Subject: Collection Fund Outturn 2013/14 Status: For Publication Report to: Cabinet Date: 28 th July 2014 Cabinet Member: Cabinet Member for Finance Report of: Director - Finance Services Author: Vicky Crossland Author Email: vicky.crossland@rochdale.gov.uk Tel: Tel: 01706 925409 Comments from Statutory Officers: yes Key Decision: No 1 Purpose of Report 1.1 To inform Cabinet and the Overview and Scrutiny Committee on the Collection Fund position as at the end of 2013/14 financial year. 2 Recommendations 2.1 It is recommended that Cabinet notes the 2013/14 Collection Fund outturn position. 3 Background 3.1 Alternatives considered Not reporting on financial performance puts at risk the achievement of the Authority s medium term financial plan. Good financial management is critical to ensuring financial resources are received in line with the budget which enables them to be targeted towards the Council s priorities. Monitoring enables the early identification of variations against the plan and facilitates timely corrective action. 3.2 Consultation Undertaken/Proposed: 3.2.1 The Leadership Team, Portfolio Holder for Finance and Opposition Portfolio Holder have been informed of the final 2013/14 Collection Fund position and its implications
for future years. The Trade Unions will be informed. 3.3 Introduction 3.3.1 The Collection Fund account reflects the statutory requirement for the Council to maintain a separate Collection Fund, in relation to the operation of the Business Rates Retention Scheme and Council Tax. 3.3.2 This report is the sixth for 2013/14 and focuses on the overall Collection Fund position for 2013/14 covering:- the Business Rates final position compared to budget, and collection performance the Council Tax final position compared to budget, and collection performance. 3.4 Summary 3.4.1 The Collection Fund position as at 31 st March 2014 is a deficit of 5.544m, of which: 2.826m relates to Business Rates 2.718m relates to Council Tax. 3.4.2 The table below shows the net position on the Collection Fund as at 31 st March 2014, and the allocation of the closing deficit between precepting authorities. Collection Fund (surplus)/ deficit Business Rates Council Tax Total m m m Balance as at 31/3/13 - (0.131) (0.131) 2013/14 (surplus)/ deficit 2.826 2.849 5.675 Balance as at 31/3/14 2.826 2.718 5.544 Rochdale MBC 1.384 2.348 3.732 Police & Crime Commissioner for Greater Manchester - 0.269 0.269 Greater Manchester Fire and Rescue Authority 0.029 0.101 0.130 Central Government 1.413-1.413 Balance as at 31/3/14 2.826 2.718 5.544 3.4.3 The Collection Fund s forecast outturn position is estimated in January each year to allow any surplus/deficit on the Fund to be included when setting the following year s budget. 3.4.4 The Council s share of the 2013/14 Collection Fund position as forecast in January 2014 is 0.2m, and this will be paid to the Collection Fund during 2014/15. 3.4.5 The Council s actual share of the Collection Fund deficit as at 31 st March 2014 is 3.732m. This will impact on the Council s funding for 2015/16, as a one off
requirement, unless there is an improvement in the Collection Fund financial position during 2014/15. Work is being undertaken to review collection strategies. 3.5 Collection Fund 2013/14 Business Rates 3.5.1 Net Income Raised 3.5.1.1 The table below provides detail of the position for business rates as at 31 st March 2014, showing variances to budget and movements since the January update report that went to Cabinet in April. The year end deficit of 2.826m is an increase of 1.373m on that reported as at the end of January. The principal reason for this change is due to an increased charge of 1.1m to the appeals provision relating to property revaluations that have been settled during 2013/14 and those outstanding at 31 st March 2014. Business Rates - 2013/14 outturn Description 2013/14 Budget 2013/14 outturn(*) Variation Change from previous report m m m m Gross income (77.015) (76.497) (0.518) (0.357) Less: Net Small Business Rate relief 3.034 3.696 (0.662) (0.122) Mandatory Charitable relief 2.814 2.922 (0.108) (0.165) Discretionary relief 0.451 0.284 0.167 (0.011) Empties & Part Occupied 4.480 5.505 (1.025) (0.005) Charge re bad debt provision 1.536 1.168 0.368 0.368 Interest charges - 0.003 (0.003) (0.003) Allowance for cost of collection 0.286 0.286 - - Provision for appeals against revaluations 4.090 5.135 (1.045) (1.078) Net yield (60.324) (57.498) (2.826) (1.373) Precepts: Central Government - 50% 30.162 28.749 (1.413) (0.686) Rochdale MBC - 49% 29.559 28.175 (1.384) (0.672) GM Fire & Rescue Authority - 1% 0.603 0.574 (0.029) (0.015) Total 60.324 57.498 (2.826) (1.373) (*) Income includes charges for 2013/14 and prior years adjustments as outlined below 3.5.1.2 The main areas of variance to the original budget are as follows: Reduction in gross income due to rateable value revaluations, properties taken out of rating and demolitions Increased Small Business Rate Relief given due to Government incentives. This is offset by a grant given to compensate for the reduction in income. The Council s share of the grant is 1.168m which is included in the General Fund outturn.
