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Replacement Of Warrant Sales By Debt Arbitration Service

Volume 114: debated on Thursday 9 April 1987

The text on this page has been created from Hansard archive content, it may contain typographical errors.

'(1) Within twelve months of the enactment of this Act, the practice of poinding and warrant sales in connection with domestic debt shall be completely abolished and the Secretary of State shall lay before Parliament an order to set up a Debt Arbitration Service to deal with cases of domestic debt, where either the debtor or the creditor wishes to refer the matter to the Debt Arbitration Service.

(2)For the purposes of this Act, domestic debt means a debt incurred and owed by an individual, as distinct from a company or body corporate.

(3)The order under subsection (1) of this section shall he subject to affirmative approval of the House of Commons'. — [Mr. Canavan.]

Brought up, and read the First time.

5.7 pm

I beg to move, That the clause be read a Second time.

With this it will be convenient to take amendment No. 2, in clause 16, page 14, leave out lines 25 to line 7 on page 15 and insert—

'(2) All household goods belonging to a debtor shall he exempt from poinding.'.

When the Bill was first mentioned in the Queen's Speech last November, I gave it a qualified welcome because, with other hon. Members, I thought that it was long overdue that something should be done to change the law on warrant sales. However, the reason why I gave the Bill only a qualified welcome was that I feared that when it was published it would bring about only minor changes in the existing law, as has happened with these rather pussyfooting proposals, rather than seek the more radical solution of the outright abolition of warrant sales.

When people outside Scotland hear that we still have the practice of poinding and warrant sales, they wonder what sort of civilised society we live in when a sheriff officer can go along and batter on someone's door —in certain circumstances, batter down the door without that person even knowing—and proceed to earmark personal property and goods, to be the subject of a sale. At one time there was certainly much agreement on both sides of the House that something should be done to end this barbaric practice. Indeed, the Scottish Law Commission set up an investigation into the whole system well over a decade ago, but clearly it has been dragging its heels. I understand that its modest proposals are behind the Bill.

My new clause goes further than the Scottish Law Commission's recommendations and considerably further than the proposals in the Bill. The new clause seeks to abolish completely the practice of poinding and warrant sales in Scotland and to replace it with the much fairer system of debt arbitration. That would be in the interests of both debtor and consumer. Rather than try to rush the matter through, I am prepared to give the Secretary of State, the Solicitor-General for Scotland and their ministerial colleagues a 12-month period in which to introduce the appropriate prohibition and parliamentary order to set up the new system of debt arbitration.

I am sure that during the various stages of the Bill it has been suggested that warrant sales are no longer the problem that they once were. It is true that their frequency has decreased in recent years. That may well be partly because of parliamentary pressure from hon. Members, such as me and my late hon. Friend Jimmy Dempsey, who had the privilege to represent the constituency of Coatbridge and Airdrie, now Monklands, West. I pay tribute to my hon. Friend the Member for Monklands, West (Mr. Clarke) and his predecessor for their excellent work, and to the trade unions, such as SOGAT, which took direct action in refusing to advertise warrant sales. Partly because of such pressure, the incidence of warrant sales has decreased in recent years. Indeed, I do not know of a single warrant sale which has taken place in my constituency since I started to apply parliamentary pressure by introducing private Member's Bills.

Although we welcome the decreasing incidence of warrant sales, it is worth pointing out to the Solicitor-General for Scotland that poinding, advertising and the build-up to a warrant sale are a distressing experience, even if the sale is eventually called off. It is a form of legalised intimidation, public humiliation and punishment, rather than a constructive attempt to get a debt repaid.

Most of the debts are personal or domestic as distinct from debts incurred or owed by companies and bodies corporate. That is why my new clause refers only to personal or domestic debts. Most of them amount to less than £100 and are not contested. In the majority of cases the debtor admits that he or she has incurred the debt and is usually willing to make some effort to repay it. But all too often he or she cannot repay the debt, possibly because of a change of circumstance—for example, unemployment, sickness or a change in family circumstances. Certainly the Government must bear some of the responsibility in this respect, as high unemployment has been exacerbated by their economic policies.

