We draw a clear distinction between people who cannot pay and people who will not

Angus MacKay

The group also suggests a statutory debt arrangement scheme which would stop all enforcement action if it was accepted by the debtor.

And it calls for the introduction of new incentives to encourage debtors and creditors to reach negotiated settlements out of court, along with a new, less intrusive enforcement procedure offering greater protection for debtors.

MSPs voted in December to change the system of debt collection under a members' bill introduced by Scottish Socialist MSP Tommy Sheridan.

They decided to scrap poindings and warrant sales by the end of 2002 when they backed his bill - against the wishes of the Scottish Executive.

The parliament agreed to delay implementation of the bill so an alternative means of debt recovery could be devised.

Tommy Sheridan: "Barbaric system"

Finance Minister Angus MacKay chaired the working group set up to examine the alternatives.

But Mr Sheridan has not been happy with the work of the group, which he resigned from.

He said: "The word abolish is quite clear, but what we have got in the recommendations of the working group is the retention of poindings and warrant sales - yes they are more difficult to use - but they still are not what the parliament voted for."

But Mr Mackay insisted that the implementation of the proposals would enable anyone with a debt to stop all enforcement action by participating in a debt arrangement scheme.

He added: "This report will protect the most vulnerable in our society, and ensure that creditors are also protected."

Mr Mackay said the legal framework for dealing with debt had to strike the right balance.

"Payment of legally binding debts cannot be optional - whether they arise from buying goods or services, or from taxes to provide essential public services for the whole community.

"The legal framework must prevent any loopholes which would encourage people to avoid paying their debts.

Positive reaction

"But the system must allow people with debt to deal with their real problems without the need for enforcement.

"We draw a clear distinction between people who cannot pay and people who will not."

After receiving the report, Mr Wallace said: "My initial reaction to this report is very positive.

"I am minded to implement the approach the group recommends, subject to responses to the public consultation which will be launched shortly."

The recommendations in this report strike the right balance

Martyn Evans, Scottish Consumer Council

Money Advice Scotland chief executive Yvonne Gallacher said: "A comprehensive and more user-friendly information and advice service will make it easier for people with money difficulties to get help before their problems get out of hand."

But she said the key was ensuring that the executive found the money to fund such a scheme.

Fellow working group member Martyn Evans, director of the Scottish Consumer Council, said: "The recommendations in this report strike the right balance between the rights of the individual, the rights of the consumer, the rights of the creditor and the rights of society as a whole."

Mike Dailly of the Anti-Poverty Alliance, said the content of the report represented a missed opportunity.

He said: "There are lots of different things they could have come up with - but it just seems more of the same."