SCOTTISH EXECUTIVE

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It Pays to Pay - improving council tax collection in Scotland

ANNEX E

RESPONSES TO THE CONSULTATION PAPER "IT PAYS TO COLLECT"

Joint billing

1. There was overwhelming support from local authorities, professional bodies and voluntary organisations for the proposal to allow joint billing and collection of council tax and rent for local authority tenants. Twenty-three of the local authorities and 14 of the other organisations which responded to the paper were in favour of the proposal. Many thought it was a very sensible suggestion. Agreement was widespread that the Scottish Parliament should be invited to promote legislation to prescribe for the joint billing and collection of council tax with rent, providing that it was not compulsory, and that the relevant safety mechanisms were included, to protect the separate integrity of the rent and revenue accounts and enforcement systems.
2. Only 3 local authorities were against the proposal. One thought that joint billing and collection would be too complex to be effective, without radical change to all aspects of the administration process. Another commented on the complexity of the processes to be effected. Its concerns were expressed against the background of the changing housing market, with the new Housing Partnerships being advocated by the Government. One authority did not consider that joint billing and collecting of council tax with rent would improve council tax collection levels. It also considered that it would be a costly change to software applications.
3. Fourteen of the professional/voluntary organisations were in favour of the proposal, but concern was expressed that suitable safeguards should be put in place to protect the debtor from being evicted for council tax arrears. Another organisation was concerned about those on Income Support and the effect this would have on the water and sewerage element of the bill. It was suggested that this could lead to claims from councils that the costs of collecting water and sewerage would increase. Only one organisation was against joint billing, with 10 offering no comments. There was a general ambivalent approach from one of the individuals who responded.

Sequestration

4. There were very mixed views on the likely effectiveness of a reduced debt level for sequestration. Most respondents took the view that it would be a very effective deterrent, although a number of respondents saw the threat of sequestration with no prospect of proceeding to sequestration itself as a misuse of the system. There was also concern that sequestration might be displaced as a measure of last resort, to become a measure of first resort.
5. 17 of the 26 local authorities that responded were in favour of reducing the debt level for sequestration to £750 for creditors. One council suggested promoting a debt level of £1,000 both north and south of the Border. Another council considered that no reduction would be required if the joint billing of council tax and rent was instituted. There was also concern that without preferential treatment being given to council creditors, other creditors, such as finance and credit companies, might sequestrate customers much earlier creating difficulties for local authorities in recovery of council tax.
6. Only 4 of the professional and voluntary organisations actively supported the measure. Eleven were against the proposal, and 11 offered no views. There was concern, especially among the voluntary sector, that poor people living in local authority housing would welcome and encourage the lower debt level for sequestration, even to the point of deliberately withholding council tax payments in order to seek debt relief through sequestration. Concerns were also expressed about the cost to the public purse of an increased level of sequestrations. It was suggested that this could lead to an abuse of the system, similar to the situation that existed prior to 1993 when there were insufficient assets to meet the expenses of the private insolvency practitioners appointed. Some respondents used the opportunity to advocate that the level for small claims should be raised. Others took the view that if the level was to be lowered, it should only apply to local authority creditors.
7. An interesting idea that flowed from responses to this section was that consideration should be given to introducing powers to restrict a debtor’s credit worthiness. It was suggested that authorities should be given powers to issue information about council tax arrears to Credit Reference Agencies thus curtailing the debtor’s ability to obtain credit.
8. In conclusion, there was genuine concern that the proposed change could lead to a misuse of the system. However, there was a very slim majority in favour of promoting legislation to reduce the debt level for sequestration. The ratio was 21 for 15 against (17 of those advocating change were local authority practitioners.)

"Right to Buy"

Aggregation of debts

9. There were mixed views among local authorities about the merits of aggregating debts with the purchase price of dwellings bought under the "Right to Buy" scheme. (Roughly, the views were 9 for 8 against.) There was concern that aggregating debt with the purchase price may encourage applicants to build up debt while their application to buy was proceeding. There was also concern that the aggregation of debts with the purchase price of the house was unlikely to encourage private lenders to grant a loan to the prospective purchaser. This could have the result of the purchaser seeking the loan from the council as the "lender of last resort". One council preferred this option to outright prohibition, whilst another considered that both options should be used in tandem.
10. Among the voluntary and professional organisations which responded, 5 indicated support for the proposal, a further 2 had no objection in principle, whilst 5 were very much against it. One respondent was concerned that there was no evidence to suggest that the introduction of such a measure would increase collection levels. Another said it could impact on the ability to sell the property at a price that would clear the mortgage.
11. In conclusion, there was a slim majority in favour of the proposal among those who chose to comment; the majority of respondents however chose not to comment.

Prohibition

12. There was extensive support among local authorities, (24 for, 2, against), for the proposal to invite the Scottish Parliament to promote legislation to give councils the power to prohibit the sale of a house under "Right to Buy" until the debtor had repaid all debts owed to the council.
13. Only 6 of the professional/voluntary organisations which responded were in favour, with 14 offering no views at all on this issue. Some organisations were concerned about the principle of refusing to sell the house to debtors; they considered it counterproductive and vindictive; others thought it discriminatory, and could be open to judicial challenge. Some indicated that they had to be convinced of the effects it would have on council tax collection levels.

