those who provide advice.
That leads me to the question of those who live in rural areas. I have no doubt that the Minister genuinely believes 835 that, somehow or other, the arrangements in place at the moment will continue. Often, Ministers express hopes that become weaknesses in Acts and result in expectations not being fulfilled. No doubt, the hopes expressed during the progress of the Bankruptcy (Scotland) Act 1985 were equally pious, but they have resulted in the problems that this Bill is attempting to address.
I have a detailed point that it was not possible to raise earlier, but which may be raised on Third Reading. We have come a long way from the original debate, when the Under-Secretary was so obviously discomforted by the fact that he appeared to be introducing a nationalisation measure. He tried to retreat and argued that the system would be open to market forces and market testing. I understand that, in market testing arrangements, the accountant in bankruptcy may be in competition with those in the private sector. Is it the intention that the accountant in bankruptcy will be involved in examining tenders? If so, there would be a potential unfairness. Perhaps the Minister can say something about that.
The hon. Member for Monklands, West (Mr. Clarke) mentioned my association with the Institute of Chartered Accountants of Scotland. He is a generous person and will also know, from the debate in the Grand Committee and the debate on Second Reading, that I have tried to put the case for the ordinary people who find themselves in debt. I have in mind citizens advice bureaux and the Tackling Debt group. If we examine the record in Committee and on the Floor of the House, their case has been put. Perhaps the more telling questions are whether their case has been listened to and whether there has been a response to it. Some of us have doubts about that.
I conclude by reminding the House of what the Scottish Law Commission stated in paragraph 2.35 of its 1982 report:The discharge of prior debts is one of the main objectives of a civilised system of bankruptcy law and we consider that it would be morally indefensible and politically unacceptable to recommend policies which do not, at least after the lapse of time, admit of an insolvent debtor's discharge.There is concern that in an effort to tackle one problem another problem may have opened up. Perhaps many families will have to suffer a continuing burden of debt and all the worry that is associated with it because under the new regime they will not feel able—perhaps they will not know what to do—to do something about it. That remains a concern. As has already been said, the Bill, when enacted, will require careful monitoring.
§ Mr. Wilson
I shall take up directly the remarks of the hon. Member for Orkney and Shetland (Mr. Wallace). It is important to return to where this proposed legislation began and why it began. It is before us because the Bankruptcy (Scotland) Act 1985 generated too much demand. The result was a level of demand that the Government found not to be acceptable financially. There were so many sequestrations taking place in Scotland. In a rather perverse way, from an ideological point of view, the Government chose to bring the process into the public sector. It remains a nationalisation measure, however unpalatable that may be to some of those who are promoting it.
836 The Government got it wrong in 1985 in terms of projecting the scale of demand. I have not heard anything to convince me that they have it absolutely right now. I congratulate the Government retrospectively, however, on what they did in 1985, which was to recognise the injustice that the Scottish Law Commission had focused upon. They provided a humane means for people to escape from the burdens of debt.
Everything that we have sought to focus upon during our deliberations is centred on the question whether it will be more or less difficult for those who suffer problems of multiple debt and poverty to use the humane mechanism that has been provided. Only time will tell, but severe doubts remain. If a Government approach the issue by believing that the process is costing too much, the suspicion must persist that the way in which money will be saved is not through cutting the cost per case but reducing the number of cases. If that proves to be true, thousands of families in Scotland each year will not have a humane mechanism open to them.
The subsidiary concern—it has been focused upon—is the possibility that those for whom sequestration is not appropriate will be led into it because the safety valve that now exists is not accommodated within the new legislation. The message that must go out clearly from our debates—there are some who are insulated from the sort of circumstances that lead to personal sequestration—is that personal sequestration is not an easy option or a course of least resistance. Every case involves human tragedy and burdens that are based on the circumstances in which people find themselves. It is not an easy option, and it would be a tragedy if an individual for whom personal sequestration was not appropriate were to take that course as a result of anything that we are doing this evening.
