It Pays to Pay - improving council tax collection in Scotland

ANNEX F

IRRV Research Executive Summary

Introduction

1. This report presents the findings of a study to identify the factors that may be responsible for the higher council tax in-year collection rates in England and Wales (hereafter referred to as ‘England’ except in those cases where a distinction is necessary) compared to Scotland. The research was commissioned by the Scottish Office (now the Scottish Executive) on behalf of the joint Scottish Office/Convention of Scottish Local Authorities Working Group on It Pays to Pay - improving council tax collection in Scotland. The Institute of Revenues, Rating and Valuation undertook the work. The report encompasses:

• quantitative research examining the characteristics of council tax administration, billing, payment, recovery and enforcement methods in both Scotland and England;

• a comparative examination of the relevant legislation in England; and
• qualitative research which focused on the experiences and views of local authority revenues practitioners, enforcement agents and key specialist government officers.

2. 30 Scottish levying authorities and 20 English and Welsh billing authorities provided data for the study. Interviews were conducted with Heads of Revenues Sections in 10 Scottish levying authorities and 10 English billing authorities and with key contacts in three additional organisations with interests in the field of council tax collection and enforcement. Informal interviews were carried out with 9 private sector bailiff firms in England. The project team used as its baseline the financial year 1997/98 and gathered data and views relating to that period.
3. The report identifies the factors that contribute to non-payment in Scotland and the extent to which they contribute to the collection problems faced. It also lists measures that could be considered for improving in-year collection rates for council tax in Scotland.

• Chapter 1 presents background information relating to the research and the reasons why the research was commissioned.

• Chapter 2 examines the contextual differences between the systems in Scotland and England that impact on the council tax collection rates. The findings are summarised at the end of the chapter;

• Chapter 3 provides a comparative analysis of council tax legislation and processes in Scotland and England up to the enforcement stage, and the related management issues. The findings are summarised at the end of the chapter;

• Chapter 4 presents a comparative analysis of council tax legislation and processes in Scotland and England from the enforcement stage. A summary table is provided at the end of the chapter.

• Chapter 5 examines the use of information technology and the general processing of information in Scotland and England;

• Chapter 6 examines broad areas in which system change might be considered; it also brings together specific suggestions for changes which if implemented could bring about improvements to in-year council tax collection rates in Scotland, based on the findings of the research;

• Six annexes to the report are also included.

4. This report focuses on the in-year collection rates achieved by Scottish and English authorities, as opposed to the overall collection rates. The statistics available do not allow for comparisons of Scottish and English overall collection rates in terms of total amounts billed and the amounts of tax collected in relation to each year.

General observations

5. Scottish authorities were required to deal with numerous difficult issues during the financial year 1997/98 and many of these impacted upon their council tax in-year collection rates. English authorities either were not affected by some of these issues, or were affected to a considerably lesser degree than were Scottish authorities.

• The complete reorganisation of Scottish authorities in 1996 still affected Scottish authorities’ revenue functions in 1997/98 and indeed still impacts on those functions in many of the councils today. The simultaneous aggregation and disaggregation of functions of former Scottish councils upon the creation of unitary authorities in 1996 brought about large-scale change to computer systems and to both staffing structures and complements. This scale of change did not arise following the reorganisation of English and Welsh authorities during the same time period. The newly established Welsh unitary authorities in 1996 faced the task of aggregating systems of the former Districts, but this was a relatively easier task than disaggregation, and certainly easier than dealing with disaggregation and aggregation of housing and council tax benefit at the same time. Only one newly created authority in England had to deal with solely aggregating functions of former authorities. The project baseline year of 1997/98 was only the second year of operation for the Scottish Unitary authorities, and many of the transitional problems of reorganisation were still being (and are still to be) settled.

• Some Scottish Unitary authorities faced particular difficulties in relation to the selection of IT solutions for their revenues systems. One supplier won Scottish revenues contracts on the basis of a proven successful track record with English authorities, but failed to provide the required Scottish system enhancements within the necessary time scale. Another supplier left client authorities looking for new IT suppliers after they withdrew their product from the Scottish market.

6. In the opinion of many interviewees, the Debtors (Scotland) Act 1987 affords considerable protection to the debtor in terms of how, and against what goods, recovery action may be taken. It is their view that debtors in England do not enjoy such levels of protection under any comparable legislation. Scottish revenue practitioners in interview clearly linked the impact of this protection with the widespread political resistance to the operation of poinding and warrant sales, and identified these combined factors as a significant hurdle in the effective enforcement of council tax.
7. Every Scottish local government officer interviewed was well aware of the importance of council tax collection rates to their authority and wanted to bring about year-on-year improvements. Since 1998 some had sought to achieve this through the improved take-up of direct debits and had increased the proportion of payers by this method dramatically. Others had discarded procedures inherited from the former regional councils. For example, some had reviewed their relationships with their sheriff officers and established new liaison and monitoring methods; a number had implemented new IT; others had unified their benefits administration; and some were replacing instalment books in favour of plastic payment swipe cards, making it more convenient for customers to make payment.

