Introduction
6.1 This chapter brings together the key findings of the research project to identify reasons why council tax in-year collection rates in Scotland are lower than in England. The preceding chapters detail the differences in Scotland and England both in terms of practices and procedures and legislative backgrounds. In this chapter the research team would like consideration to be given to broad areas of change which may bring about improvements in in-year collection rates in Scotland. It puts forward views on the key factors that affected council tax in-year collection rates in 1997/98. It should be noted that other important detailed points for consideration concerning possible changes in the Scottish council tax systems are detailed in summaries at the end of chapters 3 and 4 of this report; and for the convenience of the reader, the relevant parts of these summaries are consolidated and shown towards the end of this chapter. This chapter also provides a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of the council tax system in Scotland, and the main paradigms within which the system operates are examined.
General observations
Accuracy and control of information
6.2 The research team was aware from the early stages of the project that the timing of the data gathering exercise caused difficulties for authorities in Scotland and England, and anticipated the gaps in data returns that this timing caused. It also became apparent to the team during the course of the research, however, that some Scottish authorities were either unable to supply some information, or attached caveats regarding its accuracy; information was not obtainable from routine management information as was the case in English authorities. A key reason for this was the computer difficulties during 1997/98 as highlighted in chapter 5 and elsewhere, which either prevented the information being gathered or made the data so questionable as to be of little value for research purposes. The research team also identified however that Scottish authorities relied heavily on certain information being made available from the Sheriff Officer firms they used, with few if any apparent ways readily open to the authority to check the accuracy of the information supplied, or to obtain more detailed information. The possible inaccuracy of some of the Scottish data, particularly that relating to enforcement, is therefore flagged as a general point. It is also important to flag that, in the research teamÕs view, many Scottish authorities effectively relinquished any management control of the debt passed to the Sheriff Officer, in a way that would not have been countenanced by English authorities when passing debt to an external enforcement agency. The issue of management information is further addressed in the SWOT analysis in this chapter.
128 Comparisons in the in-year collection rates
6.3 Comparisons in the Scottish and English in-year collection rates are made with reference to the Accounts Commission and Audit CommissionÕs figures for receipts as a percentage of net collectable debt, as expressed as a national average. It should be noted that within those figures some English authorities had worse in-year collection levels than roughly comparable Scottish authorities, and a few had approximately the same in-year collection rates. Such instances were infrequent, but show that the in-year collection rates achieved in Scotland and England are not as polarised as the global in-year collection rate figures suggest.
Why is the council tax in-year collection rate in Scotland lower than in England?
6.4 In the research teamÕs view, the answer to this lies in the fact that there are differences in the environments in which the council tax systems operate, as well as differences in the council tax processes themselves. To an extent a distinction between environment and process is an arbitrary one, but the concept provides a useful starting point from which to draw conclusions from the findings.
The environment in which the Scottish system operates
6.5 The following table identifies the key factors relating to the differing environments in which council tax is operated in Scotland and England, which, in the view of the research team, contributed significantly to lower in-year collection rates in Scotland as compared to England, in 1997/98.
Table 29
Main environmental factors contributing to lower in-year collection rates in Scotland compared to England in 1997/98
Factor Comment
The legacy of community
charge debt. Scotland carries a community charge debt equivalent to that for England, but has a population base of approximately one tenth that of England. Much of these arrears would not exist if benefit entitlement had been identified at the appropriate time, but the split of housing and council tax benefits administration between district and regional authorities, and the resistance of some district councils to community charge, hampered the awarding of the benefit. A proportion of council tax payers on low incomes are still paying off these arrears and are not able to maintain council tax instalments at the same time. Particularly with regard to those in tenanted properties, debtors would have been subject to enforcement earlier had Scotland been given the same timescale as England to chase arrears after one month's instalment had not been paid.
The impact of the Debtors
(Scotland) Act 1987 Restrictions on the range of goods that may be subject to poinding and Warrant Sale in Scotland are regarded by Scottish practitioners to favour the debtor rather than the creditor. The same practitioners also hold that bailiff firms levying distress are not as restricted in the range of goods they may distrain upon for council tax debt. This, coupled with the political opposition to warrant sales in areas where debtors were aware that councils would not agree to the carrying out of the sale, weakened the bite of this diligence.
Political resistance to Some revenue officers are inhibited from considering poinding and/ or
Factor Comment
Poinding and Warrant Sales Warrant Sale as an enforcement option, either in toto or in respect of certain categories of debtor, due to member resistance.
Higher council tax bills in Scotland including water and sewerage charges.
Whilst the impact of higher bottom line bills, as a result of the inclusion of water and sewerage charges, on in-year collection rates has not been quantifiable in this report, it is the research teamÕs opinion that the higher bottom-line bill level in Scotland could lead to higher levels of arrears.