5.15 pm

In the majority of cases there is no need to go trailing along to a sheriff court or any other court to prove the debt because the debt is admitted and the debtor is willing to repay it. Surely it makes sense to set up a debt arbitration service where both creditor and debtor can get together through an independent arbitrator and reach some sort of out-of-court settlement. If such a voluntary settlement fails, the debt arbitration officer could be given the power to enforce the repayment by instalments or, in the last resort, by the arrestment of wages.

In the past we have seen similar debts settled with some success by various arbitrators set up by Governments. The Advisory, Conciliation and Arbitration Service, for example, has had some success in settling industrial relations cases, and the rent officer system has in many cases led to the determination of a fair rent rather than an excessive one. Therefore, it seems that the introduction of the system of debt arbitration would be a reasonable and constructive way of dealing with the problem. Certainly it would be more constructive than the existing system of warrant sales or threatened warrant sales.

I have not yet seen the speech of the Solicitor-General for Scotland— and certainly I have not helped him to write it — but he will almost certainly refer to the possible expense of a debt arbitration scheme, but the warrant sales system is considerably expensive. Indeed, the expenses incurred through poinding, advertising and even the sale itself sometimes far outweigh the original debt. Constituents have come to me about expenses which have been 10 or 20 times the amount of the original debt. Therefore, the existing system does not make financial sense.

Moreover, the public purse could save itself court expenses. Obviously, people would go to the debt arbitration officer rather than to court, which would reduce some of the work load and expenses of the court system. If there is any serious threat of an increase in expenditure because of the new system, a levy could be made on credit companies, particularly big credit companies, which do not always act responsibly. Indeed, some act irresponsibly by encouraging people on low incomes to take on debts far beyond their means. Then, when circumstances change, whether through sickness, death in the family or unemployment, those people often find it absolutely impossible to repay the debt under the terms demanded by the credit companies. There may well be a case there for a levy on the credit companies to meet the expense of any new system.

As a long-time campaigner for this measure, I have made several previous attempts to introduce a private Member's Bill. I have checked Hansard for 3 June 1981 and looked at the sponsors I managed to get for my private Member's Bill, because I realise that on such a measure there could sometimes be an advantage in getting support from both sides of the House. Four Scottish Tory Members sponsored me, including Mr. David Myles—who is no longer with us here—his good and dear friend and neighbour the hon. Member for Banff and Buchan (Mr. McQuarrie) and their good friend the hon. Member for Tayside, North (Mr. Walker) as well as the hon. Member for Argyll and Bute (Mr. MacKay), who is now a Minister in the Scottish Office. Unfortunately, whether by accident or design, he is not here. If he were, obviously I should be urging him to support me with his voice and vote.

I appeal to the Solicitor-General, on the ground that there is a consensus within Scotland, irrespective of party political divisions in the House or in Scotland in general, to end this system. The vast majority of the people of Scotland want to end it. They do not want a tinkering with the system through these pussyfooting reforms proposed by the Government; they want complete abolition of the system. The system of warrant sales is seen as a barbaric, inhuman, medieval practice which has caused undue hardship to countless thousands of people and their families. It is high time that the House of Commons abolished it for ever.

I rise to support the new clause and the amendment. We are presumably talking about a small number of cases when we discuss warrant sales, and, as my hon. Friend the Member for Falkirk, West (Mr. Canavan) suggests, an arbitration service could play a useful role. The Solicitor-General knows that I am unhappy with the notion that a debtor's effects can be auctioned off in a local sales room. We disagree about the usefulness of such a measure, On Second Reading I said that holding the sale in an auction room was an improvement on a warrant sale being held in a debtor's house, but that it was an unsatisfactory arrangement because the stigma is still there and little money would be raised from such a sale given the rings that we know are organised by furniture dealers and others when such sales take place.

My hon. Friend's new clause is an even better proposal than that of removing the warrant sale from the debtor's house and taking it to the auction room. I believe that the concept of a debt arbitration service is good and constructive and is certainly worthy of consideration by this Government and their successors.

In addressing myself in the main to amendment No. 2, I must say that I welcome the reference by my hon. Friend the Member for Falkirk, West (Mr. Canavan) to my predecessor, the late Jimmy Dempsey. Jimmy Dempsey shared our repugnance for warrant sales in any form and my hon. Friend, whose comments were most generous and should be much appreciated, will know that on Second Reading, as well as in Committee, the Opposition placed on record very firmly the view that warrant sales in every shape or form ought to be abolished.

