Officers provided Members with a Presentation that gave an overview of Council Tax collection processes and the factors affecting them.
It was explained there was a total of 63,300 dwellings in Middlesbrough from which £60m in Council Tax was collected, constituting approximately 22% of Council income. Of those dwellings 19,600 were in receipt of Council Tax Support (CTS), meaning they received a reduction to their Council Tax bill because of their financial position.
Of those 19,600 dwellings, 4,000 had 100% Council Tax Support, meaning those dwellings did not pay any Council Tax (Old Aged Pensioners, for example) and 2,400 were exempt from paying Council Tax (churches, for example).
This means there were 56,900 dwellings that had something to pay toward their Council Tax liability.
The panel heard there were two rates when discussing Council Tax Collection: In-Year collection and Overall collection. It was explained that while rates for collection In-Year were not performing as hoped, the Overall collection rates were positive. For example, the Council, overall, had collected 98.06% of Council Tax between 1993 and 2016/17.
A query was raised about potential comparisons between Council performances on Council Tax Collection but it was explained that no overall method for calculating this exists.
It was noted, however, that In-Year collection rates for some Councils was 98% or more but such Councils tended to have higher levels of affluence. It was also noted that Overall rates of collection were part of the Councils budget setting process.
Middlesbrough was performing well in terms of Overall Collection, but the In-Year position was in need of improvement.
The Executive Member for Finance and Governance clarified that In-Year collection was not a factor in the budget but the Overall Collection rate was.
Members heard how significant sums were being collected In-Year, but there was a recognised delay in current processes that slowed the In-Year collection rate. This situation was not unique to Middlesbrough and was an issue for all Councils that had higher levels of deprivation. It was confirmed that the delay for In-Year collection had an impact on the current financial situation for the Council and that it was similar to being in payment arrears.
It was explained that during 2016/17 the Council placed third from bottom for In-Year collection rates across England. The English average In-Year collection rate was 97.2% and analysis showed there was a correlation between Councils with high deprivation rates and low collection rates. Based on the evidence presented by the officers it was also noted that Middlesbrough was classed as the most deprived area in England.
The least deprived area was Wokingham, Surrey, which collected 99.6% of its Council Tax In-Year. From the officers analysis it was noted that of the 11 Councils with the best In-Year collection rates, five were within Surrey and were the least deprived areas of England, making collection easier for those Councils. A Member commented that lower collection rates may be more to do with a residents ability to pay Council Tax rather than it being difficult for a Council to collect it.
It was queried if further analysis could be undertaken on deprivation and Council Tax collection at Ward level. The officers confirmed this type of analysis can be done but on Administrative Area, classified as 1 to 33 and broken down by collection and recovery rates. Initial analysis had already indicated that areas of Middlesbrough with lower levels of deprivation had higher rates of collection than areas with higher levels of deprivation. A Member commented that some residents could be more affluent in deprived Wards. However, this was difficult to analyse effectively.
Middlesbroughs In-Year collection rate for 2012/13 was 96% and the introduction of Council Tax Support in 2013/14 meant this number had fallen. Council Tax Support required Councils to introduce support schemes that were appropriate to their circumstances and was not fully funded by Central Government. Middlesbroughs scheme required residents of working age to pay at least 20% of their Council Tax bill which, on average, was approximately £220. This was a new liability for some residents who had previously paid nothing toward their bill. Members pointed out that this period also saw the introduction of the Bedroom Tax and other welfare reforms.
Some Councils introduced changes to their support schemes, such as the removal of discounts, over an extended period of time. However, because of the sums of income required the situation in Middlesbrough was treated differently. Changes to the support scheme, the removal of discounts and the introduction of other Welfare reform had had a comparatively greater impact on the residents of Middlesbrough. This has led to collection rates falling.
A query was raised regarding Councils with similar deprivation rates to Middlesbrough but who have better collection rates and what they may be doing that Middlesbrough was not.
The officers commented there were several nuances that made direct comparison difficult, for example Stockton Council did not have the same level of deprivation as Middlesbrough, and therefore its In-Year collection rates were higher.
The Executive Member for Finance and Governance commented that Stockton Councils collection and enforcement processes were in-house and had strong links with their Welfare Rights teams. It was also noted that Stockton Councils collection rate improved when it moved to this model of collection.
The officers reiterated that collection rates also depend on the support scheme in place, for example Middlesbrough had a 20% scheme, whereas others had 100% schemes making comparisons between Councils difficult.
