 Cymru, a Thanks to the 34th meeting of the Economy, Energy and Fair Work Committee for 2011. It may ask everyone to turn electrical devices to silent or off if they interfere with the sound system. First of all, we have apologies from committee member, Dean Lockhart. Item 1 on the agenda is a decision by the committee to take items 6 and 7 in private. Are we agreed on that? Yes. Oedd fawr oedd yn gweithio gweithio cymryd perthynas cydechrau'r ffordd fforddolol o'r r warned o fewnerol 12 mlygol. Mae'n ddigon mwy oherwydd ffairwyr gweithio'r fforddol incleiadau. Mae'n oaf. Mae'n ddigon mwy oherwydd gweithio'r fforddol incleiadau, fod opon i gweld iaemddol yn i ddechrau IBC, cyfwyr unigol ar hyn ar gyfer Gwann Cwch, case operations and deputy accountant in bankruptcy from the AIB's office. Welcome to all three of you. First of all, I invite the minister to make an opening statement. Thank you very much, convener. I begin by saying that I am pleased to have the opportunity to appear before the committee to discuss the issues and the concerns that have been raised in connection with the common financial tool that has applied to Scotland's statutory debt solutions. At the outset, convener, I recognise that it is twice now that I have withdrawn those regulations. I recognise that that is unusual. I want to make it very clear that I am not intending making a habit of that being a feature of bringing forward secondary legislation to the committee. The first time was, of course, in relation to stakeholder feedback, when we were telling the committee that it needed some more time to be ready for the expected introduction of the regulations. Coming into force the second time, of course, was due to the concerns that you had heard as a committee, the concerns that I wanted to explore further. I am aware that the committee has already taken evidence from two panels of witnesses on the adoption of the standard financial statement, the SFS. I welcome the fact that you as a committee have written to me following the evidence sessions to set out some of the concerns that were identified. As you will note from the letters that both Richard Dennis and I have sent to the committee since those panel sessions, I am still of the view that we should move to adopt the SFS, but I do recognise that concerns have been expressed, and they clearly need to be discussed and addressed. The letters that have been sent set out my position in relation to the concerns, I do not propose to repeat those in detail, but of course I would be very happy to explore those matters during today's session. I would say that my overriding concern is that the continued use of the common financial statement, which is the tool that is currently utilised even over the short term, could be detrimental to those in Scotland faced with problem debt. That will be the outcome of the current regulations that remain in force. The committee has taken evidence that there should be consideration of an entirely new way of assessing contributions made in solvency, other countries' experience, other models used have been highlighted. What I would say in relation to that community is that it does open up debate. I think that that is a welcome debate and we should always look to learn from others and improve the landscape in Scotland. I believe that that would require consultation and a far more detailed assessment of the wider impact of such a change. I am happy to have those discussions. Plans are already in place to consult on the reforms introduced in 2014, but that will be a slightly longer term to process. Right now we have a decision before us, and the simplest term of the choice at present is a straightforward one. We either remain with the status quo, the CFS, or switch to the SFS as the adopted common financial tool. If the reasons I have set it remain of the view, the adoption of the SFS provides advantages for those who are dealing with debt, which is, of course, absolutely critical. As the committee will know, I met with stakeholders last week to find out at first hand the practical issues arising in relation to the common financial tool and its application. I can say to the committee, I invited all those who had provided evidence to you and many attended. That was an enormously helpful discussion for me. What it revealed to me was that many of the concerns from the advice community were predominantly about application of the common financial tool, either under its current guise, the CFS, or, indeed, prospectively, the SFS, rather than the tools themselves. That brought into sharp focus the need for ever closer collaboration between the accountant and bankruptcy and the advice community to develop and agree guidance that affords the flexibility and pragmatism that is required. We agreed that we desire—I think that everyone around the table agreed that we desire—a system that serves to protect those who are in financially vulnerable positions, but also one that does not create unnecessary administrative burden for all involved. I think that it is that aspect that is absolutely critical, and it is a priority that the work on advising and agreed guidance progresses at a pace. The meeting also touched on a more general debate about the other models, as I have alluded to. As I have said, I am clear that that is open for discussion, but through the planned policy review of reforms introduced in 2015. My next proposed steps are that we engage very quickly with stakeholders. The standing working group that looks at the common financial tool will meet tomorrow to discuss issues around the guidance that should accompany any new regulations and the concerns about the burden of evidence that is required through either mechanism. Those that I met with last week will be involved in that process. Many of them are already on the working group, and that purpose will be to ensure revised clear guidance for operating the common financial tool to be in place and to secure buy-in to that process. I am very keen that the committee can be part of that process as well. Once that is in place, I would then plan to provide the revised guidance alongside regulations to introduce SFS, which I plan at present to relay before Parliament in the new year. I look forward to being able to discuss this with the committee this morning. First, I want to ask about the meeting that you mentioned. Is there a list of those who were invited and a list of those who did attend that could be provided to the committee? I do not need it now, but could that be provided to the committee please? Also, is there a record of what was discussed, which could also be provided to the committee? The short answer is yes. I could read out the list, but I am not asking you to do that. My point is, is there a list that can be provided to the committee of those who were invited and those who did attend and also a record of the meetings such as may have been kept? I will stick with the short answer then, convener. Yes. Thank you. Excellent. I just want to ask briefly about one or two things in the letter that you wrote in response to my letter as convener of the committee on this matter, just to clarify one or two things. First of all, you have mentioned in your letter, I think that it is in the fourth paragraph about step change and the sound financial statement, trigger breach issues and so forth. You refer to supplementary written evidence, I think, provided to the committee. All of the evidence in that paragraph you refer to, is that evidence that has already been provided to the committee or does that include supplementary information that may have been given to yourself or the AIB? I believe that what I refer to there is evidence that was provided. My understanding is that the evidence is provided to you, but, clearly, as I have laid out, there is further evidence or the information feedback that I was provided at the meeting that you have just referred to. Yes. Apart from the meeting, that is really what I was trying to clarify. As far as I well know, it is as I have referred to what was provided to you. I want to just ask about the methodology for calculating trigger figures used in the standard financial statement or SFS methodology. Is it different than that under the CFS or common financial statement? If one is making comparisons between the figures that are arrived at, are those comparisons valid or useful or misleading if, in fact, they are