FACING UP TO DEBT: HOUSING DEBT ADVICE & COUNSELLING IN SCOTLAND Central Research Unit

FACING UP TO DEBT: HOUSING DEBT ADVICE & COUNSELLING IN SCOTLAND CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU CRU Central Research Unit Central Research Unit

FACING UP TO DEBT: HOUSING DEBT ADVICE & COUNSELLING IN SCOTLAND Michael Bell Associates Scottish Executive Central Research Unit 2001

Further copies of this report are available priced 5.00. Cheques should be made payable to The Stationery Office Ltd and addressed to: The Stationery Office Bookshop 71 Lothian Road Edinburgh EH3 9AZ Tel: 0131-228-4181 Fax: 0131-622 7017 The views expressed in this report are those of the researchers and do not necessarily represent those of the Department or Scottish Ministers. Crown Copyright 2001 Limited extracts from the text may be produced provided the source is acknowledged. For more extensive reproduction, please write to the Chief Research Officer at the Central Research Unit, Saughton House, Broomhouse Drive, Edinburgh EH11 3XA

ACKNOWLEDGEMENTS Michael Bell Associates has produced this document to provide a more detailed understanding to the need for and provision of housing related debt advice across Scotland. It is hoped that this Report will be of use to policy makers, funders of services and debt advice practitioners in developing their respective responses to the issues raised. The research team responsible for the production of this report included: Michael Bell Sue Lukes Iain Easdon Carole Millar Ros Lucas Stephanie Sexton We wish to acknowledge the support and interest in this project by the commissioners of the research, the Scottish Executive and Scottish Homes. In particular we would like to acknowledge the work of Richard Evans who acted as the project officer on behalf of the commissioners and Linda Sinclair who chaired the Advisory Group. The advisory group provided valuable support throughout the project, it members were: Martin Boyd, Scottish Tenants Organisation Bob Burrows, Money Advice Scotland Eleanor Clark, HomePoint Martyn Evans, Scottish Consumer Council Richard Evans, Scottish Executive Central Research Unit Yvonne Gallacher, Money Advice Scotland Catriona Graham, Scottish Executive Development Department, Housing Division Kaliani Lyle, Citizens Advice Scotland Scott McEwan, SEDD, Social Inclusion Division Kenny Simpson, COSLA Linda Sinclair (Chair), Scottish Executive Development Department, Housing Division John Trouten, Bank of Scotland (Representing CML) Michael Bell Associates would also like to acknowledge the contribution to this research by the many agencies and individuals who provided mailing lists, responded to the survey or participated in interviews or other research activities.

CONTENTS 1 EXECUTIVE SUMMARY...1 1.1 INTRODUCTION...1 1.2 THE DEFINITION OF HOUSING DEBT...1 1.3 OPERATING CONTEXT...2 1.4 ASSESSMENT OF NEED...2 1.5 SERVICE MAPPING...3 1.6 GAP ANALYSIS...4 1.7 LOCALITY STUDIES...5 1.8 RECOMMENDATIONS...9 2 OPERATING CONTEXT...14 2.1 DEFINITIONS OF HOUSING DEBT AND THE RELATIONSHIP TO OTHER DEBT...14 2.2 INCIDENCE OF DEBT...15 2.3 FACTORS AFFECTING ARREARS...19 2.4 ORGANISATION OF ADVICE SERVICES...19 2.5 RESERVED & DEVOLVED POWERS A SUMMARY...24 2.6 NEW INITIATIVES...27 2.7 A CHANGING LEGISLATIVE FRAMEWORK...27 3 ASSESSMENT OF NEED & SERVICE MAPPING...33 3.1 NEEDS ASSESSMENT MODELS...33 3.2 DEBT ADVICE NEEDS ASSESSMENT...35 3.3 OVERVIEW OF RECENT SERVICE MAPPING STUDIES...37 3.4 SURVEY SUMMARY...39 3.5 GAP ANALYSIS & SURVEY COMMENT...43 4 LOCALITY STUDIES...47 4.1 ABERDEENSHIRE...47 4.2 THE BORDERS...50 4.3 CLACKMANNANSHIRE...54 4.4 CITY OF GLASGOW...56 4.5 SERVICE USER/CLIENT GROUP STUDIES...59 4.6 SERVICE PROVIDER STUDIES...64 5 CONCLUSIONS & RECOMMENDATIONS...76 5.1 CONCLUSIONS...76 5.2 RECOMMENDATIONS...77

6 APPENDICES...83 6.1 THE ADVICE PROCESS...83 6.2 METHODOLOGY...84 6.3 ANARAK RESULTS BY LOCAL AUTHORITY STUDY AREA...90 6.4 SURVEY...106 6.5 SURVEY RESPONDENTS...136 6.6 MORTGAGE REPOSSESSION BY COURT DISTRICT 1994-2000...145 6.7 BIBLIOGRAPHY...146