The number of empty & part occupied properties during the year was higher than that budgeted for. A reduced charge to the bad debt provision of 0.368m. An exercise has been completed, analysing Business Rates debt by age, recovery stage, and staff experience of debt collection. This has resulted in a lower closing provision for bad debts than forecast see section 3.5.3.2 for further detail of the bad debt provision. Appeals provision for property revaluations is 1.1m higher than budgeted. The number of successful appeals and value of the reduction in property rateable values has increased in the second half of 2013/14. This has resulted in a reassessment of the value of provision required relating to appeals outstanding at the year end, and appeals likely to be submitted. Section 3.5.2 provides more detail relating to revaluation appeals. 3.5.2 Valuation Office Agency (VOA) appeals against 2005/2010 revaluations 3.5.2.1 From 1 st April 2013 local authorities have been responsible for providing for future potential losses of income for successful appeals against the revaluations which took place in 2005 and 2010. There has been a significant backlog in dealing with the appeals nationally, some dating back to 2005. In the 2013 Autumn Statement the Chancellor made a commitment to businesses that 95% of the appeals outstanding at September 2013 would be cleared by July 2015. The latest information from the VOA appeals list shows that work is on-going clearing the outstanding appeals. There has been a net reduction in the rateable value of appeals outstanding since December 2013 of 4.963m. The number of appeals outstanding at March 2014 is 386 cases with a rateable value (RV) of 36.939m, (approximately 17.4m in annual business rates income). Outstanding appeals list date Number of appeals outstandin g Variation in appeals outstanding Rateable Value (RV) Variation in RV m m March 2013 696-51.780 - June 2013 628 (68) 51.652 (0.128) September 2013 563 (65) 42.936 (8.716) December 2013 521 (42) 41.902 (1.034) March 2014 386 (135) 36.939 (4.963) 2013/14 movement (310) (14.841) 3.5.2.2 The overall number of appeals outstanding has continued to fall over the year as cases have been agreed, withdrawn, or dismissed. The outstanding number of appeals is a net figure as there has been a trend during the year for appeals to be dismissed and withdrawn which have subsequently reappeared on the outstanding list later in the year as a new reason for an appeal has been resubmitted. Over the past six months there has been an increase in the number of successful appeals. As the number of appeals outstanding has reduced and the success rate has increased, this has had an impact on the closing appeals provision that is required. The closing provision calculation assumes a success rate of 1 in 3.5 appeals, with an average reduction in rateable value of 15%.