Access to Inland Revenue data

14. Twenty-four local authorities and 6 professional/voluntary organisations supported the proposal. One local authority and 3 organisations would only support the proposal if it were effected under summary warrant. One local authority thought it was fraught with difficulties, while 7 organisations were strongly against it.
15. There was overwhelming support among local authorities for access to Inland Revenue records of employment in prescribed cases. Many other organisations were extremely concerned about civil liberty issues and the erosion of the rights to confidentiality. Others were concerned that the flow of information to the Inland Revenue might be jeopardised if other arms of government became party to the information available. One suggestion muted was that confidential and sensitive information collected by Inland Revenue should not be made available to local authorities, but limited information for the sole purpose of council tax collection could be made available, but restricted to the debtor’s place of employment or business only. One voluntary body welcomed the suggestion, acknowledging the potential for improved efficiency of collection. It also considered that such information could be used to provide a better assessment of what the debtor could realistically afford, "the former being inextricably linked to the latter". Another view expressed was that information from Inland Revenue should only be sought as a measure of last resort, and only through Sheriff Officers, as independent third parties.

Introduction of criminal penalty to encourage debtors to supply employment details

16. There were very strong views on this proposal. The majority (by one), were in favour of adopting the proposal. Only 6 councils were against the idea, compared with 11 (including 2 individuals) from the voluntary and professional fields. Twelve respondents offered no comments; 2 councils thought it prudent to await the outcome of the research project before commenting; one professional organisation said it was not convinced of its usefulness, one council thought there should be evidence to show the impact of the change, another council was ambivalent.
17. The majority of respondents were strongly in favour of the status quo. It was noted among their comments that the proposal was retrograde, draconian and would not serve the effectiveness of diligence generally. A number of respondents were concerned to establish the reasons why a great number of debtors failed to supply the information. Their responses tended to concentrate on the underlying reasons, and a clear message emerged that it was not the debtor who was deliberately withholding details of employment, but in many cases it was the employer who was failing to provide information on earnings. It was also pointed out that many debtors were reluctant to give details of their employment for fear of losing their employer’s trust or, more importantly, their job.
18. The Group felt that perhaps the message, which it was trying to convey, i.e., whether failure to supply such information on request should attract a civil or criminal penalty, might have become misconstrued, and we apologise for any confusion this may have caused. The crux of the matter is that the underlying obligation to provide the information remains and it is not proposed to change this. The proposal simply concerned the consideration of whether this obligation should be reinforced by stronger powers, i.e. similar to those which the Assessor has under Section 90 of the Local Government Finance Act 1992. (Under Section 90 of that Act the local assessor may serve a notice to supply specific information on a person who is or has been an owner or occupier of a dwelling. If that person fails to comply with the terms of the assessor’s notice, he shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 2 ie £500 on the standard scale). The Group simply wished to seek agreement as to whether strengthening the requirement in this way, i.e. by threatening the imposition of a summary conviction, rather than simply relying on the present civil "duty", might increase the number of debtors offering such information to enable diligence to be enacted.

Voluntary direct deduction

19. There was a cautious support for this proposal, with the emphasis being on voluntary compliance. Twenty local authorities and 9 respondents from the professional and voluntary sector were in favour of this proposal. Only 3 and 6 respectively were against it.
20. One voluntary organisation was sympathetic to the cause, but was concerned that without summary warrant the protection of the debtor could be jeopardised. One organisation criticised the prospect of local authorities acting as nurse maid to a vulnerable sector of society, and opined that debtors should be encouraged to take responsibility for their own finances rather than depend on a nanny state. Other concerns echoed were that the maximum deduction from Income Support for council tax debts was often less than the water and sewerage charge, and that it only amounted to the weekly amount for a band A property. There was also criticism that voluntary deduction did not address the problem of older debts, nor did it address the problem of ongoing charges. One council felt that the proposal was at odds with the process of diligence and the requirement that the creditor must prove the existence of the debt. Four respondents were of the view that the feasibility of extending the process to other state benefits such as retirement pensions and Incapacity Benefit should also be examined.

Direct deductions for water service debts

21. From the respondents that offered views on this matter, 18 local authorities and 8 others indicated their support for the proposal. (17 respondents offered no views, and one was strongly against the proposal.) Two local authorities thought it would be difficult to distinguish between the council tax and water and sewerage elements of the debt. Two thought that the introduction of the proposal would not make any difference, and could be problematic and costly. Two thought that the billing and collection of water and sewerage should not be for local authorities in any case and suggested that parity with England and Wales should be sought. Three respondents considered that the ultimate solution was simply to change the statutory formula for the calculation of payments to the water authorities. A further 3 respondents thought the solution lay in rebating water and sewerage for those in receipt of Income Support, one suggested that this should be done at source with the rebate paid direct to the water authority. Concern was expressed that the impact of water and sewerage charges was having a detrimental effect on council tax collection levels. It was suggested that the net water and sewerage for a Band A house would increase by 44% this year, this would have more than trebled since 1996/97.
22. In summary, there was widespread support for the introduction of this initiative. There was concern about the perception of community charge and council tax debts in cases where there was multiple debt, with council tax and community charge at the bottom of the pecking order. Voluntary compliance was suggested as a good way forward. It was also suggested that the amount built in to Income Support in respect of water services should be deducted at source by the DSS and paid direct to the water authorities. This would free local authorities to pursue more vigorously those who can afford to pay. The water authorities responded in favour of the proposal on the proviso that the existing priority for deductions was maintained. The Water and Sewerage Customers’ Council supported a process eliminating the summary warrant but geared to direct deduction.

A list of respondents is attached at Annex D.

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