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Mike Dailly: Are earnings arrestments only perpetuating the cycle of debt?

Mike Dailly: Are earnings arrestments only perpetuating the cycle of debt? <i>(Image: Newsquest)</i>
Mike Dailly: Are earnings arrestments only perpetuating the cycle of debt? (Image: Newsquest)

COUNCIL tax is rising across Scotland.

From April, it will increase by 5% in Glasgow.

The most common charge in Glasgow is for band B properties where council tax will rise from £1481 per year to £1556. That includes a water charge of £180 and sewerage charge of £209, which the council collects for Scottish Water.

Unfortunately, a significant number of people struggle to pay council tax and other bills. This has been exacerbated by UK inflation running at 10%, income being static for many households while energy and food bills have rocketed.

There are council tax exemptions and discounts available for people subject to eligibility criteria. You can access information about this and talk to a qualified money adviser from Govan Law Centre for free by visiting debtnavigator.scot

Creditors who are owed money and want to recover it will use an area of law known as diligence. This is a form of legal debt recovery that has to be carried out by sheriff officers in Scotland.

In 2020/21, there were 58,310 attempted earnings arrestments for debts in Scotland. Ninety-two percent of these earnings arrestments were for council tax arrears.

When a wage arrestment is executed against your employer, there’s a protected minimum amount of everyone’s wage that’s protected from arrestment. These amounts are normally updated every three years.

Last April the amount was increased to £566.51 for monthly wages. After that amount how much of someone’s wages can be taken depends on how much they earn. This starts at 19%, but as people’s earnings increase to 23%, then ultimately as much as 50% of wages can be seized.

Not all earnings arrestments are successful – sometimes people’s earnings are below the protected minimum amount or they might not be employed where the sheriff officer thinks they are.

Because of the cost-of-living crisis, the Scottish Government has been under pressure to increase the protected sum from debt advisers and advice charities.

They’ve been calling for the protected sum to be increased to £1000 – to bring the minimum protection for earnings arrestments into line with bank account arrestments.

Last November, the minimum protected sum for consumer bank arrestments was increased from £566.51 to £1000. This means the first £1000 in your bank account is not seized on arrestment, which gives you money to live on and pay bills until you get advice.

However, the Scottish Government has resisted calls to dramatically increase the minimum protected sum for earnings arrestments. New regulations have been laid before the Scottish Parliament that propose increasing the amount of wages that are protected from £566.51 a month to £655.83.

Public finance and community wealth minister Tom Arthur MSP wrote to the Parliament’s Energy and Fair Work Committee to defend his decision.

Mr Arthur said he had consulted with 30 of Scotland’s 32 local authorities and they had recovered £27.5 million from 35,000 wage arrestments and argued this was an important and effective method of debt recovery.

However, Alan McIntosh of the website advicescotland.com, has criticised this decision. He said: “What this suggests is the average wage arrestment recovers approximately £785 a year or £65 a month. These are the type of households that need greater protection, as they’re least likely to have been able to cope in recent months with hikes in fuel prices and other increases in the cost of living.

“Such households are most likely to get caught in a vicious cycle of debt, where because of a wage arrestment they will not be able to pay next year’s council tax and will default again and have another 10% added to their debt as a surcharge. They will then see their debt passed to sheriff officers, where more fees will be applied.”

It’s reasonable to ask whether it’s a false economy to use earnings arrestments against lower income households in perpetuity? For example, how many of the 35,000 people in Scotland who had their wages arrested weren’t able to pay their ongoing council tax?

One might want to research how much council tax arrears increase as a result of earnings arrestments? If it’s more than £27.5m then where is the public cost benefit? It could be argued you are continuing a cycle of debt instead of breaking it.

If we’re serious about tackling the issue of people being trapped in never-ending debt, we need to increase the minimum level of protection for earnings arrestments.

Aligning it with the bank arrestment minimum protected sum of £1000 must be logical.

We also need more flexibility with earnings arrestments, so the amount being taken in the arrestment can be varied with the agreement of councils to allow people to prioritise their current council tax and not run up more debts.