COUNCIL TAX COLLECTION ARRANGEMENTS IN SCOTLAND AND ENGLAND & WALES

Transcription

1 COUNCIL TAX COLLECTION ARRANGEMENTS IN SCOTLAND AND ENGLAND & WALES

2 COUNCIL TAX COLLECTION ARRANAGEMENTS IN SCOTLAND AND ENGLAND & WALES Institute of Revenues, Rating and Valuation Scottish Executive Central Research Unit 1999

3 CONTENTS FIGURES AND TABLES ACKNOWLEDGEMENTS EXECUTIVE SUMMARY INTRODUCTION 1 GENERAL OBSERVATIONS 2 ENVIRONMENTAL FACTORS IMPACTING ON COLLECTION RATES 3 PROVISIONS AND PROCESSES IMPACTING ON COLLECTION RATES 3 IMPROVING SCOTTISH COUNCIL TAX COLLECTION RATES 4 CONCLUDING REMARKS 7 CHAPTER 1 INTRODUCTION TO THE REPORT BACKGROUND 8 REPORT OBJECTIVES 9 RESEARCH DESIGN 10 CHAPTER 2 CONTEXTUAL DIFFERENCES BETWEEN SCOTLAND AND ENGLAND THAT MAY IMPACT ON THE COLLECTION RATES OF COUNCIL TAX INTRODUCTION 12 DEMOGRAPHIC CONSIDERATIONS 12 THE REORGANISATION OF LOCAL GOVERNMENT 14 ISSUES ARISING FROM REORGANISATION 15 COMPARISON OF STATISTICAL BASES 18 THE LEGISLATION GOVERNING COLLECTION AND RECOVERY OF LOCAL TAXES 20 THE SCOTTISH AND ENGLISH COURTS SYSTEMS FOR EFFECTING THE RECOVERY OF COUNCIL TAX 20 THE LEVEL OF CHARGES FOR COUNCIL TAX 22 THE POLITICAL DIMENSION 27 THE LEGACY OF COMMUNITY CHARGE 29 SUMMARY OF CONTEXTUAL DIFFERENCES 33 CHAPTER 3 A COMPARATIVE ANALYSIS OF THE COUNCIL TAX LEGISLATIONS IN SCOTLAND AND ENGLAND INTRODUCTION 35 CALCULATION OF THE COUNCIL TAX BASE 35 PROVISION FOR BAD DEBTS 36 ADMINISTRATION 38 BILLING FOR COUNCIL TAX 38 HOUSES IN MULTIPLE OCCUPATION 48 PAYMENT OF COUNCIL TAX 50 PAYMENT METHODS 54 ALLOCATING THE PAYMENTS BETWEEN CURRENT AND FORMER YEARSÕ DEBTS 59 PURSUING PAYMENTS AT PRE-ENFORCEMENT STAGE 61 MANAGEMENT STRUCTURES OF REVENUES AND BENEFITS FUNCTIONS 62 SUMMARY 66

