Drop in council tax collection rate

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Published: Thursday 27th November 2014 by The News Editor

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Close to three quarters of a billion pounds of council tax went unpaid last year, official figures showed as town hall chiefs blamed Government reforms for only the second dip in collection rates on record.

The Audit Commission spending watchdog said councils in England gathered on average 97% of what they were owed in 2013/14, down 0.4% on the previous year and taking overall arrears to £2.38 billion.

Worst-performing authorities failed to secure 8.3 pence in every pound and, with the cumulative total owed to each running at between £11.1 to £105.2 million, all but 13 chose to write off historic debts – in one case of up to £25.3 million.

The dip in performance – which has only happened in one other year since the council tax was introduced in 2003/4 – effectively meant £94 million less came into cash-strapped councils’ coffers.

Other factors meant that the overall sum collected rose by 2.7% in real terms.

The Commission’s analysis established that collection of business rates – which are also collected by local authorities – improved over the year from 97.7% to 97.9%, adding £47 million to the take.

It suggested councils had been prompted to boost performance because of new rules allowing them to retain some of the business rates they collect, rather than paying them all into a national pool.

At £4.55 billion, the Commission pointed out, the cumulative arrears for both council tax and business rates were enough to pay to build almost 300 secondary schools.

Chairman Jeremy Newman said: “While collection rates are high … when we consider such large sums of taxpayers’ money, even a small percentage shift can produce substantial changes in the income councils have to deliver their services.

“There has to be room for improvement for many councils.”

But the Local Government Association pinned the blame on the Treasury – and said town halls had a much better record on collecting taxes than Whitehall.

Its chair David Sparks said: “The slight increase in unpaid council tax will come as little surprise to those in local government, who warned that this would be a consequence of Government cutting funding for council tax support.

“This cut has left local authorities with little option but to reduce discounts for people on low incomes, some of whom have found it a struggle to pay.

“The high collection rates for local taxes could be improved still further if government gave local areas more control over them. If councils were able to set council tax discounts locally, we could ensure they are targeted at those who need them most.

“The backlog in unpaid business rates could be better tackled if councils were able to take into account whether a business is up to date with its payments when deciding on whether or not to grant a licence.

“We are urging the Chancellor to address these issues in next week’s Autumn Statement.”

He added: “These figures confirm that council tax and business rates have among the highest collection rates of any tax.

“The Exchequer would be billions of pounds better off each year if central government’s collection rates matched those of councils.”

Local Government Minister Kris Hopkins said: “Improving tax collection rates and reducing arrears are a key way of making sensible savings to help keep overall council tax bills down and protect frontline services.

“Every penny of tax that is not collected means a higher tax bill for the law-abiding citizen who does pay on time.

“It is important that councils are sympathetic to those in genuine hardship, are proportionate in enforcement and do not overuse bailiffs, and we have published guidance for councils to stop unjustified, aggressive collection practices.

“However, there is a significant potential source of income which councils across the country could use to support frontline service or freeze council tax bills next year.”

Published: Thursday 27th November 2014 by The News Editor

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