In saying that all household goods belonging to a debtor should be exempt from poinding, we are trying to give effect to the thinking expressed in the Scottish Law Commission's report, which obviously influenced the Government in drafting the Bill that they have put before the House. In Committee, I was left with the impression that certainly the Opposition wanted to see householders protected from humiliation and from the idea that sheriff officers can involve themselves in poinding various goods which are outlined in clause 16. Some are exempted: beds or bedding, household linen, and so on. The Solicitor General will recall that in Committee we had some doubts as to whether a washing machine might be the subject of exemption. To put the matter beyond any doubt, we thought it right to table this new clause making it clear that all household goods belonging to a debtor shall be exempt from poinding.

We believe that the Bill would be improved thereby and that assistance would be given to the debtor as well as to the creditor. The great mass of evidence that we have seen suggests that people find themselves in debt not because there is a willingness on their part to be in that position, but for other reasons. We believe that help is needed and that the legislation that we seek to introduce should be of assistance to the debtor and to the creditor in trying to find a solution to the problem by ensuring that the debt is paid, in time, without humiliating the householder or his family.

We believe that if the new clause were accepted, it would put this matter beyond question and, above all, remove any suggestion of humiliation in the way that has rightly been held in contempt by my hon. Friends the Members for Greenock and Port Glasgow (Dr. Godman) and Falkirk, West.

I suspect that I am suffering this afternoon for having pointed out on Second Reading that the hon. Member for Falkirk, West (Mr. Canavan) was not present. Nevertheless, in spite of the crack that I made then, I am grateful to the hon. Gentleman for putting forward this new clause on debt arbitration rather than the arrangements which we discussed in Committee.

As the hon. Gentleman may recall, The Labour party put forward certain proposals to the Scottish Law Commission during the course of its deliberations suggesting that there should be a debt arbitration service of some sort, and the Commissoner recorded the following in paragraph 2.85 of its report;
"It would appear that poindings and warrant sales"—
in relation to such a debt arbitration service—
"would not be permitted, though this is not entirely clear."
The hon Gentleman suggests the introduction of a debt arbitration service and the abolition in its entirety of the diligence of poinding and warrant sale. His colleagues have certainly been criticised during the passage of the Bill for failing to put forward any alternative of this character, and to that extent at least it is interesting that the hon. Gentleman should have done so. But it seems to me that there are a number of quite significant flaws in the way in which he has proposed it.

First, let me say that I am aware of the Bill that the hon. Gentleman introduced in 1981. There was some obscurity in that Bill about what would be required in terms of enforcement. The hon. Gentleman has changed his proposal from personal debt in his Bill in 1981 to domestic debt in this new clause. I think that I understand what is intended, but either definition would take us further into commercial matters than I suspect the hon. Gentleman intended. For instance, partners may in some circumstances be personally liable for the debts of the partnership. Those debts might thus be regarded as domestic within the meaning of the new clause.

5.30 pm

I rehearsed the arguments for and against the retention of poinding and sale at some length during the earlier stages of the Bill. I went into the arguments for reform rather than abolition in some detail on Second Reading. I do not propose to rehearse those arguments again. Suffice to say that the Scottish Law Commission advanced many cogent arguments against abolition in chapter 2 of its report, and the retention of a reformed procedure was the starting point of the recommendations in that report, and indeed that is the foundation on which the Bill is built.

I want to consider the somewhat unspecific debt arbitration service proposed by the hon. Member for Falkirk, West. I suppose that its purpose will be to arrange for payment by instalments and to interrupt enforcement of debts by the diligences still available to creditors. The hon. Gentleman may want the Secretary of State to set up an arbitration service similar to that proposed by the Scottish Consumer Council. Indeed, that might be a more workable system than that suggested by the hon. Gentleman. As the hon. Gentleman has developed his argument, I understand that he wants to get rid of all poinding and warrant sales. He does not simply want that system as an opt-out arrangement as the Scottish Consumer Council suggested.

I understand how a debt arbitration system would work in cases where people had a multiplicity of debts and no significant assets out of which to make payment, but the hon. Gentleman has not addressed himself to the debtor —perhaps the hon. Member for Falkirk, West himself—who is simply unco-operative, but who has sufficient means to pay his debts. Such a person may simply be unco-operative over the payments due. Such a debtor may not be in any real significant financial difficulty; he may simply decline to pay. The hon. Member for Falkirk, West has not made it clear what will happen under a debt arbitration system if a debtor simply declines to participate in that arrangement for debt arbitration. Is that person entitled simply to shrug his shoulders and go off?