4 CHAPTER 4: A COMPARATIVE ANALYSIS OF THE COUNCIL TAX PROCESSES IN SCOTLAND AND ENGLAND INTRODUCTION 69 THE ENFORCEMENT PROCESS 69 ATTACHMENT OF INCOME SUPPORT 75 POINDING AND WARRANT SALE AND DISTRESS 82 PENALTIES FOR FAILURE TO SUPPLY INFORMATION 99 EARNINGS ARRESTMENTS/ ATTACHMENT OF EARNINGS 99 ARRESTMENT OF BANK ACCOUNTS 101 ATTACHMENT OF MEMBERSÕ ALLOWANCES 101 LETTERS OF INHIBITION AND CHARGING ORDERS 102 SEQUESTRATION AND BANKRUPTCY NOTICES 102 COMMITTAL IN ENGLAND 103 OTHER ENFORCEMENT METHODS SUGGESTED IN INTERVIEW 107 INTERACTION OF COMMUNITY CHARGE DEBT WITH COUNCIL TAX ENFORCEMENT 108 EFFECTIVENESS OF ENFORCEMENT PROCESSES 108 SUMMARY 110 CHAPTER 5 A COMPARATIVE ANALYSIS OF THE USE OF INFORMATION TECHNOLOGY AND INFORMATION PROCESSES INTRODUCTION 117 REORGANISATION 117 IMPACT OF IT/ IS ON COUNCIL TAX FUNCTIONS 118 IN-HOUSE AND EXTERNAL SUPPLIERS 119 EMBRACING NEW IT 121 PROGRESS SINCE REORGANISATION 121 COMPARATIVE ANALYSIS OF USE OF IT/ IS 122 SUMMARY 125 CHAPTER 6 CONCLUSIONS AND CONSIDERATIONS INTRODUCTION 127 GENERAL OBSERVATIONS 127 WHY IS THE COUNCIL TAX IN-YEAR COLLECTION RATE IN SCOTLAND LOWER THAN IN ENGLAND? 128 WHAT IMPROVEMENTS IN IN-YEAR COLLECTION RATES ARE TO BE AIMED FOR? 131 WHAT WOULD BE THE IMPACT OF CHANGE ON THE COUNCIL TAX SYSTEM? 131 FINAL REMARKS 140 GLOSSARY 141 BIBLIOGRAPHY 146 ANNEX 1 ANNEX 2: ANNEX 3: ARTICLES EXEMPT FROM POINDING AND WARRANT SALE IN SCOTLAND, AND ARTICLES EXEMPT FROM DISTRAINT IN ENGLAND 148 EXAMPLE OF THE MINIMUM CODE OF PRACTICE TO WHICH A MAJOR FIRM OF BAILIFFS WILL WORK TO IN THE ABSENCE OF ONE BEING PROVIDED BY AN ENGLISH COUNCIL 150 POSTAL QUESTIONNAIRE ISSUED TO SCOTTISH LOCAL AUTHORITIES 154

5 ANNEX 4: POSTAL QUESTIONNAIRE ISSUED TO ENGLISH LOCAL AUTHORITIES 167 ANNEX 5: SAMPLE INTERVIEW SCHEDULE: HEADS OF REVENUES 181 ANNEX 6: RESEARCH METHODS 185

6 FIGURES AND TABLES Table 1 Council tax valuation bands in Great Britain 8 Table 2 Council tax: in-year collection rates 9 Table 3 Council tax benefits claimants in Scotland, England and Wales 13 Table 4 Authorities with council tax billing and collection responsibilities 15 following reorganisation Table 5 Amounts to be raised from council tax as a percentage of the 19 total net council tax collectable for England (1998/99) together with figures for Scotland (excluding water and sewerage charges) (1997/98) Table 6 Analysis of council tax arrears on basis of households awarded 24 full, partial or no council tax benefit in one scottish authority; for year 1997/98 Table 7 % share of total net amount of council tax paid to the Water 26 Authority by one Scottish authority in 1997/98 Table 8 Degree to which responding authoritiesõ councils are perceived 29 by chief revenues staff to involve themselves in the administration of recovery of council tax Summary 1 Showing main points raised in Chapter 2 33 Table 9 A comparison of sample councils, grouped to show those with 37 similar provisions for bad debts and their in-year collection rates; and an indication of those councils with dedicated recovery teams. Chart A1-1 Scotland: Due date of first instalment expressed in elapsed 40 days from 1/4/97 and the average number of elapsed days from the due date of an instalment to reach court action Chart A1-2 England: Due date of first instalment expressed in elapsed 41 days from 1/4/97 and the average number of elapsed days taken from the due date of an instalment to reach court action Table 10 Administrative procedures for optimally-timed recovery in 42 model councils in scotland and england Table 11 Average time lapses between key recovery stages in Scotland 43 and England

