Chamber
Plenary, 24 May 2006
24 May 2006 · S2 · Plenary
Item of business
Bankruptcy and Diligence etc (Scotland) Bill: Stage 1
Credit, as members will know, is essential in our modern economy. In the past 20 years, credit markets have been opened up and getting credit is easier and, indeed, cheaper than it used to be. That is a good thing in many ways. It has supported economic growth by helping businesses to grow at considerably less cost and it has helped people to improve their standard of living.
Most of us, of course, use credit wisely, whether as businesses or as consumers. Unfortunately, for some of us, good credit can turn into bad debt. That can happen for a variety of reasons. It can be simple bad luck, but it could be bad judgment or, indeed, bad behaviour. Whatever the cause of the bad debt, it has a cost. For business, bad debt that is not paid can lead to underinvestment, low growth or business failure. That is bad for the people who drive our economy forward—the risk takers—and, of course, for the people whom they employ. For the man or woman in the street, bad debt can lead to illness, unemployment or even to families breaking up. We know that the problems caused by debt unfortunately fall most harshly on our more vulnerable communities.
The bill is therefore about debt and dealing with debt, but it is also about hope and helping people to restart after their debt has been dealt with. It does other things, but debt and restart are at the core of our proposals.
Dealing with debt raises many issues, some of which are complex and challenging to resolve. The bill has two main objectives: to help business to grow and to encourage responsible risk taking. It will ensure that those who can pay should pay, because it will be tough on the won't pays. It will also help the could pays to get back on their feet by paying their debt, and it will offer humane ways out of debt for those who cannot pay.
Many parts of the bill strike a balance. I was struck by what was said during time for reflection, which we all listened to. A balance has to be struck between competing interests. I am not sure that Gandhi would necessarily approve, but we have made every effort to ensure that the balance has been struck in the right place.
The bill has been many years in preparation. For example, we have considered the recommendations made by the Scottish Law Commission over a 20-year period, and many of them will be implemented by the bill. Expert advice is, of course, essential, but that is not the whole story. The bill strikes the right balance because we have listened to people, parliamentary colleagues included. We have consulted widely and often. We have held meetings across Scotland and we have set up working groups as required, for example on debt relief—about which I will say something later—and on regulatory reform. We have learned much and I remain—as colleagues know—willing to learn. In that way, we can build on the consensus that I suspect is already emerging. That is good, and it is recognition of the need for reform.
This is a good point at which to thank the Enterprise and Culture Committee and its clerks for their clear and thorough report on the bill. I strongly welcome the committee's endorsement of the bill's general principles. It is clear that all the committees that fed into the report worked hard to cover an unusually wide range of issues. I hope that they will take the same approach during stage 2. I know that I will. This is a large and complex piece of legislation. The report has given me food for thought in a number of areas. I look forward to the policy discussions that will ensue.
The bill, like many bills, does more than one thing. The four main elements are linked by a theme of debt. Each offers something for business and something for consumers. The four elements are bankruptcy, floating charges, enforcement and diligence, which is debt recovery or debt enforcement, for those who are unfamiliar with the term.
I will take a quick look at bankruptcy first. Some people can manage their way out of debt by themselves, others require help and some cannot manage at all—they are the can't pay debtors who need to find a way out of the debt trap that they find themselves in. Bankruptcy, whether through sequestration or a protected trust deed, is the way out for can't pay debtors. It lets them cancel the debts that they cannot pay, after a trustee is satisfied that they have paid as much as they can. As I have already said, can't pay debtors also need a fair chance to start again, perhaps after learning a hard lesson. Members should make no mistake about it—bankruptcy is a very hard lesson for some. Although it can be the right way out, it is certainly not an easy way out. It is a very tough way out indeed. It is irrefutable that bankruptcy is tougher than any other type of debt enforcement in the bill or elsewhere. That is an important message.
Bankruptcy needs to be tough. People who can pay should pay, even when bankrupt. People who do not pay their debts when they can are a clear problem for business and others—they are a problem for everybody. The public need to be protected from those few who will not pay and who abuse the system. Of course, not many people set out to abuse the system. Most people who go bankrupt really cannot pay, for one reason or another. Some have suffered ill health, have lost their job or have found themselves in other sad circumstances. Bankruptcy needs to be fair. We all agree that people who have fallen down need to be able to restart. That is good for them, good for the rest of us and good for the economy more generally.
