STAGE
Introduction
4.1 This chapter identifies the principal legislative differences in the law governing council tax in Scotland and England from the enforcement stage onwards.
The enforcement process
Liability Orders and Summary Warrants
4.2 In England, the local authority applies to the MagistratesÕ Courts for a summons requiring the debtor to appear before the magistrates to show cause as to why the debt has not been paid. Upon satisfaction to the Court that the debt is due and payable, the Magistrates issue a Liability Order. If the debtor fails to appear in answer to the summons, the Magistrates can proceed as if the debtor had appeared. Thus, there is no hindrance to the process of recovery merely by the debtor failing to appear before the Court. It is the view of a few English authority respondents that the issue of the summons and the public nature of the hearing has a deterrent effect on the debtor.
4.3 In Scotland once a 14 day notice (a final notice) is issued, and following the expiry of that number of days without payment by the debtor, the local authority may apply to the Sheriff for a Summary Warrant. It should be noted that Scottish authorities have the option to raise a payment action rather than using the summary warrant procedure (as mentioned in chapter 2 para. 28) but the latter procedure is used in almost all cases. Under summary warrant, the Sheriff does not summon the debtor to show cause why the debt has not been paid and so the debtor has no right to appear before the Sheriff and has no opportunity to defend himself against the issue of the Summary Warrant. This would appear to be a much faster system than that in England in which the debtor has to be summoned to appear before the Magistrates and a hearing has to take place before a Liability Order can be issued. The majority of Scottish Revenues Officers interviewed felt that this latter system has the advantage for collection purposes that the debtor is called publicly to account for non-payment, is individually notified of the court hearing in advance of the session being held and has the opportunity to defend the issue of the liability order. Although administratively cumbersome and relatively expensive in relation to an application for summary warrant it has to be recognised that, in Scotland, Revenues Officers have the option to go for an individual payment action. The research team believes that Scottish Revenues Officers should give consideration to the wider use of a decree in an action for payment in appropriate cases. The one over-riding advantage of the English system as perceived by many Scottish interviewees is the advance notification to the debtor by the court that action is about to be taken.
4.4 Whilst the granting of either a Summary Warrant or a Liability Order is a matter of public record, it is not a matter for record against a personÕs credit status in the way that a
sufficient by those revenues officers interviewed on this point to counter balance this deficiency. It was observed by some of the English revenues officers in the research that making the issue of a liability order a matter for reflection in the credit status of an individual would be an added pressure upon debtors to avoid these proceedings; although technically, since the Court records are public documents, the credit referencing agencies could find out this information if they so wished.
4.5 Having obtained a liability order for outstanding debts, the English local authorities then have a range of remedies available to them which are all under their direct control and use of them is entirely at their discretion. They can either employ an outside body of bailiffs for the levy and execution of distress, or they can carry out these processes using their own internal staff.
4.6 This compares with the legal requirement in Scotland for the execution by Sheriff Officers of several of the remedies available to Scottish local authorities following issue of the Summary Warrant. Table 19 below sets out the principal differences in execution of remedies.
Table 19
Principal differences in execution of remedies in Scotland and England
Remedy in
4.7 As can be seen from the information above, the local authorities in England have considerably greater direct control of the various remedies. They also have power to switch from one to another remedy and back again if required, at their discretion with greater administrative ease because, if they choose, they need not involve an outside bailiff. Once a Sheriff Officer has executed any one of the three diligences a local authority cannot then raise an action for the recovery of a sum that has been executed72. It should be noted that the execution of a poinding in itself is not execution of the diligence. It would have to be execution of the full diligence of poinding and sale.
4.8 The Debtors (Scotland) Act 1987 formalised and regularised debt recovery and enforcement law and practices in Scotland. It also provided greater protection for the debtor particularly in moderating the harsher aspects of debt enforcement and recovery that had existed before 1987, such as Warrant Sales being conducted at the debtorÕs home. The same Act also removed the sanction of committal to prison for non-payment of local taxes.
The frequency of Summary Warrant and Liability Order runs
4.9 The charts A4-1 and A4-2 show collection rates for each sample authority with the number of Summary Warrant petition and Liability Order summons runs carried out by the authorities, expressed as a percentage of a maximum number of runs of 10 carried out by the sample group in each country (this being done so that the y axes would relate to percentages in both instances). The frequency of summary warrant runs/ liability order runs in the sample groups ranged from 1 to 9 for Scotland, and 3 to 11 for England. The charts show that as the percentage of runs declines across the tables, the collection rates (given at the top of each authorityÕs data bars) do not follow in decline. This indicates that the number of recovery runs carried out in 1997/98 did not have an appreciable effect on the collection rates achieved.
Note : Sorted by percentage number of runs.
Chart A4-1
Actual number of applications for summary warrant expressed as a percentage of a maximum number of 10 - comparison with percentage collection levels
92.8 89.7 85.4
93.1 87.1
79.8
94.5 94.2
88.9 88.7 91.4 87.7
93.8 85.5
93.3 95.9
89.3 90.8 85.7
75
85.4 83.2 91.7
80.7 90.5
0 20 40 60 80 100 120
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Scotland :Number of Councils providing data
Percentage
Percentage number of Applications for Summary Warrant Percentage In-year Council Tax Collection Rate at 31/03/98
Note : Sorted by percentage number of runs.
