Meeting of the Parliament 06 February 2024
Mr Johnson makes a very fair point. In the evidence that was given to the committee, some of the strongest-worded evidence against some of the additional protections for debtors came from, I think, the City of Edinburgh Council. To be fair, it is a reflection of the financial pressure that councils feel under that they have to try to recover whatever sums are due to them.
There is also a risk that, if bankruptcy legislation goes too far in protecting the debtor, it creates an active disincentive for mainstream financial institutions to be involved in lending to those who may be deemed financially vulnerable. That means that those individuals cannot access finance from reputable sources and are left, therefore, with no option but to go to the unregulated loan sharks who operate outwith the law. That cannot be in anyone’s interest and it demonstrates why a careful balance is needed when drawing up bankruptcy rules. That balance was reflected in the evidence that the committee heard on the bill that is before us.
As we have heard from the minister and the committee convener, the bill makes what are, in the main, fairly minor and technical reforms to existing bankruptcy legislation. The most significant reform in the bill, and the one that took up most of the committee’s time, was the introduction of a specific protection for debtors who have a mental illness, with the creation of a moratorium on debt recovery action. That is not a novel concept. It reflects the breathing space scheme that already exists in England and Wales, where individuals receiving “crisis treatment”, which encompasses those in compulsory treatment as well as those with conditions of comparable severity who are receiving crisis, emergency or acute treatment without compulsion, are protected from bankruptcy proceedings.
As we have heard, the committee received widespread support from stakeholders for the principle of a mental health moratorium. However, we also heard that there was concern about the lack of detail on how such a moratorium would operate in practice. The mental health moratorium working group agreed that the entry criteria should apply only to those who are subject to compulsory treatment orders, therefore excluding individuals with severe mental health issues who are in receipt of in-patient care and treatment on a voluntary basis. That approach was criticised by a number of those who gave evidence, including One Parent Families Scotland and the Poverty Alliance, which felt that the approach was too narrow and would help only a very small number of people. The alternative suggestion was the use of the term “severely mentally impaired”, which currently exists in council tax legislation, but there are concerns that that language is now outdated.
The committee’s concern, as we heard from the convener, is that, in asking Parliament to agree the general principles and to pass the bill at this stage without any detail as to how the moratorium would work in practice, we are essentially being asked to write a blank cheque to the Government. We have therefore asked the Government to provide, ahead of stage 2, more detail as to how the scheme would work in practice.