used in different methodology? I do not think that they are misleading. I think that they are predicated in the fact that one tool is in place and has been updated for the coming year. That is a tool that is available now, and that is the one that we propose to move to. The other tool is a tool that the organisation that has developed and devised that has been keeping it under availability for licence. The money advice trust is proposing not to maintain that going forward. What we have done is made our best effort to try and have as valid a comparison as is possible. If there is a suggested other way of doing it, then there still is some available time for us to look at that again, but we have certainly not done anything that I think could be construed as an attempt to mislead. There is a difference in the methodology, and what you say has been attempted is to make as good a comparison as can be made between the figures that are arrived at by different methods. It is certainly our best attempt to try and have as equivalent a comparison as is possible in recognition that the tools are not identical. I can ask Richard Denesaw or John Cook to elaborate that on that a little more. I can also say, convener, that again on the basis of the figure being operated, again we have undertaken a similar exercise in applying the OBR's predicted rate of inflation for the coming financial year to the CFS to have another attempted comparison, again which we are happy to share with the committee. It shows that the position that we have laid out that there are fewer trigger reaches under what we propose to move to, as is what in place just now continues to be the case. It might be helpful to have an explanation of the changes made to the CFS methodology and what effect that has had on the trigger figures, if that is possible for yourself or one of the other witnesses. I am happy to hand over to Richard Denesaw or John Cook on that. Thank you, Mr Denesaw. Good morning, committee. I will try to get it as simple as I can. Yes, the two tools have a different methodology. They use different ways of calculating the trigger figures, and there are different categories within each set of trigger figures. The SFS only has three triggered categories, the CFS has four, and there are different things in the two sets. The 2017 trigger figures for the standard financial statement produced some surprising results when they were applied in practice in terms of generating higher contributions that might have been expected. So, there was a look again at the methodology. Two things were then done when they were updated into 2018. First is that to calculate average bending in the group of folks that they look at set the trigger figures, they disregard outliers. People who report very low expenditure and people who report very high expenditure because it is based on income, not expenditure. One of the most significant changes in the SFS was that, rather than using people who were reporting expenditure below the level of job seekers allowance disregard, they moved to using and disregard those reporting expenditure via the universal credit disregard. The impact of that was, in fact, and rather surprising, and the minister and some members of the committee will have heard the creditors say this round the table at our meeting. They were surprised at the extent of that, which drove up the trigger figures in the SFS. That changing methodology for the SFS from 2017 to 2018 was because the 2017 figures were widely perceived as being too low. There were no such concerns about the SFS numbers. Their methodology has rolled forward for, I think, five or six years since it was last reviewed, and that wasn't changed. Does that help? I would make the point, of course, convener, if there is a suggested further assessment that we can undertake, and it would be sensible to undertake, then we are very open to that prospect. I think that Jackie Baillie has a follow-up on that point. I'm very grateful for you simplifying it for us on the committee. If universal credit was the base cut-off, if you like, for the standard financial tool, and the effect was to drive up the trigger figures, why didn't you use that to assess the common financial tool? It is slightly more complicated than that. There are long, lengthy documents in Spanish methodology for the two that the committee are welcome to see. If you make the methodology for calculating the trigger figures the same in both tools, then you will get the same answer, because the two tools will be the same. Effectively, by moving to the SFS, all you are doing is changing the CFS to adopt the SFS's trigger thing, methodology and categorisation. There wouldn't be a point because you don't have one tool rather than two. Okay, but the point is that at the moment, as you have acknowledged, you are not comparing the same thing. Therefore, the advantage or disadvantage isn't instantly obvious because we are not starting from the same baseline. I suppose that my observation in response to that, Ms Baillie, would be the scale of assessment that has been undertaken in respect of both from I'm aware that there was an assessment. I think that it was Money Advice Scotland, if I remember correctly. It was Money Advice Scotland, Money Advice Service, Money Advice Trusts, Convener, It Can Get, Confusion, Money Cation. I need these things simplified for me as well, Ms Baillie. This isn't criticism, incidentally, but the numbers that they assessed were quite small. The numbers that we assessed were the first time that, once the figures were uprated, we were 1,500. Now that it's been uprated again, I think we're about 2,100 cases. That would say to me that that's quite a substantial body of evidence. I make the point, convener, if something the committee really desires to, then we will go back and see if it can be done. We will make that commitment, but I think that the point that Dr Dennis has made is that our expectation would be that it wouldn't be substantially different. Thank you, convener. We would welcome the information that you chose to send us. Thank you. Just one final question of clarification for me on your letter, minister, but I think that it may be an issue more for Richard Dennis to respond to than yourself, although it's covered in your letter. You noted that the AIB had consulted with Christians against poverty, or CAP, and stated that their chief executive confirmed the organisations fully supportive of the SFS. I just wanted to ask what that means. I think that you've been relying on information from the AIB, so it might be easier for the AIB to respond to that. I can certainly hand over the case that, as is always, you rely on your officials to provide you. No, I'm not questioning that. I'm just saying that for that reason it might be easier for them to address the basis of that statement in your letter if you're happy for that. You can address your questions to whoever you wish, convener, but I'll hand over to Dr Dennis. I think that that particular reference might have been to paperland, but both paperland and Christians Against Poverty have confirmed that they are moving to use the SFS in their own systems by, I think, in both cases, the end of March. They have both already committed to adopting the SFS. This is for the UK? This is for the UK. If Scotland were to maintain with the CFS, we'd be asking both to run two systems. Well, presumably they would have to move to the SFS for England anyway, if that's the system used. So what I'm interested in, just to make clear, is the suggestion that they are fully supportive of this change. So I'm interested in what precisely they've been asked or they've said. Is there, again, a record of this information that could be provided to the committee confirming their position or what is it that you're referring to when you say this? Yes, I think that we can provide further evidence on that basis. We can, and the letter from the paper and Chief Executive is quoted in one of my letters to you, I think, for Baton. Right. I was interested in the cap, but you've referred to a paperland. So is there... Yes, again, we have written material from them, which we're more than happy to make available to the committee. Thank you. I'll now turn to John Mason. Thanks, convener. As I understood it, one of the bodies that took part on Thursday, although I think by the phone conference, was the money advice trust that currently