3.5.2.3 There have been 281 successful appeals during 2013/14, reducing the RV list by 3.8m, and reducing Business Rates income by approximately 1.4m. Backdated refunds for these appeals of 2.5m have been charged against the appeals provision. 3.5.2.4 The provision as at 31 st March 2014 for rateable value appeals provision is 2.62m see table below: Business Rates Appeals Provision m Opening balance - Charge to Collection Fund 5.135 Payment for backdated appeals agreed in 2013/14 (2.515) Provision for appeals outstanding at 31st March 2014 2.620 3.5.3 Business rates collection performance and outstanding debt as at 31st March 2014 3.5.3.1The 2013/14 collection rate for Business Rates income that has been billed in 2013/14 is 97.3%, an increase of 0.7% from 2012/13 (2012/13 96.6%). The table below shows the aged analysis of outstanding debt as at 31 st March 2013 and 31 st March 2014. Pre 2013/14 arrears are 2.403m, which is a reduction of 1.328m from the 31 st March 2013 position. Year Outstanding debt as at 31st March 2013 Outstanding debt as at 31st March 2014 Decrease/ (increase) in debt m m m Current year 2013/14-1.633 (1.633) Prior years 2012/13 1.881 1.123 0.758 2011/12 0.992 0.557 0.435 Prior to 2011 0.858 0.723 0.135 Total pre 2013/14 debt 3.731 2.403 1.328 Total outstanding debt 3.731 4.036 (0.305) 3.5.3.2 The 2013/14 year end bad debt provision is 1.663m see table below: Business Rates Bad debt Provision m Opening balance 1st April 2013 1.176 Write offs (0.681) Additional provision required (*) 1.168 Closing provision as at 31st March 2014 1.663 (*) See 3.5.1.2 for explanation
3.6 Collection Fund : 2013/14 Council Tax 3.6.1 Net income 3.6.1.1 The table below provides detail of the position for Council Tax as at 31 st March 2014, showing variances to budget and changes since the January update report that went to Cabinet in April. The year end deficit of 2.718m is a change of 3.142m on that reported as at the end of January. The principal reason for this change is due to an increased provision for bad debts of 2.911m. Change from Description Budget 2013/14 outturn Variation previous report m m m m INCOME Income from Council Tax (108.429) (109.950) 1.521 (0.048) Income from premium on empty properties (0.357) (0.235) (0.122) (0.005) Total income (108.786) (110.185) 1.399 (0.053) EXPENDITURE Council Tax discounts 10.569 11.766 (1.197) (0.037) Losses on collection 4.058 6.969 (2.911) (2.911) Local Council Tax Support Scheme (LCTSS) 17.049 16.910 0.139 0.031 Prior year adjustments - 0.280 (0.280) (0.304) Total expenditure 31.676 35.925 (4.249) (3.221) Net income to be raised for precept/ billing authority after LCTSS awarded (77.110) (74.260) (2.850) (3.274) Precepts paid to Council/Police & Fire 77.110 77.109 0.001 0.001 Surplus brought forward from 2012/13 - (0.131) 0.131 0.131 Deficit as at 31/3/14-2.718 (2.718) (3.142) Share of deficit Rochdale MBC 2.348 Police & Crime Commissioner for Greater Manchester 0.269 GM Fire & Rescue Authority 0.101 Total 2.718 3.6.1.2 The significant areas of variance to the original budget are as follows: Total income billed in 2013/14, net of Council Tax discounts is 0.202m higher than when the council tax base was set. An increased charge relating to the bad debt provision of 2.911m. An exercise has been completed, analysing Council Tax debt by age, recovery stage, and
staff experience of debt collection. This has resulted in a higher provision required than budgeted. See section 3.6.3.3 for further detail relating to the bad debt provision. 3.6.2 Local Council Tax Support Scheme (LCTSS) 3.6.2.1The award of LCTSS to a Council Tax bill payer is deducted from Council Tax bills at the start of the year as a discount. This will remain the same unless there is a change of circumstances within the household. In 2013/14 LCTSS relief of 16.910m was given. This is 0.139m (1%) less than the budget set of 17.049m. 3.6.2.2 Although the number of claimants is less than estimated, the average discount awarded is greater than estimated. Local Council Tax Support Scheme - Comparison of estimate to actual at 31 st March 2014 Number of claimants per Estimate Number of claimants per actual Change in claimant numbers data at 31/03/14 Working age total 16,831 14,333 2,498 Pension credit age total 10,583 9,823 760 Total 27,414 24,156 3,258 Forecast spend per model at 01/12/12 Actual spend at 31/03/14 Variation Change from previous report ( m) ( m) ( m) ( m) Working age total 8.495 8.727 (0.232) 0.014 Pension credit age total 8.554 8.183 0.371 (0.026) Total 17.049 16.910 0.139 (0.012) 3.6.3 Council Tax collection performance and outstanding debt as at 31 st March 2014 3.6.3.1The 2013/14 collection rate for Council Tax income that has been billed in 2013/14 is 93%, which is a reduction of 2.2% from 2012/13 (95.2%). The introduction of the LCTSS, under the Government s Welfare Reform Programme, and the additional income billed for the changes to empty property discounts have impacted upon the collection rates. 3.6.3.2 The table below shows the aged analysis of the debt as at 31 st March 2013 and 31 st March 2014. Pre 2013/14 arrears are 7.074m, which is a reduction of 2.639m from the 31 st March 2013 position.
