SCOTTISH EXECUTIVE

[Contents] [Next]

It Pays to Pay - improving council tax collection in Scotland

INTRODUCTION AND EXECUTIVE SUMMARY

1. We were set up to consider ways of improving collection rates for council tax in Scotland. Both COSLA and the Accounts Commission had highlighted lower rates in Scotland compared with England. Both suggested ways of tackling this issue. We were asked to consider their ideas, and any others that might explain the difference and close the gap.
2. We quickly realised we were facing a complex range of issues that straddled many key areas of public administration, beyond even local government. We also recognised that there would be neither simple explanation nor solutions. We began by reviewing the background to the issues (Chapter 2). We then obtained evidence from 2 main sources. First we consulted widely in Scotland on the COSLA and Accounts Commission proposals and invited views on any other aspects or ideas for improving council tax collection rates in Scotland. Second, we commissioned a research study to identify the key issues and set out the differences between Scotland and England in terms of legislation, procedures and approach.

Consultation

3. We issued a consultation document "It Pays To Collect" on 9 November 1998. The paper sought views on the list of measures proposed by COSLA and the Accounts Commission. Chapter 3 and Annexes B-E give details. The consultation period was extended from 31 January 1999 to the end of February 1999, at the request of some of those consulted.
4. The key points from consultation were:

4.1 there was broad support among local authorities for the proposals;

4.2 there was the recognition that individually each measure would have little impact on council tax, but collectively, they represented a package that was welcomed;

4.3 generally the proposals were acceptable to the voluntary and professional sectors although there was some criticism that the paper was shallow and focused too heavily on administrative procedures for council tax collection.

Research

5. The Institute of Revenues, Rating and Valuation (IRRV) did the research (hereafter referred to as the IRRV research) using 1997-98 as a baseline year. Annex F is the Executive Summary of the research report. A full report and Research Findings summary are both available.¹
6. The research report highlights a number of differences between Scotland and England. It also comments on the degree to which they explain differences in council tax collection rates and suggests issues or factors that should be considered if Scottish rates are to be improved. In general, the research highlights 4 main areas of difference:

6.1 the legacy of the poll tax: the earlier introduction of poll tax in Scotland caused much greater and longer lasting political reaction;

6.2 local government in Scotland was severely affected by the reorganisation on 1 April 1996. The abolition of the Regional Councils meant that major local taxation functions were transferred from 9 Regions to 29 mainland unitary authorities involving both aggregation and disaggregation of the function. The re-organisation in England and Wales was simpler, only one out of 105 new councils took on an aggregation of local tax and benefit responsibilities;

6.3 differences in legislation and procedures: Scotland has different legislation in key areas (local government and debt recovery) and a different legal system. This naturally means many processes and procedures also differ, with differing impacts on council tax collection rates. In some cases, the Scottish approach is, or is seen as, equally effective as the English;

6.4 the joint billing of council tax with water and sewerage charges also emerged as a key difference, and potentially a major reason for the lower collection rates in Scotland.

Our approach

7. Chapters 4 and 5 set out our views. We have tried to recognise the context in which council tax operates, identify the key factors that influence collection levels, and review all available evidence on the reasons for the present in-year collection levels in Scotland. We have tried to be rigorous and objective in our analysis. We recognise that there are aspects of our work that are less susceptible to objective analysis. In such areas we found our conclusions on the combination of data, views from consultation, and our experience.
8. Council tax collection interacts with many areas of public policy, notably the benefits and justice systems. Moreover, those in arrears often have multiple debts. Council tax then becomes but one part of a complex problem. In many cases the debtors are the least advantaged. Our report therefore straddles several key areas of policy and legislation, not all devolved to the Scottish Parliament. We recognise that it will not be easy to take forward all our recommendations as a single package. Moreover, none will achieve a significant impact alone. They will have to be considered and, where appropriate, implemented over a period of time. Nonetheless, we firmly believe that the only way of increasing council tax collection rates in Scotland is for the Scottish Executive and COSLA to consider all of our recommendations and develop a coherent, integrated approach.
9. Any approach needs to recognise that there seems to be a minority who ‘can pay but won’t pay’. Some in this category may respond to improved arrangements for collection of council tax when they were implacably opposed to payment of poll tax. Changing such attitudes to restore a sense of civic responsibility is a much harder, longer term task.

Recommendations

10. In reaching our final views and framing recommendations, we were conscious of certain key facts:
    • the great majority (nearly 90%) pay their council tax on time;
    • it is unrealistic to achieve 100% collection rates; but
    • there is clear evidence that collection rates in Scotland are significantly below those elsewhere in the UK;
    • local authorities have both a statutory and a fiduciary duty to collect the maximum amount of council tax in the most efficient way;
    • those who do not pay increase the tax level for all other taxpayers;
    • those with arrears who are least able to pay, and possibly with multiple debt, may need greater assistance. For certain classes of debt councils should be enabled to write-off their debt through an accelerated procedure.

Our recommendations seek to improve the efficiency and effectiveness of the collection process, without detracting from its sensitivity to those in need or socially excluded. We have not made any specific recommendations about the apparent need to restore a sense of civic responsibility. That is not an issue that is easily addressed, but we invite Scottish Ministers and civic leaders to note our concerns.

11. Our recommendations are listed below distinguishing what the Scottish Executive could do by way of legislation and what local authorities could do themselves by way of better practice.
12. Key points to note are:

• No one measure is likely to have a substantial effect on collection rates. It will require a package of measures implemented in a co-ordinated way to improve council tax collection rates in Scotland.

• We make no recommendations to reduce powers available to improve council tax collection levels. We are aware of the Member’s Bill on the abolition of Poinding and Warrant Sales currently before the Scottish Parliament. We recognise that poinding and warrant sales are parts of the wider debt recovery system in Scotland. Council tax is but one issue in considering the merits of the Bill. In our view, abolition of poinding and warrant sales would have a major adverse effect on council tax collection levels (and therefore council services) unless an equally effective mechanism can be substituted.

• We advocate changes in legislation to provide local councils with powers to have access to Inland Revenue data. We acknowledge, however, that the Inland Revenue, have an interest and wider consultation would have to take place to ensure resolution of any conflicts arising from taking forward specific recommendations.

• Most of our legislative recommendations are long term and may take several years to come to fruition. There are complex policy interactions between the proposed council tax legislative recommendations and other areas under Scottish Executive responsibility, such as housing, water and sewerage, and bankruptcy law. The legislative recommendations also affect reserved areas, such as those operated by the Inland Revenue and the Department of Social Security.

• The practical proposals, however, are initiatives which, with changes in working practices and the goodwill of local authorities, may be able to be embraced very quickly. Some proposals will require longer term planning and budgeting before they can be implemented effectively.

In preparing this report the Working Group have drawn significantly on material contained in the various reports which formed part of the programme of work to evaluate the Debtors (Scotland) Act 1987², as well as on the research report prepared by IRRV³.

RECOMMENDATIONS

We recommend that the Scottish Executive address these issues with other Government Departments with a view to introducing legislation to:

** Reserved powers

In addition to the COSLA issues, the research findings has thrown up these other measures which we recommend the Scottish Executive should address:

We strongly recommend that COSLA should consider promoting with authorities the following best practice initiatives:

We also recommend that individual councils should consider the merits of:

COSLA and the Scottish Executive should jointly examine whether

[Contents] [Next]