operates the common financial statement. They're not planning to carry on maintaining it after March or April, but they didn't seem to rule out that it would be impossible. Is it an option that either they or the Government or someone maintains the common financial statement after March? Yes, it is. It means to be candid with you, convener. That's clearly a practicality that we are having to explore now, given that we don't want there to be any gap in provision, because I'm not preempting the... It would be very presumptuous of me to preempt the committee's decisions, so we're having to get engaged in that territory. And as you would expect, they being an organisation has the best interests of vulnerable people at heart. They wouldn't want that either, so on a practical basis, yes, I think it is something they could do. I suppose the question would be on a long-term basis what the governance arrangements for either financial tool would be. So once right now, as far as I'm aware, there's a steering group with a range of agencies involved in assessing the efficacy of CFS. Given that the trust don't envisage continuing it, that infrastructure is going to not exist anymore, whereas there is a group, an equivalent group, for the SFS of which, incidentally, citizens by Scotland, money by Scotland and the accountant bankruptcy would be part of, which they're not just now, under CFS, which is probably a point given the group who's going to disappear. However, the point that I make is that you're not going to have that wider group with all the relevant stakeholder interests involved in monitoring the efficacy of that as a tool, but theoretically, yes. Okay, thank you. I think one of the things that worried the committee was that we were shown some spending guidelines for under SFS and under CFS, and I think the point came out from that that in 2017, as has already been said this morning, the SFS guidelines were relatively low and increased for 2018, but we still got the impression that they were lower than the equivalent spending guidelines for CFS. Are you saying that that's not the case? Well, clearly, I recognise that this is ultimately at the nub of the issue, so our analysis says no, and some of the evidence that you have been provided with is to the contrary. We think that our evidence is robust. Given the scale of the assessment that we can demonstrate, that's the case. As I say, after the last operating, some 1,500 cases were reviewed. The latest one, just over 2,100, will provide that as supplementary information to the committee again. Sorry, you're saying that there were more triggered reaches. That's the figures that you're talking about. No, no, I'm saying that we undertook a fairly comprehensive assessment that there were fewer triggered reaches. Right, okay, but I'm talking about the actual spending guidelines in pound terms, which we were told were higher, i.e., I understand that people could have more to live on under CFS in 2018 than they would have— I'm not sure that's— I think that's not the case. I'll hand over to John on that point. No, we don't believe that that is the case. We think that the standard financial statement gives more sustainable returns. It's interesting, I think, that the money advice trust, who set up the common financial statement at the meeting last week, made it clear that the standard financial statement is an evolution of that tool and that it supports the implementation of the standard financial statement. What it does do is allow more sustainable outcomes for debtors, and we think that that's the best interest of people of Scotland to make that move at this point in time. Can you say more sustainable outcomes? Do you mean more money? Essentially, yes. We mentioned the point about fewer trigger breaches. If a trigger is breached, what happens normally is that we would seek evidence from the person who submit the application to establish their circumstances. If there are fewer breaches, that doesn't have to happen, so we don't need to go through that process, which means that it's unlikely that people would pay more. There is a likelihood that if people are breaching triggers, they'd have to pay more in a way of a contribution. That process should stop that happening in as many cases as it happens at the moment, and that's what our statistics show. It was suggested last week that, for travel, the trigger is zero because all the travel has to be evidenced. That's a good point. I think that that comes to the part of the issue. I think that, in respect of that, the concern is about the burden of evidence and how reasonable that the accounting bankruptcy will be in undertaking an assessment. My expectation, as the minister is responsible, is that accounting bankruptcy will be reasonable. I have no doubt that, if I would stand over to Iar Richard John right now, he would say that they are reasonable in the application of any guidance or rules. What I can say, to be quite upfront and candid convener, is that there was a sense at the meeting last week that some stakeholders don't necessarily feel that that is always the case. There's a disconnect there, so that's why I have concluded that the most appropriate thing for us to do is to get everyone together to discuss that further so that we can have agreed guidance that shows that the accounting bankruptcy isn't going to expect every single bus ticket to be returned where it is unnecessary to do one because it won't be possible for everyone to do that, and, more likely, it will be unnecessary because the costs are low. That said, of course—and, of course, we need to remember that, because that is applied across all the various products for dealing with a debt situation, there can be. We need to take creditors with us for those elements where they have to agree, such as the debt arrangement scheme. We need to make sure that there is still some form of mechanism within the system that evidence has to be provided, otherwise we would be at danger of losing some creditor at buy-in. For that element, I think that we all agree—I was here recently at the committee and we all agree that the debt arrangement scheme is a very good model because it avoids people having to end up becoming bankrupt or under protected trust deed. My concern would be if creditors don't buy in the system, more people are going to be pushed down that avenue. Of course, we have to get the balance right. That's what I'm determined that we can do, and I want to get people to buy into that. Of course, that includes the committee. The only apparent driver for introducing SFS is to achieve a standardised approach across the UK on income assessment. Will the minister accept that, as a result of the introduction of the CFS for statutory debt solutions, Scotland already has standardised income assessment in both formal and informal debt solutions? On the latter point largely, yes. On the former, I wouldn't say that's the only driver. I don't think that's the only—if that had been the overwhelming concern. The assessment that had been undertaken showed that more people are going to be negatively impacted. You can imagine what my response would have been. I think that the inherent advantages of having a more simplified and straightforward system using one tool would have been outweithed by my concern that more people are going to be negatively impacted. I wouldn't say that's the overriding concern, but I'll bring in a richer than that point. Just to add a slight rider on that, the common financial statement is common across the statutory debt solutions. It's not necessarily widespread use in the non-statutory, and there are more non-statutory than statutory. We can't, in fact, tell you the exact numbers, but we can tell you there are more and there are a lot of them. Increasingly, because they are run by big firms working at the UK level, they will be running off the standard financial statement. In the past, it has been highlighted about the cost of running two systems for debt advice organisations that operate both in Scotland and south of the border. However, the costs wouldn't arise for organisations only in Scotland. Do you have a breakdown of the bodies providing debt advice in Scotland and what percentage of the market is covered by organisations that work only in Scotland? Not before me. Candidly, I don't know if that is available, but John might be about to say that it is. As well, I'll let him