HL Deb 13 January 1987 vol 483 cc504-10

4.22 p.m.

Debate on Second Reading resumed.

Baroness Elliot of Harwood

My Lords, I think the moment has come when we may return to the Debtors (Scotland) Bill which has been postponed for almost an hour for questions. That is not to say the questions are not very important indeed.

I cannot claim to be an authority on the Bill but I have had the opportunity of discussing it with the Lord Advocate. I should like to give it my wholehearted support. No doubt a Bill coming in the year 1986, replacing a Bill brought out 150 years ago, has some very important significance for us all today. I think that this Bill is one which we can claim has that importance.

There are one or two points I should like to mention which I believe to be important in the Bill. Clause 16 gives a comprehensive list of articles which cannot be sold unless a debtor agrees. The noble Lord, Lord Morton of Shuna, detailed those and I think he was right to do so. I am glad that the debtor can retain those items because they are essential to family life.

I also think that it is important that a debtor can ask for time to pay an order if it is more or less than a certain amount because I consider that would also be a safeguard for the family. I think not only of the debtor and creditor but of the effect that these debts could have on family life, which might be very significant and very important. This Bill recognises that.

I also think that Clause 18, which states that an officer of the court cannot enter a house which has children under 16 unless the debtor agrees, is also important. Clause 21 states that a debtor can buy back articles if he pays the value. That is also a good point. I think that Clause 23, which releases the debtor from payment if it is unduly hard on him, is also something to which we can agree.

The sheriff can refuse a warrant to sell and that will also be of help to the debtor. It may sound as though I am in favour of the debtor, but I am thinking only of the family if very severe conditions were put on these cases. It is important too that a warrant sale may take place only if the goods can be removed by an officer and sold at auction. The object in the Bill to enable a creditor to get his own goods back without undue hardship is also an important point.

The Bill is obviously highly technical and one which our law authorities have carefully thought out. It has been dealt with great care by the Lord Advocate. I listened to his speech and thought it extremely interesting. I am sure that the House will accept the Bill, and I hope very much that during our further discussions we may learn more about it and perhaps make alterations if it seems they are valuable and will improve the Bill. I support the Bill very strongly.

4.28 p.m.

Lord Ross of Marnock

My Lords, I think that we should be grateful for the work of the Law Commission in Scotland. It has produced a very comprehensive report. It took a long time, and as a prelude had to consider various inquiries and summaries of the trends in relation to debt in Scotland. I was a little bit staggered when it stated that we all are now debtors. It used to be that in Scotland we took great pride in paying our bills, but when one thinks of it, rates, rents and mortgage are paid in arrears. The same applies to the plastic money which most of your Lordships use in order, when you can, to get from Scotland to this place probably; and so that is perfectly true.

One of the things which worries me is that the most up-to-date statistics we have from the Law Commission are for 1983. Having seen one or two programmes about the ease with which credit can be given, particularly to young people, I wonder whether we should not be rather alarmed at the present-day statistics for debt. A television programme highlighted the case of a fairly young girl getting into debt to the tune of £18,000. I find that incredible. The effectiveness of our new arrangements for diligence adds to this to a certain extent. Firms can say, "We can get it back all right and we can use the courts".

It would have been interesting to have heard the views of the Law Commission about the changes because they took into account the social life, but mainly the historical social life in respect to the law of diligence. It is a pity that they could not have waited a little longer. We may need to consider, although we certainly could not do it in this Bill, making it more difficult for people to be able to get credit.

We are all grateful for the Bill. It is the first comprehensive Bill since the collection of Bills that started in Scotland way back in the 1500s. From my time in another other place, I recall all sorts of Bills being brought forward by all sorts of people to try to ease the situation in respect of arrestment of earnings. I remember the work of Archie Manuel. There was also the work, at a time of no limit to the arrestment of earnings, of George Lawson and Jimmy Dempsey on warrant sales. This was part of social life in Scotland.

I have to thank the Government for bringing forward a Bill at this time of the year that takes me into the Burns area. I remember on one occasion, when people in Scotland were thinking about reciting Tam o' Shanter, we had a Bill that provided a fine and followed that up by something even worse for being drunk in charge of a horse. Without that, we could not have referred to the poem by Burns.

Here we are again with a reminder of Burns. I've notic'd, on our laird's court-day, (An' monie a time my heart's been wae), Poor tenant bodies, scant o' cash, How they maun thole a factor's snash: He'll stamp an threaten, curse an' swear He'll apprehend them, poind their gear; While they maun staun', wi' aspect humble An' hear it a', an' fear an' tremble! That happened within Burns' own family, the poinding of the gear.

I am glad that the Law Commission reminded us of the pronunciation as well as the spelling of poinding. The legal antiquarian would be pleased, I think, that we managed to keep the Lord Lyon in the picture somewhere but in muted regard. We must be grateful, however, for the recognition that simplification was required. This may require speeding up. In considering the drafts we have been given about the approach to debt, let us be clear first that most of this diligence—about 85 per cent.—relates to personal, debt rather than commercial debt. It is the same in relation to the final aspect of the warrant sale. It applies to somebody's personal wellbeing and the sale of their goods.

