Social Justice and Social Security Committee publishes findings on low income and problem debt

The Social Justice and Social Security Committee has urged the Scottish Government to progress quickly and implement the mental health moratorium, according to a Scottish Government impact assessment published on 28 April 2023¹. The committee reached its findings after an inquiry into low income and problem debt that ran between 15 February 2022 and 31 March 2022, hearing evidence from people experiencing debt and poverty, debt and money advice specialists, third sector organisations and local authorities¹.

The Bankruptcy and Diligence (Scotland) Bill will contain provisions in three broad categories: enabling powers for a mental health moratorium, minor or technical amendments to existing bankruptcy legislation, and diligence measures modernising debt recovery¹. The mental health moratorium is intended to provide "breathing space" for people experiencing serious difficulties with their mental health as well as problem debt¹. The Bill introduces an enabling power only, allowing Scottish Ministers to implement the moratorium through secondary legislation; the assessment states this means it will have no immediate impact on socio-economic disadvantage¹.

The assessment cites Royal College of Psychiatrists figures that one in two adults with debts has a mental health problem and one in four people with a mental health problem is also in debt¹. It says people with mental health problems often do not seek early help with debt, which may be attributed to stigma, and that the threat of creditor action can exacerbate existing mental health issues¹.

The Scottish Government consulted on its policy review response in August 2022 over eight weeks. Of the 93% of respondents who answered the question on a specific mental health process within the statutory moratorium, 84% agreed with the proposal¹. The summary of responses was published on 26 January 2023¹.

A mental health moratorium working group of mental health professionals and key stakeholders has been established to consider the practical aspects of the process, with its first meeting held on 28 February 2023¹. It will make recommendations on entry criteria, including the definition of mental health crisis and mental health professional support, the period of the moratorium, its protections, administrative work including possible review, and exit criteria¹.

Why it matters for households

The moratorium is aimed at a specific group: people in Scotland with problem debt who are also experiencing serious difficulties with their mental health¹. The Bill as assessed does not itself change anyone's protections, because the mental health moratorium is an enabling power and the detail will be set out in regulations made after the Bill passes¹. Those regulations will be subject to a further Fairer Scotland Duty impact assessment¹. The assessment states the Scottish Government expects the socio-economic impact of the regulations to be positive, if limited to a specific group of vulnerable individuals¹. The bankruptcy amendments and diligence provisions were concluded to have no significant impact on socio-economic disadvantage¹. The assessment does not set out eligibility rules, the length of any moratorium or the protections it would give, and no date for the regulations has been reported¹.

What happens next

The working group will make recommendations on the design of the process, covering entry and exit criteria, duration, protections and administration¹. The full detail will be set out in secondary legislation following passage of the Bill, and those regulations will be subject to a Fairer Scotland Duty impact assessment¹. No timetable for the regulations has been reported¹.