Meeting of the Parliament 06 February 2024
I am pleased to have the opportunity to speak in the debate on the Bankruptcy and Diligence (Scotland) Bill at stage 1, particularly as I am a member of the Economy and Fair Work Committee, which recently considered it.
The bill’s objectives seem quite simple. Many of the proposed changes are of a technical or minor nature and appear to require little debate. However, the area that has been the focus of most attention is the provisions intended to improve the lives of people who are struggling with problem debt and who have serious mental health issues. I will focus my remarks on that area.
In principle, the proposal to provide a moratorium to give breathing space to people who have serious mental problems would give them a chance to recover and to handle their situation better when they are able to do so. However, a number of issues need to be considered to ensure fairness and justice. As we now know, people with mental health problems are three and a half times more likely to be in debt, and half of people who are in problem debt are experiencing a mental health problem. The cost of living crisis has exacerbated the link between money issues and mental health problems.
Although the bill is focused on the more extreme end of the scale, research from the Money and Mental Health Policy Institute shows that one in six adults in the UK has experienced suicidal thoughts due to the cost of living crisis. That makes it very clear why the proposed bill is necessary.
The current legal framework for statutory debt solutions allows people in debt, including those with mental health issues, to apply for a six-month moratorium against diligence, giving someone with debt problems time to consider the best solution to their financial situation. During that time, the debtors are expected to continue making payments towards any debts due while the moratorium is in place, but the moratorium prevents creditors from taking particular forms of recovery actions for a set period of time.
Section 1 of the bill would give ministers the power to make regulations to introduce a mental health moratorium. There is little included that indicates how the moratorium would work, and, although leaving the detail to the regulations will allow flexibility to adapt legislation to changes, it means that the specifics of how the moratorium will work are not set out. Compulsory eligibility is a key factor. It seems likely that those who are subject to a compulsory treatment order under the Mental Health (Care and Treatment) (Scotland) Act 2003 and those receiving treatment under the Criminal Procedure (Scotland) Act 1995 would be eligible. After that, it becomes less clear—and understandably so. Mental health is a complex business, and there must be a clear line in the bill as to who is eligible without grey areas or ambiguity.
In England, the debt respite scheme breathing space criteria are wider than the proposals put forward by the Scottish Government: breathing space is open to anyone who is receiving mental health crisis treatment. Perhaps the Scottish Government will consider using similar criteria going forward. That would cover people receiving crisis treatment, which would include those receiving compulsory treatment as well as those who are receiving crisis, emergency or acute treatment without compulsion.
There is also the question of who would sign off on such a mental health moratorium. The Scottish Government’s consultation proposes that eligibility to sign off would be certified by a mental health officer, a reporting medical officer, a community psychiatric nurse or a similarly qualified professional, which seems reasonable.
There has been some debate on the length of the moratorium. The Government’s proposal that the initial stage of the moratorium should last as long as the person is receiving treatment, followed by a six-month period to allow the person to deal with their debt problems, is reasonable. My only question is, what happens if the person has a long-term condition or, indeed, a permanent condition? What is the backstop to deal with that?
Details of how the freeze will work remain to be seen. How will diligence be stopped? I assume that interest will be frozen and that creditor contact will be ceased. I look forward to receiving more information on that as the bill progresses.