Environmental factors impacting on collection rates

8. There were environmental factors that impacted on the ability of Scottish authorities to achieve comparable in-year collection rates with England in 1997/98. These included:

• The legacy of community charge debt, which was greater in Scotland than England on a per capita basis by an approximate factor of ten;
• The separation of payment of local taxes from the payment of rent by public sector tenants, which commenced under the previous community charge system, and which severed previously well maintained local tax payment profiles for many council tenants. Although this separation also applied to England, the impact was greater in Scotland due to its higher proportion of public sector housing;
• The impact of the Debtors (Scotland) Act 1987; which in the view of Scottish revenue practitioners and English bailiffs, provides for greater restrictions in the range of goods that can be taken and sold in settlement of a debt than does the corresponding legislation for distress in England;
• Political resistance to Poinding and Warrant Sales by some authorities;
• Greater impact of the local government re-organisation which took place in 1996 and which gave rise to changes that are still settling down;
• Higher bills in Scotland because they incorporate water and sewerage charges collected on behalf of the Water Authorities;
• Greater public resistance/inurement to paying local taxes in Scotland, first manifested under the community charge system;

Provisions and processes impacting on collection rates

9. English authorities enjoyed a number of provisions and processes that differ to those available to Scottish authorities, which in the view of the research team helped English authorities to achieve higher in-year collection levels in 1997/98. These included:

Differences in legislation

• The ability to issue bills in advance of the financial year, and to set the date for the first instalment to be paid on 1 April or thereafter;

• The ability to issue a combined first and final reminder notice, so that only the one notice needs to be issued prior to enforcement action being taken;

• The power to Issue individual summonses, compared to the corresponding Scottish process, to debtors at low cost and low administrative complexity requiring them to appear before Magistrates’ Court to contest the issue of a Liability Order;

• The power to request the Magistrates Court to carry out a means enquiry in relation to a debtor’s ability to pay; and if satisfied that the circumstances justify it, and that there has been wilful refusal and culpable neglect to pay the debt, the power for the Magistrates to make an order to commit the debtor to prison;

Differences in processes

• Greater control of the caseload being dealt with by external agents for enforcement action;
• Direct control over the enforcement powers they themselves institute;

• Greater stability of council tax systems during the time period studied in the report, both in terms of staffing and computer processes.
• A lesser proportion of cases requiring applications for attachments of Income Support via the Benefits Agency, and therefore fewer difficulties in terms of application backlogs, principally because of the absence of non-rebated water and sewerage charges.

Improving Scottish council tax collection rates

10. The research team is of the opinion that there is no one single measure which could be introduced that would bring about an immediate transformation in collection rates; improvements will come from adopting a range of improvement strategies. The research team believes that councils in Scotland could improve their in-year collection performance if consideration is given to introducing changes in a number of the following areas relating to legislation and processes.

Legislative issues:

• Clarify the interpretation on the transitional benefit regulations for both community charge and council tax;
• Consider whether the Debtors (Scotland) Act 1987 requires re-examination in terms of the range of goods protected from poinding and warrant sale or whether guidance on its scope should be issued;
• Consider whether the issue of using committal as an ultimate measure for non-payment of council tax should be re-examined;
• Consider encouraging the wider use of decrees in an action for payment in appropriate cases; in tandem with the more general use of applications for summary warrant.
• Address the issue of Scottish councils demanding instalments one month later than English councils;
• Reconsider the need for Scottish authorities to issue a combined reminder and final notice;
• Consider making available to revenues officers the same powers as are available to Assessors to require information from a taxpayer;
• Consider Introducing a requirement that a debtor who is subject to an earnings arrestment must inform the Council or Sheriff Officer of any change in employment details;
• Consider up-rating each year, for changes in inflation, the maximum wage deductions that can be made for earnings arrestments;
• Consider lowering the minimum level for sequestration from £1500 to £750;
• Consider denying the right to buy council houses to those who are in arrears with community charge/council tax;
• Consider changes in tenancy agreements so that in future any council tax debt in respect of a council tenancy could carry the penalty of eviction;
• Consider changes to give greater effect to the provisions relating to homes in multiple occupation, or dwellings where there is a high turnover of residents;
• Consider joint billing of council tax with rent though council tax revenues systems;
• Consider a requirement for banks to advise the Sheriff Officer when an arrestment has been successful and to release funds promptly;
• Consider provisions to allow Income Support claimants to make requests to the Benefit Agency to deduct council tax payments at source and to have remitted those payments direct to the local council.