I suppose that it is possible, given the very much improved arrangements for arrestment in a later part of the Bill, that the system could be operated. However, what will happen when someone has a valuable moveable asset —for example, a Van Gogh hanging on the wall of his house? In such a circumstance, if the hon. Gentleman's scheme were followed, there would be no way in which the owner of the Van Gogh's perfectly lawful creditors would be able to get satisfaction for the debts owed to them.

The new clause makes it perfectly clear that either the debtor or the creditor can refer the matter to the debt arbitration service in a case such as that outlined by the Solicitor-General, in which a fairly rich debtor is simply being unco-operative in paying the debt. There is nothing to stop the creditor going to the debt arbitration service.

During my speech, I said that the debt arbitration officer could, and in my view should, be given the power to enforce the repayment of the debt in cases where there is clearly an ability to repay the debt, but the debtor is unwilling to pay. I do not know of anyone who has a Van Gogh or a Rembrandt who does not have a few bob in the bank as well. It would be more practical, to achieve a constructive repayment of the debt, to arrest that person's wages or unearned income or whatever than to grab the Rembrandt or Van Gogh and to sell it at a warrant sale. Frankly, the Solicitor-General's example was ridiculous.

The hon. Gentleman is trying to slip around the point. He will not face the fact that the example that he has just given would require the individual — whom he describes as the debt arbitration officer — to have power to enforce the system. The hon. Gentleman must face this point. It is a matter of intellectual argument. What powers of enforcement would he grant to that individual? If a debtor simply says that he accepts that he owes the debt but will not pay it, what will happen then? An arrestment may be made, but that is elaborate and clumsy. If someone owes a large sum of money——

What did the Government do to the National Union of Mineworkers? They seized its bloody funds.

I do not think that I will go down that particular path; nor will I adopt the hon. Gentleman's unparliamentary language.

Is the situation that my hon. and learned Friend has described, in which an arbitrator has no power, similar to that of a Chairman of a Committee of this House who has no power in Committee to eject an hon. Member who is not a member of that Committee, but who is disrupting the proceedings of that Committee and of the House?

I grasp my hon. Friend's allusion, but Opposition Members may rest assured that I shall not follow my hon. Friend down that route.

There is a substantial difficulty. As I said to the hon. Member for Falkirk, West a moment ago, bodies such as the Scottish Consumer Council have carefully considered the possibility of a debt arbitration service. However, those bodies did not slip away from facing up to the difficulty that, if such a system existed, it could be introduced only as an option or alternative. It would not be possible to introduce a coherent and workable scheme if, as an ultimate remedy, no form of enforcement was retained through the reformed procedures of poinding and warrant sales.

The hon. Member for Falkirk, West said that if we talk to anyone outside Scotland, that person will not have heard of poinding or warrant sales. That is correct. I do not know of any other system with practices called poinding or warrant sales. However, there is no mature legal system—as far as I am aware—that does not have at least a comparable system.

The hon. Member for Monklands, West (Mr. Clarke) spoke briefly about amendment No. 2:
"All household goods belonging to a debtor shall be exempt from poinding."
We had considerable discussion about that in Committee. I immediately have difficulty about the provision that the hon. Gentleman suggests. What are household goods?

The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is shaking his head in a knowledgeable way. However, according to amendment No. 2, anything that is contained in a house, whatever its value, whatever its use, or whatever reasonable use is required of it—

The hon. Gentleman wants to pursue my example. If there is a valuable painting on a wall, is that "household goods"?

It is highly arguable whether it is. If the hon. Member for Roxburgh and Berwickshire says that it is not part of household goods, he is effectively saying that we should consider the list in clause 16 of the Bill and decide that household goods do not include paintings on walls, satin pillows or such things. Rather, they are goods that are reasonably required for people to carry on their lives. The Government and the Scottish Law Commission believe that——

No, I want to finish my point.

We have said that the proper way to approach the matter is to have an extensive list— one that is much more extensive than the previous list. For example, according to amendment No. 2, if a warehouse were full of refrigerators and there was a commercial debt, there can be no doubt that refrigerators are household goods. In such circumstances, all those items would be exempted from poinding and ultimately from warrant sales.