Scottish bills contain water and sewerage charges whereas in England a separate bill is issued to households in England by private water companies.
This means that an English household can more easily "juggle" the payment of the two bills in a manner which best suits their income. Scottish households facing a combined bill may be unable to meet the whole instalment and may therefore choose not to make any payment. This would be of particular issue in relation to taxpayers regularly going on and off council tax benefits, in respect of whom arrears can quickly build up in-year.
Data on unpaid water and sewerage charges in England indicates that in 1997/98 presummons notices were issued in relation to 17.6% of domestic accounts, summonses were subsequently issued regarding 1.5% of accounts, and court judgements were obtained in respect of 0.94% of cases.
Public inurement/ resistance
Widespread resistance to and non-payment of community charge was greater in Scotland than in England. Many taxpayers broke the habit of making regular payments of local tax to the council during community charge and this change in habit impacts now on council tax. Scottish taxpayers accrued significant levels of community charge debt, and unlike English councils, which could pursue the debt after one missed instalment, Scottish authorities were prevented by statute from pursuing these arrears until after three instalments were missed. Linked to this, the abolition of the collection of joint rent and local tax payments affected Scottish authorities more than English ones due to the higher proportion of public sector housing.
The impact of
re-organisation Re-organisation gave rise to more complex council billing, recovery and enforcement and benefit issues in Scotland than in England, due to the creation of new councils from the former regional and district councils.
Many staff in revenues and IT sections either took the opportunity to retire or were deployed on to other projects. Employee expertise which had been built up in the 12 former authorities became dispersed within 32 of the new councils.
The impact of Water and
Sewerage charges Scottish authorities are required to collect water and sewerage charges on behalf of the water authorities, as a separately identified element in the council tax bill. There is no rebate available in respect of these charges, thus those on Income Support in Scotland who would otherwise be liable for council tax are still required to pay the water and sewerage charge element of their council tax bill. It should be noted that prior to re-organisation on 1/4/96 sewerage was part of council tax and therefore was subject to the benefit scheme. A high proportion of council tax arrears cases in Scotland relates solely to this charge and whilst they may generate a low proportion of arrears, the caseload itself impacts heavily on the administrative resources of council tax arrears.
Processes in Scotland
6.6 The following table identifies the key factors relating to the differing council processes operated in Scotland and England, which, in the view of the research team, contribute to lower in-year collection rates in Scotland, as compared to England, in 1997/98.
130 Table 30
Main legislative and processing factors contributing to lower in-year collection rates in Scotland compared to England in 1997/98
Factor Comment
Difference in earliest
instalment date. There is a difference of one month between the earliest possible instalment demand dates in Scotland and England. Billing and recovery cycles in Scotland run over a maximum of eleven months in a given financial year, as opposed to twelve months in England.
Difference in reminder
notice requirements Scottish authorities are required to issue two reminder notices. This is thought to have a prime effect on the difference in the number of days taken from issue of bill to issue of final notice in model authorities in Scotland and England: 70 days and 42 days respectively. Although the data does not reveal a direct impact on collection rates, Scottish revenues respondents identify that the removal of this requirement would assist them in pursuing arrears earlier in the financial year.
Differences in actioning
enforcement. The only enforcement method, apart from sequestration and inhibition, which are not true recovery methods in themselves, actioned directly by a Scottish authority is deductions from Income Support (and even the speed of that action depends upon the resource of an external body the Benefit Agency). All diligences in Scotland are done by the Sheriff Officer.
English authorities can carry out more aspects of the enforcement process if they so choose, so have direct administrative control over these processes.
Differences in the control of enforcement activities of external agents
English authorities generally have codes of practice with their bailiff firms setting out clearly what the councilÕs enforcement wishes are, whereas Scottish councils do not, partly because of the status of Sheriff Officers as appointed officers of court. English authorities generally have service level agreements with their bailiffs in place and they monitor the caseload passed to bailiffs more closely than Scottish authorities, through comprehensive management reports and frequent dialogue. Some of the large councils in England have direct links to the Bailiff's computer system.
Differences in the stability
of systems Scottish authorities have had to implement a wider range of changes in revenues computer systems than English authorities. These changes have taken some time to bed in and have impacted on billing, in-year collection and recovery processes. Authorities in England undergoing computer system change have reported similar major difficulties with revenues processing and a resulting decrease in council tax in-year collection levels.
The processing of deductions from Income Support
A higher proportion of council tax accounts in Scotland require deductions from Income Support to be processed than in England, due in some part to the water and sewerage element of the Scottish bill attracting no benefit.
Significant delays in the processing of these applications have been experienced and impact on the ability to commence and/ or complete collection of arrears in-year.