7 Table 12 Shortest and longest time lapses reported by Scottish and 44 English councils between instalment due date and the issue of reminder notices and court action Chart B1-1 Scotland: Days from due date of reminder until application 45 for summary warrant compared with the in-year collection rate Chart B2-2 England: Days from due date of reminder until application for 46 liability orders compared with the in-year collection rate Table 13 Arrears accounted for by council and other tenants 50 Table 14 Payment profile for council tax for year Table 15 Scotland: Methods of payment used by councils to collect council 56 tax in year 1997/98 Table 16 England: Methods of payment used by councils to collect council 57 tax in year 1997/98 Table 17 Comparative number of dwellings administered per head of staff 64 in Scotland and England and the relevant in-year council tax collection rate (1997/98) Table 18 Approaches taken in the administration of various functions in 66 Scotland and England from survey data Summary 2 Showing main points raised in Chapter 3 66 Table 19 Principal differences in execution of remedies in Scotland 71 and England Chart A4-1 Actual number of applications for summary warrant expressed 73 as a percentage of a maximum number of 10 - comparison with percentage collection levels Chart A4-2 Actual number of court summons runs expressed as a 74 percentage of the maximum number of 10 - comparison with percentage collection levels Flowchart 1 Typical processes for recovery of Council Tax through 76 Income Support in Scotland Flowchart 2 Typical processes for recovery of Council Tax through 77 Income Support in England Table 20 Percentages of residents on income support in Scotland, 79 Wales and England, 2 May 1998

8 Flowchart 3 Minimum time scales over which deductions of Income Support 80 were processed in 1997/98, in respect of the fastest performing authority, an average-performing authority and the slowest performing authority Chart A5-1 Scotland: Percentage of net amount of 1997/98 council tax 84 billed passed to Sheriff Officers for collection compared with the % of that amount still outstanding with Sheriff Officers at 31/3/98 Chart A5-2 England: Percentage of net amount of 1997/98 council tax 85 billed passed to the Bailiff for collection compared to the % of that amount still outstanding with Bailiffs at 31/3/98 Chart A6-1 Scotland: Use of diligences together with sequestrations and 90 inhibitions shown with the in-year collection rate Chart A6-2 England: Use of enforcement powers granted by the liability 91 order together with insolvency and legal charges shown with the in-year collection rate Table 21 Scotland: one Scottish council's analysis of the results of 103 threatening sequestration over a five year period Table 22 Survey information relating to committals in 1997/98 in England 105 Table 23 Opinions regarding effectiveness of recovery and enforcement 109 actions - Scotland Table 24 Opinions regarding effectiveness of recovery and enforcement 110 actions - England Summary 3 Showing main points raised in Chapter Table 25 Use of different types of document systems within survey 121 groups in Scotland and England in 1997/98 Table 26 Use of IT/IS services in Scotland and England in 1997/ Table 27 Percentage of 30 Scottish local authorities using the listed 124 software providers Table 28 Percentage of 20 English local authorities using the listed 124 software providers Table 29 Main environmental factors causing lower in-year collection 128 rates in Scotland compared to England in 1997/98 Table 30 Main legislative and processing factors contributing to lower 130 in-year collection rates in scotland compared to england in 1997/98

9 Table 31 SWOT analysis of changes to council tax system based on 132 views of the research team Table 32 Showing more detailed areas in which changes to council 136 tax system could be considered

10 ACKNOWLEDGEMENTS Thanks are due to all those who supplied information for the research project. Some aspects of the postal questionnaires required data that was not easily available, and we are grateful to those who went out of their way to supply the requested information. The views and experiences expressed during the interviews were a valuable source of information and the openness and generosity of time of the respondents are much appreciated. We are grateful to officials from the Scottish Courts Administration and the Society of Messengers-at-Arms and Sheriff Officers for their time and helpful comments; and to two Sheriff Officers firms for the supply of information at interview. The help of Margaret Conlon of the Chartered Institute of Public Finance and Accountancy, Philip Evans of the Certificated Bailiffs Association, Gary Keith of BACS Ltd and the information service of OFWAT is much appreciated. Staff of North Ayrshire Council and Oxford City Council provided very helpful comments during the concluding stages of the reportõs compilation, as did the Directors of two bailiff companies. Thanks are due to those within the Institute of Revenues, Rating and Valuation who have assisted at various stages on this work. The contribution of the Scottish Branch of the Institute in developing the questionnaire for Scotland and contributing to aspects of the research has been invaluable; likewise the input of local authority members of IRRV Council on the development of the English questionnaire. Thanks are also due to the Institute staff who helped on various administration matters. Finally thanks go to the spouses of the research team members for the support they have given and the patience they have shown.