During our consideration of the Bill we have dealt with many sub-plots. For example, we have dealt with the argument that the 1985 Act encouraged a great increase in personal sequestrations. We have dealt with the idea that insolvency petitioners are responsible for the rapid growth in personal sequestrations. We have dealt with the theory that there are money advice agencies that are telling people to go for personal sequestration. There are many theories for the increase in the number of personal sequestrations in Scotland, but we must not let the Government escape from the real reason for the increase, which is the rapid growth of grinding poverty that afflicts the lives of so many of our people. That is why there has been an increase in personal sequestrations. That is why debt has increased. That is why human misery has increased. People do not have enough money even to meet the commitments that they have entered into, far less to enter into new commitments that would enhance the quality of their life.
We would do a disservice to those affected by this sort of legislation in the past and those who will be affected by it in future if we did not recognise that they are victims of an economic system and economic circumstances that have led to a vast and frightening escalation of debt and poverty in Scotland. They are not guilty parties.
When the Prime Minister visited Scotland shortly before the general election he was interviewed by the Glasgow Herald. He was asked—perhaps this was one of too few occasions during those weeks—what he intended to do to deal with the problems created by poverty and deprivation. His reply was memorable. "Poverty," he said, "what poverty?" It is clear that he is truly insulated from the realities of human experience for thousands of people 837 in communities within a few hundred yards or a few miles from where he was speaking that day. He could have gone to any part of Britain and been told of the same circumstances, but he would still have replied, "Poverty, what poverty?"
There is grinding poverty. There is lack of income along with unemployment, the failure of social services and the failure of public provision generally to provide a safety net. That is why people live in circumstances that no society in the western world in the last decade of the 20th century should find acceptable. That is the reason why personal—
§ Mr. Bill Walker
On a point of order, Mr. Deputy Speaker. I am not aware that what the hon. Member for Cunninghame, North (Mr. Wilson) is talking about is to be found in the Bill.
§ Mr. Deputy Speaker
The hon. Member for Cunninghame, North (Mr. Wilson) is straying rather wide. I have been tolerant. I hope that the hon. Gentleman will return to the contents of the Bill.
§ Mr. Wilson
I am about to conclude, Mr. Deputy Speaker. It is the personal failing of the hon. Member for Tayside, North (Mr. Walker) that he does not realise the connection between poverty and the contents of the Bill. When we give the Bill its Third Reading, nobody should be unaware of its root cause and the root reasons for it being necessary.
§ Mr. Stewart
With the leave of the House, I shall respond briefly to the debate. I recognise that several hon. Members have set down points for further consideration.
I agree entirely with the hon. Member for Cunninghame, North (Mr. Wilson) that sequestration is never an easy option. I shall not weary the House with the figures, which disprove his final argument and point to a clear problem in Scotland that is not mirrored in England and Wales. I say that in the context of the way in which the law has operated since 1985.
The hon. Member for Moray (Mrs. Ewing) talked about widening the list of assets that should be exempted from resting with the permanent trustee. We fully discussed the matter in Committee and I agreed to reflect further on the treatment of compensation, especially for personal injuries. We concluded that it would prove impossible to introduce a workable general exemption in the Bill that did not itself create many anomalies. I shall write to the hon. Lady in the near future to explain in detail precisely why we reached that conclusion.
The hon. Member for Orkney and Shetland (Mr. Wallace) asked me about the involvement of the accountant in bankruptcy. I can assure him that arrangements will be put in place to ensure that the accountant is not placed in a more advantageous position from that of other contractors in tendering for sequestration work. The hon. Gentleman made an entirely reasonable point.
I have no doubt that the Bill, when enacted, will bring significant benefits to the conduct of sequestrations in Scotland. I have in mind especially the introduction of summary administration procedures with the greater flexibility and lower costs that they will offer.
The Bill introduces a number of improvements to procedures that take account of practical experience of the 838 1985 Act. It has been improved by the comments of not only right hon. and hon. Members but organisations such as those mentioned by the hon. Member for Monklands, West (Mr. Clarke).
We are committed to maintaining an efficient and effective sequestration service in Scotland. That was our objective on Second Reading and remains our objective on Third Reading. No doubt the House will debate on a future occasion aspects on which several hon. Members put down markers in today's debate, but meanwhile I commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read the Third time, and passed.