answer on that basis. If it is, then yes. If it's not, then it's something that we would need to try and pull together. I don't know how readily that would be achieved, but John. We do keep statistics of trustees and bankruptcy and protective trustees, even for the debt arrangement scheme and the money advisers in place, so we can pull out those statistics. What I can say is that some of these products are dominated by big providers who operate both north and south of the border, but we can get those figures for you absolutely, yes. It would be interesting to see that. Are there any other ways that adopting the SFS, rather than continuing to use the CFS, would benefit debtors and advisers in Scotland? Well, I suppose that the fundamental one, and it goes back to the assessment that we've undertaken, is that I think that more debtors will benefit through a lower number of trigger breaches, and I think that the assessment that we've undertaken can demonstrate that to be the case, so I would say that that's a fairly fundamental benefit to those who are debtors. So, your primary concern here is to reduce the number of triggers? It's certainly always going to be a feature of my consideration. It's going to be uppermost in my mind, but there are a variety of other issues that play here. One, yes, there's the issues about having a straightforward system for also those who are involved in the provision of advice, and I think that we've touched on that as well, but there's also the very practical consideration, although I have obviously conceded to the point that you could work around it, but the practical consideration of the fact that the existing mechanism, the CFS, is about to be switched off by the people who administer it and who licence it. I seem to correct me here, but my memory tells me that there's a number of different systems in use south of the border. Do we know if there's an intention to bring in the CFS as a standardised system there? There is. Clearly, we have a different approach here in that we've, on a more long-standing basis, had this as a matter of legislation, but yes, that is my understanding. Are they going to be able to achieve that, given the diversity of the different organisations and the different priorities and so on that we see? I think that I'll probably hand over to Rich that in terms of that being a sort of practical issue that he's more and more likely to be in touch with those involved south of the border. I guess that just to explain my concern is that down the line, are we going to be coming back and revisiting that because some major organisations south of the border have decided to… Well, we can never preclude that possibility, because ultimately, and I've made the point already, we intend to review the legislation that was passed, the system that's been in place, and we're open-minded to having that discussion about what ultimately is best for people utilising this system. I would reflect on the fact that at the time of the introduction of these regulations there was consultation and a majority of people felt that we should use an existing tool, and of those who said that we should use an existing tool, a majority said that we should use what's in place now at that time. Yes, it's that you cannot rule out the possibility that we have to revisit this because of practical eventualities and also it strikes me and it's certainly something that Parliament will call for regularly, is that we should keep these things under review. That seems to me to be a sensible thing to do, but I'll hand over to Richard on the wider point. I think that we can have a fair degree of confidence. Down south, a system of money advice is different to Scotland in that, effectively, local authorities stepped out of this world some time ago when the money advice service was set up. Now, the SFS is their tool, and it's transferring to the single financial guidance body. As part of putting it in place, they have the three biggest third sector providers of money advice signed up. That's the money advice trust, step change and Citizens Advice in London Wales. Between them, they are the majority of free advice provision south of the border. They also have more creditors signed up than we've previously managed. Yes, we can expect to see the spread of this further down south. Our opposite numbers in the insolvency service have adopted it for calculating contributions in DROs, for example. It's flagged in the treasuries consultation for breathing space that they'll intend to use this as a way of assessing what debtors can contribute to their version of our debt arrangement scheme. They are already talking to the court service and others down south. I think that there is a genuine opportunity to see this as a single tool. It may not work. There have been many previous attempts to do this, none of which have worked, but this has the best chance. I find it particularly compelling that the money advice trust, who run the common financial statement, has said that they see the standard of financial statement as an evolution and as a better tool. That is why they are moving. If the organisation has run the previous tool and thinks that the new one is better, that's quite compelling. It does sound a wee bit of a step in the dark there. I don't think that's fair, Mr Beattie. You could have argued the same at the time that we passed the legislation and we said that there has to be a statutory mechanism that we put in place the CFS. I don't think that characterise moving to a new mechanism as a step in the dark is a fair assessment, but, clearly, it is. I have made the point that, when you change any mechanism, you have to be informed by what happens on a practical basis and keep that under review. That is something that we will commit to do. Indeed, any committee of the Scottish Parliament could undertake such a review and tell us what they think as well. Just on one point, Mr Dennis, you said that in England it is different in terms of the local authorities are not involved in money advice provision, whereas in Scotland they are. Is that difference reflected in what way in the CFS is being applied to Scotland? The point that I was trying to make is that, in England and Wales, they are going through the process of getting the CFS adopted by local authorities. I think that something like 140 have made a commitment to adopting it and they are still working in the one-by-one. That is in their role as a creditor. Will most debtors south of the border go through a process using the standard financial statement? The question is, do the advice agencies use it? In Scotland, most free advice is funded by local authorities. If you are a debtor going through the three advice, you are more likely than not to be going through a process funded by local authorities. Local authorities have a hugely important role in Scotland. If you were working with that assumption that the situation was down south, your key question would be how many local authorities have signed up to using it. That is not the key question. Down south, the free debt advice comes from the money advice trust, it comes from step change, it comes from citizens advice and it is funded by the money advice service, drawing on the levy paid by the consumer credit sector. Down south, if you are a debtor, the question is, are those three third sector bodies all signed up? Previously, step change had its own tool. We know the money advice trust and we are using the common financial statement. All three of those have already committed to using the standard financial statement. Step change are ready to switch on the new computer system on 1 April. Citizens Advice England of Wales have already moved to using it. I will move to questions from Gordon MacDonald. Last week, when I attended the meeting on Thursday afternoon, what I took from that meeting was that a lot of people were very concerned about the administrative burden that is placed on people. We are already debt advisers and we are already aware that, because of the accountancy and bankruptcies evidence requirements, it is more onerous in Scotland than elsewhere, i.e. England and Wales, for that evidence to be calculated. On the two evidence sessions that we have had so far, this is what we have heard. If we adopt a standard financial statement, we will need to gather more information as evidence for fixed costs. The standard financial statement