11 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 ÔEnglandÕ 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 Council Tax Collection. 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 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; 1

12 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 authoritiesõ revenue functions in 1997/98 and indeed still impacts on those functions in many of the councils today. The simultaneous aggregation and dis-aggregation 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. 2

13 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 yearon-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 3

14 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 MagistratesÕ 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 debtorõs ability to pay; and if satisfied that the circumstances justify it, and that there has been willful 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; 4

15 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; 5

16 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 yearõs bill first, and once that is fully paid to allocate any additional payments to previous yearsõ 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 CouncilÕs 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 fulfill their responsibilities under a service level agreement by prompt response and feedback to the Sheriff Officer; 6

17 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 debtorõs 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. 7

18 CHAPTER 1 INTRODUCTION TO THE REPORT Background 1.1 This report presents the findings of a study of the main factors, both legislative and others that affect council tax collection rates in Scotland and England. It identifies and makes comparative assessment of the procedures and practices in council tax collection in both countries, and provides comment on the relative effectiveness of those processes. The report also provides points for consideration regarding ways in which the council tax system in Scotland could be amended in order to bring about improvements in the council tax collection rate. 1.2 Council Tax is a local charge on domestic property set, in England, by charging authorities and their precepting authorities, and in Scotland by local councils. It is based on the value of property and the number of residents. Properties in each authority area are assigned to one of eight valuation bands, A to H (see Table 1). The tax is set on the basis of the number of Band D equivalent properties. Tax levels for dwellings in the other bands are set relative to the Band D baseline. Council tax has operated in Scotland, England and Wales since 1 April 1993, when it replaced the community charge system. The property banding process in Scotland is the responsibility of the Assessor, an officer appointed by and employed by the Unitary Authorities, but who remains an independent professional valuer. Valuation Office Agency officials carry out banding in England. The value bands are different for Scotland, England and Wales and are shown in the following table. Valuation Band Table 1 Council tax valuation bands in Great Britain Scotland RANGE OF VALUES England Wales Proportion of Band D bill payable A Up to 27,000 Up to 40,000 Up to 30,000 2/3 B 27,001 Ð 35,000 40,001 Ð 52,000 30,001 Ð 39,000 7/9 C 35,001 Ð 45,000 52,001 Ð 68,000 39,001 Ð 51,000 8/9 D 45,001 Ð 58,000 68,001 Ð 88,000 51,001 Ð 66,000 9/9 E 58,001 Ð 80,000 88,001 Ð 120,000 66,001 Ð 90,000 11/9 F 80,001 Ð 106, ,001 Ð 160,000 90,001 Ð 120,000 13/9 G 106,001 Ð 212, ,001 Ð 320, ,001 Ð 240,000 15/9 H Over 212,000 Over 320,000 Over 240,000 18/9 1.3 In terms of national average figures, Scotland achieves significantly lower in-year collection rates 1 than England and Wales. Table 2 shows that for the year 1997/98 the inyear collection rate for Scotland was 8.2 per cent lower than for England and 6.7 per cent lower than for Wales. In-year collection rates of council tax in both Scotland and England increased in 1997/98 compared to the previous year, but only marginally, while Wales experienced a decrease. Scotland achieved a 0.6 per cent increase in collection rates between 1996/97 and 1997/98; in England the corresponding increase was 0.3 per cent, whilst in Wales there was a 1 per cent decrease. 1 This is the proportion of the net amount of council tax billed for the given financial year, which is actually collected within that year. 8

19 Table 2 Council tax: in-year collection rates Receipts as a percentage of net collectable debt 1996/ /98 % % Scotland England Wales In early 1998, the Accounts Commission for Scotland published a report on council tax collection in Scotland. The report highlighted a number of key aspects of best value, benchmarking and the sharing of good practice, which it was considered might lead to significant increases in council tax collection. That report also included a number of areas where legislation could be changed to allow authorities to pursue debtors more effectively and allow additional payment options to taxpayers. These mainly reflected proposals that were put to the former Scottish Office Ministers by elected representatives of the Convention of Scottish Local Authorities (COSLA) and included: Joint billing and collection of council tax with rent; Reduction in the debt level for sequestration from 1500 to the previously applying level of 750; Prohibition of the sale of council housing under ÒRight to BuyÓ arrangements for community charge and council tax debtors; Bypassing of summary warrant procedures for debtors who agree to a direct deduction from their Income Support; and Providing councils with access to Inland Revenue data relating to employment details. 1.5 As a response to the recommendations listed in the report, the then Secretary of State for Scotland and COSLA agreed to establish a joint Scottish Office / COSLA Working Group on Council Tax Collection, to explore ways of improving collection rates. In November 1998 the Working Group issued a consultation document, ÒIt Pays to CollectÓ 5. This considered legislative solutions to the list of measures formerly proposed by COSLA, and other issues and measures that might improve collection levels in Scotland. The paper also proposed a study to examine differing statutory arrangements relating to council tax collection in Scotland and England; this report provides the findings of that study. Report objectives 1.6 The remit of this research project has been to provide information on factors, both legislative and other, that affect collection rates for council tax in Scotland and England. The study provides the joint Scottish Executive (formerly known as the Scottish Office)/COSLA Working Group with information on the procedures and practices used by local authorities in 2 Scottish Office Statistical Unit 3 DETR finance statistics 4 Welsh Local Government Financial Statistics 5 It Pays to Collect Ð A Consultative Document by the Joint Scottish Office/ COSLA Working Group on Council Tax Collection 9