Chart A4-2
Actual number of court summons runs expressed as a percentage of the maximum number of 10 - comparison with percentage collection levels
93.6 97.2 93.9
89.5
96.2 93.0 96.0 96.0 93.8 97.4 95.7 97.5 92.4
82.0
98.0 97.8
94.4 90.7 97.5
0 20 40 60 80 100 120
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
England and Wales - Number of Councils providing data
Percentage
Percentage number of runs Percentage In-year council tax collection rate at 31/03/98
Attachment of income support
4.10 In those cases where a debtor is in receipt of Income Support, the local authority may apply to the Benefits Agency for an attachment of Income Support or Jobseekers Allowance. If the application is accepted, the local authority will be able to have deductions made from the debtorÕs benefit of a prescribed amount by the Benefits Agency.
The deductions will then be passed over to the local authority, usually on a monthly basis.
If a number of applications for deductions have been made in respect of a debtorÕs Income Support, (either by various creditors or by the local authority in respect of two or more years debts), the attachments will be applied up to a maximum amount of deduction from the Income Support payment. In this situation any further applications will be treated as pending, and will be dealt with as existing attachment orders are ended, in order of date of application. The following two flowcharts illustrate the processes involved in administering an application for Income Support in Scotland and England. In essence the two sets of processes are the same for both countries. The English set of processes may look to be more complex than those for Scotland. An important point to be drawn out, however, is that English local authorities have more opportunity to undertake the recovery work directly, rather than having to use an external agency, and to keep control of all the related administrative stages.
76 Flowchart 1
Typical processes for recovery of council tax through Income Support in Scotland
Flowchart 2
Typical processes for recovery of Council Tax through Income Support in England
78 Frequently changing Income Support status
4.11 The number of cases frequently going on and off Income Support and therefore on and off 100% council tax benefit impacts more on Scottish recovery processes (and thus Scottish collection rates) than on the recovery processes of English authorities. The three key factors are:
• the difference in accruing payment burdens for Scottish and English Income Support claimants;
• the processing of applications for attachments of Income Support, and
• The interface with Sheriff Officers.
The first two factors are dealt with below; the interface with Sheriff Officers is expanded upon later in this chapter (see para. 39).
The difference in accruing payment burdens
4.12 Whilst this research primarily examines the reasons for the differences between Scotland and England in in-year collection levels for council tax, the fact that water and sewerage charges are collected as part of the council tax bill in Scotland does impinge upon the performance level for Scotland because of the resources that have to be used to administer the collection of a combined bill and the effect of the calculation by which sums are deemed payable to the water authorities (see Chapter 2 para. 43).
4.13 Claimants of 100% council tax benefits in Scotland still have to pay the water and sewerage element of the council tax bill. A typical taxpayer in England on Income Support with no local tax arrears will not have any council tax liability in respect of the period he is claiming Income Support and will not figure in local authority recovery cycles. A similar typical taxpayer in Scotland will however continue to figure in the council tax billing runs and recovery cycles. That taxpayer in England, on coming off Income Support, will simply become liable for council tax from the time he is off Income Support. The taxpayer in Scotland however becomes liable for council tax from the time he is off Income Support and may have arrears for any balance of water and sewerage charges which have not been met by the attachment order. All other things being equal, if both taxpayers then fall into arrears and go back onto Income Support, the taxpayer in Scotland will already have a larger debt burden accrued than the taxpayer in England. The difference between their respective debt burdens would become greater each time they both were to go on and off Income Support.
4.14 Table 20 shows that Scotland has a higher percentage of residents on Income Support than England and consequently will require administering potentially more arrears accounts. It can be seen that Scotland also has a higher percentage of Council Tax Benefit Claimants in receipt of Income Support. The majority of dwellings are connected to mains water and sewerage and accordingly it is likely that Scotland will require to administer more Attachments of Income Support than would be the case in England because of the
existence of Water and Sewerage charges. Overall Scotland also has a higher percentage of households on benefit, 27% against 22 % in England. This has an impact on the administration of arrears. From Table 6 in Chapter 2, it can be seen that in one Scottish authority, 7% of the amount of one council's arrears outstanding for Year 1997/98 was attributable to those on Income Support receiving 100% Council Tax Benefit. The total number of households receiving 100% council tax benefit and in arrears, however, equated to nearly 13% of the total number of households. Whilst the figures only relate to one Scottish authority, it is reasonable to assume that these figures would be broadly comparable to those of others. Thirteen per cent is a significant proportion of households for a Scottish authority to pursue for arrears, especially when it is considered that this category of debtor is not an issue for English authorities.