shifts more of those areas of expenditure across to fixed costs, which we will then need to evidence. Under the financial statement, categories including transport, school uniform costs, the cost of school trips and other things that are difficult to evidence will be moved so that they are always required to be evidenced. We will need to gather even more evidence that will prolong the process potentially by an extra three or four weeks. Given that background of evidence, do you accept that all of the debt advisers—many of the debt advisers—are concerned about administrative burden? What are we going to do about that? Self-evidently, I have to accept that they are concerned about it. I suppose whether or not we feel that they need to be concerned is a matter of perspective, but that is fundamentally why I have committed to ensuring that we can quickly move towards having the guidance in place that will demonstrate that we do not want this to be a burdensome requirement. We do not want it to be something that is onerous, that delays the process that can cause difficulties for the organisation, the individual money adviser, providing the advice and assistance, and ultimately, and fundamentally, we do not want to put in place a system that is going to cause difficulties for the debtor as well. That is what we have committed to doing. My takeaway from the meeting last week was that that was the fundamental point that people were expressing rather than a strong position about whichever tool it may be. Equally, I think that those concerns were again candid. Those concerns were being expressed about the CFS as it has been practised now. Whether or not the accountant bankruptcy feels that that is fair, it is something that has been stated, it is something that has been heard, and it is something that we are committed to working towards trying to bring people together to understand why that is a concern and to make sure that any guidance that is put in place and that it is then taken for on a practical basis and put into effect does not create something that is burdensome for people to work through. You have talked about tightening up the guidance. It would be helpful if you gave it an indication of what kind of areas you are looking at in order to tighten that guidance up to see if it would have an impact on the administrative burden, but you also spoke about maybe in the long term having a review. I am just wondering, should we not have the review first? The Institute of Chartered Accounts in Scotland said in their evidence that we would strongly encourage the AIB and the Scottish Government to defer any decision on the use of CFS or SFS and instead urgently carry out an assessment of the policy effectiveness behind the CFT. So surely that would be the most sensible position, is to review it first and then decide the best way forward. I suppose that that would go back to the fundamental point, Mr MacDonald, is that we are coming to a juncture whereby the tool that we use just now is about to be switched off by the organisation that administers it, that created it, the licence it, who themselves say that the tool that we propose to use is a better one than the one that they are about to turn off. That is a juncture for which it seems sensible to me that we need to make a determination about whether or not we use a tool that is increasingly not going to be used by the sector, that is certainly not planned to be continued to be administered or have that wider stakeholder group to look at its efficacy, because the trust do not intend to continue, so why would they maintain that group? Ultimately, they could till they roll it out, did they? They have said nothing about continuing the steering group that they have in place. I do not think that they will do that. Why would they? Ultimately, I think that they would be keeping the tool in place just for the use of the accountant bankruptcy. It then gets to the position of who is determining how it is operated and so on. Ultimately, it could just come back to the Government themselves to do it. If that is something that the committee ultimately feels is appropriate, then we can hear that and we can consider that. That is the juncture that causes us to consider how we move forward. In terms of whether or not we should undertake that wider review, I would go back to the point that, because we reached that juncture, I think that we need to make a decision about what we do in the immediate term. However, yes, we have committed. The people are saying that we should review this on a wider basis. We are already intended to do that. We have committed to doing that. I am saying it here and now, convener. I am with the record saying that we will do that. I am very keen to hear what the committee's perspective is on that. That work will be under way. This is a statutory mechanism that has been in place in coming up five years. The average bankruptcy process lasts about five years. For me, that seems to be the appropriate position by which we start to look to see whether it has been an effective mechanism. That is why we have been working to that timescale. I have talked so long about that point. I have forgotten your first question if you could reacquaint me with it. I was just asking about the administrative burden on the area that we would look at. You are going to change the guidance. Fundamentally, that is what it would be about. The threshold for requiring really detailed evidence would be. The worldwide case is where that is necessary. I go back to the point that we need to have a system in which creditors can buy into and have faith in as being proportionate and fair. Let us remember that there are many creditors. Credit unions are a prime example. They have a customer base. Many of whom are vulnerable could be considered as vulnerable and from low-income households. Ultimately, credit unions' finances are only there because of those individuals. It is their money that they are handling. We need to take creditors with us as well. We need to make sure that, through the guidance that we have put in place, the threshold for detailed evidence is appropriate, proportionate and correct. That is the area that I think that we need to undertake the most work on. The common financial tool or the statement is based on the old tool that was used by a number of debt advisers back to 2003. There is a long history of it being used. Has the Government done any work on whether there is another agency that could continue uprating the CFT and what the cost of that would be? No, I do not think that we have. There clearly would be a cost if we were to ask the trust to continue doing it. I do not know precisely what that would be. I have to be careful coming up to budget time, so the Cabinet Secretary for Finance could be watching this. I have to be careful what I say, but I do not think that it would break the bank for us to have to do so. We could not compel the trust to do that long-term. They made themselves the term, and we do not want to do that. Then the question would be, well, who is appropriate to do it? We would then need to find someone. Those are not impossibilities. I am not suggesting that it would not be possible to do those things. We would then need to consider that in detail work out who might be most appropriate to do it. I suppose that it could even be done in-house. The then question is whether or not some people would feel that that is appropriate. I think that I saw in your first evidence session that ICAS had posited that as a suggestion, but R3 immediately came back and said that it did not think that that was appropriate. It was also suggested. There could be many suggestions. We would need to consider whether or not we thought that they were appropriate and sensible suggestions. I suppose that the point that I was trying to make is that there would be a diversity of views on that. Just as we will never be able to satisfy everyone with whatever tool we put in place, it would be able to satisfy everyone in respect of that decision as well, but a decision could be made. I will bring in Richard on that as well. I just wanted to reflect back on the situation before the 2014 badass came into force in 2015. In those days, the money adviser sat down with the client and decided whether or not they needed to go bankrupt. Could they cover their debts? Were they apparently insolvent? Did they have assets? All the