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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 1989. 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.

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 1997. The outcome has been an increase in the proportion of remaining council tenants dependent on housing benefit⁷. 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

Dwellings Total Claimants

Council Tax Benefit Scotland England Wales S E W S E W

% % % % % %

Claimants at 100% 378,000 2,973,000 208,000 17 15 17 64 67 73

Other Claimants 212,000 1,480,000 75,000 10 7 6 36 33 27

Total Claimants 590,000 4,453,000 283,000 27 22 23 100 100 100 Notes:

1.Source of Benefit figures DSS Housing Benefit and Council Tax Benefit Management Information System - 1% sample taken on 2/05/98.

2. 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 1993

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 1996. 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.

2.10 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.

2.13 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

functions were passed over to, or aggregated to, the new Unitary Authorities. The remaining districts and counties were left more or less undisturbed within a two-tier structure. Thus out of the full review of English authorities, only one new Council took on an aggregation of local tax and benefits responsibilities from other former authorities, and no authority had to deal with taking on local tax and benefits responsibilities from a disaggregating authority. In England 238 District Councils and 47 Unitary Authorities were in place following reorganisation. The following table shows the authorities with council tax billing and collection responsibilities following reorganisation in 1996.

Table 4

Authorities with council tax billing and collection responsibilities following reorganisation

Scotland England Wales

32 Unitary Authorities 32 136 the Council of the Isles of Scilly) Shire Districts

22 Unitary Authorities

Issues arising from reorganisation

2.14 Scotland has been uniquely affected by the recent reorganisation of local government.

The new unitary authorities had to deal with taking on local taxation information from former authorities (the Regions) that were disaggregating their systems and combining them with the work of the former district councils. At the same time these new authorities had to deal with aggregating housing benefit systems without the benefit of the continuity of former highly experienced IT staff, many of whom had either retired or had moved to different councils or projects.

2.15 In Scotland the abolition of the Regional Councils meant that major local taxation functions were transferred to a much larger number of Unitary Authorities. This meant that not only were senior officers in the new authorities faced in many instances with functions with which they were unfamiliar, but so too were many of the politicians comprising the Councils of those new unitary authorities.

2.16 Thus were created a number of new issues. The most significant of these for their impact on local taxation and benefits administration were:

§ the desegregation or aggregation as appropriate of manual and computer systems;

§ the division or combination of resources (including Revenues and IT staff and sharing of common computer hardware and software) for these functions among the new unitary authorities; and

§ the learning curve for both revenues staff and members of Councils, many of whom had had no previous experience with collection and recovery of local taxes, their only previous revenue collection function having been collection of council

2.17 The same conditions did not however exist in England and Wales. Although there had been major changes, they did not, except in a very few cases, impact upon the administration of local taxes and benefits. Thus members and officers alike were able to continue with systems, administration and policy in respect of these functions with very little disruption or need to learn new regulations or cultures. The only even nearly comparable situations have been where local authorities have amalgamated, with the consequent need for the aggregation of systems, staff, facilities and policies; this situation poses substantially fewer problems than the situation in Scotland where the mixture of disaggregation and aggregation has been a major hurdle.

The impact on IT systems

2.18 The fast pace of change in local government has also impacted upon support services.

There is evidence that the IT service suppliers to local government have not always succeeded in keeping up with the pace, particularly in so far as their services to Scottish local government is concerned. Of particular note is a comment by Kneen and Travers⁹ made regarding the council tax implementation in Scotland:

"It would appear that those who were reliant on external suppliers had a more difficult time, partly because of the orientation of the software houses to the dominant English market. There was no software available which was designed specifically to meet Scottish requirements, and Scottish users had to make do with often imperfect adaptations of English software"

2.19 The IT suppliers are now addressing more specifically the needs of the Scottish market but there is still a long way to go before the needs are fully met. This is discussed further in chapter 5.

The impact on staffing

2.20 The nine former regional councils responsible for the issue of council tax bills held the body of expertise over the wide administration and policy formulations of the Revenues Service. This expertise since 1996 has been spread over 29 mainland councils and the scarcity of such experience has had an impact on the pace at which many tasks are accomplished. Responses at interviews in Scottish authorities indicate that a number of staff resource issues arose from reorganisation: staff had to take on new responsibilities and had to adapt to new working practices; staff used the opportunity either to leave revenues work entirely or to look for better paid employment; a large scale training requirement was created;

and at least some increases in workload occurred. Responses at interviews in Scottish authorities included:

ÒWe have a mixed bag of staff skills. The majority [of staff] from the former Regional Council is very good. The quality of revenues staff from the former District Council is generally mediocre. The District staff had previously been on lower pay scales. They were upgraded on reorganisation, but had a larger change to make in the shift to generic working. Recruiting staff is now very difficult because there are a

9 Page 15 of Implementing The Council Tax by Pat Kneen and Tony Travers sponsored by both the Joseph Rowntree Foundation and Local Government Chronicle - published by LGC Communications 1994

number of neighbouring authorities offering higher pay than usÓ. [This authorityÕs collection rate for 1997/98 was below the national average figure.]

ÒThe quality of our staff is variable. When we went over to generic working those [the former District staff] with a benefits background did not want to be involved in the collection of revenues and this caused considerable problemsÓ. [This authorityÕs collection rate for 1997/98 was above the national average figure.]

