Executive Summary
The study
This Report presents the results of a study carried out for the Scottish Executive during 2005 on 'Improving Council Tax Collection in Scotland'. The study aimed to: identify and quantify the factors which account for differences in Council Tax collection rates between different local authorities in Scotland, England and Wales; understand the nature of non-payment from different perspectives including that of non-payers; and recommend best practice and other measures which could promote higher collection rates.
The study entailed: reviewing previous research and policy documents; undertaking statistical analysis of CT collection and other data at different levels across the three countries; undertaking case studies in half a dozen local authorities; contacting and interviewing a number of 'non-payers' in these areas.
Issues and structures
'Non-payment' refers to a broad range of circumstances, including people who have paid nothing, people in partial arrears, people with 'technical' arrears generated by system properties ( e.g. delay in setting up direct payments), and people with complex histories and/or multiple debts. It comprises a mixture of those who 'can't pay' and some who 'won't pay', but many cases cannot be simply classified. Half of non-payers are on CT Benefit, and more would be eligible if they actually did pay and claim.
The CT recovery mechanisms and sanctions available to Scottish local authorities are different from and generally weaker than those available in England. Key problems/limitations relate to: water and sewerage; timing of process; power to seize goods or property; and committal powers. Some difference in the use of powers reflects a general reluctance in Scotland to criminalise non-payers. In common with England, there is concern to access information from HMRC, to be able to attach all benefits, and to capitalise on the reform of bankruptcy law.
Council Tax and water charges are regressive taxes and this is reflected in the findings that non-payment is associated with low income, deprivation and that many are concerned about issues of affordability and fairness.
Statistical analysis
Most of the variation in collection rates between local authorities and smaller areas can be explained statistically by objective demographic and socio-economic factors. The strongest drivers of variation in CT collection rates are measures of poverty and deprivation, with unemployment and transitory/partial benefit status being particularly associated with problems. Demographic factors include the share of older people (fewer problems) and of single person or lone parent households (more problems), as well as indicators of transitory residence, including private renting, and more urbanised areas generally.
Ward level analyses help to separate the effect of local authority administration from the above factors, and confirm that there are quite significant differences between local authorities' collection rates, even after controlling for socio-demographic factors. This evidence, and some of that from England, suggests that it is in deprived urban areas that administrative effectiveness can make most difference.
It is also clear that there is a large systematic difference in collection rates (4-5% points) between Scotland and England, which cannot be explained by the socio-economic or demographic factors included in a combined statistical model. This difference probably reflects structural differences as well as administrative and cultural factors.
Individual data indicate that non-payment incidence tends to be higher for those on benefit, particularly partial benefit, but that there is still a large number of non-payers who are not on benefit. Comparisons with other low income benefits data suggests that, in some areas of Scotland, a lot of low income households are not engaging with the Council Tax system at all.
Perspectives on non-payment
Council officials and independent money advisers provide a broadly consistent perspective on the reasons for non-payment, which supports the conclusions from both the statistical and qualitative parts of the research.
The problems associated with collecting water and sewerage charges with Council Tax in Scotland, and their interaction with the benefits system, are seen as a major issue by council officials. Transient populations in private renting are a more general problem for collection services.
Poverty and low income are universally perceived as a major cause of non-payment, with a particular concern about people with some non-benefit income or moving between different benefit statuses. Multiple debts are a common and growing factor in non-payment, with Council Tax often assigned low priority. Other factors like literacy and language and mental ill-health may be relevant for particular individuals and groups.
There is a group of non-payers who remain hidden from the system, through deliberate avoidance of contact, while others fail to face up to their problems.
Negative perceptions of Council Tax are common, but views about what services are paid for may be poorly informed. The Community Charge left a long legacy of arrears and a non-payment culture in some areas, but this is now less of a factor.
Non-payers' characteristics, circumstances and views
A qualitative interview survey with 29 people currently in Council Tax arrears yielded a rich picture of the circumstances and views of non-payers. However, this survey was intrinsically unlikely to represent those who avoid payment by avoiding all contact and moving around frequently.
