ISSUES FOR SCOTTISH EXECUTIVE
Water and sewerage liability
a. for debtors in receipt of full rebate, the deduction could be treated as a water debt which enjoys a higher ranking in the DSS hierarchy of deductions than council tax; and
b. for debtors on partial rebate, two deductions (one for council tax and the other for water charges) from Income Support would be possible.
This would put Scotland on the same footing as England and Wales in terms of direct deductions for water and council tax debts. It would also require councils to identify each element of the council tax bill to the DSS, so that the water debt and the council tax debt were truly transparent.
There was widespread support for this proposal from respondents to our consultation exercise. There was concern that the deduction from benefit was normally less than the actual water and sewerage charge, meaning that the debt would never be settled.
Conclusion and recommendation
The researchers suggested that the presence of water and sewerage on the council tax bill adversely affected the in-year collection levels of Scottish councils (see Chapter 4, paragraphs 12-19 of the IRRV Research Report). We believe that since there is an opportunity to collect part or all of the water and sewerage debt through a direct deduction separate from council tax, the Scottish Executive should enter into dialogue with the DSS with a view to promoting legislation accordingly. We also note that water services charges are rising faster than the rate of inflation.
Statutory Instalment Scheme
The research revealed that there was a difference of one month between the earliest possible instalment demand date in Scotland and England. The statutory scheme in England permits 10 monthly instalments starting 14 days from the date of issue if the demand notice is issued on or before 30 April. (Where a demand is issued on or after 1 May, the number of instalments is based on the number of complete months remaining in the year after issue of the notice, less one.) This means that where the demand is issued before mid-March, the first instalment can be requested on 1 April. In Scotland, the first instalment cannot be requested earlier than 1 May. This means that English local authorities are able to collect payment of the first instalment at the beginning of the financial year. This difference gives English authorities 12 months for billing and recovery compared with 11 months in Scotland in any given financial year. (Chapter 3 paragraphs 10 & 11 of the IRRV Research Report.)
The researchers suggested that Scotland should be given the opportunity to operate an instalment scheme with the first due date of 1 April. To substantiate this viewpoint they demonstrated that in Scotland almost 30 additional days were lost from the due date of a missed instalment to executing court action. (Chapter 3, paragraph 13 of the IRRV Research Report.)
Conclusion and recommendation
This suggestion was heavily endorsed by Scottish practitioners (See Chapter 3, paragraph 11 of the IRRV Research report), and could be achieved in Scottish council tax legislation by Statutory Instrument. We concluded that the research evidence demonstrated that progress could be made in council tax collection levels by allowing authorities to bill and collect council tax one month earlier. We therefore recommend that the Scottish Executive introduce secondary legislation to allow the Scottish statutory instalment scheme to commence in April.
Combined reminder and final notices
The research team found that Scottish authorities tended to take 42 days longer to obtain a summary warrant than English authorities to obtain a Liability Order, (Chapter 3, paragraph 15 of the IRRV Research Report). They suggested that this was mainly due to the Scottish requirement to issue separate reminder and final demand notices. (English authorities can issue combined reminder and final notices.)
Evidence from research conducted by the team suggested that the issue of the combined notice in England did not achieve significantly higher collection rates (Chapter 3, paragraph 23 of the IRRV Research Report). However, the view of many Scottish practitioners was that a combined reminder and final notice would at least enable recovery processes to commence earlier in the financial year.
Conclusion and recommendation
We were persuaded by the view expressed by practitioners, and the ease in which such an amendment could be achieved within council tax secondary legislation. We recommend that the Scottish Executive should introduce legislation to allow Scottish practitioners to issue a combined reminder and final notice.
Information powers
The researchers also looked at the powers available to local authorities in Scotland to establish employment and banking details of a debtor. (Chapter 3, paragraphs 3.45- 3.47 of "It pays to Collect" and Chapter 4, paragraphs 53-62 of the IRRV Research Report.
In England and Wales failure to supply information to the council can be referred back to the Magistrate by the council where the debtor shall be guilty of an offence under paragraph 18 of schedule 4 of the Local Government Finance Act 1992 and be liable on summary conviction to a fine of between £500 and £1000. Similar provisions under section 90 of the Local Government Finance Act 1992 (re summary conviction) already exist in Scotland, but are only available to the Assessor (not the council) where a person fails to supply information (fine of up to £500). Where false information is knowingly supplied the person may, on conviction, be liable to a term of imprisonment not exceeding 3 months and or a fine not exceeding £1000.
There is a clear indication that the powers available to Councils to require information from Council Tax payers are mainly honoured in the breach, extensively despite the fact that there is a sanction by way of civil penalty applicable for failure to produce the information requested. Our information is that when Councils request information, almost invariably, none is provided. The position in England and Wales is different in that there is a criminal sanction which gives the request for information greater effect and means that Councils in England and Wales have better and more accurate information than Councils in Scotland.