The hon. Member for Monklands, West has made several efforts to extend the list in clause 16 and to modify some of its provisions. I have given some examples showing how difficult it would be to rely on such a broad test. If we did so, we would be considering what are truly commercial debts. Far from there being less difficulty, there is a grave possibility that we would have to leave it to the courts in circumstance after circumstance to decide whether paintings or other items were truly household goods. Far from Parliament or the Scottish Law Commission deciding what should be included in the list, effectively we would be asking the courts to determine for us what should be included in the definition of household goods.

In Committee, the hon. and learned Gentleman did not have much difficulty in explaining to my right hon. Friend the Member for Glasgow, Govan (Mr. Millan), who had some doubts about whether a washing machine was exempt, that it was. Why is the hon. and learned Gentleman so confident about that? Where does a dish-washing machine figure in the Government's thinking? In the absence of a clear explanation, does the hon. and learned Gentleman not feel that "household goods" is a much clearer definition than what appears in clause 16?

We are going to move quite a long way from the amendment. Clause 16(2) contains an extensive list of what is required. I thought that the right hon. Member for Glasgow, Govan (Mr. Millan) understood from my answer that we did not include the term "washing machine" but relied on a broader definition. We wanted to ensure that we were talking not simply about a washing machine, rather than a spin drier—or, to develop the technology of the times, the two incorporated in a single appliance, with the problem of deciding whether it was or was not a washing machine. Accordingly, we decided that it was safer to use the broader definition in clause 16(2).

I have said why I do not accept the view of the hon. Member for Falkirk, West of a debt arbitration service. I am surprised at the approach of the hon. Member for Monklands, West, who fought valiantly in Committee to refine clause 16(2). He now shrugs his shoulders and says that all household goods are to be exempted. That would mean that the courts would have to decide what should or should not be included.

I have a great deal of sympathy with the point raised by my hon. Friend the Member for Monklands, West (Mr. Clarke) because of the simplicity it offers. I notice that under clause 16(3) the Lord Advocate may add to or delete from the list from time to time. The hon. and learned Gentleman knows very well that it is a long time since we have heard about an exercise in diligence of this kind. Work has been going on for 17 or 18 years on the present exercise. Would the Lord Advocate be prepared to add to or delete from the list annually? Things change rapidly. I, for one, should be greatly reassured if the Lord Advocate were to do this annually.

I cannot give the right hon. Gentleman an undertaking that the Lord Advocate will do so annually. But the right hon. Gentleman clearly appreciates the provisions of clause 16(3), which states:

"The Lord Advocate may by regulations add to the list… delete or vary any of the items".
I cannot immediately envisage any item that needs to be added to or deleted from the list. However, if at any time it is thought that the list should be added to or varied, that can be done without any 10-year consideration of the item. It can be done immediately. I do not envisage that, if the Lord Advocate decided that an item should be added to the list, and accordingly excluded from what might be subject to poinding and warrant sales, it would excite much controversy in the House.

5.45 pm

I do not see any difficulty about the interpretation of "household goods". The Solicitor-General for Scotland is talking absolute rubbish. Under the prohibited items, page 15 of the Bill lists

"tools used for maintenance or repair of the dwellinghouse or of household articles."
"Household articles" is clear by definition and is not subject to interpretation by a sheriff. What, therefore, is wrong with the term "household goods", used by my hon. Friend the Member for Monklands, West (Mr. Clarke)?

I know that the hon. Gentleman had a lot to think about as I was speaking, following my attack on his proposed debt arbitration service.

If I am provoking the hon. Gentleman, I withdraw. I want to get on with the debate. The hon. Gentleman does not seem to have grasped one problem.

If amendment No. 2 were to be accepted, not only would household goods in the debtor's home be excluded from poinding but, if the debtor happened to be a commercial man who had a warehouse full of refrigerators, hi-fis, and so on, those items would not be subject to poinding and warrant sale. For that reason, I hope that the hon. Member for Falkirk, West is prepared to withdraw the motion and new clause. If the hon. Members for Falkirk, West and for Monklands, West continue to have any misgivings about what is excluded in clause 16(2) from poinding and warrant sales, an opportunity remains immediately the Bill becomes law to make representations to the Lord Advocate to add to or vary by regulation what is included in the list.

Question put and negatived.