 Welcome to the 27 meeting in 2022 of the Delegated Powers and Law Reform Committee. I like to remind everyone present to switching mobile phones to silent. The first item of business is to decide whether to take items 5, 6 and 7 in private, as a committee content to take these items in private. Moving to agenda item number 2, today we're having our final evidence session on the movable transactions at Scotland Bill and are taking evidence from Tom Arthur, MSP, the Minister for Public Finance, Planning and Community Wealth. The minister is accompanied by three Scottish Government officials, Amy Scoodle, the bill team leader, Rob McConnell, solicitor in commercial and competition law branch and V. Stoodley, solicitor in commercial and competition law branch. Good morning to you all and welcome to the committee. I remind all attendees not to worry about turning on your microphones during the session as it is controlled by broadcasting. I would like to invite the minister to make some opening remarks. Thank you very much, convener, and good morning to the committee. It's a pleasure to be in front of the committee. I'm a committee of many phone memories of being a member of, and I say it's a pleasure being in front of the committee. I hope I'm still saying that at the end of the evidence session. Turning to the matter in hand, the committee will be aware that there is significant support for reform and modernisation of Scottish Movable Transactions law, among those who use it since it is out of date and inadequate by international standards. If implemented, the bill would make various types of commercial transactions more efficient, less expensive and less complicated than they currently are. Movable Transactions law enables both businesses and individuals to use their assets to raise finance by selling debts or by granting security over movable property. For example, a business may wish to acquire funding by transferring to a financial institution, its claim to payment of existing and future customer invoices, which would be done by means of an asagnation. Alternatively, it may want to retain assets such as vehicles, equipment and intellectual property, but to use those assets collateral to obtain loaned finance, which would be done by means of a new statutory pledge. That would lead to greater access to finance for businesses in Scotland, thus benefiting the general economy. I am aware that the committee has hired evidence from Citizens Advice Scotland and Money Advice agencies who have suggested that the bill should only apply to businesses and not to individual consumers. They have also suggested that, if the bill is to apply to individual consumers, the consumer protections in the bill should be strengthened. When the economy committee took evidence on the proposals in the last Parliament, the vast majority of respondents indicated that they thought that the consumer protections in the bill were perfectly adequate. I understand that many respondents to the committee have repeated that view. However, I did meet with Citizens Advice Scotland and some of the data advice agencies last week and listened carefully to what they had to say about the application of the bill to consumers. I am certainly well disposed to strengthening the consumer protections in the bill. In particular, I think that the monetary threshold under which it will not be possible to grant a statutory pledge should be raised from £1,000. I am also no doubt that the policy of the Government should be that it should not be possible to grant a statutory pledge over ordinary household goods. We can look to see how the bill might be amended at stage 2 to ensure that that is not possible. However, I will conclude and be happy to take any questions that the committee may have. Thank you very much for that, minister. I am just a worry open with some questions, essentially. Can you provide any up-to-date figures about the likely impact of the bill on businesses in Scotland? I am conscious that the committee has had a range of evidence in the policy of engagement with FSB last week. You will be well familiar with what the provisions of the bill aim to do with opening up finance to businesses. To give an example of one particular area, I will not rehearse all the aspects of the bill, which I appreciate the committee will be well familiar with now. However, if we look at what the Scottish Enterprise Intellectual Assets survey estimated, it will form around 80 per cent of the Scottish businesses' value and will continue to increase further in the future. We will take something around IP and the opportunities that would be opened up through the legislation and using that as security. There is a whole range of different ways in which that could be positive. The Scottish Government Small Business Survey in 2015 showed that only 2 per cent of businesses surveyed applied for an invoice discounting or factoring facility, with most applying for bank overdrafts 34 per cent, followed by a loan of 32 per cent, whereas if Scottish businesses utilised invoice factoring to the same extent as the UK as a whole, they might assign invoices worth nearly £18 billion. The figure for invoice factoring in 2018 and 2019 was still only 4 per cent. Those figures demonstrate that there is significant room for growth in that sector in opening up that access to finance for business. What evidence has the Scottish Government received from lenders that they are planning to offer a broader or a cheaper range of products to businesses in Scotland? I would note that the evidence that you received last week from Nat West as an example. I think that the reality is that the current arrangements in Scotland, given their complexity, do not make this an attractive environment to offer those particular products, as is the case in other jurisdictions such as England. What we are doing in Scotland, and I know that this is something that I am proposing to do through this bill in Scotland, I notice that this is something that was commented on by witnesses. We would go from having a system that is perhaps significantly far behind what is available in other jurisdictions to one that is significantly more advanced and up-to-date and modern. By dint of that, it would create that opportunity for those new products to be offered, which in turn would give more options for business in raising finance, which is something that we recognise as extremely important. I do not know if you want to comment on some of the evidence that we have received in regards to what lenders would hope to do. I think that evidence was given last week by Nat West to say that they would be looking at offering new products. Generally speaking, there has been a positive response to this. If you go back to the SLC's report, there were comments from the CBI Scotland UK Finance, as well as the Law Society. There is a letter that was sent by the then president of the Law Society in August 2019. That is a critical piece of legal infrastructure that is required to enable small and growing businesses in Scotland to thrive and stay here and to ensure that Scotland is