With much rhetoric but little movement on local tax reform, CommonSpace takes a look at the pressures and problems the current Council Tax system can cause ordinary Scots
A LITTLE over ten years ago, a group of friends moved into a flat.
The property, explains one of the group who spoke to CommonSpace on condition of anonymity, was rented to them by Harpal ‘Harry’ Singh, who served two-and-a-half years in prison after lying during a fatal accident inquiry into the 1999 deaths of two students in a fire at one of his flats. He was subsequently banned from letting out any of his 14 Glasgow properties after inspectors found he was acting illegally as an unlicensed landlord.
According to CommonSpace’s source, Singh told the group that “he was taking care of the Council Tax” and that they were “not to worry about it.”
“Being young and naïve, we believed him,” the former tenant recollected. “It turns out he was lying to the council about the property being multiple occupancy, which is why he didn’t want us handling paperwork, I guess.
“Anyway, eight years in whatever lies he'd been telling them about us being students or whatever finally stopped working, and we got hit with a surprise bill for 8 years of backdated Council Tax.”
The flat’s occupants, “not having a spare £14,000 to hand,” arranged a payment schedule with Scott & Co., the private debt collection and enforcement agency empowered as Sheriff Officers and used by several Scottish local authorities to collect Council Tax arrears once the debt is sold on to them. Despite having moved out of the Singh-rented flat, the group are still paying off the debt.
Unfortunately, it was not the end of their problems. “In February,” CommonSpace’s source went on, “my bank account briefly dipped below my arranged overdraft limit, and unbeknownst to me this halted the direct debit to Scott & Co. The first I heard about this was on the 16th of August, when a Sheriff Officer delivered a letter to my door demanding payment in full, including £1598.16 in surcharges and £81.16 attributed to ‘expenses of Sherrif Officer’.”
According to the source, the letter in question read: “If you do not pay this sum within 14 days you are liable to have further action taken against you including arrestment, the arrestment of your earnings and the Attachment and Auction of articles belonging to you. If you have total debts amounting to £3000 or more, you are liable to be sequestrated (declared bankrupt). If appropriate you may be liquidated (wound up).”
This threatening correspondence arrived, the source told us, “two weeks after I had started taking a course of antidepressants, the side effects of which can include suicidal tendencies. I live on the 20th floor of a tower block. This was not a good letter to receive.”
Eventually, our source says they managed to “sort things out” with Scott & Co. by agreeing to increase their payments by 50 per cent. “It took about a week for the feeling of nervous terror to subside,” the former tenant said.
Realities such as these are what lie behind the often dry and technical-sounding discussions of local tax in Scotland, which are likely to increase over the coming months.
The Scottish Greens, whose party conference will take place in Glasgow this weekend, have repeatedly stated that local tax reform – specifically, the abolition and replacement of the Council Tax with a fairer, more progressive system, a reform also broadly supported by Scottish Labour – will be necessary in order for their MSPs to support the next Scottish budget of the minority SNP administration.
The experience of the tenant who reached out to CommonSpace should not, according to an expert source who also wishes to remain anonymous, have occurred as it did.
This source, who works in debt collection in the energy sector – which is regulated by the Consumer Credit Act, unlike Council Tax which is regulated separately, along with other government credits such as VAT – explains that when a person misses a Council Tax payment, they are supposed to be sent a reminder letter advising that if they don't pay in seven days, they will lose the right to pay in instalments.
If the person makes a payment but falls behind again, then they are supposed to be sent a second reminder, explaining that they may lose the right to pay in instalments and become liable for payment for the whole year’s Council Tax. If payment arrangements are still not made after this, they are supposed to receive a final notification, advising they have 14 days to pay the outstanding amount. Only after this point should a local authority apply to the Sheriff Court for a summary warrant.
Referring to the case detailed above, the expert source said: “Whilst a local authority does not need to inform a person that they are contacting the Sheriff Court, Glasgow City Council issuing a summary warrant before sending out a reminder letter is in breach of what little protection people have of further action being against them.”
“People are punished and treated like criminals for falling into council tax debt.” Anonymous source working in debt collection in Scotland
Despite this breach of the regulations which are supposed to govern the collection of Council Tax, this instance demonstrates how little local authorities need to do to keep those in arrears informed, in comparison with the energy sector.
Our expert source explains: “Council Tax is one of the three 'priority bills', along with rent/mortgage and energy bills. Despite having the same priority status, energy companies have to go through a much longer, and frankly better method of collection. We need to send payment reminders by text, email and/or letter. The customer's credit rating plays a factor into how quickly the balance is passed onto the company's internal collections team. If this team is unsuccessful, it is passed on to an external collections company. If they are unsuccessful then it is recalled from them and passed onto another collections company.
“This typically happens three times before it goes to the home visit stage where the customer will have an agent come to their property to discuss the outstanding balance. If payment is still not made after that, only then can we proceed to warrant stage.
“Whilst this method is far more lengthy, it makes sure that every possible source of communication is exhausted and the customer has been given every opportunity to settle the balance. It is also far more likely to end in a fair and affordable payment plan for the customer who may be experiencing financial hardship and other compounding factors such as mental or physical health issues, fleeing domestic violence, caring for sick/elderly relatives, bereavement, and so on.
“Local authorities will probably claim that they don't have the funds to go through the same lengthy collections process, but even something as simple as wording the reminder letters or a phone call or a text with a friendlier approach advising of the balance and signposting to debt advice charities could seriously help them get more money and reduce the financial and health impacts on the individuals they chase.
“Going to warrant stage and contacting the Sheriff Court for further action is supposed to be treated as a last resort,” our source emphasised – as opposed to treating it as a default, as occurred in the case of the anonymous tenant quoted here.
