In Focus Collections
Breathing space to standardise local council debt collection?
How could a breathing space apply to local authority debt collection, without infringing on the judicial process?
Russell Hamblin-Boone Chief executive, the Civil Enforcement Association
ceo@civea.co.uk
Theresa May will no doubt take a place in political history for declaring an end to austerity at the Conservative Party Conference in October. Pundits claim that this was a late addition to the speech and the chancellor was not consulted. Whatever the truth, the Treasury seized the
initiative to follow up with some supportive pledges in the chancellor’s Budget Statement. One of the pledges listed in the detail of the Red Book was to consult on a breathing space and statutory debt-repayment scheme. This brings to fruition a manifesto commitment from 2017.
The proposal The proposal would require creditors to allow a 60-day period in which someone in problem debt would have the right to legal protections from creditors. During this period, no action could be
taken to collect the debt and no additional fees or interest would be incurred, provided the individual was seeking advice or an appropriate debt solution from a qualified debt advisor. The scheme is based on Scotland’s
successful Debt Arrangement Scheme and would enable anyone in problem debt to enter a statutory agreement to repay their debts to a manageable timetable. The proposal has received a broadly
positive reception from a wide audience, including creditors in the finance sector. However, there are unresolved issues, particularly regarding priority debt collection in the public sector. The Treasury is considering whether to require local authorities to adopt the scheme.
34 Recent reports from the National Audit
Office and Treasury Select Committee have raised concerns about the methods employed by local authorities to collect debts owed to the public purse. This is assumed to include unpaid council tax, business rates, parking fines, magistrates’ court fines, and commercial rent arrears, which are collected by certificated enforcement agents. Under Schedule 12 of the Tribunals,
Courts and Enforcement Act 2007, which includes the Taking Control of Goods Regulations 2013, certificated enforcement agents are empowered to collect money owed to local authorities or seize goods for the purposes of sale. Given that almost half of new StepChange clients so far this year who owe unpaid Council Tax are in a deficit budget, it seems sensible for a breathing space to apply to public service collections.
Not subject However, local authorities are not subject to the Financial Services and Markets Act and do not provide credit services. Council Tax is not means tested and only a minority of councils have retained a Council Tax reduction scheme. But debts to local authorities must be recovered in order to maintain essential services. Government funding for local authorities has halved in real terms from 2010 to 2018. As an austerity measure, local authorities
have recently changed their strategy from reducing spending on services to looking for ways to make savings and increase revenue, including increasing efforts to collect the 4% of Council Tax debt that, on average, remains unpaid in each year England and Wales.
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As an austerity measure, local authorities have recently changed their strategy from reducing spending on services to looking for ways to make savings and increase revenue, including increasing efforts to collect the 4% of Council Tax debt that, on average, remains unpaid in each year England and Wales
In its ambitions for a breathing space, it
appears that the Treasury has not grasped the unintended consequences of its proposal. At CIVEA, we were very clear in our original response that a breathing space is not practical where a court order has been obtained by the council as part of a clearly prescribed judicial process. This position is supported by others involved in local authority revenue collection and the court process. The consultation remains unclear on a number of critical measures. For example, if the breathing space is
applied to local authority debt, there could be 2 million parking fines that cannot be enforced in a timely manner. Without a change to the law, this could mean that people who seek a breathing space will find that their charges escalate in accordance with a statutory timetable.
December 2018
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