money adviser was focused on whether or not their client needed to go bankrupt. Bankruptcy will be awarded. The case will then be referred to a trustee, and the trustee would go through the process of setting the contribution. In the period of consultation in the run-up to those reforms that has actually gone on from about 2007 onwards to 2012-13 when the policy was set, the decision was taken that the debtor ought to know what their contribution may or may not be before they decided whether or not to go bankrupt. As a result of that, the administrative burden of going through the financial tool of coming up with the calculation has been brought from after the award of bankruptcy done by the trustee to before the award of bankruptcy done by the money adviser. We know that that is a burden on money advisors that they did not have to face before, but we went into that with our eyes open because it allowed us to put the debtor in a more informed position in making the choice, and it allows us to tailor what their contribution is to their specific circumstances. That is a fundamental policy issue, but of course we will be looking again at the assessment, but the fact that it has imposed administrative burden should not be any surprise, because clearly we have brought a lot of work from post-award done by somebody different on to pre-award by the money adviser. Of course that has been designed by the best interests of the debtor at heart, which I think we would all agree is a sensible thing to do. We do not want to put people into solutions that they do not necessarily have to be pushed into. Of course, if that is the outcome of your design, which I think that money advisors would want, they would have to be going through that process of evidence gathering anyway, so that they can make sure that the person before them can make a fully informed decision based on their advice. Going back to the administrative burden, my last point is that we again heard on committee that insolvency practitioners and money advisors could use their professional judgment to sign certificates declaring someone insolvent, yet they are unable to do so at the moment. Is that something you would be willing to look at to see? I would not close down any option. I would go back to say that we need to take the creditor community with us, and we would need to hear what they had to say about that. I go back to the point that creditors constitute a wide variety of individuals or organisations, some of whom represent people on low incomes and who could also be described as vulnerable. We need to have a system that requires some level of evidence gathering and some level of sign-off, but is done so on a proportionate basis to look after the interests of the debtor, but also to ensure that creditors are with us. I will bring it to them again. That is technically slightly wrong in the nature of the question, so apologies for butting in, convener, but it is important to get this right. The insolvency practitioner and the money advisor can sign the certificate of insolvency and declare the debtor to the insolvent. What they cannot do is set the debtor's contribution, which the law says is set by us. Well, sorry, before someone else butts in here, I think that Jackie Baillie wanted to come in on the issues already raised. I welcome the minister's commitment to additional guidance, but let me put it to you that money advice Scotland, citizens advice Scotland, ICAS, Alan McIntosh, all of these people sit on your common financial tool working group. They already have a voice. The evidence that they have given to committees should not come as a surprise, because they have been raising their concerns within the group, but they are not listened to. If their participation is not translating into better practice, what comfort can we take from you offering more guidance and their input to developing it, given that they already have an input? Who wants to butt in on that? I do, convener. I hope that you do not consider me butting in. I reassure them that this is a new area to me, Ms Baillie. I have not been involved in the process before. Having heard the concerns of this committee, the first thing that I determined was that we should withdraw the regulations, because serious concerns have been raised. We should not proceed as we had previously envisaged. It is incumbent on me to sit down with those involved. All those individuals and organisations were invited to the meeting with me, not all attended, most did. That was precisely so that I could hear directly from them. That is my commitment to them to continue doing that, so that any guidance for you is going to chair this working group now. I will not chair the working group, but I have it because I am quite a busy person, Ms Baillie. Really? If it is that important, you would find time to do it? I do find the time to engage with organisations. That was meant to be a bit of a jocular remark, Ms Baillie. I will engage. I am not suggesting that there is anything funny about them, Ms Baillie. Let me go back to the fundamental point that I was making. I committed at the meeting that I held last week to engaging regularly with those organisations on a round-table basis. I do not know whether that is something that has happened in the past. It is something that I found instructive and useful. I am very clear that it is I. As the minister, we are the responsibility for this area that devises policy. I can only do that if I am properly and adequately informed, and part of that will be me engaging with those around that table on a regular basis, and that is something that I am committed to doing. Can I ask you then who chairs the working group and have you not been receiving information from that working group? I do not think that it is fair to say that I have not been receiving information from the working group. The working group will be meeting tomorrow. It has been convened quickly. It was scheduled to meet at the request of some of the participants. They had suggested that they should not. I asked the bankruptcy to go back to them to say that, given that this is the position that we are in, that we need to try and undertake this work quickly. Please ask them to reconsider. I am grateful that they have agreed to do that, so that they will be meeting tomorrow, indicating some sense of urgency and seriousness by which I take this matter. I will, of course, look into hearing what was discussed there, and I will be fully involved in the process. Can I go back? I am not meaning to nitpick, but I just want to understand the process. Can I ask you again who chairs it? If you were getting reports, were you being told about those concerns well before the regulations were laid? I will ask Richard to come in on who chairs it. Clearly, I am relying on the bankruptcy to provide me with information. I am satisfied that they provide me with information that is necessary to move ahead as I see fit. The meeting tomorrow will be chaired by John. It is usually chaired by another member of my staff, given the importance of this topic. We have raised it to the deputy accountant tomorrow. Who is it normally chaired by? Graham Cair. Angela Constance. If I could follow on from some of Ms Bailey's question, because I think that I would like some categorical assurances also. Given that Mr Cook said earlier, and I think that this was an important point, that if there are fewer breaches, less evidence is required to the accounting and bankruptcy. However, if there are breaches, evidence is required to waive contributions. I want to know specifically, or the options that the minister has, to ensure robust assurances that, in all circumstances, Mr Dennis and his colleagues will be proportionate and reasonable. Over and above guidance, what thoughts the minister has about that specifically? Your role in bearing down on the AIB is pivotal. In this circumstance? It is certainly my expectation that it should be proportionate. That goes back to the point that I just made to Ms Bailey. I hope that I have made throughout my contribution in answering questions today. If there are people out there expressing some concerns, it is incumbent on me to hear that. That is why I have put and trained the process that is currently under way. Yes, I want to be as categorical as I can. Not only is it my expectation, I want us to devise some form of guidance that can set that out. As much as any