Rutland County Council will be asking Cabinet to write of £87,863.85 debts owed to council
Some of the debts are unavoidable care debts and the person has died.
Other should be pursued.
I am not sure Rutland County Council has ever pursued a council tax debt to the stage of sending a resident to prison. If I did not pay my share I am sure I would be the first. last year I was late paying by a few days and receive quite threatening communications from Rutland County Council.
Perhaps Can't Pay? We'll Take It Away! could make a TV Special here in Rutland,
The Council each year claim this figure is low add all the years together and it is high loss of
revenue.
Cabinet meeting to be held on 20th March 2018 at 10am
Report No: 21/2018
PUBLIC REPORT
CABINET
20 March 2018
WRITE OFF OF IRRECOVERABLE DEBTS
Report of the Director of Resources
Strategic Aim: Sound Financial and Workforce Planning
Key Decision: No Forward Plan Reference: FP/240817
Exempt Information Yes - APPENDIX A contains exempt information as
defined in paragraph 2 of Part 1 of Schedule 12A of the
Local Government Act 1972
Cabinet Member(s)
Responsible:
Mr Gordon Brown Portfolio Holder for Regulatory
Services, Waste Management, Property Services,
Culture & Leisure, Finance.
Contact Officer(s): Saverio Della Rocca, Assistant
Director - Finance
01572 758159
sdellarocca@rutland.gov.uk
Andrea Grinney, Revenues and
Benefits Manager
01572 758227
agrinney@rutland.gov.uk
Ward Councillors N/A
DECISION RECOMMENDATIONS
That Cabinet:
1. Notes the action taken to recover outstanding debts.
2. Approves the write off of the debts shown in Appendix A.
1 PURPOSE OF THE REPORT
1.1 The purpose of this report is to seek approval to write off debts, over the value of
£2,500, where officers believe that there is little or no prospect of recovering them.
2 BACKGROUND AND MAIN CONSIDERATIONS
2.1 Overview
2.1.1 The Council collects council tax, business rates, overpaid housing benefit and
sundry debtor income. Every effort is made to collect all monies due by the most
appropriate and effective method. This includes reminder letters, attachment of
earnings and benefits, civil enforcement action and special arrangements to pay.
2.1.2 The Assistant Director-Finance has delegated authority to write off debts up to
£2,500 and debts above that level are written off by Cabinet. Cabinet are being
asked to write off debts of £87,863.85 which officers believe cannot be recovered.
2.1.3 The Council has a good track record of collecting debt and in the context of these
collection rates, the level of proposed write offs is relatively low. Current issues in
relation to type of debt are given below. The Corporate Debt policy is also being
reviewed this year.
2.2 Council Tax
2.2.1 The Council has above average collection rates. The national average for all
Councils in England and Wales is 97.2% for 2016/17.Our collection rates are
typically around 98.9% in year. Our forecast collection rate for 2017/18 is 98.9%.
2.2.2 The recovery process is defined in legislation and a set process must be followed.
Instalments are due on the 1st of each month. For example, the first instalment is
due on 1
st April. If this first instalment is not paid the Council would only be able to
obtain a Liability Order to take enforcement action towards the end of June, by
which time further debt will accrue. If a Liability Order is obtained a number of
measures can be taken to recover the debt which include attachment of earnings,
attachment of benefits, referral to enforcement agents, bankruptcy and placing a
charge on a property.
2.2.3 There are a small number of “difficult to collect debts” (c30 cases with arrears on
average of £4,500) where the statutory process has been largely exhausted.
Officers are left with three choices a) we monitor and continue to pursue as best
we can; b) we write off the debt or c) we pursue committal action (but this can
result in the debt being expunged if a prison sentence is given so this is only used
as a last resort). We are requesting write off of one debt that falls into this
category.
2.2.4 We have recruited a specialist recovery lead officer and this has had a significant
impact on our difficult to collect debts. We have started committal action for three
cases and this has resulted in contact from debtors and payments are being
made.
2.3 Business Rates
2.3.1 The Council has above average collection rates, but Members should note that
only c500 businesses pay the full charge with many benefiting from reliefs. This
has helped keep our collection rates high as most Small and Medium-sized
Enterprises (SME) are not required to pay any rates.
2.3.2 The recovery process is defined in legislation and a set process must be followed
as detailed at point 2.2.2.
2.3.3 Our experience tells us we have two problem areas:
Businesses going into liquidation – in this event, we are a non-preferential
creditor and as such we come below HM Revenues & Customs, employees’
wages etc. as preferred creditors. In Rutland, we regularly see public houses
struggling to stay in business and often close down. The Government has
recognised this and given a £1,000 rate relief for public houses with a rateable
value of less than £100,000 for 2017/18 and 2018/19. We are requesting write
off of two cases that fall into this category.
Undiscovered businesses (e.g. someone running a business unbeknown to
us) – In this case, if we identify a new business then we can raise a bill
accordingly but we can only the collect amount owing for the existing year.
We have an Outside Inspector who does identify such instances but there is
always a high residual risk that businesses exist that we are not aware of.
This is a common issue particularly in rural areas and two cases have been
presented for write off.