ÒWhen you look at the staff to chargeable dwellings ratio, reorganisation has meant that we are now working with one third less staff than before. This has caused us problems in terms of achieving good collection rates, particularly as some of the best experienced staff left rather than go through reorganisation.

Ò The staff we have are very willing and able, but only 35% of the revenues staff that were here at reorganisation are still with us. We have no formal programme of training Ð financial incentives from central government for this would be helpful. The staff have had some training in telephone debt recovery techniques and this has been usefulÓ. [This authorityÕs collection rate for 1997/98 was below the national average figure.]

2.21 Not all Scottish authorities reported difficulties regarding staff resources:

Our staff is fine. They are good, committed, well motivated and well trained. Well over 40% have gained technician qualifications with the IRRV. It has been difficult to ÔpinchÕ experienced staff from other authorities because of geographic considerations, so we have had to train up new staff from scratchÓ. [This authorityÕs collection rate for 1997/98 was above the national average figure.]

2.22 The following observation by a revenues officer in one of the few English authorities to undergo full scale reorganisation, reinforces the point made by Scottish practitioners that a reorganisation process impacts on staff resourcing, and that Scottish authorities were not unique in terms of the difficulties they experienced:

ÒOur staff quality is poor. [A number] of authorities aggregated into this one at reorganisation and most of the good staff went elsewhere. On a scale of one to ten, with ten being the best quality, I would rate our staff as 5Ó. [This authorityÕs collection rate for 1997/98 was below the national average.]

2.23 It was clear from interviews that several senior Scottish revenue officers felt that in terms of staff expertise, their authorities were still trying to improve council tax collection from a position of weakness. Staff training was perceived as very important, but any comprehensive training programmes required financial support that would strain current budgets. A number of the revenues officers interviewed were of the opinion that financial assistance from central government to support staff training would be welcomed by theirs and other Scottish authorities. The research team supports the view that an allocation of central funds for training of council tax staff merits consideration.

Comparison of statistical bases

2.24 When comparing average collection rates for Scotland and England, it should be noted that a large sized authority whose collection rate was significantly lower than that for other authorities would have far greater impact upon the Scottish average collection rate figure than a poorly performing English authority. This is due to the far greater number of authorities with council tax responsibilities in England than in Scotland and to their relative proportion of the national total to be collected by each council in England. For example, GlasgowÕs amount to be raised from council tax as a percentage of the total Scottish net council tax collectable (excluding water and sewerage charges) is 11%¹⁰ and its number of council tax dwellings equates to 12.3% of the national total¹¹. Birmingham's amount to be raised from council tax is 1.7%¹² of the total English net council tax collectable, and its number of council tax dwellings equates to 2.0%¹³ of the English total (excluding Wales).

Although the data shown for England relates to the data year 1998/99, Table 5 illustrates these relative proportions and shows the average in-year collection rates for different groups of billing authorities.

10 Scottish Office Annual Returns of Council Tax

11 Scottish Office Grant Aided Expenditure 1999Ð00 Report

12 Audit Commission's Annual Council Tax Collection figures for 1998/99.

13 DETR Finance Statistical Unit

Table 5

Amounts to be raised from council tax as a percentage of the total net council tax collectable for England (1998/99) together with figures for Scotland (excluding water and sewerage charges)

(1997/98)

Inner London Boroughs 500,759 443,024 88.5 4.7

(incl. City of London)

Outer London Boroughs 1,042,636 977,574 93.8 9.8

London Boroughs 1,543,395 1,420,598 92.0 14.6 *

Metropolitan Districts 2,066,719 1,961,624 94.9 19.5 *

All Purpose Authorities 1,613,449 1,531,698 94.9 15.2

Shire Districts 5,372,915 5,219,024 97.1 50.7

Shire Areas 6,986,364 6,750,722 96.6 65.9 *

England - Totals 10,596,478 10,132,944 95.6 100 *

Birmingham City 168,458 158,303 94.0 1.7

1997/98 Net Collectable

The legislation governing collection and recovery of local taxes

2.25 Collection and recovery of council tax in Great Britain is governed by the Local Government Finance Act 1992 together with the associated Regulations relating to Scotland and England respectively. Chapter 3 examines in detail the differences in council tax legislation between Scotland and the rest of Great Britain and sets out the implications of those differences. Collection and recovery in both Scotland and England is also governed by legislation covering debt recovery more generally.

2.26 Scotland has had a substantial review of its law relating to debt recovery and the impact of the Debtors (Scotland) Act 1987 has recently been evaluated by the Scottish Office Central Research Unit (now known as the Scottish Executive Central Research Unit). The programme of research was commissioned by the Scottish Courts Administration on behalf of the Lord Advocate. The aim of the research was, "to provide an overall assessment of the impact of the Act and the extent to which it has met its objective of achieving an equitable balance between its two main aims of ensuring effective machinery by which creditors can recover their debts and protecting debtors from undue economic hardship and personal distress¹⁴". It should be noted that the evaluation of the Debtors (Scotland) Act 1987 did not examine summary warrant procedures.

The Scottish and English courts systems for effecting the recovery of council tax

2.27 There are many similarities between the legal powers in England and Wales and those in Scotland in relation to the collection and recovery of local taxes. However, The differing legal codes and courts systems do introduce some marked differences in the application of

2.27 There are many similarities between the legal powers in England and Wales and those in Scotland in relation to the collection and recovery of local taxes. However, The differing legal codes and courts systems do introduce some marked differences in the application of