Table 20
Percentages of residents on Income Support in Scotland, Wales and England, 2 May
1998 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 Note:
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
The processing of applications for attachment of Income Support
4.15 The length of time taken to reach Summary Warrant stage in an authority has an impact on the earliest date on which attachment of Income Support may commence, though any bearing that this has on collection rates is linked with other factors as outlined in the next paragraph. The following flowchart illustrates the shortest time scales over which deductions of Income Support were processed in 1997/98, for each of the fastest performing authority, a typically performing authority and the slowest performing authority.
80 Flowchart 3
Minimum time scales over which deductions of Income Support were processed in 1997/98, in respect of the fastest performing authority, an average- performing authority and the slowest performing authority
Key: ABO represents Attachment of Benefit Order BA represents Benefits Agency
4.16 The above flowchart illustrates that even for the authority taking the most prompt enforcement action in 1997/98, even in respect of the fastest processed applications for deduction from Income Support, it was not able to collect in-year the minimum council tax arrears level. Three authorities fell into the category of slowest performing, unable to process any attachment applications within the year.
4.17 It became apparent in interviews with some of the Scottish practitioners that their authorities were experiencing significant difficulties in the processing of applications for Income Support by the Benefits Agency. Factors were the backlog of applications to be processed, limited numbers of applications that the Agency would undertake to process over a given time period, the frequency of the allocation of deduction payments to the authority, and the allocation of deductions to particular yearsÕ arrears. One authority highlighted the problem in this way. The earliest date that they could obtain Summary Warrant in the financial year was in August. If the council knew a person was on Income Support, an application for attachment of their benefit would be sent in September. If deductions began in September, only the amount collected until the end of March would influence their in-year collection figures. Cases of taxpayers going on and off Income Support and those with non-dependant deductions73 caused further administrative delays and impeded in-year collection.
4.18 In September 1997/98, the same authority identified 5,000 cases for applications in respect of bills only containing the water and sewerage charge element of the council tax demand and 2,000 cases in respect of council tax bills for higher amounts. However, the Benefits Agency informed the authority that it could not cope with this volume of applications immediately, and gave a performance target of 100 applications per week. To quote the respondent:
Ò Even if the authority had managed to obtain Summary Warrants for these cases a few weeks earlier in the year, we would still have run into the DSS brick wall on processing applications in terms of upping our in-year [collection] rate.Ó
4.19 Another Scottish respondent described a similar situation in his authority, where again a limit of 100 processed applications per week was encountered:
Ò Our first recovery cycle generated 7 or 8 thousand for Summary Warrant, which in turn generated 2,000 letters of application [for attachment of Income Support].
Most of those will relate to the water and sewerage element of the bill only. It took 20 weeks just to get some of those cases processed Ð they were not even particularly efficient in doing 100 cases per week. It is not even as if we were collecting that money for ourselves Ð we were doing it for the Water Authority and receiving £4 per case for it.
ÒAnother problem as I see it relates to poll tax. We had £16 million outstanding at the end of poll tax. A lot of people with these arrears were not in receipt of Income
73 Deductions made from the income support assessment of the claimant, which reflect deemed contributions to household costs by non-dependants.
82
Support then, but they are now. The deductions for those arrears will carry on for years before the debt is cleared. So you will never get any money for this yearÕs debt through attachment, because this yearÕs debt is at the back of a debt queueÓ.
4.20 Respondents also commented that the allocation of deduction payments to the local authority in 1997/98 affected collection levels. At that time, it was usual for the authority to receive deduction payments on a quarterly basis. With applications not being sent until the September, and the subsequent processing delay, this meant that there was a very small window of opportunity for the authority to receive payments before the end of the financial year and thus to be recorded in the collection levels. Payments were now being sent to the authority on a monthly basis.
4.21 One Scottish authority reported that, in the case of multi-year debtors, they had had difficulties with the Benefits Agency allocating deductions to the wrong yearsÕ arrears.
This necessitated the frequent checking of individual records for errors.
4.22 Four English authorities were subsequently contacted by telephone and asked about their experiences with the Benefits Agency. All reported that they had had no significant problems, although they had also received quarterly payment of deductions at that time.
There were no problems with backlogs, no quotas attached to numbers of applications processed and turn-round times were reasonable (four to five weeks was quoted by one major metropolitan authority, who also held regular liaison meetings with the Benefit Agency staff). These four authorities reported no problems of allocation of deductions to incorrect years. This experience may be expected because of the substantially lower number of applications for Attachment of Income Support by virtue of the absence of the effect of water and sewerage charges and the lesser effect of non-payment of the community charge.
4.23 A small number of Scottish respondents raised the view that they would see merit in provisions which allowed income support claimants to request deductions of council tax from their benefit payment, so that such deductions could be remitted direct to the local authority. One revenues practitioner stated that since the implementation of council tax his authority had received a small number of requests from taxpayers on income support for
4.23 A small number of Scottish respondents raised the view that they would see merit in provisions which allowed income support claimants to request deductions of council tax from their benefit payment, so that such deductions could be remitted direct to the local authority. One revenues practitioner stated that since the implementation of council tax his authority had received a small number of requests from taxpayers on income support for