The length of time between the various stages, the informal approach—by a commercial company, a local authority an electricity board or perhaps by public authority—is a long process. What surprises me —to take rates as an example—is the shrinkage of numbers of people involved. In Scotland, we have figures relating to 1980 from Strathclyde which covers half the population of Scotland. Summary warrants were granted in respect of 38,500 rate defaulters. But, by the time the end of it was reached, only seven warrant sales were executed in respect of seven householders.

One matter that worries me is that we shall have many more people liable for rates if a certain rather preposterous Bill goes through this House. Every youngster who has left school and who is not undergoing full time education will be liable to rates. So far as I can understand the Bill, as it has not come our way, the parent, or in the terms of the Bill "the responsible person" in the household, will be responsible for that. However, I do not think that the whole thing will work at all. In a family of four, the father may have to collect £700 or £800 from his own family to pay the rates. These are people who do not pay them now. Who will be in debt? It will be the responsible person. A young person who is living alone or is a student will be paying himself.

This complementary Bill will be important. I wonder whether the Government have thought how it will play its part in the new system of rate collection and who will be left with the small number of debtors being subjected to warrant sales. It is something we have to think about. I am surprised and disappointed that the Government have not immediately taken power to get rid of warrant sales or at least to get rid of them later. As my noble friend Lord Morton suggested, there are alternatives which, together with the improved debt arrangements that the Government are making, suggested by the Law Commission, could further reduce warrant sales. I shall be told that according to the figures we already have, there were at the second-last stage about 20,000 cases and eventually only 470 actual executions of warrant sales. Starting with a figure of 68,000 there are degrees of debt. By the time the whole process is gone through, which is quite lengthy, there are only 484 warrant sales. That was in 1982–1983. It should be admitted that this was double the number in 1979.

In relation to the 20,000, it is admitted by the Law Commission, and surely by the Government too, that it might be discovered that there was not enough in the house to be realised from the warrant sale to pay the debt and that, taking into account the cost, the whole thing is dropped. We could have taken a further step and said that we wanted to get rid of warrant sales altogether as quickly as possible. It is part of the history of working class life and everyone who has been in another place has come across incidents of peoples' furniture being taken out, put on the street and sold there. All the neighbours knew. I think the word used by the noble Lord, Lord Taylor of Gryfe, was correct. There was humiliation and embarrassment, and not just for the immediate family. As working class people tend to live in the same area their parents suffered the humiliation of this as well. Little was realised or would be realised from sales in the auction halls. Anyone who knows anything about what is sold in auction halls understands that the return from sales is paltry, and the greatest thing is the embarrassment to the people concerned. I should have liked to have seen that aspect removed altogether.

I am worried too about rising rates and rents and the number of owner occupiers who are being pressed and encouraged by the Government, with the rather cheap capital sums to be paid over for local authority houses, who have had to forgo and get rid of their houses. Once again, the Government are lending themselves to people taking over burdens of debt with which they cannot keep up. Unemployment comes—and, my goodness!, it has come in Scotland. It is the poorest of the poor who will be subjected to the eventual warrant sales, and many of them that go forward do not in any way reach the required level.

So the Bill is an improvement. It is comprehensive and the arrestment of wages is equally important in respect of what can be done. But when you come down to it, we have to draw up a Bill to say, "You will not take children's toys out and sell them." Do we really mean that? I wish that the Government would think again about this and would get rid of the warrant sales and the humiliation and despair of that kind of thing. I do not think that the warrant sale is a necessary deterrent for the 20,000 who have reached the stage of being warned through the second stage of diligence. There are other ways and when you consider the people who are involved—the unemployed and the single parent families, as the noble Lord, Lord Morton, suggested—I do not think it is right. So we are grateful for what has been done in respect of the Bill; but I think we could have gone a little more courageously forward.

4.41 p.m.

Lord Cameron of Lochbroom

My Lords, I am grateful to all noble Lords who have taken part in the debate and generally for the welcome that they have given the Bill. Obviously I look forward to the Committee stage. I think the noble Lord, Lord Morton, recognised that some of the matters he raised were ones which could figure in Committee. I was a little amused at one point where the noble Lord made reference to the exemptions in Clause 16, observing that, as he was no doubt well aware, the Bill is based on the draft which the Law Commission itself proposed. I think he will find that that clause is in almost exactly the form in which the Law Commission put it forward. But, as he said, the Law Commission may be wrong, so we may talk about refrigerators, sideboards and cupboards in Committee.

It is clear that both the noble Lord, Lord Morton, and the noble Lord, Lord Taylor, were concerned about the absence of a proposal for debt arrangement, and I accept that there is no provision in the Bill for that. However, it is important to have in mind that the scheme applied in the case, and only in the case, of a debtor with several debts but not enough assets to make bankruptcy procedures worth while. It was a scheme which was to be operated by an administrator, such as as sheriff clerk appointed by the sheriff to arrange for the regular payment of the debtor's debts to his various creditors, normally over a period of three years. I have to say that the Law Commission itself noted that on consultation there was a mixed reaction to that proposal.