The fair and the tough are tricky things to balance, as I think members agree, but I hope that the bill manages it. I will give members a couple of examples. The bill will help debtors by reducing the discharge period from three years to one, thus giving people a chance to restart more quickly. It will also help business by bringing in stronger protections. For those few who do not deserve a quick restart there will still be a flexible system of two-year to 15-year bankruptcy restrictions—tough but fair.
Most of us, of course, use credit wisely, whether as businesses or as consumers. Unfortunately, for some of us, good credit can turn into bad debt. That can happen for a variety of reasons. It can be simple bad luck, but it could be bad judgment or, indeed, bad behaviour. Whatever the cause of the bad debt, it has a cost. For business, bad debt that is not paid can lead to underinvestment, low growth or business failure. That is bad for the people who drive our economy forward—the risk takers—and, of course, for the people whom they employ. For the man or woman in the street, bad debt can lead to illness, unemployment or even to families breaking up. We know that the problems caused by debt unfortunately fall most harshly on our more vulnerable communities.
The bill is therefore about debt and dealing with debt, but it is also about hope and helping people to restart after their debt has been dealt with. It does other things, but debt and restart are at the core of our proposals.
Dealing with debt raises many issues, some of which are complex and challenging to resolve. The bill has two main objectives: to help business to grow and to encourage responsible risk taking. It will ensure that those who can pay should pay, because it will be tough on the won't pays. It will also help the could pays to get back on their feet by paying their debt, and it will offer humane ways out of debt for those who cannot pay.
Many parts of the bill strike a balance. I was struck by what was said during time for reflection, which we all listened to. A balance has to be struck between competing interests. I am not sure that Gandhi would necessarily approve, but we have made every effort to ensure that the balance has been struck in the right place.
The bill has been many years in preparation. For example, we have considered the recommendations made by the Scottish Law Commission over a 20-year period, and many of them will be implemented by the bill. Expert advice is, of course, essential, but that is not the whole story. The bill strikes the right balance because we have listened to people, parliamentary colleagues included. We have consulted widely and often. We have held meetings across Scotland and we have set up working groups as required, for example on debt relief—about which I will say something later—and on regulatory reform. We have learned much and I remain—as colleagues know—willing to learn. In that way, we can build on the consensus that I suspect is already emerging. That is good, and it is recognition of the need for reform.
This is a good point at which to thank the Enterprise and Culture Committee and its clerks for their clear and thorough report on the bill. I strongly welcome the committee's endorsement of the bill's general principles. It is clear that all the committees that fed into the report worked hard to cover an unusually wide range of issues. I hope that they will take the same approach during stage 2. I know that I will. This is a large and complex piece of legislation. The report has given me food for thought in a number of areas. I look forward to the policy discussions that will ensue.
The bill, like many bills, does more than one thing. The four main elements are linked by a theme of debt. Each offers something for business and something for consumers. The four elements are bankruptcy, floating charges, enforcement and diligence, which is debt recovery or debt enforcement, for those who are unfamiliar with the term.
I will take a quick look at bankruptcy first. Some people can manage their way out of debt by themselves, others require help and some cannot manage at all—they are the can't pay debtors who need to find a way out of the debt trap that they find themselves in. Bankruptcy, whether through sequestration or a protected trust deed, is the way out for can't pay debtors. It lets them cancel the debts that they cannot pay, after a trustee is satisfied that they have paid as much as they can. As I have already said, can't pay debtors also need a fair chance to start again, perhaps after learning a hard lesson. Members should make no mistake about it—bankruptcy is a very hard lesson for some. Although it can be the right way out, it is certainly not an easy way out. It is a very tough way out indeed. It is irrefutable that bankruptcy is tougher than any other type of debt enforcement in the bill or elsewhere. That is an important message.
Bankruptcy needs to be tough. People who can pay should pay, even when bankrupt. People who do not pay their debts when they can are a clear problem for business and others—they are a problem for everybody. The public need to be protected from those few who will not pay and who abuse the system. Of course, not many people set out to abuse the system. Most people who go bankrupt really cannot pay, for one reason or another. Some have suffered ill health, have lost their job or have found themselves in other sad circumstances. Bankruptcy needs to be fair. We all agree that people who have fallen down need to be able to restart. That is good for them, good for the rest of us and good for the economy more generally.