Conclusion and recommendation
We do not believe that introducing legislation requiring a debtor to provide employment and banking details will on its own be effective in bringing forth the information sought. We already have legislation that gives councils power to request information to establish employment details of a debtor. We do, however, believe that these powers should be strengthened to make it a criminal, rather than a civil, offence not to comply with these information-gathering powers. We therefore recommend that the Scottish Executive should introduce legislation that would enable councils to request employment details from a debtor. Failure to comply should render the debtor liable to a fine not exceeding £500, or level 2 on the standard scale. We also think that the information making power could be extended to require details of bank or building society accounts to assist in enforcement processes as well as a requirement to inform about any changes to employment and other details.
Duty of debtor to advise of employment changes to creditor or sheriff officer arresting his earnings
In Scotland, debtors subject to earnings arrestments are not obliged to advise a sheriff officer, the local authority or other creditors when he terminates or changes employment. In England an attachment of earnings order places a duty on the debtor to notify the local authority in writing of any changes in his employment status. Failure to do so renders the debtor liable to a fine of £500, or £1000 if he makes a false statement. (See Chapter 4, paragraphs 63 & 64 of the IRRV Research Report.)
Conclusion and recommendation
Scottish practitioners told the researchers that collection rates could be improved if the process of making earnings arrestments was transferred to the council, instead of being subcontracted to sheriff officers as part of diligence. We had debated this matter extensively within the group as it was one of the measures suggested by the Accounts Commission in its report on It Pays to Pay - improving council tax collection in Scotland. We reached the conclusion that if local authorities could administer earnings arrestments this could have an impact on collection levels. We felt that there were benefits to be gained especially where councils had carried out data matching to identify employees who owed council tax to the council.
We recommend that the Scottish Executive should introduce legislation to require a debtor subject to an earnings arrestment to inform the creditor or sheriff officer of any change in employment details.
Annual up-rates to deductions made for attachments of earnings
Conclusion and recommendation
We took the view (as a pragmatic measure, that could be introduced relatively easily) that 3 yearly up-rating (in line with inflation) should be made to the Table of Deduction of Earnings that can be made from an earnings arrestment (see Chapter 4, paragraph 67 of the IRRV Research Report).
Arrestees to release funds where successful — use of mandates
Conclusion and recommendation
Income streams for arrestment or attachment
Not all sums payable to a debtor can be treated as earnings for the purposes of an earnings arrestment. (Details of what sums are and are not arrestable are given at Section 73 of the Debtors (Scotland) Act 1987.) It may be that these exempt categories should be reviewed. For example, an occupational pension payable under any enactment which precludes the assignation of the pension or exempts it for diligence is not treated as earnings.
Definition of houses in multiple occupation
The researchers highlighted the difficulties experienced in both Scotland and England in collecting council taxes in respect of properties with high resident turnover, e.g. houses comprising of bedsits occupied by individual tenants only for short periods (see Chapter 3, paragraphs 24-30 of the IRRV Research Report).
The council tax legislation provides that for certain classes of properties, the owner of the property should fall liable for any council tax due. It was intended that houses in multiple occupation would fall within this category. The legislation attempts to define bedsits as falling within this category. The legislation also defines the terms of occupation of the inhabitants of the dwelling.
According to the researchers’ findings, there is a difficulty in pursuing the owners for payment of the council tax in such cases because they or their letting agents are finding ways of changing the tenancy agreements, to render the occupancy criteria of the dwelling outwith the provision of the regulations on houses in multiple occupancy. Although the English regulations were amended recently to give greater effect to the policy intention, it would appear from the research carried out by IRRV (Chapter 3, para 26) that the amendment did not achieve its objective.
Conclusion and recommendation
Individual practitioner members have experienced some of the difficulties highlighted by the researchers in this area, and it is our collective view that if an easy solution can be found to improve collection levels for houses in multiple occupancy it should be done. We recommend that the Scottish Executive should review the classes of dwelling in respect of which the owner is prescribed as liable to pay the council tax at the earliest opportunity.
ISSUES FOR COUNCILS TO CONSIDER
The conclusions below were arrived at by looking at a number of suggestions to improve the in-year collection performance of councils made by the research team. Again, when considering these suggestions we looked to the responses to our consultation paper for supporting evidence and to the evidence provided in the research report. Consideration also had to be given to the practicality of the suggestions.
Councils have many discretionary powers and can decide whether to use these powers or not. The researchers8 found that the political environment impacted on the enforcement methods used. Councils should be encouraged to use all available measures, both statutory and non-statutory, to pursue debt. At 31st March 1998 £503m9 was owed to councils in outstanding community charges. In the past year that figure has reduced by £18m10. If the debt continued to reduce at this rate it will take at least 25 years to clear. We recommend that community charge debt should be examined through dialogue with the Accounts Commission.
Council tax arrears — council employees
It became apparent to revenue practitioners through a number of initiatives, such as data matching promoted by councils themselves, that a number of their own employees have outstanding community charge and council tax arrears. Councils should consider making it a condition of employment that employees do not fall into arrears. Also, councils should be encouraged to provide direct payment facilities from payroll. (See Chapter 3, paragraph 48 of the IRRV Research Report).