20 collecting council tax debts, and with an assessment of the relative effectiveness of the procedures and practices used. Specifically, the research objectives have been: a) to gather information on the procedures followed by local authorities in Scotland and England in collecting council tax and recovering council tax debts, and on the success of those procedures; b) to identify differences in procedures and practice of council tax collection in Scotland and England, and the reasons for these differences; c) to identify the main factors affecting in-year collection rates in Scotland and England; and d) to identify problems (if any) with current administrative and legal arrangements and possible suggestions which could assist Scottish local authorities in their duties to collect and recover council tax. Research design 1.7 The study has employed a variety of research methods. It was necessary to quantify the different council tax processes in Scottish and English authorities as much as possible. To this end a postal survey of a sample of local authorities was conducted. The Scottish authority questionnaire was designed with the assistance of the Executive Committee of the Scottish Branch of the Institute of Revenues, Rating and Valuation (IRRV). The English questionnaire received design comment from those members of the Law and Research Committee of the IRRV who were based in English local authorities. Qualitative data, concerning individualsõ experiences and views of the council tax processes, was gathered through in-depth, semi-structured interviews with key revenues officers in local authorities. Less formally structured interviews were held with officials of the Scottish Courts Administration, elected representatives and officers of the Society of Messengers-at-Arms and Sheriff Officers, and partners of two firms of Sheriff Officers. The information arising from these interviews provided very useful insights into council tax recovery and enforcement issues as seen from non-local government perspectives. The project also required an analysis of the relevant available statistical information, and the relevant legislative arrangements. Additional information regarding specific issues identified by the research team during the drafting of the report was supplied by an officer of the Certificated Bailiffs Association and by a professionally qualified public sector revenue consultant with wide ranging experience of English revenue practices. 1.8 At the final drafting stages of this report, a Members Bill to abolish poindings and warrant sales was introduced to the Scottish Parliament by Tommy Sheridan MSP. In view of the interest generated by this development, the research team obtained additional views regarding the current use of both poindings and warrant sales for council tax purposes and the comparable action of distraint in England. Some of this extra data was obtained through informal interviews with bailiffs and Directors of nine private sector bailiff firms in England. 1.9 It was important that all Scottish authorities were given the opportunity to contribute to the report. All 32 Scottish authorities were invited to complete the postal questionnaire. Responses were received from 30 of the authorities. A sample of 10 Scottish authorities was 10

