Foreword
In reaching our conclusions we took into account the views of those who responded to our consultation exercise and the evidence from the research project. We complemented this with expert advice from our specialists in the different aspects of council tax collection. In all of this we were mindful of the need to ensure fairness and sensitivity towards individuals with multiple indebtedness problems. At the same time we were careful to bear in mind the vast majority of people who do care enough about the services councils provide and who do acknowledge their civic responsibilities to pay timeously and in full. We believe that the conclusions we have reached represent a balanced and well-founded approach to improving council tax collection levels in Scotland.
For discussion purposes this Chapter deals with the COSLA proposals that started our work. The next deals with proposals that arose during our work.
Consideration of COSLA proposals
Joint billing
The legislation that prevents councils from billing and collecting council tax with rent could be changed, but there could be an associated difficulty of integrating the appropriate debt recovery procedures for both housing and council tax. We were also concerned that there could be a need for primary legislation to ensure that by virtue of the collection arrangements the council tenant would not be subsidising the council tax payer and vice versa. We took the view that prescription would be required to ensure that a proper attribution of the joint sums collected was achieved. It would also be used to avoid the situation where councils could favour the council tax collection account as having first call on the sums collected so that council tax debts were kept small and rent arrears high.
We recognised that the imposition of water and sewerage charges on the council tax bill added a wider dimension to the problems of joint billing and collection of council tax with rent. This added to the number of charges to be collected on one bill and thereby complicated the attribution of any sums collected. We concluded that any prescription might need to include arrangements for the separate attribution of the water services charges.
Most of the respondents to our consultation exercise "It Pays to Collect" echoed similar concerns on the attribution of sums collected and on the integrity of the separate enforcement procedures being maintained. The views expressed in response to the consultation exercise were mainly favourable. Around 72% of local authorities and 56% of the other respondents were in favour of the proposal.
In considering the merits of joint billing of council tax and rent, the IRRV researchers looked at the statutory council tenant’s scheme in England. This scheme enables authorities to collect council tax at periods that are the same as when their rent is due. Each element is separately billed, but the main features are that there can be no more than 52 payments in any year, and the 10 monthly council tax payment cycle does not apply. The research team concluded that a slower collection and recovery rate was inherent to such a scheme and did not see it as a model for joint billing and collecting in Scotland. (See Chapter 3, paragraphs 32-34 of the IRRV Research Report.)
As far as joint billing of council tax and rent was concerned, the researchers concluded that they thought there might be merit in considering joint billing of council tax with rent, providing that the rent was collected as part of the council tax system. It was their view that it would be more straightforward to provide for the billing, collection and accounting of rent within computerised council tax systems, because the council tax and housing benefit schemes differed only slightly in terms of their system requirements. They also advised that joint billing would have to acknowledge the impact of any transfer in public housing stock to housing associations.
Conclusion and recommendation
Sequestration
To avoid abuse of the bankruptcy process, the law of personal bankruptcy was changed in Scotland in 1993 to double the amount from (£750 to £1500) of the debt level required before a creditor was qualified to petition for the sequestration of a debtor, or for a debtor to petition for his own sequestration. Reducing the qualifying limit for bankruptcy would require that councils used the process responsibly so that the full cost of the process did not fall on the public purse through the appointment of the Accountant in Bankruptcy as trustee.
We were also concerned that Scottish local authorities should have the opportunity to petition for sequestration at the same level of debt as their English counterparts. (The English debt level is £750). This would put Scottish local authorities on the same footing as English local authorities in the bankruptcy process.
There was a mixed reaction to this question in our consultation exercise. But, if it was used as a measure of last resort, then the fears expressed by those consulted, (i.e., that the system might be abused, leading to pressure on the public purse), would be unfounded. We also took the view that, to safeguard the integrity of the process, the debt level required for sequestration should be reduced for creditor petitions only. This restriction counters the view that many debtors would welcome the opportunity of a lower threshold to petition for their own sequestration. Councils would have to consider the use of sequestration where appropriate.
The IRRV researchers considered that the feasibility of the proposal warranted further examination since the power to sequestrate would be more readily used if the minimum debt level was lowered in Scotland. (See Chapter 4, paragraph 71 of the IRRV Research Report.)
Conclusion and recommendation
"Right to Buy"
The principle of sanctions had already been deployed using the "Right to Buy" scheme in England and Wales for rent arrears and anti social behaviour. We considered that it was demonstrably unfair that an individual owing money to the council should benefit directly from a council initiative. We also considered that the same rationale applied to other council schemes, such as the "Right to Loan" scheme. Since there were no provisions within the Housing (Scotland) Act 1987 that would allow councils to refuse applications from tenants wishing to buy their council house if they were in arrears of council tax, primary legislation would be required to introduce such a measure.
The views from those that responded to the consultation exercise, were very much in favour of the proposal preventing council tax debtors from buying their council house under the "Right to Buy" scheme. This was our preferred choice.
Conclusion and recommendation
Access to Inland Revenue records
There are very strict and limited rules governing access to Inland Revenue records, but we noted the precedent of access offered to the Department of Social Security for the use in prevention, detection, investigation or prosecution of Social Security fraud. Any access to Inland Revenue records to assist in the recovery of unpaid local taxation would require the agreement of HM Treasury and primary legislation by the Westminster Parliament.
We received enthusiastic responses from local authorities to this proposal. There were also positive and sensible comments and only limited concerns from professional and voluntary bodies about civil liberty and rights of confidentiality.
The research team was of the view that access to Inland Revenue records would not be required if legislation were introduced that required the council tax defaulter to provide information regarding employment details. (See Chapter 4, para 64 of IRRV Research Report.)
Conclusion and recommendation
We recommend that access to Inland Revenue records after summary warrant for the purposes of identifying a council tax debtor’s place of employment or business should be available to councils in prescribed cases. Prescription would protect civil liberty issues and the erosion of the rights of confidentiality. Access should only be granted where it can be proved that all other methods to obtain information from the debtor have failed and that summary warrant or Decree in Action for payment had been granted.
The Scottish Executive should be encouraged to consult with the Inland Revenue with a view to promoting legislation that would allow councils, either through a third party or directly, to access Inland Revenue records of employment in prescribed cases.
Voluntary deductions from Income Support
The voluntary payment arrangements already provided for in council tax legislation between council tax payer and the council are rarely used. Nor are they geared to help those on very low incomes budget and manage their council tax. The COSLA proposal to encourage voluntary direct deduction from Income Support is counter to the Department of Social Security’s (DSS) policy on debtor dependence and also its policy to maintain parity with England and Wales. Any change to the present system would require primary legislation both in Edinburgh and Westminster.
There was strong support for this proposal from respondents to our consultation exercise. However a number also shared DSS’s view that people should be encouraged to manage their own affairs rather than depend on the welfare state to do it for them.
Conclusion and recommendation
We believe that allowing voluntary direct deductions from Income Support at an early juncture (at the request of the taxpayer) would enable the taxpayer to pay council tax on time, and promote good debt management. We do not see this as acting as a "nurse maid" to the vulnerable in Society, but more of an option available to enable them to make choices about payment. It might even prevent the taxpayer from defaulting on council tax, and it could prevent the taxpayer from incurring any additional debt in the form of the statutory surcharge imposed by summary warrant.
We recommend that the Scottish Executive should consult with the DSS with a view to promoting legislation to allow council tax payers on Income Support the option of instructing voluntary direct deductions from their Income Support in respect of their council tax, without the need for formal proceedings.