an attractive investment destination in the future for relevant businesses coming from abroad. At the moment, it can be extremely cumbersome for Scottish businesses to use their intellectual property, plant equipment and stock, debts owned by their customers, bank account balances and shares as collateral to fund their businesses. Our members report that that means that some considering starting or growing businesses in Scotland or considering coming here to do so instead locate to England or move there to use English contracts, bank accounts and other assets or English companies. As it is much more straightforward under English law to use those assets to support funding in their businesses, that applies across all sectors, including particularly data, technology, energy, food and drink, which Scotland currently enjoys or has the potential to establish a strong reputation. It goes on to say that it would be extremely unfortunate if Scotland were hampered by failing to take this opportunity to replace inadequate, antiquated and legal infrastructure with something better than some of our competitors. I generally do welcome the comments that have just been reiterated to the committee, but has the Government received any up-to-date recommendations or suggestions or advice from the financial sector? I note that the comments also were from the DSLC work in the past. I would notice that the body in possession of the most up-to-date opinion is this committee from the evidence that has received as part of its stage 1 inquiry, and I would refer back again to the evidence that the committee received from the representative last week. The stakeholders from the consumer and money advice sector have raised concerns about the impact of the assignation reforms on consumer credit debts, from the consultations with lenders and also other potential users of the register of assignations. Can you tell us, minister, on what extent do you expect the register to be used for the assignations of consumer credit debts? The first point that I would make is that I am very conscious of the concerns that have been raised by consumer advice and money advice stakeholders. I studied carefully the evidence that was given at the start of October to the committee, and as I said, I had a meeting last week. I want to reflect on those concerns carefully. I recognise that the committee will want to touch on other areas around the statutory pledge later on. I also want to be clear at the outset that I will consider carefully the committee's stage 1 report, because I recognise that you have had to contend with evidence that, in some contexts, may be conflicting or coming from different perspectives, including some of the written evidence that you have received in recent days. I will want to give full reflection on that matter. The indications that we have had, particularly from the registers of Scotland who have been doing work on the likely usage of the new registers, we believe that assignations of consumer debt will be an early and heavy usage of the new register of assignations, possibly quicker and more readily than the use of the new register of statutory pledge. It is simply because the new register of assignations will make it possible to assign debt without using English law. It will be possible to register the assignation in the new register, and people who are looking to find out whether a debt has been assigned will be able to search that register. The indications were that this would be early usage and heavy usage, partly because, under the existing law, you can assign existing debt, but you cannot assign future debt because, under the existing law of Scotland, you need to intimate to the debtor. You cannot intimate to the debtor if you do not know who that debtor is. For those two reasons, the use of the register and the possibility of assigning future debt, we think that the usage of the new register will be quite heavy indeed. That speaks to your earlier question, convener, with regard to what the anticipated uptake of those new provisions will be from business. One other aspect of that is the waiver of defence clauses. I mean that they would appear to work against the interests of debtors in assignation. Why has the Scottish Government chosen to formulate the proposed law in this way? Why haven't protections for individual debtors been included as they have elsewhere in the bill? It is important to note that the bill changes nothing in relation to waiver of defence clauses. It simply puts an existing common law into statute. I want to stress that the existing common law position is that the ability of parties agreeing to have a waiver of defence clause is subject to any legislation that restricts or prevents it, including any and all consumer protection legislation. I would say that the correct place for regulation of asic nations of consumer credit agreements is consumer credit law and more generally the place for protecting consumers from unfair contract terms as the Consumer Rights Act 2015. That legislation holds that an unfair term and neither a consumer contract or a consumer notice is not binding on the consumer. The result of that is that the potential for a waiver of defence clauses in a consumer context is checked by the consumer protection legislation, particularly the 2015 act. An unfair term in such a consumer contract would not be binding on the consumer. The bill, as a draft, allows consumers the contractual freedom to contract as they feel appropriate, all with the consumer protections apart to the 2015 act. However, if I appreciate the art concerns, that has been raised by the committee and about the drafting of section 15, so this is something that I am happy to consider at stage 2. Of course, we will be keen to study what the committee's thoughts and reflections on the report. The final question for me at the moment is, under the information provisions in the bill, a debtor in an asignation would have no direct right to find out if the obligation to which their subject has actually been transferred. They could also be charged for this information by the asignee. Is this something that the Scottish Government will commit to addressing? Happy, of course, to consider, but you will have heard the evidence from Professor Stephen that it is not anticipated that the average debtor will have a need or an interest in searching the register. Indeed, it has been seen from the way in which the land register operates, that information registers tend to only be accessed by legal advisers in particular. In addition, as the committee understands and appreciates, a debtor would be protected under the terms of the bill if it continued to perform in good faith, meaning that its requirement to know the absence of notice about an asignation is diminished. However, the provisions in the bill do permit a debtor who has received notice of an asignation or who has reasonable grounds to believe that an asignation has been granted to request reasonable evidence of the granting of an asignation document. The debtor is entitled to withhold performance using payment of the