1 EXECUTIVE SUMMARY 1.1 INTRODUCTION This research was commissioned jointly by the Scottish Executive and Scottish Homes. The research was undertaken between September 2000 and March 2001. The work was managed by the Scottish Executive on behalf of both commissioners and supported by an Advisory Committee comprising key individuals from all key stake-holders. This report recognises that alongside providing financial support to those seen as being at high risk of housing debt through the benefit system, the Government can also try to minimise the problems arising from housing related debt. This can be achieved by encouraging the provision of preventative information and advice (including representation and negotiation), and, if debt is incurred, appropriate and timely advice on what to do to discharge it and avoid the damaging consequences. The main objectives for this project were to: Improve the knowledge of housing debt; Research the nature of existing advice services including how extensive they are, how they are organised and how effective they are; Research examples of good practice, e.g. particularly effective services; Identify where gaps in provision exist; and Identify ways in which services could be improved. It is important to stress that this report does not seek to provide an analysis of the causes of housing related debt. Instead the report aims to be of use to bodies that currently provide housing debt advice services or which might do so in future, and to the current or potential commissioners of such services. It aims to address these objectives by: Reviewing the nature, extent, and organisation of housing debt advice services in Scotland, reviewing and drawing conclusions on their effectiveness and this is likely to distinguish between both advice on different types of housing debt and different types of client; Including detailed examples of effective services; and, Mapping of provision in Scotland. This looks at the different types of debt dealt with by different types of agencies and quantifies both the incidence of these types of debt and the means employed. 1.2 THE DEFINITION OF HOUSING DEBT All of the key players interviewed reported that different type of personal debt were difficult to separate as individuals will often balance the payment of one debt by incurring debt elsewhere. Advice providers stressed that assistance that they provide inevitably includes both housing related debt and other types of debt. For the purposes of this report the definition of Housing Related Debt we utilise includes: 1

Tenure dependent charges e.g. Mortgage and rent arrears. Other charges on the Property e.g. Council Tax arrears and service charge arrears (where these are levied separately from mortgage and rent charges) and other loans secured against the property. Quality of housing experience charges These relate to expenses that are critical to the housing environment e.g. utility bills. 1.3 OPERATING CONTEXT The gathering of statistics on housing debt is problematic. This area of work is now subject to a separate study commissioned by the Scottish Executive which will examine mortgage arrears and repossessions, which is due to report in early 2002. This Report highlights evidence that rent arrears are an increasing problem for both local authority and other public sector landlords in Scotland. For example, between 1996 and 1999 the level of Council rent arrears had increased from 26.5 million to more than 37.2 million (a 9% increase in the percentage from total rent due). Housing association arrears had increased by a similar level over this period. Mortgage arrears have also increased in Scotland over this period, in contrast to the rest of the UK. The consequences of this increase in arrears for individuals in debt is evidenced by a dramatic increase in the number of court possession orders granted. Over a five year period from 1994 to 1999 there was a 188% increase, with almost 6,000 possession orders granted in 1999. It should be noted that over the last twelve months there has been a significant decline in possession orders granted. Whilst some factors impacting upon this increased indebtedness are outwith the direct control of public sector landlords there are a range of other management actions that can be taken to minimise the impact. This theme is explored in the locality studies. Advice services in Scotland are present in the private, statutory and voluntary sectors. The approaches taken by these various agencies are reported in more detail within the case studies. In addition to the provision of information, advice and assistance in negotiating with creditors, a number of agencies also provide debt management services that have been reported on but are outwith the main focus of this report. All debt advice services (and debt management services) are subject to a regulatory framework overseen by the Office of Fair Trading. In addition, a number of voluntary and self-regulatory schemes exist. There are a number of developments that are likely to impact upon the future management of debt advice services, including pending Scottish legislation. These include provisions within the current Housing Bill and the introduction of the Community Legal Service to Scotland. Alongside legislative change that may impact upon the management of debt advice services there are a range of other pending legislative changes that will impact upon the way in which creditors may pursue their debts. These are reported in section 2.7 below. 2

1.4 ASSESSMENT OF NEED This Report makes use of an advice needs assessment tool (ANARAK) that identifies the ambient need for debt advice and adjusts this by a range of socio-economic factors. Using this model, across Scotland we anticipate that the need for debt advice is likely to require more than 200,000 advice episodes. This translates as a requirement of one specialist debt adviser for every 22,596 head of population. Using a range of assumptions detailed in the report this translates to an annual cost of 7.5 million ( 1.5 per person per annum, 3.72 per household per annum). The model is also applied to half of the local authorities in Scotland. There is a substantial variation in figures for different local authorities, for example in the City of Edinburgh we would anticipate that one adviser per 26,928 head of population (at a cost of 1.26 per person and 2.84 per household) would be sufficient, whilst within the City of Glasgow we anticipate that one specialist adviser per 20,247 head of population would be required (at a cost of 1.67 per person and 3.80 per household). It should be stressed that the variation between wards within a single local authority area can be as great as those between different authorities. The model used has been designed to be applied at ward level where results can be aggregated up to appropriate sub-district levels. We would also wish to stress that, whilst the figures generated from ANARAK appear to be very precise, they only provide a starting point for consideration of needs. A range of local factors need to be considered when preparing an area plan that a national model cannot address. The results of this model, whilst providing a useful indicator of likely need and resource requirements should be read with caution. 1.5 SERVICE MAPPING The research reports on an extensive service mapping exercise. Almost 1800 agencies were sent surveys, ranging from specialist debt advice providers to faith groups providing some level of community service. No service mapping exercise using this methodology can be wholly comprehensive, a total of 477 agencies responded to the survey, which indicates both considerable interest and activity. A range of validation exercises were undertaken and we estimate that the mapping exercise reports on around four-fifths of those services providing a significant debt advice service. The results of this survey covering both specialist and generalist providers have been tested against the recent Money Advice Scotland Survey 1, which, although covering a smaller number of respondents asked a range of more detailed questions. The findings from both surveys are remarkably consistent. Amongst our key findings were: Across Scotland more than half of the advice outlets responding to the survey are located in the voluntary sector. Both statutory and private providers are also significant 1 Money Advice Services in Scotland A Time to Reflect Bob Burrows, (MAS, 2000). 3