Year Outstanding debt as at 31st March 2013 Outstanding debt as at 31st March 2014 Decrease/ (increase) in debt m m m Current Year 2013/14-5.336 (5.336) Prior Years 2012/13 3.433 1.965 1.468 2011/12 1.942 1.438 0.504 Prior to 2011 4.338 3.671 0.667 Total pre 2013/14 debt 9.713 7.074 2.639 Total Outstanding Debt 9.713 12.410 (2.697) 3.6.3.3 The 2013/14 year end bad debt provision is 8.643m see table below: Council Tax Bad debt Provision m Opening balance 1st April 2013 2.597 Write offs (0.923) Additional provision required (*) 6.969 Closing provision as at 31st March 2014 8.643 (*) See 3.6.1.2 for explanation 4 Financial Implications 4.1 The main body of the report provides a detailed analysis of the Collection Fund position as at 31 st March 2014. 4.2 The Council s budget for 2014/15 assumes a net deficit of 0.2m in relation to the Collection Fund outturn for 2013/14, and this will be paid to the Collection Fund during 2014/15. 4.3 In January 2015 a forecast surplus/deficit position for the Collection Fund as at 31 st March 2015 will be estimated. This will take account of the brought forward 2013/14 closing deficit of 5.544m (The Council s share is 3.732m), and the 2014/15 forecast surplus/deficit. The Council s share of this forecast position will form part of the Council s 2015/16 General Fund budget. 5 Legal Implications 5.1 Billing authorities are required to inform precepting authorities of the final position on the collection fund. The relevant precepting authorities have been informed of the 2013/14 Collection Fund outturn position. 6 Personnel Implications 6.1 There are no personnel implications arising as a result of this report.
7 Corporate Priorities 7.1 The Collection Fund budget is set at Budget Fixing Council, and resources are allocated in line with the corporate priorities of the Council. 8. Risk Assessment Implications 8.1 Unresolved appeals against the revaluation assessments for 2005 and 2010 continue to cause uncertainty and financial risk for the business rates income retained by the Council. The situation is being monitored to ensure that any changes in the trend for successful appeals is raised quickly due to the future impact on business rates income and the impact for the provision for any backdated elements. 8.2 The level of collection of both Business Rates and Council Tax debt continues to cause uncertainty and potential financial risk. Collection performance is being monitored on a monthly basis. This is to ensure that debt is recovered as efficiently and effectively as possible, and that any trends may be highlighted and action taken as necessary. 8.3 There is a potential financial risk relating to the Council s 2015/16 budget, as highlighted in section 4.3. 9. Equalities Impacts 9.1 Workforce Equality Impacts Assessment 9.1.1 There are no workforce equality issues arising from this report. 9.2 Equality/Community Impact Assessments 9.2.1 There are no significant equality/community issues arising from this report.