The principle reason why the Government decided not to introduce the procedure was that its complexity and likely administrative costs would have far outweighed the benefits to the few debtors who would have been eligible. Furthermore, the scheme would have been a voluntary one and it is likely that a significant number of debtors would default at some point in the life of a debt arrangement scheme, because of the high level of self-discipline required of them. Therefore the Government concluded that in those circumstances there was no substantial advantage to be gained from acceptance of the proposal.

The noble Lord, Lord Morton, raised the question of the proposals so far as concerns arrestment of earnings and in particular the possible conflict between an existing earnings arrestment and a subsequent instalment decree. Obviously this is a matter which we shall probably discuss again at Committee, but I would just say at this stage that an existing arrestment of earnings will not result in a level of deduction which would necessarily make payment of an instalment decree impossible. I think that will be clear by reference to Schedule 2. In any event, I have to say it is likely that the second creditor would seek to arrest the debtor's wages also in terms of the provisions in Clause 60, which allow for the making of a conjoined arrestment order. But I accept that obviously this is a matter which the noble Lord may wish to consider again and perhaps debate further at Committee stage.

Both the noble Lord, Lord Morton, and the noble Lord, Lord Ross, were particularly concerned about the matter of warrant sales. I have to say to the noble Lord, Lord Morton, that, as he rightly guessed, I would stand firm on the fact that the Law Commission went into this matter in very great detail, and I observe that nothing that he said attempted to undermine the reasoning which brought the Law Commission to the conclusion that the warrant sale should be retained.

Perhaps I may say this about it. If one would have abolition of the warrant sale one has to accept—and indeed it has been said by some individuals and other agencies—that it could lead to credit becoming more difficult and expensive to obtain, since the warrant sale is an important spur to payment in the large number of cases which are settled at an earlier stage. Indeed, the noble Lord, Lord Ross, indicated the way in which the system operated and the result that, at the end of the day, very few cases come to the actual stage of a warrant sale.

If one had a restriction of that scale, it would affect everyone not paying for their goods in cash and would bear particularly hard upon those who live in the poorer areas of our towns and cities. There would also be a wholly undesirable temptation for those with money in bank accounts to convert it into luxury goods, collectors' items or other moveable goods, so as to put their money out of the reach of their creditors. It is generally agreed that people who are able to pay their legally binding debts should be required to do so.

As I said in opening, warrant sales could not be abolished unless an alternative mode of enforcement could be devised which would be as effective and more socially acceptable. The Law Commission considered this matter at length and it was well aware of the kind of problems which have been outlined by noble Lords opposite, but its conclusion, which was quite clear, was that such an alternative could not be devised. The result is that there has been a substantial reform proposed in this Bill which will remove most of the resented aspects and, in particular, the kind of aspects to which the noble Lord, Lord Ross, referred—the fact that it was done in the debtor's home and the fact that it was a public announcement of people being in debt. I accept entirely that these are the kinds of distresses which a humane system should avoid. I suggest to your Lordships that this is precisely what is effected by the Law Commission's proposals which are set out in this Bill.

I have to point out that we are not talking only about personal debt; we are also encompassing debt which goes beyond that, as I think the noble Lord, Lord Ross, recognised. I do not believe that we have precise figures with regard to that matter. However, in 1985, of the 80,000 debt decrees that were granted by the Scottish courts only some 700 ultimately reached the warrant sale stage. That is the figure for all sales and includes not merely those in houses but also those in shops, offices and the like.

Lord Ross of Marnock

My Lords, those are figures that have not yet been published. The published figures, most of which I quoted, showed a number nearer 400. Therefore, as I suspected, the amount of debt and the number of actions of diligence have gone up and up.

Lord Cameron of Lochbroom

My Lords, your Lordships will take the inference from the figures. I was merely indicating that these are the most important figures. For that reason I continue to advise your Lordships that the Law Commission's views are the appropriate way to provide in this Bill for the most humane method of securing the interests of both the creditor and the debtor.

I believe I have dealt in general with particular points raised by noble Lords. Although I notice that the noble Lord, Lord Taylor, is not now present, perhaps I may say that I am very glad he was able to speak; and I shall be glad to see the noble and learned Lord, Lord Wilson of Langside, here from the Campsies. In view of what has been said in your Lordships' House this afternoon concerning how long the cold spell is going to last, I can only say that he seems to have an effective way of accurately forecasting the weather in that he is confident that he will be here for the Committee stage.

I am also grateful to my noble friend Lady Elliot for the welcome she has given the Bill. She clearly pinpoints the importance of achieving the procedures which allow a creditor to be confident of obtaining payment of a debt and at the same time do not impose unreasonable hardship on a debtor and his family or produce unreasonable distress in their personal lives. I suggest that this Bill does just that, and for those reasons I commend it to your Lordships.

On Question, Bill read a second time, and committed to a Committee of the Whole House.