debt until that evidence is received. The bill also allows a debtor having obtained consent from the assigner to make inquiries of a registered assignee as to whether a claim has been assigned and whether a condition to which the asignation is subject has been satisfied. That protection sits along with a general ability to search the register. I want to have a look at the thing that was in the original bill that has been taken out by you in regard to finance instruments. I know that you are working with the UK Government to use section 104. First, why, in your opinion, it would not be appropriate for us to be in the bill and why you think that it has to be done through Westminster? As you say, the view that the Scottish Government has come to is that it is outwith competence and understanding internal processes that inform that decision and it is not something that I can go into in front of the committee. That is the view. Of course, we want those provisions to be within the legislation and why we have sought at the earliest stage to engage with the UK Government with regard to section 104. I hope that, notwithstanding the particular areas of concern that I know that the committee and stakeholders have raised at the general thrust of the bill and what it aims to achieve will command the broadest support across Parliament. Given that we can get to that place of consensus, I hope that the UK Government would be agreeable to engaging constructively on this through section 104 to ensure that we can get financial instruments into the operation of the final legislation. I wonder if I can just put you slightly on that, minister. Clearly, if you get four lawyers into a room, you get 12 different opinions. There is obviously quite a lot of legal opinion to say that this is competent. I wonder if you could give us a wee bit more information on why you have come to a view that it is not competent. I think that it is fundamental because it relates to the reserve matters of financial services and financial markets. I recognise the point that the member raised that there can be contrasting opinions, but what we have sought to do is to take an approach that ensures that the matters that we believe are within competence can be considered as part of the bill. One area that we do not believe to be within competence can still be affected, albeit through another process, namely the section 104 that is provided for by the Scotland Act. Do you want to come in, Hamish? We have been in liaison with the Scotland Office about this. We are still waiting for their initial assessment of whether a section 104 order is required, but they did say in one email to me that this was technical, complex stuff and it was not easy. I think that it is one of those areas where the judgments are finally balanced. We have not reached an agreement with the UK Government on this, but we are still waiting for your back from the Scotland Office. We are still waiting to hear from the Scotland Office. I emailed them again yesterday and have not heard back. I have one quick question on this. I assume therefore that there has been no indication at all that if this aspect was covered in the bill that there would be a challenge from the UK Government or from anyone within the legal fraternity if this was included and that the process had been decided through the Parliament? I cannot speak to what opinions others might have privately, but I certainly had no indication that that would be the case. Obviously, the condition is that we have to be satisfied at the bill that is within competence in introducing it. That is what we have sought to do. We are seeking to engage constructively with the UK Government on this matter, and I hope that it would not be withstanding the technical and complex nature of the legislation that the merits of it would be widely recognised and would command support from the UK Government. That is the same. I would be happy to keep the committee updated as to and when we receive further correspondence from the UK Government on the matter. Clearly, there is still some time between stage 2 and stage 3, but the evidence that we have received has suggested that, for this aspect, whether it is in the bill or not, there is a section 1 or 4 order to happen as the bill passes, so that there is a full suite to complement the bill as compared to having that gap. I reference what I hope will be a position of strong political support in the Parliament, but there has been evidence from the submissions that the committee has received and from wider commentary that there is significant support for the financial instruments to be covered. I hope that the UK Government will recognise that and will engage constructively so that we can achieve it as soon as possible. I do not think that the section 1 or 4 order can be passed until the act is passed. That is correct. On a practical level, a section 1 or 4 order has to wait until there is an act in place. That is the way that the legislation is drafted. Minister, in the way that the bill would operate, it will not be entirely clear until detailed regulations are made. Is the minister able to give the committee early sight of those regulations now or at some point before the stage 1 debate, which is anticipated in the next six or seven weeks? I am not going to be in a position to provide early sight of the regulations. We obviously have to recognise that this is a live bill and that it will be for Parliament to determine what the final shape of it is should Parliament be content to pass the legislation. However, we will, of course, with regard to the rule-making for both of the registers, be consulting on that. Given that it would be an exercise of delegated powers, I am happy to keep the committee informed as that process develops with regard to consultation and engagement. That makes sense. Therefore, I am not 100 per cent sure if the next question might fall under the same provisos. However, several stakeholders have called for links between the registers set up between the bill and the company's house. Does the committee understand that this is being discussed with the UK Government? Is it possible to give us any update on any progress that might be being made? We have raised the issue, and it is something that I am certainly alive to. I am also conscious, if I remember correctly, that the comments from the keeper last week in the committee were inquiring as to whether we should be provisioned within the bill to enable that joint registering. That is something that I am happy to consider as part of the stage 2 amendments. However, with regard to the update on engagement for the UK Government, we raised the possibility of reciprocal registration when we raised the possibility of the section 104 order, so we are still waiting to hear. It is just because the stage 1 debate is anticipated within the next six or seven weeks, so it was just an idea as to whether any movement had been made there, but you are still holding on for that at the moment. We are still waiting to hear from the UK Government. It is perhaps worth adding that the