accounting for around one fifth of respondents each. This pattern is reasonably consistent across Scotland with only two local authorities (Moray and South Lanarkshire) having a higher proportion of statutory sector respondents. Services with an all Scotland or all UK catchments are more likely to be found in the private sector (e.g. private practice solicitors and financial institutions). Of respondents, around half are principally advice providers. Housing providers also play a significant role, accounting for around one in five respondents. Financial service providers are also significant players. Across Scotland as a whole more than half of services are open to all members of the general public, around one fifth or services are only for customers of the principal service (e.g. tenants) and a similar proportion for specific communities (e.g. older people). Face to face provision from agencies own premises remains the most common form of service delivery. With the exception of mortgage arrears, there is little education work undertaken 80% of information and advice work by the volume of cases reported are for housing related debt. 90% of court representation work is for housing related debt work. This is mainly for rent arrears cases, however, it is anticipated that the proportion of cases relating to mortgage arrears may increase with the introduction of the mortgage Rights (Scotland) Bill (see below). Respondents reported only 4,107 cases where court representation was provided in debt cases (3,665 for housing related debt cases). Almost one third (10) of local authority areas did not report any court representation figures for housing related debt cases. (There may have been activity undertaken by all of Scotland or all of UK services in these areas). More than 80% of services were provided free at the point of delivery (95% of voluntary sector providers and 100% of statutory sector providers. 20% of private sector respondents provided their debt information and advice services free at the point of delivery. Local authorities were identified as the most common funders of services (for 253 agencies) followed by charitable trusts (for 66 agencies). Actual funding levels for debt advice were difficult to obtain for most agencies as the activity was not separately funded or accounted for. Money Advice Scotland emerged as the single most represented network in the survey responses, followed by Citizens Advice Scotland. FIAC, Shelter and the Law Society were also identified as significant networks. More than one fifth of agencies were not members of networks. Compliance with the licensing requirements of the Consumer Credit Act 1974 may be an issue for some of these agencies. The vast majority of service providers did not have any form of externally accredited quality assurance system (four out of five). The most common single system was the Scottish Quality Management System (13 agencies) and HomePoint Standards (9 agencies). CABx are covered by the CAS membership scheme. The MAS survey also reported on the use of Scottish Vocational Qualifications as a tool to ensure quality. With the exception of the CAS membership scheme, voluntary agencies were least likely to report an externally accredited Quality Assurance system. 4

It should be noted that member of the MAS are required to sign up to Good Practice to obtain membership. 1.6 GAP ANALYSIS The ANARAK study identifies resource requirements for housing related debt advice work across Scotland of at least 6.4 million. Financial returns from survey respondents were not wholly reliable in this regard and have not been utilised as part of the gap analysis, instead we have made use of service output returns. In considering the responses to the question of court representation (Type III interventions) we identify significant under provision. As this is the most costly type of advice intervention we suggest the level of resources for debt advice is substantially less than required. The incidence of basic advice giving (Type I interventions) is lower that anticipated in the ANARAK model (by at least 20%). The absence of interventions at this stage may lead to increased needs for more resource intensive advice interventions (Type II & III). It should be noted that court advice desks, where there only a one-off representation service and not an ongoing case-work service, can be very cost effective. 1.7 LOCALITY STUDIES The above data has been tested through a variety of means in four distinct local authorities: Aberdeenshire Borders City of Glasgow Clackmannanshire 1.7.1 Issues Emerging from the Fieldwork There appears to be a number of key headings emerging from these studies: Access The Nature of Employment Joined up thinking, planning and delivery Data collection Independence of provision Prevention is better than cure Representation and the role of Sheriffs Training 5