6.7 Several Scottish revenue officers during interviews expressed the opinion that a key difficulty lay in the handing over of enforcement work to Sheriff Officers. They felt that the local authorities should be given the responsibility for administering earnings arrestments, instead of the Sheriff Officer as part of his duty to do diligence. The research team can find no compelling reason for such a fundamental change. Instead, it feels that a maximisation of the existing effectiveness of the Sheriff Officer in enforcing council tax debt is required, and could be brought about by:
• a change to a more compelling requirement on the debtor to supply information;
• clear written policies on collection being provided to the Sheriff Officer including details on the precedence to be given to the various diligences and whether there are any restrictions by the authority on the use of poinding and warrant sale; and
• a greater direction and management control of the arrears cases transferred between councils and Sheriff Officer firms.
What improvements in in-year collection rates are to be aimed for?
6.8 Having used EnglandÕs council tax in-year collection rates as a basis for comparison throughout this report, it is reasonable to assume that the objective would be to raise Scottish year collection rates to a position equivalent to the English levels i.e. a move from a current in-year collection rate of 87.3% to 95.5%. Some of the difficulties that have impacted upon in-in-year collection rates in Scotland have been identified within this report as arising from the bedding in of various earlier changes that either directly or indirectly impacted upon the revenues function e.g. reorganisation introduction of new information technology. Marginal but steadily rising increases in council tax in-year collection rates would be anticipated by the research team if, all other things being equal, Scottish authorities were allowed a period of consolidation to let these changes settle in. Likewise, the introduction of innovative methods in billing and recovery, as has been seen in a number of councils, will also improve collection rates marginally.
Encouragement therefore should be given to councils to seek to adopt enhancements to existing processes that will improve collection rates. It is the view of the research team however that a settled period after re-organisation and improvements within the existing environmental and legislative framework will not, on its own, bring about collection rates comparable with those in England in 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 a goal over the short to medium term, significant and immediate changes in both environment and process issues, as identified above, must be considered. If the increase in in-year collection rate is to be achieved over the longer time period, changes could be instituted more incrementally. The research team offer no view on the optimum time scale over which any consolidation could take place; but that decision would be a key factor in determining the extent of the improvements to the in-year collection rate which feasibly might be considered. The best value process being introduced within revenues functions should in itself assist local authorities in developing best practice and will be a driving force in achieving higher rates of collection. It is important to recognise that local authorities are at very different stages in the bedding in of revenues processes and will thus achieve improvements at significantly different rates.
What would be the impact of change on the council tax system?
6.9 The question of introducing changes in the council tax system in order to bring about improvements in the council tax in-year collection rates in Scotland can be viewed holistically.
The research team offer their own analysis of the strengths, weaknesses, opportunities and threats of the current system based on the 8 M paradigms: manpower, management of the tax, management information, material, methods, marketing, machinery and money.
Table 31
SWOT analysis of changes to council tax system based on views of the research team
Strengths Weaknesses Opportunities Threats services and focus clearly on the key functional areas. To arrange tasks so that the issue of reminders, the monitoring of Sheriff Officer caseload and the physical side of recovery are split, and work is passed through the sections on a steady rolling basis. between the time it takes to bring arrears to court and the in-year collection rate.
A high level of local tax bill arrears impacts on the administrative resources
Provide a greater scope for fraud prevention over and above fraud detection. Acts as a source of information to determine the liable person for council tax. To improve accuracy and turn-round of benefits assessments
To strive to optimally time each stage of the council tax process so that there is a strong correlation between the time it takes to bring arrears to court and the in-year collection rate.
92 Account Commission's Report on Collection of Rates.
Strengths Weaknesses Opportunities Threats go as smoothly as might be anticipated.
For all but the large councils in-house development is not an option, either on cost or because of the lack of skills and experience, Other
To develop standard and ad hoc reports to provide both experience. This will be an additional cost to be
Strengths Weaknesses Opportunities Threats
MATERIAL The quality of data passed to
Sheriff Officers is not very
Potential to use other external enforcement mechanisms e.g.
call centres, visiting teams.
Set codes of practice and p e r f o r m a n c e i n d i c a t o r s
endorsed by each council Possible adverse reaction from some Sheriff Officer
MACHINERY Joint billing of council tax and
rent Long term benefits lost if
stock is transferred to Housing Association control.
Strengths Weaknesses Opportunities Threats
MONEY Central government has already
shown willingness to address the improvement of in-year collection levels, by funding additional resource for community charge and council tax collection for one year.
Councils have a desire to reduce costs, particularly in the light of best value but at the same time may require to increase its costs to achieve higher collection rates maybe at the expense of other service provision.
Table 32
Showing more detailed areas in which changes to council tax system could be considered
Paras. Chapter 2
2.1 Consider allowing Scottish authorities the power to set an earliest
2.1 Consider allowing Scottish authorities the power to set an earliest