A range of reasons for non-payment were voiced by non-payers, but there was an almost universal experience of affordability or hardship as the key reason for Council Tax non-payment. The study did not find evidence of a groundswell of objection to Council Tax in principle. But in general respondents were struggling financially, and Council Tax was afforded very low priority alongside other debts and financial commitments.
Chronic financial hardship was particularly an issue for respondents living on state benefits, whereas respondents in work on low or irregular incomes experienced more episodic problems, often triggered by one-off events such as ill-health or a previous redundancy.
Changes of circumstances, such as illness or redundancy, and transitions in and out of Council Tax Benefit eligibility appeared to be particularly disruptive for many respondents, compounded by some misunderstandings and delays in communication. The double burden of paying both CT arrears and current liabilities compounded affordability difficulties for many. These financial difficulties had negative impacts on quality of life, particularly on health.
Respondents were broadly positive about contact with local authority revenue and benefits staff, while giving more mixed views of sheriff officers. There were concerns about too-steep repayment schedules being pushed onto them, and about a lack of personalised approach. Money advice had rarely been sought by respondents, and there was a relatively low level of knowledge of this service.
Perceived unfairness regarding ability to pay was the most commonly raised general concern about the system. One third of respondents said that Council Tax should be based on ability to pay. Some were concerned about value for money, relationship to use, availability or quality of services. However, levels of knowledge of what services were paid for were low.
Collection process issues
All councils generally seek to maximise their collection rates, but the level of political support and management focus has varied.
Important general managerial approaches to improving performance include quantitative targets, use of IT for monitoring and targeting, customer orientation, specialist arrears teams, adequate staff numbers and skills, and attention to staff motivation and feedback. Formal benchmarking and comparison within peer groups is much more established for CT collection in England, and relatively lacking in Scotland.
Early billing and consistent speedy processing of cases through the subsequent stages are clearly important to keeping on top of collection. Maximising use of direct debit is a major theme in relation to payment methods, with a changing mix of other methods featuring depending on the type of area.
The significant differences between Scotland and England/Wales in formal sanctions are reinforced by differences in the extent to which they are utilised, directly or as a threat. The timing of enforcement action and authorities control over the process are more constrained in Scotland, partly owing to the role of sheriff officers.
Deductions from benefits are an important mechanism but structural features limit their ability to collect all CT due. CT Benefit take-up may not be maximised owing to the complexity of the forms or the failure to provide documentation on change of circumstances.
Recommendations
Key recommendations for national policy include:
- Modifying the discount on water-sewerage charges for households on low income benefits to bring about compatibility with benefit system allowable deductions;
- reviewing CT banding structure at the lower end, in the context of revaluation;
- ability to make deductions from all state benefits*;
- by-pass Summary Warrant stage for most roll-over benefit deduction cases and for the seeking of information;
- routine access to HMRC information on employers and banks*;
- direct collection of CT from certain private landlords, linked to new registration scheme.
The items marked * clearly involve reserved UK-wide matters.
Authorities displaying good practice and results had a clear managerial commitment and political support. Beyond that there is no single technical fix or magic bullet, and best practice may vary with local circumstances. However, the following areas of practice offer scope for improvement for many authorities:
- writing off more of the older arrears;
- frequent, close communication with relevant agencies;
- promoting Direct Debit, telephone and other flexible payment routes;
- earlier billing and payment/ reminder timetable;
- benefits check to ensure CTB take-up and income maximisation;
- speed in processing CT queries and CTB claims;
- targeting of recovery initiatives on specific groups/areas, including areas with low CTB take-up relative to general low income benefit numbers ;
- reviewing contracts with sheriff officers;
- benchmarking practice with other councils;
- staff training, performance targets, and feedback both ways on performance and 'what works';
- reference of cases with multiple debts or budgeting problems to money advice services;
- outreach to particular groups e.g.BME.