regulations will probably be quite lengthy when they are finally put out to consultation. I understand that the regulations on rules of procedure for the land register extend to about 80 pages. It may not be as bad as that, but we are not talking about something short. It will be a significant piece of work. Following on, as the Scottish Government has proposed, the updates to the register of statutory pledges, for example, where a statutory pledge is to start discharged, will be a voluntary process. Given feedback that creditors will want to minimise the information provided to reduce the risk of errors and that the English experience is that creditors are notoriously slow in dealing with discharges, do you think that that is a realistic approach? Clearly, there were incentives for those who are using the register to operate it in such a way that it effectively is self-regulating in that regard. There are two points that we would make. One, that would be a new register, so we want time for it to bed in and see who operates in practice, but it is the committee that will appreciate that there is a provision to defend the bill to enable ministers to make regulations to address the points of concern that have been raised. In the first instance, from that particular point in time, my view would be that we would want to see how the registers operate in practice and what sort of behaviour we see. There is an option to address any issues of clogging up that have been highlighted through delegated powers. I do not know if there is anything that you would want to add. If I could just add to that, the provision on decluttering the register was thought to be necessary because although it will not be possible to create a statutory pledge without registering it in the register, there is no compulsion on registering an assignation, a restriction or a discharge of the statutory pledge. That is how it is done internationally. Assignations, restrictions and discharges take place off register. It is thought that it might be a constriction on business if it was required to be compulsory to register those things. UK Finance told us that they thought that it would be unnecessary bureaucracy to require registration of those things. However, they went on to say that they thought that commercial pressure would lead to discharges of standard securities being registered in the register on a voluntary basis. If you think about a new creditor who is perhaps coming along to give you a loan on the basis of the collateral of your whisky sitting in a warehouse, if they search the register of statutory pledge and find out that you have already granted a statutory pledge over that whisky, they will want to make sure that you have discharged that statutory pledge that has been discharged, otherwise they are not going to have a first ranking security over the whisky. There will be commercial pressure for discharges to be registered. That speaks to my point. If we think about who the principal actors are who are going to utilise this and what their interests will be, I think that we have expended on it in some detail there, but I think that fundamentally we will be in that interest for this to be self-regulating. However, as I say, I think that what we have adopted is a proportionate approach with the flexibility to intervene if that is required at a later date. That is understandable. On the basis of the worry that the register of statutory pledges could stop working effectively if there were too many out-of-date statutory pledges remaining on it, the Faculty of Advocates has proposed that creditors should be able to set a timescale pledge that can last when they register it. Is that something that the Scottish Government might be interested in? I am happy to consider all suggestions in detail. Do not put anything you have to add to any of our engagement with the faculty on that point? We have not engaged with the faculty on that point, but I can, as I remember, erase this point with Professor Stephen and Gretan about timescales and statutory pledge. Professor Stephen definitely does not agree with timescales. I think that Professor Gretan was possibly of the other view, but I do not know if timescales are actually practical because you can register a statutory pledge and say that it will expire 25 years from now, but someone who is searching the register will not know if it has expired or not, whether the money is being paid or not. The best way would be to discharge the pledge. On the back of that, the risk of containing inaccurate or out-of-date information about individuals, is there going to be a commitment to introducing more user-friendly corrections and dispute resolution process to deal with such problems? The rules are obviously going to be set out through regulations, and I will be interested to see what views the committee comes to in its stage 1 report. There will be consultation and engagement around the rules as well. Clearly, there is a lot of detail still to come on the operation of the year registers, but we want this to be a system that is user-friendly as possible and one that commands confidence as well as robust. I do not know if there is anything that you want to add. I would just add that the intention is that the registers will both be online and automatic, so all you will have to do to register your asset nation or your statutory pledge is to fill in a field on the screen and send in either the asset nation document or a copy of the statutory pledge. That will be all that will happen. If you fill in the field correctly, the application will proceed without any intervention from the keeper's staff. If it is not filled in correctly, the system will automatically reject it. To that extent, it will be fairly user-friendly, and we do not anticipate that there will be huge scope for mistakes and corrections. That makes sense. Obviously, people have different ideas about user-friendly and in terms of cost of access in the registers. We have heard evidence that it should be set at a level that encourages and enables use by all potential users. Will charges differ for different types of user? People with various levels of income or resources may have better options for access if the cost is very well not widely enough. A few points. Fees will be set out, of course, through regulations. I think that when considering the cost of using the register, that has to be seen within the broader context of the savings that can be made and the cost benefit by having this option available, which is not currently there. As regards to any variation or differential application of fees, that is something that would require careful consideration. I ultimately want to be in a position where the fees cover the cost of the operation of the register. However, if there was a shortfall, it would come down to the consolidated fund to pick up and fill that shortfall. I think that we can all appreciate, given the challenging fiscal and economic circumstances that we are in, that any consideration of using Government-funded money to intervene to effectively subsidise the register would