Economy Committee unconvinced by new debt repayment system


A new system to calculate the financial situation of people in debt or facing bankruptcy should be delayed until significant reservations are addressed, according to a Holyrood committee.

Following the Economy, Energy and Fair Work Committee’s inquiry into the Common Financial Tool (Scotland) Regulations, the Committee has recommended that a wider review be carried out, and that the proposed system should be deferred by a year, until March 2020.
This is the second time that the Committee has not endorsed the system, which resulted in the Scottish Government withdrawing the regulations in November 2018.
During its inquiry, the Committee heard evidence from financial advisers that under the Standard Financial Statement (SFS), the ‘trigger figures’, which set the level of repayments to take account of necessary household spending, are less flexible and require more evidence before being approved. This means that those in debt are more likely to struggle with repayments, and it could result in more workload for frontline advisers.
The Convener of the Economy, Energy and Fair Work Committee, Gordon Lindhurst said:
“Following extensive consideration of the regulations, the Committee is unconvinced of the adoption of the Standard Financial Statement. We have significant reservations around the rationale for moving to the SFS and the impact its introduction will have on the living standards of those who are paying back debt.
“While a reason for introducing the SFS was for a consistent approach across the UK, the Committee recommends a delay until a more in-depth review by the Scottish Government is carried out.”
Under the current system, the Common Financial Statement (CFS) helps calculate a payment proposal for those in debt to pay their creditors. However the Standard Financial Statement (SFS) was intended to replace the CFS in March 2019.
The Committee recommends that use of the CFS continues for one more year while a review of the options takes place. That review should include consideration of:
• A minimum income standard for debtors.
• Reducing the administrative burden on money advisers.
• Providing more scope for the exercise of professional judgement.
• Evidence from debtors with lived experience of the current income assessment processes.


The Bankruptcy and Debt Advice (Scotland) Act 2014 legislated for a standardised system for assessing a debtor’s income when they used a statutory debt solution in Scotland. This is referred to as the Common Financial Tool. The three statutory debt solutions are bankruptcy, a protected trust deed and the Debt Arrangement Scheme
This is the second time the Committee has informed the Scottish Government of their significant reservations replacing the CFS with the SFS as the Common Financial Tool.
The Regulations were originally laid on 15 June and withdrawn on 10 August 2018 following requests from the advice sector seeking a longer lead in time ahead of commencement. The Regulations were re-laid on 19 September and were withdrawn a second time, on 9 November 2018, following a letter from the Committee to the Minister for Business, Fair Work and Skills outlining members’ significant reservations.

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