The officers pointed to factors affecting collection rates including the rise in liability orders which, between 2012/13 and 2016/17, rose from 6,548 to 15,371 respectively (135%). Other factors included an increase in the overall Council Tax liability. For example, due to increased house building in Middlesbrough the overall liability increased from £44.9m 2012/13 to £60.8m in 2017/18.
An overview of how Council Tax was administered was provided by the officer representing Kier Group, the Councils strategic partner. Legally, the collection process was administered in accordance with the Local Government Finance Act 1992, meaning there were restrictions on how the process could be administered. The process of issuing a Council Tax bill followed a rigid course in that a bill was issued, failure to pay after a prescribed deadline resulted in up to two Reminder Notices. A Final Notice could then be issued after which a Court Summons was issued.
It was noted that the higher proportion of residents receiving benefits the harder it was to collect Council Tax. This was due to frequent changes in circumstances for those on benefits and any instalment arrangements were frequently re-set.
53% of Council Tax bill-payers in Middlesbrough paid by Direct Debit with 11% classed as cash payers who did not require a prompt for payment. 34% of bill-payers received a summons due to non-payment. It was noted that if a summons was issued additional administrative costs (£65) were added to the account and these costs had to be collected before the Council Tax debt was collected. This year it was estimated additional costs of £900,000 would be generated because of non-payment, which needed to be collected before being able to impact on collection rates.
The Panel heard that residents only engaged with the collection process at the summons stage. A query was raised about why this was the case, and it was suggested apathy was likely to be a key factor. At summons there were harder messages involved in communications which prompted residents to make contact and make arrangements for payment. However, given the time scales involved for payment, should a resident not engage until the summons stage this would result in a reduced time period in which payment could be made which in turn resulted in higher instalments. This had the cumulative effect of reducing a residents ability to pay.
Members were told that many residents were already trying to pay back a debt from a previous bill when they received a summons for their current bill.
A query was raised about how many people were sent to prison because of non-payment and it was confirmed that committal to prison was last carried out over 20 years ago. The officers also stated the Courts were reluctant to perform this action as there had to be evidence of a lack of will to pay and this could be difficult if the resident was in receipt of benefits. Additional costs were also incurred when performing this kind of action, and on the whole additional costs should try to be kept to a minimum.
The officers highlighted initiatives to encourage people to pay any contribution as this was better than nothing, but it was re-emphasised that factors effecting collection rates could vary but include deprivation levels. It was also emphasised that, due to the different support schemes in place across the country, it was difficult to measure Middlesbroughs performance against other Councils.
Middlesbrough had one of the highest levels of benefit caseload against its chargeable dwellings but recent evidence suggested that residents were no longer making benefit claims with Middlesbrough having £600,000 in unclaimed benefit. A piece of work had been undertaken with 52 residents entitled to Council Tax Reduction but only one of these residents has taken up this benefit. More work was being undertaken to further understand why there was little engagement in these instances. This trend was concerning because a fall in benefit take-up increased the amount of Council Tax requiring collection. Because residents were not claiming their benefit they may be unable to pay their Council Tax Bills which in turn may lead to increased additional costs.
The officers stated that it was important to try and engage with residents to make payments earlier in the collection process.
A query was raised about the work with the 52 residents and if this was a multi-team approach. It was confirmed the staff carrying out this work were not qualified to undertake this work beyond the levels already carried out and it would likely fall outside of the remit of the Kier/ Council contract. However, undertaking this work as part of a multi-team approach could be examined later as a recommendation.
It was highlighted that a number of initiatives had, or were being, introduced to improve the current situation with collection rates. These included early intervention to try and prevent residents falling through the system as well as establishing a Revenue Services presence in Community Hubs, Libraries and so on in order to better engage with residents. A query was raised if these initiatives were linked in with the Financial Improvement Group. It was confirmed that this did happen but take-up was low.
Another initiative had been the merging of the Revenue and Benefits Services. Instead of two separate services and processes, residents could now discuss both what monies they owed and what benefits they were be entitled to. This system had now been in place for approximately two months and had also led the service to work more closely with Landlords in relation to housing benefit. A query was raised as to why this initiative had come into being relatively recently. It was explained that Revenues and Benefits were traditionally two large, separate services that had to be broken down into more manageable components. This involved a long process of re-structuring.
Current Council Tax collection processes utilised external Enforcement Agents, previously called Bailiffs. The officers explained that this may not be the best solution, as it was better to engage with residents. There were several options available for the use of Enforcement Agents namely; External Agents models, Internal Agents models and hybrid models. An example of the hybrid model was for those residents in Council tax arrears and receiving benefits an Internal Agent model was preferred whereas those in arrears but not on benefit could have utilised the External Agents model.