require careful consideration. I do not know if there is anything that you want to add. I would add that, in the business and regulatory impact that is produced by the Scottish Law Commission, it looked at the question of registration fees and search fees in conjunction with the registers of Scotland. At that time, in 2017, it was looking at search fees of under £4 and registration fees of up to £60. By way of comparison, to register a standard security in the land register at the present moment costs £80. However, we are talking about registration of assignations and standard statutory pledges of registration fees of up to £60. If you consider that by comparison with the possibly thousands or hundreds of thousands of pounds worth of assets, which may be the subject of a statutory pledge, that is very small bear. It is also small bear in comparison with the expensive legal workarounds, which are currently have to be undertaken, which we understand can sometimes amount to up to £30,000 per transaction. Thank you very much indeed because that does give a pointer to the idea that this is supposed to be more open and more accessible than the present circumstance for a wider range of people so thank you very much for that. Thank you just before we bring in Oliver. Excuse me, certainly in evidence that we have heard from Alan McIntosh, we have made the recommendation regarding potentially even money advice, operations for that to be free in terms of searches. Is that something that clearly deals with consumers, which we are going to go into in a moment? Is that something that you would consider? Yes, that is what I alluded to in my response to Mr Kidd. I recognise that that has been raised in evidence to the committee. The point that I would come back to is that it has to be considered in terms of affordability and cost but, as I say, it is something that I am happy to give consideration to and I will be keen to see what conclusions the committee draws. I know that you said in your opening remarks that you were happy to look at ways of making sure that the bill did not apply to ordinary household goods. Obviously, a lot of the evidence that we have had has centred on concerns around consumers and I just wondered if at this stage you had any idea on what option you would go with to take that forward. Obviously, there is the £1,000 minimum threshold. Obviously, there is the option to put it on to the face of the bill that ordinary household goods would be excluded. There is also the possibility of making clear that the bill would not apply to anyone who is not acting with a business interest. I would be interested if you had a view on what options we should be looking at. That is one area of the bill that people would, by consensus degrees, be most contentious and the most common train in wider interests. First, I recognise those concerns and I take them very seriously. As I mentioned earlier, I met with citizens of advice and other stakeholders on money and debt advice last week to hear directly from them what their concerns were. They made many points similar to what you have heard at the committee in the evidence. I am conscious that the broader concerns that have been narrated to the effect that this legislation could create an environment that could be favourable to high-cost predatory lenders, but it would be difficult to specify what format it might take or quantify, but it is based on the professional experience and institutional knowledge of the organisation. I want to be clear that I take that very seriously. That particular outcome of creating an environment of an opportunity for what has been described as high-cost predatory lenders is something that we would all be agreed to. We would absolutely not want to see a measure of unintended consequences from this bill. With regard to the options available, one is the removal of what has been defined as the application to consumers, although the bill does not make specific reference to consumers but to individuals, and then, in a particular point, clarifying certain protections with regard to the statutory pledge. That is something that I am content to consider. I appreciate that I made this point a few times, but I want to stress that I am keen to see what the committee comes to and will be informed by the conclusions of the committee's deliberations. One important point to recognise is that, if we were to seek to affect that particular aspiration of removing individuals or quote-unquote consumers from the bill, that would require careful consideration for how it could be affected in the drafting. There is also a specific issue with regard to individuals and sole traders and, in particular, access to finance there, which I think is something that FSB raised. We would need to be very careful consideration about how that can be achieved. In seeking to prevent potential risks, we would not, in doing so, generate other unintended consequences that would limit the impact and policy objective of the bill, which is about opening up opportunities for financing to businesses of all sizes, particularly for businesses that want to grow and perhaps do not have any heritable property. We would rely on using their movable property as collateral, so I am conscious of that. On the other option that you articulated, which was that individuals are still able to make use of the statutory pledge, but there are certain additional protections. If that is where we land, then I am absolutely looking at increasing the monetary threshold. I recognise that £1,000 has been described as perhaps a placeholder. It dates to 2017, and that amount should be increased. If the committee has any particular views on what that amount should be, I would, of course, be very keen to hear. However, I think that what it should ultimately seem to do in that, if that is a scenario that ultimately prevails, would need to be amount that includes the possibility of household goods being used as collateral for a statutory pledge. On that, would you be open to doing both to looking at a higher figure? I am sensitive to the number of representations that have been made and the seriousness with which the organisations you have referenced and some of the individuals that we have heard from as a committee. Given that that issue has come out, it was not anticipated probably when the bill was brought forward, just to add additional reassurance, just putting on the face of the bill that it is not intended to cover ordinary household goods, as well as having that higher threshold, would you give those organisations a sense of reassurance? I take the point that you make, Mr Mundell. The point that I was coming to in conclusion was that there is an option, in addition to the increasing and monetary threshold, which is having a described list of goods similar to the law concerning attachment, which would be exempt from being used as collateral. Obviously, we should note that the regulation-making power within the bill is currently drafted to affect those particular outcomes. The final point that I would make is to interrupt you. I think that the worry