Process issues:

• Address the legacy of community charge debt, through write-off provisions;
• Consider making it a condition of employment that Council staff do not fall into arrears with their council tax;

• Address the impact that re-organisation has had upon staffing and accrued expertise by providing central government funding for both training and special schemes for recovery;

• Address the backlog of applications for deductions from Income Support by making available more staff resources in relevant Benefits Agency offices, and encourage liaison between local authorities and the Agency offices in order to successfully plan for workload peaks;

• Consider the use of incentives to pay either by direct debit or in a lump sum;
• Consider the greater use of payment card facilities i.e. Visa, Delta, Switch;
• Fully exploit the facilities provided by imaging and workflow documentation systems;
• Improve management information from computer systems;
• Consider the introduction of dedicated recovery teams;
• Consider the use of visiting teams to advise debtors and others on council tax payment arrangements, benefit eligibility and enforcement processes;
• Encourage debtors to allocate any payments made in a financial year to that current year’s bill first, and once that is fully paid to allocate any additional payments to previous years’ arrears; this would be a major step towards reducing the overall indebtedness of individuals in terms of council tax;
• Execute billing, reminder and recovery procedures as promptly as possible and pass debtor files to Sheriff Officers timeously;

• Address the issue of political resistance in some authorities to the use of poinding and warrant sale and the related restrictions on revenues practitioners which prevent them from selecting freely from any of the enforcement options available to them;

• Establish comprehensive written agreements with Sheriff Officers which identify the Council’s view on the use of the various diligences and the required levels of service; and to carry out effective and regular monitoring of performance in accordance with those agreements;

• Implement greater control of the caseload going forward to Sheriff Officers for enforcement action, through improved communication, monitoring and written procedures;
• Consider leaving it to Sheriff Officers to decide the maximum time period over which special arrangements to pay must be settled, rather than directing them to accept whatever is offered by way of payment;
• Ensure that local authorities fulfil their responsibilities under a service level agreement by prompt response and feedback to the Sheriff Officer;

• Consider the use of a range of debt collection and recovery processes and facilities, both statutory and non-statutory, that Sheriff Officers and other commercial agencies can supply.

11. The Research Team does not advocate changes in legislation to provide local councils with powers either to apply earnings arrestments themselves instead of the Sheriff Officer or to have access to Inland Revenue data, as had been suggested by several respondents. It is felt that if improvements were made to legislation requiring the defaulter to provide information regarding employment details, and additionally to provide other information as might be prescribed regarding the debtor’s financial situation, then this would obviate the need for such changes.

Concluding remarks

12. It is the view of the research team that neither a settled period after re-organisation nor improvements within the existing environmental and legislative framework will, on their own, bring about a national average collection rate comparable with that in England within a satisfactory time scale. It is important to acknowledge that if an in-year collection rate equivalent to that achieved in England is to be the aim, significant and immediate changes relating to both environment and process issues, as identified above, must be considered. The research team offer no view on the optimum time scale over which any consolidation of changes could be take place; but that decision would be a key factor in determining the extent of the improvements which might feasibly be considered. The best value process being introduced within revenue functions should in itself assist local authorities in developing best practice and will be a driving force in trying to achieve higher rates of collection. It is important to recognise that local authorities are at very different stages in the bedding in of revenue processes and thus individually will achieve improvements in their collection levels at different rates.
13. The research team put forward a final point for consideration; that the issue of seeking to improve in-year council tax collection rates should be set against a backdrop of ensuring that the rights and responsibilities of the citizen are fully addressed. All aspects of the billing, collection and enforcement processes should be carried out with a commitment to delivering the highest standards of customer care. But with rights come responsibilities. Council tax is a tax borne by all households (with some statutory exemptions) to pay for services enjoyed by all households, and it is a duty of each liable citizen to pay the amount due. Local authorities differ from the majority of creditors in that they cannot stop the provision of many of their services to individuals who default in their payments. If individuals seek to ignore their responsibilities to pay, local authorities must have in place the mechanisms to quickly identify and deal with such cases. They must also be able to access a range of efficient, effective and acceptable enforcement powers, that will enable both actions to be tailored to the individual cases and the collection of the amounts outstanding within a reasonable time period.