Meeting of the Parliament 01 November 2022
As convener of the Social Justice and Social Security Committee, I am pleased to open the debate on the committee’s important report on low income and debt.
YouGov research that was commissioned by Citizens Advice Scotland found that more than 600,000 people have encountered new debt problems during the pandemic, either getting into debt for the first time or seeing existing debt get worse. With the cost crisis, it is likely that we will see that number grow exponentially.
As the costs of basics rise sharply and energy prices skyrocket, households across the country are limiting their use of essentials and suffering a significant decline in their mental and physical wellbeing. People are desperately worried about the future, and we, as a committee, share their concerns. Spiralling costs will push an increasing number of people into debt because they simply do not have enough money to pay for all basic outgoings and bills.
As a committee, we set out to explore the specific challenges that people with low incomes face in accessing support and finding solutions to their debt situation. We wanted to find out what their key challenges are and how we could help them. What more could be done?
Our starting point for the work was a focus group with people who are experiencing debt problems. We wanted their experience to be at the heart of the inquiry and to inform the scope of our work. Their testimony shaped the questions that we posed in our call for views and the committee’s subsequent evidence-taking sessions.
What a stark picture those people painted. Despite receiving advice on social security entitlement and other forms of income maximisation, many people on low incomes simply did not have enough money to meet essential living costs. They were stuck in an inevitable cycle of debt, operating with deficit budgets, and there was often no obvious way out. Bankruptcy might be a short-term solution for some, but many people rely on money advisers spending significant time trying to negotiate reduced payments with public sector creditors or access charitable support, with the sole aim of enabling their clients to have enough money to live.
Participants from our original focus group formed our panel of experts by experience. The panel made recommendations to the committee on how things could be improved, which fed directly into the committee’s report. For us, this was about empowering people not just to tell us their story but to be involved in shaping change. The report title, “Robbing Peter to pay Paul: Low income and the debt trap”, is taken from a comment from one of our experts by experience.
I thank everyone who gave evidence to the committee and I particularly thank our experts by experience, who diligently engaged with us throughout our work. That would not have been possible without the organisations that supported them—the committee extends its sincere thanks to them all.
During this inquiry we were told:
“Problem debt has a particular stigma and shame attached to it that leaves people feeling trapped, isolated, unable to sleep. Many of these worries are related to wider stigma around poverty.”
Our inquiry was far reaching, and our recommendations span a number of different Scottish Government portfolios as well as local government and United Kingdom Government responsibilities. We looked at the school meals debt that is owed to schools, council tax debt, the advice sector, the availability of information and support, early intervention and prevention, mental health, and statutory debt solutions such as bankruptcy. I hope that my colleagues will touch on a range of those areas today.
In my remaining time, I will focus on just two of the key areas that the committee explored: public sector debt and money advice.
When we think of debt, we often think of the debt that is owed to private businesses, such as credit card debt and loans. Increasingly, we might think of debt as a result of fuel costs. We might not think so quickly about the role that the public sector plays in debt in areas such as social housing, benefit deductions, council tax, care charges and school charges.
We were told that the debt that is owed to public bodies is increasing as people struggle to pay bills. Collection of such debt can be quicker and harsher than collection from private creditors. Failure to pay council tax can result in enforcement action. CAS highlighted that council tax debt is one of the biggest debts that bureaux see. Local authorities tend to favour bank arrestments as a way of enforcing payment, which means that money can be seized from people’s bank accounts.
Steps have been taken to bring greater consistency to local authority debt collection, but we heard that that effort is not always felt on the ground. We were concerned to hear that public sector processes are not always sensitive enough to individual circumstances. Our experts by experience stressed that compassion must be built into processes and services. We cannot have rigid, faceless services that assume that the debtor is always wrong—that makes the whole experience worse and increases anxiety.
We need a fundamental change in attitude from the front-line services that are dealing with people in debt. The public sector should aim to lead best practice, by handling debt in a fairer and more considerate way. Debt recovery should be done proportionately, based on individual circumstances. People should be treated with compassion.
We were concerned to hear that people are sometimes failed by clunky systems that are not connected or easy to use. People must take it on themselves to navigate complex systems to get the support to which they are entitled—often at a time when they have limited emotional and financial capacity to do that. The burden of responsibility falls too often on the individual. That theme often emerges in our committee work.
Before I turn to the role of the free money advice sector, I want to touch on school meals, which is another important area in which quick action could be taken. Free school meal provision should be increased and rolled out at pace, and school meals debt should be written off. That is already happening in some but not all councils. As I said during my debate on challenge poverty week, weans need to eat.
Last but by no means least, I turn to the advice sector and the people across Scotland who are working tirelessly to help people who are existing in truly desperate circumstances. Money advisers are doing a hugely difficult but important job in helping people to navigate their finances—and advisers might be suffering from their own financial and wellbeing challenges in the process. Debt advisers told us that they are firefighting and hanging on by their fingertips. They are burned out by demand for their services, the complexity of cases and the lack of available options to resolve people’s problems. Witnesses raised issues around awareness of advice services, stigma around seeking help, channel choice and digital exclusion, as well as funding concerns.
Christians Against Poverty shared with us an example of one of the many people whom it supports through its debt advice. The client is coming to the end of a minimal asset process bankruptcy and their sole income is social security benefits. They suffer from depression, anxiety and panic attacks. Once they have been discharged from bankruptcy, they will have £8.55 a week to live on for food and all household items. Living on a budget of £8.55 is not sustainable, and the very tragic reality is that that individual will fall back into problem debt.
Debt advisers highlighted that many low-income households are
“the most prudent money managers you will ever come across. They know where every penny goes and can account for every part of their income. The problem is that the income is simply not enough to cover the costs.”
We must continue to use all available avenues to tackle poverty and resulting debt issues, and we must take a person-centred approach.
I am proud of the committee’s inquiry and the work that it has undertaken to shine a light on the complex circumstances that lead people to become indebted and their struggle to find solutions to that debt. The systemic and interlinking challenges of tackling poverty were interwoven in that work. We made a wide range of recommendations that we think could make a real difference to people who are the most marginalised and overwhelmed by their debt—those whose incomes are so low that there can seem no feasible way to pay off debt and no way out of the debt trap.
I hope that the Scottish Government, the UK Government and local authorities recognise the compelling evidence received by the committee on these issues and work together to enact much-needed collective change.
On behalf of the Social Justice and Social Security Committee, I move,
That the Parliament notes the conclusions and recommendations contained in the Social Justice and Social Security Committee’s 8th Report, 2022 (Session 6): Robbing Peter to pay Paul: Low income and the debt trap (SP Paper 211).
I note that I did all of that while having a menopausal hot flush. Yes—go me! [Applause.]