with that would be that we would be playing that game of cat and mouse where the predatory lenders were moving and then the Government was adding things to the list or regulating them. Whereas, if there was reassurance up front that certain category of goods were excluded, that would probably remove the fear that is out there. I take the point that you would seek reassurance by something that we do on the face of the bill, but I am sure that you would agree that the additional provision of regulation-making powers would be important to keep up to keep pace for any developments that we might not anticipate at this stage. That is another scenario. The final point that I will make is that I am conscious of the evidence that the committee has received in recent days, including from Professor Stephen, that having a need to have a very careful consideration of how this interacts with existing consumer protection regulation, the 74 act being one example. We are absolutely clear on what the potential risks are, and we recognise them as well, where there may be protections that sit within other legislation and other regulatory regimes that perhaps are not explicit in the bill, but they are operating within wider legal structures and there would be protection there. I think that it is unlikely that lenders would be interested in ordinary household goods as collateral for loans, simply because ordinary household goods will depreciate and value very quickly. Therefore, I do not think that they would be of much use as collateral. I think that the point that I take from the evidence provided by those working in the advice sector is that it is one about risk in its technical term or to use the Rumsfeldian definition, known unknowns, and we can assume that there will always be those who operate within the high cost predator lending market who will look for opportunities to exploit any particular loopholes within the law, and we have to be informed by that risk when we are drafting legislation. That is why I think that it is important that we take a very considerate and careful approach to properly understand and quantify what the risk is. To the greatest possible extent, recognising that there is only sometimes so far that we can go and that we should absolutely value the constructive input from the advice sector based upon their professional experience and their sense of potential risks. Consider that carefully, considering all the hand safeguards that we have discussed and what other safeguards exist through different legislation. That is a crucial area, and it is absolutely important that we get it right. I am certainly going to be reflecting carefully on all the evidence that we have received in that regard. I look forward to reading the committee's considerations on that matter when you publish your stage 1 report. I imagine that the final question is on the £1,000 that you said that you would be interested to hear what the committee thinks, but we would be interested to hear what you were thinking and what work you have done to consult with stakeholders. In terms of forming a Government view on what an appropriate figure would be, we have heard a variety of different figures. It would be interesting to know if you have come to a view on what the right amount would be appropriate for the register and other things. I have not reached a settled view, but my reflections are consistent with everyone else's engagement with that argument. Is there a point where you, particularly given the provisions that that has to do with the statutory pleasure of individuals, have specific listed items rather than a category of goods? Is there a situation that arises where you increase the threshold to such an extent that the statutory pleasure is no longer a realistic option for any individual who would be seeking to use it? I am also conscious that there is a particular focus on motor vehicles, as there has been a potential for high-value goods at the individual's own. In terms of arriving at a particular amount, I have not reached a settled amount. I am conscious of the £3,000 that is in the Regulations and Debt Arrangement and Attachment Act, but I want to give it further consideration. To say any particular amount at the moment, it would be arbitrary. Yes, we can have reference to £3,000, which is a figure sitting within our legislation, but I want to give it fuller consideration. Also, considering any increase in the threshold, I have to consider that in relation to any list of items that are excluded, because there has been an interaction there. I want to give it further consideration, but I hope that what I have been able to do in that answer is not to give you a number to demonstrate. I am wrestling with that and thinking through it. I hope that in a similar way to what the committee and our stakeholders have been doing. That is helpful. Ultimately, we will have to arrive at a number if you can proceed with the bill, as it is currently drafted. Thank you for that. Thank you, convener. Just on that point around the minimum threshold, it will inevitably be a bit of an arbitrary figure, although there can be models that could be undertaken in a basket of typical household goods, for example assessing typical debt loadings that people might take out on, or that typical households might take out on consumer goods. One particular remedy that we were considering was to introduce an automatic deflator in the legislation. In this context, we have a high inflation environment. The figure that is our eventually arrived at would automatically correct to RPI or CPI over time, so that it does not require secondary legislation to operate the figure, which would inevitably lag behind reality. Would that be something that the Government might give consideration to, as the bill develops? It is something that I am happy to reflect on. As you highlighted in your question, there are two approaches to develop some automatic mechanism or the periodic operating through statutory instrument. However, with regard to any particular automatic instrument, we have a wider range of considerations, the design and reference to what other statistics you mentioned to RPI. In general, it is something that I am happy to consider on and respond to the committee in response to the stage 1 report. You have also mentioned that there are in sole traders and the difficulty in defining sole traders. There are a couple of pieces of legislation that have previously been indicated in the act 2020 in the 74 act. The issue of definition might be a motor vehicle that is maybe used as a combination of family car and perhaps a taxi, for example. Have you given consideration to how that, what remedies there could be to define that and how we can better protect? I think that there were issues raised by the FSB that if consumers were to be carved out, it could exclude people raising finance who are sole traders or early startup businesses. On the other hand, we have seen examples where business critical equipment could be seized and destroy a business overnight just because a particularly aggressive lender