Access The issue of access to advice for rural communities is often problematic. It was interesting to note that for resident of Aberdeenshire the majority of services were based in Aberdeen City. This contrasts to the Borders where even the Regional Council Offices are located in a small village. In spite of this contrast, the issues raised by both sets of respondents were similar. In many localities there is little or no on-site provision. In the case of Borders Council, there appears to be a significant amount of attention paid to this, with welfare rights and consumer protection staff, providing outreach provision on a regular basis. In Aberdeenshire, Shelter noted that they tend to provide at least initial advice by letter and phone. Even where there is some form of outreach provided, this is clearly labour intensive and costly. Respondents noted the value of at least voice to voice contact and suggested the use of telephone banks available in the evenings; helplines etc. For those in urban areas physical access was easier. However, respondents reported that demand was managed by not publicising their services. This raises issues of ensuring that advice services are targeted at meeting the most acute need rather than providing a reactive service based upon an individual s local knowledge. There was considerable enthusiasm for court-based services that can deal with crises as a means of addressing priority needs. The Nature of Employment There were a number of issues which could impact on the level, but probably more important, the nature of advice provision required. Within rural areas, seasonal employment may mean that people fall into debt at certain periods of the year. If they have not been able to prepare for low income times, then debt or money difficulties may follow. Also, if people are usually managing they are unlikely to be familiar with the resources available to them. Low income economies i.e. where the usual wage is not substantial, but is deemed to be the norm, can mean that people look to their own income and consider themselves better off than perhaps their neighbours who are not in employment. As a result they may not seek to maximise their income (through tax credits or benefit supplements) either because they do not think that they are entitled to do so, or because they are unaware of resources that might be available to them. Benefit entitlements that have been allocated to address the issue of low wages, such as the Working Families Tax Credit, were seen as insufficiently publicised. Housing related debt is often identified as relating to those in public housing or on low incomes. It is important to remember that people with relatively high incomes, may have over-extended themselves, and if loss of employment occurs, the whole pack of cards can collapse. Again, such individuals may be unaware of, or lack confidence in using, those local services that are available. 6

Joined up thinking, planning and delivery Although not unanimous in their view, most of the respondents involved identified the difficulties inherent in different departments having different responsibilities in relation to housing provision and the management of housing related debt. Particular issues raised included: Where Finance Departments have responsibility for sorting out rent arrears, it is not usual for that to be undertaken in a joined up way. This could leave housing departments having to address housing need because the Finance Department is pursuing a policy of working to a zero tolerance of rent arrears; Administration of housing benefit may not be in tune with other activity undertaken by various departments within a Council; Social Work does not necessarily have any sway to stop proceedings; and, Councils appear to have a tendency to push towards eviction, rather than looking at other issues within the council s ambit to minimise a crisis. Respondents noted the general lack of communication both inter-departmentally within Councils and between local authority providers and others most specifically voluntary sector agencies (although one respondent noted that the change to a cabinet style approach was likely to affect the whole culture of communication). Data collection It appeared that the level of arrears for those in local authority housing that could lead to housing problems, could amount to just a few hundred pounds. One solicitor s practice identified that issues relating to rent arrears were generally for arrears of 300 to 400, while for those with mortgages, problematic arrears are more likely to be of 1,000 to 20,000. The issue appears to be, at what point a creditor starts to take action ; it may also reflect the relative ability to clear such arrears. For example, a household on benefits may take months or years to clear a relatively low debt because of very limited disposable income. The statistical returns and the case-studies of provider agencies indicated a wide variety of ways of recording both problems and activity. This contributes to the problem of identifying the nature of housing related debt and identifying strategies for effectively addressing the problem. Independence of provision Everyone noted the importance of being perceived to be independent. Where services were not independent (e.g. services provided by creditors such as mortgage lenders) providers described robust mechanisms for identifying potential conflicts of interest and procedures for referring individuals to other agencies. However, agencies views of each other gave a slightly different view with concern being expressed about how far, e.g. CAB could be independent when being funded by a local authority, 7

or how far Consumer Protection would go to advance their own client s cause when having to challenge their own council. We understand that CABx, as part of Citizens Advice Scotland, are subject to rigorous procedures that guarantee their independence and that the problem may be one of perception only. This problem may be exacerbated where provision on the ground is scant and the opportunity for clients to exercise choice in the selection of an agency is limited. Prevention is better than cure Interviewees commended early intervention and preventative and educative work, but provision was identified as extremely limited. All respondents talked about the reality that people will pay those who are on their door-step rather than more distant creditors such as local authorities. For those living in rural communities issues about preserving anonymity were significant e.g. where an individual can access a service without being seen to access that service and therefore be seen to have a problem by family, neighbours and the wider community. This may mean that an individual will access assistance at a later point when the problem has become acute. Early intervention, if it is not possible to prevent debt, may impact upon both the level of debt accrued and the action necessary to remedy it. However, yet again there are difficulties about awareness, access to provision, and concerns about confidentiality and anonymity. The new Scottish Debt line is intended to provide an accessible service that is confidential and can preserve anonymity. Representation and the Role of Sheriffs Shelter identified the need to invest time developing relationships with Sheriffs in order to create more understanding of the wider problems individuals in debt may face. A supplementary view was offered by one respondent who felt that Sheriff s were insufficiently discriminating between those who deliberately default and those who are struggling with debt. Training, Competence & Regulation The absence of access to appropriate and accredited training was noted by a large number of respondents as problematic. There is a need for training for debt advice and particularly for debt advice work relating to housing. We understand that Citizens Advice Scotland are introducing a new system whereby they will identify the knowledge and skills based competency requirements for each different area of law (including housing debt advice work) and are developing training materials and courses that will assist advisers to meet these competency requirements. It was also noted that solicitors are not always trained in housing related debt advice work, with referrals to solicitors based upon professional status than subject specific competence. 8