2.4 Housing Benefit Overpayments
2.4.1 The Council pays out £5.2m Housing Benefit (HB) every year, overpayments arise
when claimants have a change in their circumstances and are not entitled to the
amount that they have been paid e.g. an increase in their earnings. As the Council
is not aware of changes in circumstances until it is notified then an overpayment is
inevitable. Overpayments can also arise as a result of fraudulent claims e.g.
undeclared savings. HB overpayments are difficult to collect because claimants
generally have low incomes, they may be affected by welfare reforms i.e. underoccupancy
charges (bedroom tax) or they may have other debts. Overpayments
collected from on-going entitlement to HB or other benefits are restricted by
legislation which is currently £11.10 per week.
2.4.2 Recovering overpaid HB is very difficult as people tend to be on a low income and
have numerous changes in their circumstance i.e. partner moves out, wages
increase, grown up children move in or out, health deteriorates. We often see that
people have other debts that they are repaying as well e.g. rent arrears, utility bills.
2.4.3 Collection rates are low nationally (between 25% - 35%). A high % of our debt is
being recovered by repayment plans but these arrangements are often for low
amounts and take a long time to repay e.g. £2.50 per week for the next 3 years.
We are requesting write off of two cases that we are unable to pursue any further.
2.5 Sundry Debts
2.5.1 The Council raises on average £8.5m sundry debt invoices every year. There are
two key types of sundry debts:
(a) Social care debtors
(b) Commercial rents
2.5.2 In terms of social care, people are often vulnerable i.e. have a learning disability,
have dementia, are in and out of hospital. It is often difficult to contact the person
to discuss payment of invoices and sometimes family members have to take on
managing the person’s finances either informally or formally by Power of Attorney.
If there are no family members or there are signs of financial abuse we apply for
Deputyship which takes a long time to obtain.
2.5.3 The Council has a duty of care and we cannot simply stop providing care even if
people do not pay their invoices. Debt can accrue quickly e.g. £500 a week for
residential care fees if unpaid for only 2 months can quickly accrue to a debt of
£4,000. Where a person dies and there are no funds left in the estate, debts will be
presented for write off. The family are not required to pay the debt. One of the
write offs presented for approval is in this category.
2.5.4 The process of recovering unpaid social care invoices is therefore not easy. It is a
problem for many Councils. Currently we have 28 cases where there are debts
outstanding that are over 90 days old. These debts total £92k and the debtor has
been identified as vulnerable and recovery is complex (7 of these debts account
for £76k).
2.5.5 One of the key areas relates to business units. The Council’s position, as indicated
in its standard lease terms, is quite clear. If payment of any rent is 28 days
overdue, even if it is not billed, then the tenancy is subject to forfeiture. There are
some challenges in applying this strictly including:
The Council tends to work with SME’s and there have been many examples
whereby tenants fall behind with their rent but then catch up – the Council
wants to support businesses if this is the case rather than exacerbate the
situation.
By evicting tenants, the Council effectively creates a void unit with no income
coming in – where there is not waiting demand, giving the tenant more time to
pay does not worsen the Councils position.
The position can change quickly making decision-making about when to take
recovery action difficult.
2.5.6 The Council is presenting three write offs for approval that relate to the
circumstances outlined above. Whilst nothing further can be done in these cases,
the Council has revisited its approach and strengthened it by:
Closer working relationships between Property Services and Exchequer which
has resulted in issues being flagged earlier and an agreed approach being
taken to recover the debt.
Rent Bonds now being taken for 3 month’s rent as standards across all units.
Introduction of Direct Debits from April 2018.
3 CONSULTATION
3.1 Consultation is not required for any decisions being sought in this report.
4 ALTERNATIVE OPTIONS
4.1 The Council has a statutory duty for the proper administration of its financial affairs
and this is detailed in the Council’s Financial Procedure Rules.
5 FINANCIAL IMPLICATIONS
5.1 A bad debt provision is made for loss of collection for all debts and the provision is
sufficient to cover these write offs. When the provision is reset any increase is
charged to the Revenue Account.
6 LEGAL AND GOVERNANCE CONSIDERATIONS
6.1 There are no legal and governance implications arising from this report.
7 EQUALITY IMPACT ASSESSMENT
7.1 An Equality Impact Assessment questionnaire has been completed and there are
no specific issues arising from the write off of uncollectable amounts.
8 COMMUNITY SAFETY IMPLICATIONS
8.1 There are no community safety implications arising from this report.
9 HEALTH AND WELLBEING IMPLICATIONS
9.1 There are no health and wellbeing implications arising from this report.
10 CONCLUSION AND SUMMARY OF REASONS FOR THE
RECOMMENDATIONS
10.1 There is no prospect of collecting the debts detailed in Appendix A; it is therefore
prudent to write off the debts.
11 BACKGROUND PAPERS
11.1 There are no additional background papers to the report.
12 APPENDICES
12.1 Exempt Appendix A– Appendix A is marked as “Not For Publication” because it
contains exempt information as defined in paragraph 2 of Part 1 of Schedule 12A
of the Local Government Act 1972, namely information which is likely to reveal the
identity of an individual.
A Large Print or Braille Version of this Report is available upon request –
Contact 01572 722577.
