Despite personal debt levels in the UK now having returned to pre-credit crunch levels, new figures released by the Improvement Service, reveal that free, local authority-funded debt advice services have now seen their funding cut by more than 44 per cent in the last three years. The latest figures paint a picture of services that are not only lacking capacity to deal with current demand, but should Scotland face another personal debt crisis, will not cope with future demand.
Then in 2012-13, the Scottish Accountancy in Bankruptcy (AIB), the agency which leads on debt policy for the Scottish Government, removed the wheels from these progressive policies that were driving such change. It concluded the law had become too debtor friendly and less than five years after the credit crunch, decided the law had to be re-tilted back in favour of banks and other financial institutions.
The effect was that within a year of the new rules being implemented in 2015, the numbers applying for bankruptcy fell by 44 per cent, whilst the numbers applying for the Debt Arrangement Scheme fell by 49 per cent.
Also, the Improvement Service produced another report that showed of the 49,000 people in 2016-17 who had sought advice from free, council-funded debt advice services, fewer than 21 per cent had their problems addressed through a formal solution, but more than 50 per cent had relied on their free sector advice agencies to negotiate solutions on their behalf.
Our debt laws may be world-recognised, but unless there are adequate resources and political will, they will not work.
The problem is they are no longer working and when Scotland faces another personal debt crisis, this will become all too obvious, but by then, it will be too late.
First published in The Herald, 4th April 2018