We were also concerned that there may be an issue about compliance for some agencies with the registration requirements for debt advice and management services under the Consumer Credit Act 1974. 1.8 RECOMMENDATIONS This section highlights a number of key recommendations that may be addressed by policy makers, funders of services and providers of housing related debt advice. Recommendation 1 The volume of housing related debt advice work should be increased substantially We suggest that the current level of provision is inadequate to meet demand. This may increase the level of indebtedness by failing to provide early interventions, increase social exclusion and lead to individuals being denied justice through a lack of representation in court hearings. Recommendation 2 The expansion of housing related debt advice should be phased to ensure that a pool of appropriately trained individuals are available to undertake this work and co-ordinated through a central body. Any expansion of funding for services should be carefully phased, as there is an inadequate supply of trained and competent advisers. The experience in England following the introduction of the Community Legal Service has seen an increasing crisis in recruitment and consequent upward pressure on salary levels as agencies compete for trained advisers rather than developing their own training programmes. We understand that the Scottish Executive s Social Inclusion Division have been in discussions with MAS with regard to the need to increase resources within a central support structure that may provide training. Recommendation 3 Increased funding for housing related debt advice should be planned at a local level with new resources targeted at voluntary sector providers who can act and will be seen as independent advocates for their clients. Any increase in funding for debt advice work should be in response to local needs assessments and locally led. Across Scotland local authorities are currently the most common funders of debt advice services. In most areas, local authorities, as creditor landlords they have much to gain financially from an effective debt advice and should therefore remain the key players in any partnership arrangements for future funding. However, as creditors they should not be the only providers in the delivery of services. We suggest that the voluntary sector, as the current most common providers who are independent of creditors should largely maintain this role. 9

Recommendation 4 New funding from any source should supplement and not replace existing financial resources. Any additional funding for housing related debt advice work should not be seen as a substitute for existing local authority funding but supplementary to this funding. Recommendation 5 The Scottish Executive should provide a framework for planning that includes standard approaches to needs assessment, service mapping and gap analysis. The Scottish Executive should commission the development of a pilot scheme that will lead to a standard approach to needs assessment, service mapping and gap analysis that is made available to all local authorities. We understand that the Task Group charged with developing the Community Legal Service is also considering these issues. Any pilot programme developed by the Scottish Executive should be linked to developments in this area to ensure that an approach to housing related debt advice is consistent with an approach to other types of debt and other related areas of advice, in particular welfare benefits advice. Recommendation 6 All money advice services should be subject to an externally accredited quality assurance system. Additional funds should be made available to assist agencies to secure accreditation. The need for externally accredited quality assured services is critical. Both this Report and other studies highlight the absence of appropriate quality systems and adviser training at present. Scottish Homes, through HomePoint have developed an extensive quality assurance system that includes standards of service, competency training (under development) and external accreditation (currently being piloted). This should form the basis of a quality assurance scheme for housing related debt advice services. Recommendation 7 Specific adviser competencies for housing related debt (and other related debt) advice should be developed and form the basis of a nationally available training programme. The HomePoint competencies should be developed to cover housing related debt. This should be undertaken in conjunction with developments by MAS and Citizens Advice Scotland. Recommendation 8 A central support body should be responsible for the co-ordination and delivery of this training across Scotland. The central body referred to in Recommendation 2 (above) should be charged with developing a training programme for all advisers providing debt advice in Scotland. 10

Recommendation 9 Membership of advice networks should be encouraged to promote referral network and promote the development of quality services. Networks should be adequately resourced to promote the development of quality within their member organisations. In addition to a central support service, local agencies have access to, and make use of a number of networks, such as Money Advice Scotland, the Citizens Advice Scotland and the Federation of Independent Advice Centres. These can act as agents for change in promoting quality services and in promoting referral networks at a local and national level. These networks will need to be adequately resources to undertake this function. Recommendation 10 Standard systems for statistical data collection should be applied in all providers of housing related debt advice services The central support body identified in Recommendation 2 above should be charged with developing a standard system of data collection by all providers of housing related debt advice services. This should be developed in conjunction with the any comparable initiatives in the emerging community legal service framework. Recommendation 11 Appropriate local partnerships led by local authorities should be established to co-ordinate funding. Housing related debt advice is currently subject to a mixed economy of funding with local authorities being the most common source of resources. As the principal funder these partnerships should be led by the local authority. This should continue. Recommendation 12 Additional funds should be made available from the Scottish Executive to assist local authorities to address this need. Local authorities capacity to respond positively to the recommendations in this report may be dependent upon some adjustments by the Government. For example, the Revenue Support Grant could be adjusted to provide additional (weighted) per capita allowances in respect of this responsibility. Recommendation 13 Statutory Instruments should be used to ensure that the provisions in the Housing Bill regarding the housing information and advice are extended to include housing related debt advice. We understand that the current Housing Bill is likely to contain a duty upon local authorities to provide for housing information and advice services in certain circumstances. This should be extended through use of statutory instruments to meet needs arising from housing related debt work. This should recognise the need for such interventions as a preventative measure. 11