Concern was raised by the officers that either model resulted in additional cost when used. It was noted that Enforcement Agents now worked in stages, for example there were letter and telephone interactions before personal visits. Middlesbrough had an enforcement strategy in place, however a paper was being drafted that costed an Internal Agent model at minimal cost. It was emphasised that were Enforcement Agents used, any previous administrative costs would be added to this so early intervention was again highlighted as the best solution to addressing collection rates.
The officers outlined several initiatives that aimed to address the current collection rate, even though it was recognised that given high levels of deprivation and an inability to pay, there was little that could be done once an arrear reached the point of summons. When an arrear reached summons it ordinarily only left the Council with two options; do nothing, or engage the Enforcement Agents. One initiative described was the Cash Maximisation Strategy, which aimed to ensure residents paying cash (those not on Direct Debit), paid their bill on time.
It was also highlighted that there was a concern that when a Council Tax debt reached the enforcement stage it would not be recoverable as it was not as high a priority as others debts, such as water and heating bills for example.
The Propensity to Pay initiative was an attempt to analyse how Revenue Services communicates with residents in order to tailor their communications to different residents depending on their circumstances.
Officers discussed the various options that had been used to improve collection rates including the Community Support Fund whereby £300,000 was used to reduce the liability for people on Council Tax Support. This involved writing to residents receiving a summons and offering, over a set period of time, to contribute toward the cost of their overall liability. If the resident matched the Council contribution this, in essence, encouraged people to pay something toward their debt.
However, of several thousand residents asked only 205 took up the offer and the initiative was not deemed to be popular. A query was raised as to why this initiative did not work, and it was agreed that it was most likely the residents inability to pay any amount toward their debt.
It was also noted that a review of the Council Tax Support Scheme had recently been undertaken but had yet to be agreed by full Council. For 2018/19 it had been reduced from 20% to 15% meaning that should a resident be required to pay Council Tax their liability will be reduced. This initiative was funded from the Community Support fund. Because the reduction in Council Tax was viewed as a discount this should result in an improved collection rate. It was noted that other Councils operate different rates, for example Durham operated 100% Council Tax Support. This was explored in Middlesbrough in 2013, however the cost at that time was £2m and was not pursued.
A Member queried if there would be another fall in collection rates when Universal Credit was introduced. It was discussed that intelligence from other Councils suggested residents were not applying for Housing Benefit and, as such, Council Tax arrears were rising substantially. A discussion ensued regarding resources being put into place to assist in addressing this. It was queried if Kier had the resources required to implement the outlined initiatives. It was confirmed that discussions would be held with the Council as a matter of course but Kier would do the best job it could with the resources it had.
A Member queried that if more financial resources were put into Council Tax collection would this help the situation. It was discussed that any extra resources would be dependent on what objective for Council Tax collection was agreed.
Officers stated that an increased presence of staff engaging with residents did improve collection rates. However, it was also noted that it usually required 6 to 8 contacts with residents to arrange a payment schedule. When this contact time was multiplied by the 20,000 residents in arrears this amounted to a significant resource allocation.
Due to summons issues almost tripling in Middlesbrough, Kier agreed with the Council for an additional 8 Full Time Equivalents in Revenue services. The objective for those additional staff was to generate a 1% increase for In-Year collection. The recruitment process for the additional staff, however, did not occur until August 2017 with none having previous experience in Revenue Services. They were put on a fast track training programme and became effective by November/ December 2017. In order to hit the target of 93% In-Year collection rate Revenue services staff needed to generate £51,000 per day and have been achieving this for several weeks.
The officers stated that the additional resources installed had generated results, and this should be combined with early intervention to further improve the situation. This initiative, however, is only in place until the 31 March 2018 and a query was raised about what would happen after this point. It was confirmed that the additional resource would be lost. Due to staff leaving their posts Revenue Services currently have 6 FTE and were using agency staff to undertake this task.
The 1% improvement had been witnessed since November/ December 2017 and it was assumed a result of 92.8% to 93% would be achieved. However, it is uncertain how other Councils would perform so Middlesbroughs position on the league tables was not guaranteed. There was more concern that due to benefit applications falling this would make it more difficult for residents to pay and therefore more difficult for the Council to collect Council Tax.
It was queried if there were any contingency plans for the introduction of Universal Credit and it was discussed that the Welfare Rights team had already begun work on this. A Universal Credit expert worked within the Revenue Services department to provide advice.
The Chair thanked all involved for the contribution to proceedings.
Analysis of Administrative Areas and their collection rates to circulated to Members
That the information, as presented, be noted.