The fair and the tough are tricky things to balance, as I think members agree, but I hope that the bill manages it. I will give members a couple of examples. The bill will help debtors by reducing the discharge period from three years to one, thus giving people a chance to restart more quickly. It will also help business by bringing in stronger protections. For those few who do not deserve a quick restart there will still be a flexible system of two-year to 15-year bankruptcy restrictions—tough but fair.
In the same item of business
The Deputy Presiding Officer (Trish Godman):
Lab
The next item of business is a debate on motion S2M-4269, in the name of Allan Wilson, on the general principles of the Bankruptcy and Diligence etc (Scotlan...
The Deputy Minister for Enterprise and Lifelong Learning (Allan Wilson):
Lab
Credit, as members will know, is essential in our modern economy. In the past 20 years, credit markets have been opened up and getting credit is easier and, ...
Murdo Fraser (Mid Scotland and Fife) (Con):
Con
One issue that the Enterprise and Culture Committee considered is the rising trend of personal bankruptcies. Reflecting on what has happened south of the bor...
Allan Wilson:
Lab
As Murdo Fraser knows, we have deliberated that issue and listened to that claim. I put it to the member that no direct evidence exists that the claim is tru...
John Swinburne (Central Scotland) (SSCUP):
SSCUP
Does the bill contain any measures to tackle what I call junk mail debt? Everyone is inundated with junk mail that promises instant access to £3,000 or £5,00...
Allan Wilson:
Lab
The short answer is no. The member is talking about the credit side of the credit-debt coin. As I have said, access to credit is good for individuals and the...
Fergus Ewing (Inverness East, Nairn and Lochaber) (SNP) rose—
SNP
Allan Wilson:
Lab
Sorry, but I have a lot to get through.I will make a quick comment about floating charges, although perhaps they are not on everybody's agenda. We are workin...
Fergus Ewing:
SNP
Will the minister take an intervention?
Allan Wilson:
Lab
I think that I am about to move to my conclusion.
The Deputy Presiding Officer:
Lab
You have some time in hand, minister.
Fergus Ewing:
SNP
I accept a great deal of what the minister is saying. However, the new land attachment will be a radical, new and powerful weapon in the hands of creditors. ...
Allan Wilson:
Lab
I am sure that Fergus Ewing's intention is not to scaremonger. However, I take his point. I am sure that, as with private creditors, public creditors will we...
Christine Grahame (South of Scotland) (SNP):
SNP
Will the minister give way?
Allan Wilson:
Lab
If the member does not mind, I will develop the point, which is important. We are aware of the issue. I say to Fergus Ewing that we want to ensure not only t...
Tommy Sheridan (Glasgow) (SSP):
SSP
Will the minister give way?
Allan Wilson:
Lab
I will give way in a minute.Of course, the bill includes safeguards with regard to the length of time that the process will take and, importantly, to the acc...
The Deputy Presiding Officer:
Lab
Very briefly please, Mr Sheridan.
Tommy Sheridan:
SSP
Can the minister tell the chamber what safeguard will be put in place to prevent creditors using land attachment to scare the living daylights out of debtors...
The Deputy Presiding Officer:
Lab
You should be winding up, minister.
Allan Wilson:
Lab
I am sure that Tommy Sheridan has no intention of scaring the living daylights out of the population by suggesting that the Executive would suggest such a th...
The Deputy Presiding Officer:
Lab
Yes.
Allan Wilson:
Lab
I thought that I should ask. I could go on but, to be fair, there is a time limit. I am happy to respond to members' questions throughout the debate. I take ...
Mr Kenny MacAskill (Lothians) (SNP):
SNP
I welcome the minister's speech, his view that the bill should be dealt with consensually and his statement that he will deal with it inclusively. I am also ...
Tommy Sheridan:
SSP
Will the member take an intervention?
Mr MacAskill:
SNP
Not at the moment.We have commented on land attachment in various contexts, including outwith the chamber. We think that the proposed threshold of £1,500 for...
Tommy Sheridan:
SSP
Will the member take an intervention?
Mr MacAskill:
SNP
I think that I am out of time.
The Deputy Presiding Officer:
Lab
Yes, the member is out of time.
Mr MacAskill:
SNP
That could compound the problems of debt with the ignominy of homelessness. As well as asking the minister to review the £1,500 threshold, we ask him to ensu...