Recommendation 14 Good practice regarding the management of rent arrears should be adopted by all Scottish local authorities. The Accounts Commission and Scottish Homes ( Managing Rent Arrears ) has provided good practice guidance on rent arrears in which it identifies a range of management issues that are within the control of local authorities, including providing for debt advice services. The good practice guidance should be adopted by all Scottish Local Authorities. Recommendation 15 The implementation of improvements in the administration of Housing Benefit should be a priority. The UK Government has set out priorities for improvements in the administration of Housing Benefit in a DSS Green Paper. The implementation of these measures should be a priority. Recommendation 16 A sustainable and joined up approach to managing rent arrears within a context of challenging social exclusion should be promoted. We suggest that the management of rent arrears needs to be seen within the context of promoting social inclusion rather than just debt recovery. Whilst rent arrears have increased, this has been out-stripped by the rate of growth in possessions granted by the courts. This may suggest a more aggressive approach to debt recovery that may not be consistent with broader social inclusion priorities. This may include better co-ordinating the housing finance and housing management functions, and, developing standards on negotiating appropriate repayment schedules taking a holistic approach to the debtor s wider circumstances. Recommendation 17 The development of innovative methods of delivery including telephone based case-work services and internet services should be explored. Physical access and psychological access to services (where the stigma of debt may act as a disincentive to service use) needs to be addressed. This is particularly problematic in rural areas but is not exclusive to them. These issues of access should inform the evaluation criteria for the National Debt-line pilots. The growth in the sale of financial services over the Internet should be paralleled by the growth in advice services utilising this medium. Recommendation 18 Innovative services focussing on early intervention should be encouraged through the national funding of local pilot projects. This should include non-advice interventions such as projects promoting consumer education and financial literacy. Insufficient resources are focussed upon early intervention, with the possible exception of mortgage arrears. 12

Recommendation 19 Additional funding for court representation services should be a priority. Insufficient resources are focussed on court representation. This can be costly, early studies of pilot lay adviser projects that are court-based (in both Scotland and elsewhere in the UK) suggest that this may be a cost effective means of providing such services. Recommendation 20 Services developed as a result of the implementation of these recommendations should be widely promoted. Any new developments expanding the quality and the quantity of debt advice should be widely promoted to ensure that people benefit from early intervention and crisis services. Promotion should only follow the introduction of new resources as existing services would be unable to cope with any increased demand. Recommendation 21 Further research should be commissioned. The recommendations in this report should be supported by further research. 13

2 OPERATING CONTEXT The methodology applied to this part of the study is detailed in the appendices (see 6.2 below). In summary, this section of the report is largely based upon desk based research and supplemented by interviews with key players and experts in the field. 2.1 DEFINITIONS OF HOUSING DEBT AND THE RELATIONSHIP TO OTHER DEBT The definition of housing debt used in this report has been informed by both the view of housing promoted by the Government that goes beyond a simple definition of bricks and mortar providing shelter, and an understanding of how individuals manage debt. Government policy is committed to the creation of a more inclusive society and recognises the central importance that housing has to play in this process. Scottish Executive s Green Paper on housing 2 states that Housing is fundamental to al our lives and that: Good housing has a vital part to play in promoting social inclusion, and although it cannot, on its own, provide a panacea for all the ills of social exclusion, a decent, secure and affordable home for all is fundamental to the development of the sort of inclusive and participative society the Government wants for Scotland. Debt relating solely to housing is, in itself, relatively easy to define as mortgage or rent arrears. However, debt cases rarely lend themselves to such neat definitions. Debt advisers report that in most cases clients suffer from multiple debts, juggling creditors and, without assistance, rarely prioritise on the basis of must pay debts. There is substantial anecdotal evidence that personal consumer debts, particularly where the collector may be known to the debtor (e.g. catalogue clubs ) are likely to be given higher priority for payment than housing specific debts, in particular local authority rent arrears. This extends to other property related debts; the recent joint study by Scottish Homes and the Accounts Commission 3 highlights that: Many tenants in arrears with their rent are also in arrears with their council tax. Debts that have an implication for an individual s housing are, therefore, more widely spread from those secondary loans secured on a home, through to social fund loans deducted at source or debts for items the individual considers essential for living. For the purposes of this study it was therefore considered necessary to expand the definition of debt beyond mortgage and rent arrears to a broader range of debts. Early stages of the research, 2 Investing in Modernisation An Agenda for Scotland s Housing The Scottish Office, (The Stationery Office, February 1999). 3 Managing Rent Arrears: Getting the Balance Right Scottish Homes/Accounts Commission (June 2000). 14

