Almost eight months since the Lockdown began, Scots now stands at an economic precipice.
In the next couple of weeks, a number of different things will occur which will likely tip many over that precipice.
Stepping up to Edge
First, the UK Furlough Scheme will end and the UK Government’s new Job Support Scheme will begin, leaving millions of UK employees possibly living on two thirds of their wages.
Second, the Financial Conduct Authority’s (FCA) payment holidays for mortgages, credit cards, personal loans and car finance agreements will move onto their next stage, meaning they will now only be issued on a case by case basis. This is likely to mean many, if not the majority of people, will see their payment breaks end and for those that don’t, interest and charges will continue to be added. Creditors will also now begin reporting such missed payments to Credit Reference Agencies, damaging people’s credit rating.
Third the Repossession Ban imposed by the FCA for Home Owners, will also come to an end, raising fears by many that as they slide into arrears with their mortgages, legal action to recover their homes may begin. For car owners, with 9 out of 10 of all new car agreements being subject to car finance agreements, the likelihood is many will now have to choose between keeping their homes and their cars.
Fourth, the number of actions being raised to evict both private and social landlord tenants will begin to climb, as there has never been an eviction ban on tenants in Scotland; and for many the 6-month extended period of notice that landlords were required to give them, will be coming to an end.
Finally, with most Council Tax Payers having used their two-month payment break at the beginning of the financial year, hundreds of thousands of Summary Warrants will be getting issued in coming weeks and will shortly be getting passed to Sheriff Officers to serve Charge for Payments and execute Wage and Bank Account Arrestments.
For many Scots the precipice is only a step away and in the next few weeks, many will be taking a step closer.
So what is the Scottish Government Doing?
The reality is, in relation to many of the above threats that people face, the Scottish Parliament has a lot of power to take the necessary steps to protect people now.
It may lack the financial means to provide its own financial support schemes to subsidise Scots that face losing their wages or jobs, but this is not to say it lacks the legal powers to help people.
First, it has the power to introduce powers to freeze all interest and charges and fees on debts for Scots that are experiencing financial difficulty.
This could be done through using the Scottish Statutory Moratorium procedure that currently protects Scots from Sheriff Officers and being made bankrupt.
This procedure , which previously only provided six weeks protection, now offers six months protection. However, it unfortunately doesn’t protect people from Creditors still adding interest and charges.
However, proposals to allow this were laid before the Parliament in May by Jackie Baillie (MSP) during the passing of the Coronavirus (Scotland) (No 2) Bill 2020 and rejected by the Parliament.
Since then, the UK Government has laid it’s own Regulations for a similar UK Scheme, called Breathing Space, that will introduce not only interest freezing power to their Scheme, but also powers to stop evictions and repossessions.
The Scottish Government have no such progressive plans.
On top of that whereas the legal notice period for tenants was extended from one month to six months for tenants, no similar legal protection has been introduced for Home Owners in Scotland.
Such a measure, however, could be introduced, imposing a requirement on mortgage providers, that when they serve Calling Up Notices on Homeowners, instead of giving them 2 months’ notice, they will be required to give 6 months’ notice, providing Home Owners with parity with Tenants.
In addition to that it is within the Scottish Parliament’s power to provide even greater protection for those who are in debt with their Council Tax.
Currently, when debts are passed to Sheriff Officers, they can serve legal demands for payment, demanding the full debt be repaid within 14 days. This is known as a Charge for Payment.
Last year over 200,000 of these were served on Scots.
They can then execute Bank Arrestments.
These allow Sheriff Officers to arrest what sums they find in people’s bank accounts.
There is some protection for those in debt, however, that allows the first £529.90 to be protected (Minimum Protected Balance). However, this amount doesn’t change if you are a single person or a couple with three children.
Obviously, as a result this can cause severe hardship and although it is possible to challenge such arrestments, it can take a minimum of 8 weeks before any case will be heard by a Sheriff (in normal times).
By then the hardship will already be experienced.
However, there is nothing to stop the Scottish Parliament softening the effect of this debt recovery procedure, by only allowing a % of the person’s money above the Minimum Protected Balance to be taken, as happens with Wage Arrestments.
The reality is, although the Scottish Government introduced some measures to protect people in debt with the Coronavirus (Scotland) (No 1 and No 2) Acts 2020, both statutes were knee jerk responses to a quickly developing public health crisis that had not yet become a fully blown personal financial crisis.
In the next couple of weeks, however, the Covid 19 Crisis is about to mature fully as a Personal Financial Crisis and the level of protections for Scots are no where near enough.
In addition to that , the protections that have been introduced are only in place until the 31st March 2021 with the option for the Parliament to extend only until the 30th September 2021.
In no playing out of this Crisis will Scotland financially have recovered by then, especially with the possibility of a hard Brexit on the horizon.
In all likelihood, what tends to occur with financial crisises is many of the protections introduced to help people are withdrawn just as the threats they were introduced to protect people from, become real.
Can we Learn from the Credit Crunch?
There are, however, lessons that we can learn from the last financial Crisis when Fergus Ewing introduced the Home Owners and Debtor Protection (Scotland) Act 2010.
That piece of legislation was pivotal in providing Scots, reeling from that financial crisis, with much needed protection and relief and suppressed the number of homes lost, whilst also allowing tens of thousands to deal with their historic debts in as painless a way as possible.
Key, the measures were also timeously introduced not in the immediate aftermath of the crisis, but as the delayed effects of it began to feed through to consumers.
Such a step is now required of the Scottish Government and Parliament.
In many ways the first two Coronavirus Acts have dealt with the immediate public health effects of this crisis, but as the financial rug is now pulled from the feet of Scots and we enter into the personal finance crisis, a third Coronavirus Bill that looks to address the impact on people’s personal finances is now necessary.
If we don’t we cannot say we have done enough and in many ways, morally, are no better than the UK Government, which is currently pulling away financial support from people when they need it most.