Training
Reorganisation in Scotland had a profound effect on staffing. (See Chapter 2, paragraphs 20 to 23 of the IRRV Research Report). A considerable number of experienced staff either retired or moved to different councils or projects. Staff training, therefore, was perceived as very important. A number of revenues officers interviewed by the researchers were of the opinion that financial assistance by central government to support training would merit consideration.
Incentives to pay
Existing regulations allow for the provision of discounts for council tax payments (See Chapter 3, paragraphs 49 to 52 of the IRRV Research Report). Currently, only two Scottish councils offer discounts. Both councils offered a discount of 3_% for lump sum payments. In 1998/99 one of those councils offered a £25 discount to those signing up to pay their council tax by direct debit and had a 51% take-up for this payment method. Both councils were of the opinion that their schemes were cost effective.
The revenue practitioners and ourselves agree with the researchers that councils should encourage their local taxpayers to pay by lump sum or direct debit and should consider offering financial incentives to do so.
Other payment systems
Visiting and Recovery teams
It is the view of the research team that, however debts are pursued, there is merit in establishing dedicated visiting and debt recovery teams (Chapter 4, paragraph 51 of the IRRV Research Report). From interviews with Sheriff Officers it was discovered that they found themselves assisting people to complete council tax benefit claim forms. This experience suggests that there is a section of the Scottish taxpayer base that would benefit from a ‘visiting team’ who would explain fully the benefit system and payment methods available (Chapter 3, paragraphs 63 and 64 of the IRRV Research Report).
We would encourage councils to adopt any process that would assist their taxpayers to obtain benefits to which they are entitled.
Relations with sheriff officers
The Research Report (footnote 13A, paragraphs 38, 41, 43 to 45, 46, 47, 51, 52 and 53 of Chapter 4) showed that there were a number of issues about communication between local authorities and sheriff officers and suggested ways in which communication could be improved to maximise in-year collection and improve the targeting and decision-making of local authorities. These included entering into codes of practice and service level agreements with sheriff officers — assuring the quality of information provided and the monitoring of caseloads carried out by the sheriff officers, looking to the timescales within which the sheriff officers were to carry out enforcement and monitoring their performance particularly with regard to individual types of diligence.
It was demonstrable that monitoring arrangements introduced by one authority had produced considerable savings but whilst not being linked directly to increased collection rates indicated that concentrating efforts and resources within the local authority itself was likely to have a positive effect on overall collection rates. Any code of practice or service level agreement should include guidelines on extended instalment payments and the nature and extent of the discretion available to the sheriff officers should also be determined.
There should be protocols agreed with regard to the communication networks between Councils and sheriff officers so that confusing and conflicting payment arrangements were not reached. It is also desirable that effective management information should be available within the local authorities by direct electronic transfer wherever possible from the sheriff officers and we suggest that discussion between the local authorities and the sheriff officers should take place to consider the nature of broad general arrangements to this end.
Finally, within the scrutiny of the local authority systems and the possibility of earlier and joint billing it is desirable that agreement should be reached as to the optimum time at which instructions should be passed to the sheriff officers for enforcement action to take place following the granting of summary warrant since it is clear from the Research Report that increasing time lapses reduce the realistic chances of recovery
Current year payment
Currently, multi-year debtors (See Chapter 3, paragraphs 53 to 58 of the IRRV Research Report) offering payment will normally have their payment allocated against the earliest debt due. This practice means that people with previous years debts may never ‘catch up’ and will continuously be in arrears. If all payments were allocated to the current year first (and only thereafter to earlier years' debts) it could stabilise the position and provide a base from which earlier years debts could be reduced.
We support any move by councils which will allow this to be done and thereby assist taxpayers to ‘catch up’ and stabilise their debt position.
The decree process
In Scotland, following the issue of a final notice, the local authority may apply to the Sheriff for a Summary Warrant. The researchers also noted that Scottish authorities have the option to raise an action for payment leading to a ‘Decree (Chapter 2, paragraph 28 and Chapter 4, paragraphs 3 and 4 of the IRRV Research Report). It was felt that consideration should be given to its use in appropriate cases.
Monitoring of special payment arrangements
It is the view of the researchers, based on interviews with Scottish revenue practitioners and from previous systems implementation experience, that there were problems with existing Information Technology systems which impacted significantly in Scotland on a number of councils’ ability to process and monitor special payment arrangements. (See Chapter 4, paragraph 52 of the IRRV Research Report).
The revenue practitioners are agreed that improvement in councils Information Technology systems would assist with monitoring special payment arrangements. We would also endorse this recommendation that councils consider upgrading IT systems.
FOR JOINT CONSIDERATION
Calculation of Council Tax base
The researchers, in their report, (See Chapter 3, paragraphs 2 to 5) pointed out that in England there is a specific formulae for calculating council tax that takes account of a number of predetermined factors. In Scotland there is no such formula.
In their report the researchers suggest that there would be merit in standardising the method of calculation as there are differences in approach between councils. This area could benefit from a review to ensure consistency of approach across Great Britain. A possible vehicle for affording a uniform approach might be by way of a Code of Practice.