in particular the provider surveys, were permissive in their definition of housing related debt allowing respondents to self-define the term. Respondents were also asked to provide statistical information on named areas of advice that were analysed and contributed to the discussion of appropriate definitions. For the purposes of subsequent stages of the study, and for the conclusions and recommendations it should be noted that the definition of Housing Related Debt we utilise includes: Tenure dependent charges e.g. Mortgage and rent arrears (including endowments and insurance). Other charges on the Property e.g. Council Tax arrears and service charge arrears (where these are levied separately from mortgage and rent charges) and other loans secured against the property. Quality of housing experience charges These relate to expenses that are critical to the housing environment e.g. utility bills. However, in considering these definitions and the implementation of any recommendations it is important to note that the way in which agencies intervene to assist those in debt is likely to include both housing related debt and advice on other types of debt. 2.2 INCIDENCE OF DEBT This research has been prompted by the understanding that whilst all debt is liable to create problems, housing debt can have particularly damaging consequences: from eviction to repossession, with some eventually becoming homeless as a result of their inability to pay for their existing housing. Possession orders (mortgage arrears) from the Scottish Courts indicate a steep upward trend (188%) between 1994 to 1999. In addition, to all of Scotland figures we include details of the four locality studies: 1994 1999 % Increase 1994-1999 Aberdeenshire 69 140 103 City of Glasgow 479 1190 148 Clackmannanshire 12 75 525 Scottish Borders 47 103 119 Whole of Scotland 2058 5952 188 Note: Glasgow & Borders may have dealt with cases from other districts that do not have a District Court. The mortgage repossession statistics by Court District for 1994-2000 for each local authority are contained in the appendices to this Report (see 1.1 below). 15

2.2.1 Debt Amongst Home-owners The scale of housing debt in Scotland is not known, but, in contrast to the rest of the UK where mortgage arrears have been falling for a number of years, there has been an upward trend in Scotland. This is evidenced by mortgage repossession orders granted almost tripling in five years to 5,952 in 1999. There has been a substantial decrease in 2000 to 4,933. The Scottish Executive has commissioned a parallel research project that aims to improve the understanding of mortgage arrears and repossessions in Scotland. The project will be analysing court records of cases of repossession, surveying those who have experienced mortgage arrears or repossession, and investigating mortgage lenders' policies and practices. It will report in early 2002. Figures provided by the Council of Mortgage Lenders (CML) to the Scottish Executive 4 compare the profile of mortgage repossessions with the rest of the UK. These are summarised below. Year Number of mortgages Scotland Number of Possessions (Note 1) Possession rate (%) Number of mortgages (Thousands and percentages) UK Number of Possessions (Note 1) Possession rate (%) 1993 805 2.4 0.30 10,137 58.5 0.58 1994 852 1.8 0.21 10,410 49.2 0.47 1995 847 1.8 0.21 10,521 49.4 0.47 1996 903 2.2 0.24 10,637 42.6 0.40 1997 949 2.6 0.27 10,738 32.8 0.31 1998 989 2.9 0.29 10,821 33.8 0.31 1999 1,013 3.1 0.31 10,981 30.0 0.27 Source: Council of Mortgage Lenders (as published in 2001 Scottish Social Statistics, Scottish Executive). Note 1: Includes properties surrendered voluntarily. There are changes in the coverage of the series caused by additional institutions joining the Council of Mortgage Lenders The following table provides a profile of mortgage debt for the whole of the UK. Lending in Scotland is estimated at less than 10% of the total; the incidence of arrears for Scotland is not known. 4 Scottish Social Statistics, The Scottish Executive (2001) 16

Period Number of Mortgages at end of period Properties Taken into Possession in Period Mortgages 3-6 Months in Arrear End-Period Mortgages 6-12 Months in Arrear End-Period Mortgages more than 12 Months in Arrear End-Period No % all Loans No % all Loans No % all Loans No % all Loans 1998 10,821,000 33,820 0.31 129,090 1.19 74,040 0.68 34,880 0.32 2000 11,168,000 22,610 0.20 91,630 0.82 45,680 0.41 18,830 0.17 2.2.2 Debt Amongst Council Tenants Rent arrears have become an increasing problem for many Councils. At 31 st March 1999 the total rent arrears due from these tenants was 37.2 million (3.3% of the total rent due in 1998/9). This figure had risen dramatically over the three years from 1996 when rent arrears stood at 26.5 million. Whilst this in part due to increased rents the percentage of arrears from total rent due had risen 9% from 2.9%. 5 Figures supplied by the Scottish Executive up to the third Quarter indicate a continuing upward trend: 5 Managing Rent Arrears: Getting the Balance Right Scottish Homes/Accounts Commission (June 2000). 17