guidance can, it is always going to be subject to interpretation, and there will ultimately be differing points of view from time to time. That is inevitability, but as much as we can, in the form of written guidance, I want to be clear about the level of evidence that is required in circumstances where the trigger has been breached. It will speak largely to common sense, where things absolutely cannot be demonstrated, then you need to reflect that in your consideration of those matters. If it is for something that can be demonstrated as a regular current in terms of travel, it can be readily assessed through looking at what public transport costs are, or an assessment of what petrol costs are, for example, then that can be undertaken by the accountant and bankruptcy looking at any specific situation. What I will say, and it has not come out thus far in the evidence that you have been gathering today, is that there is a mechanism already in place. I cannot remember the precise name of it, but I will ask John to come in and remind me of that in a second. If an adviser is concerned that the process has not been proportionate or fair just now, he can seek to challenge it. I do not think that that happens often just now, so that is in existence perhaps one element of the guidance that might need to be reflecting that better that is some form of mechanism. I will just ask John yet, of course. I will go back to the issue of advisers. Forgive me, I was trying to pursue a line of questions that was particularly about Euro as Minister. In terms of the guidance, guidance is important, the more detailed it is, the better. I, for one, am not demuring from the central importance of guidance, but what other options do you have in terms of belt and braces approach to ensure that the AIB is reasonable and proportionate other than guidance? Is it appropriate or possible for there to be some sort of protocol between the minister, the AIB and stakeholders? Are there, over and above, quite detailed working groups? Are there forums that there can be ministerial oversight and input into what other options do you have to ensure that, on an on-going basis, we are not just issuing guidance as a one-off piece of action, that there is a collective endeavour to ensure, because this is the crux of it for a lot of your stakeholders, is that they are concerned about the burden of evidence and that Mr Dennis and his colleagues are not reasonable and proportionate in all occasions. It is clear that I have just made the point, so there is the working group that will meet on an on-going basis. I will be looking to be updated on an on-going basis as to what the considerations of that working group have been. That will be informative and instructive. I have already responded to Ms Bailey. I think that the evidence that we are going to provide to you is a note of the outcome of the meeting. Within that note, it expressly states that I found the meeting useful and I intend to do that on a regular on-going basis, so that will allow stakeholders to raise issues directly with me. What I cannot, of course, do is become involved in the direct application of a specific case that would be entirely inappropriate for me to do so, but, if I get some sense, as you can do, through people contacting you directly, parliamentarians contacting you on behalf of their constituents, that there seems to be some general issue, then that, of course, allows me to have a very straight conversation with Dr Dennis and any of his colleagues as appropriate. Can I move on to the issue of evidence? The minister just mentioned that. Mr Cook earlier, when he was questioned by Mr Mason, said that he believed that the standard financial statement would give more folk more to live on. Is that just a belief or is that something that you can state categorically based on the evidence that you currently have? Based on the evidence that we have, the answer to that is yes. The difficulty is that trigger breaches do not necessarily mean higher contributions. It depends on the person's circumstances and whether they can evidence it and it is reasonable in those circumstances, so that is what muddies the water somewhat, I suppose. I would like to add another point to what the minister was saying. On how it works at the moment as a review process, if someone does not like their contribution, they can ask for a review. That is carried out by a separate part of accounting bankruptcy, and they can also go to the sheriff to ask for an appeal on a formal basis. In addition, we have an independent review committee that is made up of external stakeholders who look at our decisions that have been reviewed to say where those are right. That gives us external scrutiny and allows us to reflect on our decisions and take on board any criticism that we get from the external stakeholder group. We try as much as possible to be transparent in the process so that we can learn from the experiences of people who are using the service, but it is fair to say that we get very few review requests for debtor application contribution cases, if the truth be told. That is a very interesting point, Mr Cook. It leads me to ask that, in terms of what committee has before it to decide upon, there does not appear to be any direct consultation with debtors on the approach to assessing income or, indeed, of their experience more broadly on statutory debt solutions. Is that something that the minister will reflect on and rectify? Yes. I have already said very clearly that we are going to undertake a review of the legislation. We will do that. We will seek to involve debtors in that process. Of course, accounting bankruptcy is in contact with debtors on a regular basis, so that will be instructive, but we will do that on a formal basis. As we did in this case, I know that one of the elements of your letter to me was a concern about the process of consultation and the lead-up. We followed the normal process of consultation that we would have with any form of legislative change, so if there were to be legislative changes arising, it would be a normal process of consultation. Any individual, including people with direct experience as a debtor, would be able to contribute to that consultation. It probably is a fair point. There can be a tendency, and committees and the Government can be subject to that problem. It is a challenge for us legislators, convener, that when we engage in consultation, we usually hear, mainly and most directly, from what we call stakeholders, the organisations themselves. There is always that challenge to reach out to others who we want to engage with. In that case, clearly, we would want to engage with debtors, but we will all make sure that that is part of the process. Again, I am conscious that we can all diligently follow the processes that are expected of us, either as a committee or, indeed, as a minister. However, the reality is that there are some folk that are harder to reach. There are other areas of government where we have worked very hard to overcome that in terms of those with the lived experience of the social security system, those with the lived experience of homelessness. What further specific endeavour do you think that the minister and his officials can make to reaching those that we need to reach, bearing in mind that they can be difficult to reach? I suppose that that was the point that I was speaking to. It is always an inherent challenge for us, and I think that we would all recognise that. It is an inherent frustration. I would say that, clearly, Ms Constance was involved in the process of trying to widen out the reach for the Social Security Bill and how we advise the Social Security Agency. We can learn from previous experience what I can say is that, through the process of on-going engagement that Bankruptcy has been undertaking a survey of those with direct experience of the results that are being collated just now. That was the point that I was trying to make, where there is that regular engagement. I cannot say what the answers are just now, because we are going through that collation. Is it phone calls? Is it face-to-face contact? Is it focus groups? We are normally right to people to ask for consent to put it in a survey, so we have done that through IPs, money advisors, creditors and debtors, people who are experiencing the system. The feedback from that has been very positive in the past, and we