21 visited for follow-up interviews. These authorities to be interviewed were chosen as a representative sample spanning the Ôfamily groupsõ 6 of local authorities as identified by the Accounts Commission. In each family group, one authority was selected from each of the upper and lower quartiles and mid-range of collection rates, with one additional authority also being selected. A number of other factors which it was hypothesised could have an impact on collection rates were identified as important in selecting the individual authorities for interview: housing tenure mix; whether aggregation/ disaggregation had occurred upon re-organisation; population sparsity/density; population mobility; proportion of population in receipt of Income Support; and use of local area offices for collection Postal questionnaires were issued to 33 English authorities. These were selected in order to provide a broad match to the Scottish authorities selected for postal survey, using the same criteria as listed above. Returns were received from 20 authorities. Follow-up interviews were conducted with a sample of 10 authorities, chosen to broadly match those Scottish authorities selected for interview, again on the criteria listed above. The lower response rate from English authorities had been anticipated, and is attributed to the lower motivation of English authorities to take part in the survey. A number of them saw little point in allocating resources to the survey at a very busy time in the revenues calendar, when there was little perceived payback for them in terms of the studyõs findings. Copies of the questionnaires are attached as annexes to this report, as is a copy of the interview schedule It should be noted that the research only sought information and views from local councils, sheriff officers, private sector bailiffs and the Scottish Courts Administration and therefore does not include the views of other parties with an interest in this issue, e.g. money advice workers and Citizens Advice Bureaux The timing of the project meant that the bulk of the information gathering exercise coincided with an extremely busy time in local authority Revenues sections, as they prepared for the issuing of annual demand notices. This impacted on the study in terms of the actual number and completeness of the returned questionnaires, the scheduling in of interviews with key staff and general delays in the provision of information by local authorities Supplying data for the projectõs baseline financial year 1997/98 presented considerable problems for several (mostly Scottish) authorities. Changes to computer systems within and since that year meant that some authorities found it difficult to retrieve relevant information within the project time scale for questions relating to issues such as staffing ratios, take-up of payment methods and recovery processes. A few of the Scottish respondents attached a Ôhealth warningõ to the information they provided, since they felt it was not representative of how things would be in normal times, once computer system conversion had been completed. 6 Both the Accounts Commission for Scotland and Audit Commission uses family groupings of authorities. These allow more of a like-for-like comparison than would be the case by comparing all councils with one another. 11

22 CHAPTERÊ2 CONTEXTUAL DIFFERENCES BETWEEN SCOTLAND AND ENGLAND THAT MAY IMPACT ON THE COLLECTION RATES OF COUNCIL TAX Introduction 2.1 The collection and recovery procedures for council tax are similar in Scotland and England in many respects. Points of similarity include the following: council tax payers are entitled to pay the total annual amount in 10 instalments; the first instalment in Scotland cannot be payable before 1 st May, whereas in England the first instalment can be payable from 1 st April; enforcement may commence after any instalment is due but unpaid, although in England enforcement may not commence until 14 days have elapsed from the due date of payment of the instalment; a pre-requisite to court action is the issue of both a reminder requiring the instalment to be paid within 7 days, and a final notice requiring payment of the full yearõs charge (although the reminder and final notice can be combined in one notice in England); and successful court action results in a variety of enforcement options becoming available. 2.2 This report examines the hypothesis that there are key differences in the operation of council tax procedures in Scotland and England that account for the lower collection rate being achieved in Scotland. Before looking in depth at these council tax processes, it is important to set the Scottish and English systems in the context of the different environments in which they operate. This chapter identifies the main contextual differences between Scotland and England that affect the collection and recovery of council tax, and the administration of housing and council tax benefits. The issues contained in this chapter are based partly on the results obtained from the survey questionnaires, but principally on the interviews conducted with local authority officers in England as well as Scotland, the Scottish Courts Administration and the Society of Messengers-at-Arms and Sheriff Officers (SMASO). Demographic considerations 2.3 Scotland has a higher percentage of public housing than most other parts of Great Britain. The proportion of council taxpayers from the public tenancy sector is generally higher in Scottish authorities than in England. 2.4 The collection of council house rents inclusive of local authority taxes was prohibited with the introduction of the community charge in Whilst this applied throughout Scotland and England, the move away from inclusive rents was more significant for Scottish local tax collection rates. A high proportion of the Scottish tax base had used this method of paying their local tax, and it was now no longer available to them. 12