Authority Total Rent Arrears as at 31.12.99 ( m) Number of Current Tenants with Rent Arrears as at 31.12.99 Number of Former Tenants with Rent Arrears as at 31.12.99 Average Rent Arrears Per House Standard Rental Income 1999-00 ( m) Rent Arrears as a Proportion of Standard Rental Income in 99/00 % Aberdeen City 2.144 8,498 141 252.29 48.372 4.43 Aberdeenshire 0.514 3,211 1,747 160.16 26.711 1.93 Angus 0.518 3,369 397 153.75 15.099 3.43 Argyll and Bute 0.380 1,261 895 301.25 13.241 2.87 Clackmannanshire 0.567 1,548 1,009 366.35 10.540 5.38 Dumfries and 0.852 3,420 1,136 249.04 23.901 3.56 Galloway Dundee City 1.525 10,366 1,721 147.11 42.361 3.60 East Ayrshire 1.948 7,600 1,144 256.31 28.935 6.73 East Dunbartonshire 1.293 2,529 815 511.18 11.294 11.45 East Lothian 1.120 3,825 893 292.94 16.972 6.60 East Renfrewshire 0.300 986 197 304.58 7.252 4.14 Edinburgh Council, 2.212 8,677 n/a 254.91 70.161 3.15 City of Eilean Siar, Comharlie 0.138 715 72 192.66 4.025 3.42 nan Falkirk 1.474 6,126 3,496 240.61 36.148 4.08 Fife 3.429 12,711 3,625 269.76 68.539 5.00 Glasgow City 16.875 32,258 17,433 523.13 216.807 7.78 Highland 1.355 5,771 1,876 234.76 39.838 3.40 Inverclyde 2.096 3,786 3,486 553.62 24.406 8.59 Midlothian 0.958 2,954 750 324.16 11.159 8.58 Moray 0.366 3,630 604 100.85 11.214 3.26 North Ayrshire 2.166 7,432 1,125 291.40 28.945 7.48 North Lanarkshire 2.115 12,339 5,272 171.41 91.590 2.31 Orkney Islands 0.041 204 4 199.65 1.726 2.36 Perth and Kinross 0.294 2,617 473 112.50 16.016 1.84 Renfrewshire 1.918 3,829 1,564 500.85 39.906 4.81 Scottish Borders 0.295 2,213 400 133.36 12.451 2.37 Shetland 0.182 723 164 251.52 5.092 3.57 South Ayrshire 1.740 2,622 1,652 663.65 18.952 9.18 South Lanarkshire 1.472 11,712 2,432 125.70 72.511 2.03 Stirling 1.310 2,545 1,805 514.93 14.798 8.86 West Dunbartonshire 2.449 5,417 2,919 452.10 26.330 9.30 West Lothian 0.799 6,805 893 117.48 30.757 2.60 SCOTLAND 54.845 181,699 60,140 301.85 1,086 5.05 2.2.3 Debt Amongst Tenants of Registered Social Landlords (RSLs) Rent arrears have also become an increasing problem for many RSLs. More than three fifths of mainstream RSLs reported higher levels of rent arrears in 1998/99 than in the previous year. The rate of growth in arrears over the three-year period from March 1996 to March 1999 was similar 18

to that for councils 8% (9% for Councils). At 31 st March 1999 the total rent arrears due from these tenants was approximately 6.8 million, 2.6% of the total rent due in 1998/9. 6 In the locality studies we have produced RSL rent arrears figures for each local authority area. 2.2.4 Debt Amongst Tenants of Privately Rented Homes Figures for tenants of privately rented homes were unavailable. 2.3 FACTORS AFFECTING ARREARS It is outwith the scope of this report to identify the wide range of factors that affect levels of rent arrears. However, these have been subject to other studies, including a recent study by the Accounts Commission 7. These indicate that both the socio-demographic profile of tenants and the prevailing culture of payment (likely to be strongest in rural areas or where tenants have lived in an area or house for a long period) are amongst the strongest factors affecting the level of rent arrears. Whilst these factors may require longer-term interventions to address the Accounts Commission and Scottish Homes, in promoting their good practice model in managing rent arrears suggest that: Landlords can minimise the impact of the factors less within their direct control by good management of factors that do fall within their control, for example: 1. Provide good quality housing 2. Charging affordable rents 3. Providing good advice and support to tenants (e.g. having payment methods that suit the tenants lifestyles and referring them for Money Advice). 4. Encouraging full take up of housing and other welfare benefits 5. Taking a firm line on arrears legal action where tenants fail to pay their rent, after being given every opportunity to do so. Whilst this report focuses particularly upon items 3 and 4 from the above list, the other areas of good practice are examined further in the locality case studies below. 2.4 ORGANISATION OF ADVICE SERVICES 2.4.1 Overview of Scottish Services There have been a range of studies of advice services in Scotland and in other parts of the UK. However, where studies have looked at debt advice in Scotland these have often been as part of wider studies of advice services. For example, from a sample of 270 agencies in Scotland in 6 Managing Rent Arrears: Getting the Balance Right Scottish Homes/Accounts Commission (June 2000). 7 Tenants Rent Arrears: - A Problem? Accounts Commission 19