The Cuckoo in the Nest: Four Year Bankruptcies
In the campaign for Independence, the campaign for social justice is a key battle ground.
The idea being Scotland’s commitment to social justice is best served by ruling ourselves than relying on Westminster to protect the poor and vulnerable.
Typical sentiments are “we believe in Society”; “we believe in supporting the weak and vulnerable”; “we do not believe in the coalition’s welfare reforms”; “we will abolish the bedroom tax post-independence”…et cetera, et cetera.
Then you come to the Scottish Government’s position on bankruptcy law and if you support independence, it’s bewildering: the Scottish Government’s social justice gear in this area is completely in reverse.
In Clause Four of the Bankruptcy and Debt Advice (Scotland) Bill 2013 it is proposed in future Scottish bankrupts will pay for four years instead of three, meaning Scots will pay more and for longer than elsewhere in the UK.
The reasons behind this being the Scottish Government have said they want to create a Society where people pay their debts (don’t the majority of us already?) and wants to rebalance bankruptcy laws towards the rights of creditors.
On the face of it, this appears reasonable, but there is a problem. The vast majority of bankrupts in Scotland apply only as a last resort and usually because their income is too low to apply for other formal debt remedies like Protected Trust Deeds and the Debt Arrangement Scheme. So making bankrupts pay more and for longer doesn’t make a lot of sense, unless your committed to punishing the poor.
Even if this point is lost on the Scottish Government, it is not lost on many of the largest creditors in Scottish bankruptcies. Both the Lloyds Banking Group and the Consumer Finance Association got the point and made it patently clear when they gave evidence to the Scottish Parliament: stating bankruptcy was about allowing people a fresh start and paying for three years, and not four, in line with the rest of the UK, seemed reasonable.
Money Advice Scotland, Step Change, Citizen Advice Scotland, The Law Society of Scotland, Christians against Poverty, The STUC and The Church and Society Council of the Church of Scotland all agree, as do many individual advice agencies and advisers.
Even many Insolvency practitioners, who arguably could benefit from the changes, have voiced their concerns that forcing people to pay for four years instead of three, will lead to more defaults and disputes arising with debtors.
So what is driving the policy?
The Credit Union movement is in favour of it, possibly because they are less able to suffer the losses and are disproportionately affected by debts being included in bankruptcy. However, they represent less than 0.5% of all bankruptcy debts in Scotland: so it’s ridiculous that Scottish Government policy in this area should be driven by them. There may be an argument that their debts should be treated differently in bankruptcy, however, that’s a separate matter and although the Scottish Government consulted on it, have chosen not to bring anything forward on it in the bill.
If the truth be told there is little logic driving forward this policy, but there is a wilful ignorance being shown by the Scottish Government to the effects such a policy will have on low income debtors. It will leave many of them having to subsist for longer on only essentials, whilst forcing them to pay back more as they struggle with rising living costs, stagnating wages and unexpected financial emergencies.
It will not just affect debtors, but also their families and with over 60,000 having been made bankrupt in Scotland in the last five years, it’s not unreasonable to suspect tens of thousands, not including their dependants, will be affected in coming years.
In real terms this means cars not being repaired, boilers remaining broken and children continuing to wear last year’s winter coats, whilst going 4-5 years without even the most humble of summer holidays.
The Scottish Government’s policy of extending bankruptcy payment periods from three to four years is a cuckoo of a policy in a pro-independence social justice nest. Unlike the bedroom tax and other cut backs, it cannot be blamed on Westminster. It is wholly Scottish in its making, with nothing else as regressive being proposed elsewhere in the UK and should be a cause of concern for those SNP members that believe in social justice.
How such a policy, less than a year before the independence referendum, has found its way into a SNP Government Bill, is beyond me.