A further difference between the debt collection methodology of local authorities and the energy sector is that energy companies are required to signpost customers to debt advice charities, if their customers advise that they are struggling to pay their debts. In such cases, a hold is put on collection activities while the customer seeks advice.
However, a report from the leading debt advice charity StepChange has shown that only 13 per cent of people in council tax arrears were advised to seek debt advice. As CommonSpace’s source in debt collection argues: “People are punished and treated like criminals for falling into council tax debt, whereas in the energy sector we treat them like people and do our best to help them get back on track.”
In 2015, StepChange called on the UK Government to implement changes to help those facing what the charity described as a “growing arrears crisis”, after they found that their clients owed an average of £832 in Council Tax arrears, an increase of £157 since 2010.
StepChange also found that a majority of their clients had faced threats of legal enforcement or demands for “unaffordable lump-sum payments” from their local authorities, with 62 per cent threatened with court action and 51 per cent threatened with bailiffs. By contrast, along with the mere 13 per cent encouraged to seek debt advice, only 25 per cent were offered an affordable payment option.
The charity concluded that tough action by councils, many of which have suffered as a result of austerity-driven cuts and are desperate for the much-needed revenue that Council Tax brings in, only push people into greater financial difficulty, and is a counter-productive strategy for ensuring sustainable repayment.
Nevertheless, aggressive collection methods such as legal threats and the use of Sheriff Officer-empowered debt collection agencies have increased dramatically in Scotland.
According to data from the Scottish Government agency the Account in Bankruptcy (AIB) released earlier this year, a total of 463,729 summary warrants were issued in Scotland throughout 2016-17, a 38 per cent increase from 2011-12.
These warrants include a ten per cent penalty on the original debt, making the repayment required of debtors even more onerous, and allow for the arrestment of a debtor’s earnings, or even the removal of belongings from their home. A Scottish Government spokesperson attributed the rising level of debt in Scotland to UK Government welfare cuts, despite the Scottish Government spending over £127m this year in an attempt to mitigate their effect on low income households.
Earlier this year, a study from the charity Christians Against Poverty (CAP) also found that, while the debt collection practices of private companies have become more customer focused, in the words of CAP chief executive Matt Barlow: “Some of the most aggressive debt collecting in our nation comes from local and national governments,” and those owing Council Tax or benefit overpayments were being pursued more ruthlessly, and suffering more as a result.
While it appears that greater, more sympathetic action could be taken by local authorities to help those facing Council Tax debt, the question of local tax reform and the possible abolition and replacement of Council Tax have persisted almost since the advent of Scottish devolution.
In 2004, a bill brought by then-Scottish Socialist Party leader Tommy Sheridan to replace the Council Tax with an income-based ‘Scottish Service Tax’ failed to gain sufficient support, while the newly-elected SNP’s own plans for a local income tax replacement were scuppered when the UK Government threatened to withdraw nearly £400m in Council Tax benefit, arguing it would be unncessary without the Council Tax itself. More recently, the Scottish Government’s 2016 decision to adjust, rather than replace the Council Tax elicited widespread disappointment from advocates of more radical reform.
Despite these setbacks, calls for reform have grown in recent years. In 2015, the Scottish Government set up the cross-party Commission on Local Tax Reform to consider alternatives to the Council Tax. The Commission subsequently lobbied for a new form of local taxation to be introduced, making the case for several alternatives in its final report on the matter.
This was welcomed by Keith Dryburgh, policy manager at Citizens Advice Scotland, who stated in response that Council Tax is one of the most common causes of financial difficulty in Scotland and said his advisors dealt with around 29,000 new council tax-related queries in 2014/15.
Movement on local tax reform appears to have stalled. Over the past year, the loudest voices in Scottish politics arguing against the Council Tax have been the Scottish Greens.
In the aftermath of successfully negotiating an extra £170m in funding for local council services in exchange for Green support for the last Scottish Budget, Scottish Green co-convener Patrick Harvie MSP said that the party would be unable to enter negotiations on next year’s budget if “meaningful progress” was not made on local tax reform. However, the Scottish Greens have made similar noises before, and earlier this year lost a non-binding vote they brought before Holyrood to scrap the Council Tax, after the SNP and Scottish Tories voted against it.
Speaking to CommonSpace in March of this year, Harvie said: “We think it’s reasonable that we see a bill on Council Tax replacement at some point during this parliamentary session, before the next Holyrood election.”
In March, Scottish Greens’ local government spokesperson Andy Wightman told press: “We want to see action and that includes as a bare minimum an unequivocal agreement to scrap the Council Tax.”
CommonSpace approached the Scottish Greens for comment, asking if the party could confirm that the reform referred to by their MSPs would still include the “initial steps” to replace the Council Tax with a different system of local taxation - in other words, is the “unequivocal agreement” of Council Tax abolition still a necessary pre-condition for budget negotiations with the Scottish Government, or would the Scottish Greens now be satisfied with ‘local tax reform’ which merely adjusted the existing system, as the Scottish Government did last year, when they included a 25 per cent increase in the child allowance and extended relief for low to middle income households on properties in bands E-H?
The Scottish Greens did not respond to our request for comment at the time of publication. Further clarification of their current position may be made at their Glasgow conference.
Whether the Scottish Greens pursue scrapping the Council Tax or not, so long as it exists, and so long as cash-strapped local authorities are so desperate for the revenue it provides that they will resort to threats, punitive demands and aggressive means of debt collection, calls for the abolition of a system based on outdated and inaccurate property valuations - which takes little account of income or circumstance, and which some of its critics have come to refer to as the “daughter of the Poll Tax” - will almost certainly continue.
Picture courtesy of Howard Lake
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