decides to close in on a business and destroy it. So have you given consideration to how that could, the balance could be struck better? This is something that, given active consideration to the moment, I cannot offer you what a model and what a balance would look like. It is something that is a subject of a live discussion. However, I think that the point should make for us to early start up sole trader micro-business when the lines between individual use of property and businesses can be perhaps a bit vague and hard to define. If I reflect on my own pre-political professional background in music, I am sure that something that the convener can emphasise with is that a musical instrument can be both something that is for personal use but also professional use. I am not saying that necessarily. It is the best example, but it is one of those areas, particularly when someone is establishing himself in business with that. You made reference to the use of a van, which can be both for use personal and business use. It can be hard to distinguish. I think that, particularly recognising the points that the FSB made, we would not want an unintended consequence when seeking to afford greater consumer protection. We might have a high concentration of movable property, but we cannot use it as a collateral. That is something that we would want to avoid. We need to be given very careful consideration and it is something that we are actively considering. I do not know if there was anything that you wanted to add or if you wanted to comment with any reflections on those points. I suppose that the one point to make is that there are obviously protections within the bill without knowing exactly what any carve-outs might look like in relation to sole traders, but one would hope that those protections that do exist in terms of enforcement would continue to apply to sole traders going forward as well. I would just add Colin Borland of the Federation of Small Businesses made the point that, from their perspective, one of the advantages here is that we will be opening up a form of finance to unincorporated bodies, which is definitely a major prize. We definitely need to avoid stymying a micro-business, a business that has just started up or a sole trader's ability to raise finance. Inevitably we come to points where there is a distressing situation where a small business start-up might have over-leveraged or maybe just in a situation where they have a particularly aggressive lender who is seeking to cause disruption. That happened quite commonly after the credit crunch when, had RBS, I think, was a particularly egregious example where it was destroying lots of businesses that, if a more patient approach had been taken, we could have had far more success and resilience in the economy. One particular area that has been highlighted was the fact that a lender would not need a court order to seize items pledged by a sole trader or a small business if they had missed a payment. It is simply one missed payment in a cash flow situation. If an energy bill had spiked like we had at the moment, it might have had to defer payment so that it could destroy the business potential overnight, is that something that the Government may well give consideration to strengthening that at least there could be a safeguard within the legal system to allow for at least pleased to be made about the circumstances before a lender is allowed to just arrest property that could be business critical? I am happy to reflect on it. I suppose that the question that I would also take away is that it is in the definition of what particular category of business that protection would apply. Businesses of all sizes, of course, can get into financial distress, and it is an example of larger businesses that have been done that have declined and have failed with smaller businesses that have been very resilient and very nimble in the fleet of foot. In the general point that you make about the risk and exposure to small businesses when there are still saplings in the forest floor, and the particular risk that they face, I recognise that point. The protections within the bill, as they apply to individuals with regard to statutory pledge, I think that they could inhibit, for example, what a small business who would rather perhaps pledge a category of assets than specific assets, so that they can maximise what they can raise in finance. We would need to be a careful balancer in seeking to protect small early-stage micro-businesses sole traders. In pursuing that, we did not, as the FSB suggested, risk doing anything that would stymie access to that finance. It is helpful to know that the Government is alive to the issue anyway, and we will obviously work through it in your course. I want to touch on a particular issue, if I may, that has been highlighted by the committee before. That touches on some of the discussions around motor vehicles, for example, as an area of particular focus. The committee has recommended in its Delegated Powers report on the bill that the procedure in relation to section 53 brackets 8 on the acquisition in good faith of motor vehicles should be the affirmative procedure, as the Government had suggested in its response to the committee's letter on the power that it is open to changing this stage 2. Is that still the case? Yes, I am happy to consider that. That is welcome. I also want to touch on a matter that was raised by the Government law centre in relation to some sections of the bill. Just in particular, Mr Daly, when he gave evidence, had raised concerns about section 63 of the bill, which entitles a creditor to serve a pledge enforcement notice on a debtor if payment has not been made. Section 65, which enables an authorised person such as a sheriff officer to enter someone's home to remove movable goods, sub to the statutory pledge in section 66, which, in his interpretation, gives a creditor the rights to sell someone's movable goods at a public auction. He characterised that as a virtual pawn-broken scenario that could potentially emerge. That has been disputed by others, notably the Scottish Law Commissioners who were involved in drafting the legislation. However, I wanted to get your take on that, as the minister or our colleagues in the Government law centres, highlighting if those particular sections have been at risk or potentially at risk of unintended consequences, as we have previously discussed. Will those particular sections need to be further investigated? Of course. I will be always very keen to reflect on the evidence that is given. I think that all that has been touched on is that, for the security to be effective, there has to be a means of acquisition of the asset in terms of default. Clearly, the provisions that are there are consistent with other provisions elsewhere in diligence. I want to give careful reflection. I am conscious of, as I said, some of the commentary from Professor Stephen Wood, who received in court at committee, received in correspondence, and particularly the commentary on evidence that was received from the committee at the start of October. I