23 2.5 The continuing process of house sales under the Tenants Rights Etc. (Scotland) Act 1980 has significantly increased the proportion of owner occupied dwellings in Scotland, from 36% in 1981 to 60.2% of total dwelling stock in The outcome has been an increase in the proportion of remaining council tenants dependent on housing benefit 7. The highest proportions of 100% council tax benefit claimants are generally within the public tenanted sector. 2.6 Those receiving 100% council tax benefit in Scotland must, however, still pay water and sewerage charges to local authorities (an annual charge payable for water and sewerage services in respect of dwellings that are connected to mains water and sewerage) 8. Many of the Scottish revenues practitioners interviewed were of the opinion that it was relatively more expensive to collect small sums of money billed, such as the water and sewerage charge element paid by 100% council tax benefit claimants, than larger non-rebated sums billed. In view of this there is reluctance by many local authorities to exercise diligence against debtors in this category, favouring instead applications for attachment of Income Support. The percentage of Summary Warrant cases where attachments of Income Support were made ranged from 15% to 53% in 1997/98 in those authorities responding to the question. Table 3 Council tax benefit claimants in Scotland, England and Wales Numbers expressed as % of Number of Claimants 02/05/98 Total Claimants Dwellings Council Tax Benefit Scotland England Wales S E W S E W % % % % % % Claimants at 100% 378,000 2,973, , Other Claimants 212,000 1,480,000 75, Total Claimants 590,000 4,453, , Notes: 1.Source of Benefit figures DSS Housing Benefit and Council Tax Benefit Management Information System - 1% sample taken on 2/05/ Source for Number of Dwellings from Scottish Office Statistical Returns; DETR; Welsh Office. 2.7 From Table 3 above it can be seen that Scotland has a higher percentage of Council Tax Benefit Claimants in receipt of Income Support (claimants at 100% benefit level) as a percentage of non-exempt dwellings: the figure in Scotland being 27%, compared with 22% in England. It is therefore likely that Scotland will require the administration of proportionately more Attachments of Income Support than would be the case in England because of the existence of Water and Sewerage charges. 7 Page 19 - Managing Housing Benefit- Accounts Commission Report In Scotland Water and Sewerage charges are collected, as part of the council tax demand, by the local authorities on behalf of the three Water authorities. In England local authorities are not involved in the billing and collection of water and sewerage charges as these processes are carried out by the 29 Water Companies themselves (some of these issuing bills in respect of water charges only). 13

24 The reorganisation of local government 2.8 The structure of local government throughout Scotland, England and Wales has recently undergone substantial reorganisation. These changes have impacted upon local taxation collection in these countries in substantially different ways. Scotland 2.9 Reorganisation in Scotland became effective on 1 st April It brought about the abolition of 9 Regional Councils, 53 District Councils and 3 Islands Councils, and the creation in their place of 32 Unitary Authorities and three independent water and sewerage authorities. Prior to local authority reorganisation the function of collection and recovery of local taxes (council tax, residual community charge and non-domestic rates) rested with the 9 Regional Councils and 3 Islands Councils, as did the responsibility for the provision of water and sewerage services. Responsibility for administration of Housing and Council Tax Benefits was divided, with the Regional Councils responsible for Council Tax Benefit and the District Councils responsible for Housing Benefits while the Islands Councils dealt with both Reorganisation meant that, in most instances, the functions of the former Regional Councils in respect of collection and recovery of local taxes and council tax benefits were dis-aggregated to become the responsibility of the newly formed Unitary Councils. The former District CouncilsÕ functions in respect of housing benefits were passed over to, or in most cases aggregated to, the new Unitary Authorities. Wales 2.11 The corresponding reorganisation in Wales resulted in the abolition of the 11 County Councils and 32 District Councils and the creation in their place of 22 Unitary Authorities. Prior to this reorganisation, which also came into effect on the 1 st April 1996, the function of collection and recovery of local taxes rested with the District Councils as too did responsibility for administration of Housing and Council Tax Benefits. Reorganisation meant that in all instances the three functions were passed to, or aggregated to, the new Unitary Authorities. England 2.12 The reorganisation in England was rather different from that of either Scotland or Wales. The 32 London Boroughs, the City of London Corporation and 36 Metropolitan District Councils were not reviewed and their functions remained unchanged; they were, and remain responsible for all collection and recovery duties in connection with local taxes and the administration of Housing and Council Tax Benefits The remaining 33 Counties and 297 District Councils of England were reviewed. The result was the creation of fourteen new Unitary Authorities (in addition to some other minor changes). Thirteen of these new authorities had previously been District Councils, responsible for all collection and recovery duties in respect of local taxes and for all administration of Housing and Council Tax Benefits. Thus on reorganisation, there were no changes in jurisdiction or level of responsibility for these local authorities so far as local taxes or benefits were concerned. The remaining one new Unitary Authority was an amalgamation of a number of District Councils. Reorganisation meant that in all instances the three 14