hope that that continues. However, we just need to learn lessons from the experience. In the current process, we get that through the advice sector, because they are not advocate on behalf of their clients. That gives us a chance to speak directly to the people who experience the system. We will report on that, we will produce a release on that and give detail as to what people think of our service. I am conscious of time, but we will move on now to John Mason for the question. I realise that both the common financial statement and the standard financial statement are controlled by outside bodies, so whichever one we go with, we do not have full control of it, but they are tied into legislation. What would happen if, in future, the standard financial statement was changed quite dramatically? Perhaps for political reasons, it became harsher for debtors. That would be a decision made in England. How would we react to that? I do not think that that form of characterisation of the process is necessarily how it would work in practice. I would make the point, as I have alluded to earlier, that I can understand why people have come to this conclusion, because we are moving from a system that has been used on a widespread, standardised basis in Scotland to one that is going to be used on a wider basis across the UK. There has been some suggestion about a loss of direct influence or control you, Mr Mason. Ultimately, those are products operated by organisations that are not directly in the gift of the Scottish Government. What I can say is that, by contrast to the steering group that existed, which, by my estimation, is not likely to exist for the CFS, because the Money Advice Trust does not intend to continue it, to the equivalent group of organisations for the SFS, we have more Scottish representation on that for the SFS through Sitns Advice Scotland, through Money Advice Scotland and through the Accountant and Bankruptcy. We have more influence, so you cannot preclude the possibility that the tool develops in such a way that you feel that it is not what you want to utilise going forward. That could have happened with the CFS, just as much as it could with the SFS. Then we need to make a judgment and we may then need to alter the system going forward. We could not preclude that possibility with the CFS, and then we come back to the committee saying that this is what we intend to do and seek the committee's consent or ascent. Andy Wightman Thank you very much. I have a brief follow-up to your earlier comments on the guidance. For clarity, in relationship to things such as the allowances for travel, the guidance cannot change the fact that the allowance is zero, but the guidance could be determinative of the kind of evidence that would be required. Is that what you are saying? Andy Wightman Yes or no, I think that the first point that I would say is that there is a tendency to look at those as allowances, and I think that the community that is involved in the provision of advice would also say that it is not intended to be alleged. That is probably a moot point, but, in essence, it is about how the guidance that we put in place to implement it on a practical basis. That was very clear to me, Mr Wightman, from the discussion that I had, that that is the concern, as it stands now, with the current tool through CFS, and it would be the case with the SFS. Ultimately, it is what we do on a practical basis, implementing whatever tool we have before us that I think is the critical thing for the advisers and for the organisations that are involved in supporting debtors. That is something that I am very committed to trying to get right. Self-evidently, given the concerns that you have had as a committee, I am going to need to get that right if the committee is going to agree to any change. Andy Wightman Okay, thank you. You said earlier that we are at this juncture because of the impending ending of the maintenance of the common financial statement. My understanding is that when the AIB undertook its consultation, two thirds of those who responded said that they did not agree with the standard financial statement. We are interested in alternatives, but no work has been done to explore alternatives. Clearly, one alternative would be to continue the common financial statement, conduct a review of the methodology to determine how much money a debtor is left with, minimum living standards, setting trigger figures, et cetera, and then make a decision as to whether we embrace the standard financial statement or not. Andy Wightman I would not necessarily posit those as contradictory or alternatives. I would not also say that it is I do not think that it would be fair to say that there has not been any work undertaken. For example, minimum income standards have been suggested as an alternative, and there has been an assessment undertaking that shows that, broadly, the SFS results in the same outcome. I do not think that there has been no work undertaken. I do agree that more work can be undertaken and I am already committed to doing that. Andy Wightman I think that the criticism has been that the kind of work that we are talking about here is work that would inform a decision as to whether to move to the standard financial statement. In the absence of that work, we are being invited to make the change purely because the current tool is being discontinued when, in fact, there are bridging mechanisms that we could keep that tool going. Andy Wightman Potentially, yes. Whether or not that would be a satisfactory process is probably a matter of perspective. I would think that there could be any number of concerns raised from a number of stakeholders about having that bridging process, in terms of having a variety of tools for different assessments, having to operate more than one of them. Also, whether or not it is appropriate that the organisation that currently operates and licences it has himself said that they think that the alternative that we seek to move to is better, but they are asking them to maintain it solely for our utilisation. Is that an appropriate thing to do? Again, I would not say that it is fair to characterise the process that has been undertaken thus far as no work has been pursued. I have made the point that there has been an assessment of a comparison between the CFS and the SFS. I think that I have made a comprehensive one. I have already made the point that if the committee thinks that there is more that we can do in relation to that, and that we can do it, we will do so. I am not quite convinced that the argument that we have not done anything here in the lead-up can be held up to be true. Thank you very much. That concludes our questions on this at this time. Thank you to the minister and Mr Dennis and Mr Cook for coming in today. I will suspend the session for a change over witnesses. We turn now to agenda item number 3, the Insolvency Scotland Receivership and Winding Up Rules 2018, which is SSI number 347. I would welcome the minister again, Jamie Hepburn, minister for business fair work and skills, and the officials with him, Graham Fisher, head of branch legal directorate constitutional civil law, the Scottish Government, Alex Reid, who is the head of policy development and David Farr, policy manager, corporate insolvency from the accountant in bankruptcy. I will start first by asking the minister to give a brief outline of the purpose of the instrument. I will speak very briefly because I am happy to take questions of the committee. I think that my letter of the 28th of November aim to say at the background to this instrument, I recognise that it is a very weighty document that is by necessity because the rules that seek to replace were similarly so. It is largely an exercise at updating those rules from legislation past. Over 30 years ago, it is designed to update the language that is used around them, designed to make the rules a bit more transparent for people to be able to understand those involved in the provision of advice and insolvency solutions. It is really just a very straightforward exercise in updating the rules that are in place, not substantially changing them, but modernising them and making them easier to understand. Are there any questions from committee members to the minister on this instrument? If there are no questions, I will suspend the meeting to allow the witnesses to leave. Thank you very much for coming in.