want to consider that carefully and, of course, to look at the committee's report, and particularly to clarify and understand where protections exist by dint of other legislation, for example, the 74 act. I would only add to that, just to make it absolutely clear. Section 66, the secured creditor's right to sell. The right to sell only applies to the asset, which was the subject of the statutory pledge, and only that asset. It does not apply to any other property of the debtor. I think that the allegation was made that we would be having sheriff officers going into people's houses and basically lifting anything that they wanted as under warrant sales. That is not the case. It is only the asset, which was the subject of the statutory pledge. That is helpful in clarifying that. The snard that it was going to paint was almost a bright house type situation, in which you almost have adverts with prices on every bit of household goods. People can say cash in and liquidate your assets. You do not need to take it to move from your home. That is in the context of distressed household finances across the country. It could be a very tempting proposition. I guess that it is helpful that the Government has indicated that it is willing to look at that carve-out for consumers. I think that I am happy to rest on that. I appreciate you indulging me. Just two bit more technical questions just to close with, hopefully. Obviously, this legislation was drafted before Covid. It is just coming down to the requirement for an electronic signature. There has been, I think, you have probably seen some concern that you need to have a type of software if you do it the way that it is suggested with the mobile. I am just wondering whether, with now post Covid, an electronic signature can be done in a much easier way than having to use the software that might be required, particularly for a small business who may not have that. It is a fairly technical issue, but whether we just need to look at the way that the legislation is drafted at present. I think that I would ask a legal comment about that one. That is something that we can take away from the committee. That is helpful. The second one is that you may have seen that one respondent to the committee's call for use of mobile, called for agricultural charges to be performed rather than abolished. Have you reflected on that? That was a recommendation by the Scottish Law Commission. It is not something that we really considered, but we can have another look at it. I am happy to look at the evidence that you received to say this. What we have introduced as legislation reflects the recommendations of the Scottish Law Commission? Again, on both those points, if a response was before the stage 1 debate, I would have found that it would be helpful that we could then reflect on it back, so maybe just some kind of correspondence if that would be helpful. Thank you. Do colleagues have any other questions for the minister or his team? Okay, well, thank you. Minister and your colleagues, thank you very much for your appearance in front of the committee today. I have just got one ask of yourselves. When you do, I will say, be able to produce a stage 1 report and when the Scottish Government does reply to that report, you have touched upon a couple of times already regarding the referencing of existing legal protections. I think it would be quite useful when you do reply back to our stage 1 report to highlight where, after the discussion from today, you feel as if those legal protections exist or, if they are not, there is a potential gap. I would be happy to do so. I would also make the point that legal protections, as they relate to the bill that is drafted, but I would be happy to discuss some hypothetical potential amendments in ways in which the bill could be changed. With regard to any decisions that the Government takes about progressing ahead of stage 2, I would be happy to keep the committee informed about how any changes would be impacted or would relate to the broader protections that are available. I think that that would be helpful. I also think that, going on to the point that Jeremy Balfour had questions earlier on regarding the potential section 1.0.4, if there is any update from the UK Government in terms of correspondence to inform the committee that that would be helpful. I thank the minister and his officials for their evidence this morning and the committee may follow up in my letter with any additional questions that stemming from today's meeting. I thank you very much once again and I will now suspend this session. Under agenda item number 3, we are considering two instruments subject to the affirmative procedure. No point has been raised on the draft police act, 1987, offences in schedules 8A and 8B, amendment Scotland regulations 2022, and the draft rehabilitation of offenders act 1974, exclusions and exemptions at Scotland amendment number 2, order 2022. Is the committee content with those instruments? Under agenda item number 4, we are considering two instruments subject to the negative procedure. An issue has been raised on one of those instruments, which is SSI 2022302, the Scottish child payment saving provisions at regulations 2022. The instrument makes savings provisions in connection with the amendment made by the social security miscellaneous amendment and transitional provision Scotland regulations 2022 to the Scottish child payment regulations 2020. The savings provisions ensure that the higher weekly rate of the Scottish child payment of £25 only applies to periods of entitlement which fall on or after 14 November 2022, and an individual's entitlement to a double payment where a child dies does not apply where the child in question dies before 14 November 2022. In correspondence with the signing officer, the Scottish Government explained that, following an issue being identified, it was necessary to breach the 2018 rule in order that the savings provisions come into force at the same time as the substantive provisions, so the policy intent is delivered and to prevent there being a gap between the substantive changes to the law and the coming into force of savings provisions on a later date. Under section 282 of the interpretation and legislative reform of Scotland Act 2010, instruments subject to the negative procedure must be laid at least 28 days before they come into force, not counting recess periods of more than four days. The instrument breaches the requirement as it was laid on 26 October 2022 and will come into force on 14 November 2022. Does the committee wish to draw the instrument to the attention of the Parliament on reporting ground to J for failure to comply with line requirements? At the same time, does the committee wish to note that this instrument makes necessary savings provisions in order to give full effect to the social security miscellaneous amendment and transitional provision of Scotland regulations 2022? Under the agenda item, no points have been raised on SSI 2022-286. Is the committee content with this instrument? With that, I will move the committee into private.