Chamber and committees

Scottish Government submission of 15 October 2021

PE1897/A - Reform certain of the procedures for the collection of Council Tax

The Scottish Government’s policy is to ensure households that are financially vulnerable do not have to meet a Council Tax liability they are unable to afford. This is delivered by the Council Tax Reduction (CTR) Scheme which assesses a household’s income and circumstances, and can reduce council tax liability by up to 100%. Currently, around half a million households (around one fifth of all dwellings chargeable for Council Tax) receive some level of Council Tax Reduction and of these, around 80% receive a full reduction, meaning they have no council tax liability.

The CTR scheme is administered by local authorities as part of their administration of Council Tax and applications can be backdated by up to 6 months. The Scottish Government is providing £351 million in funding to local authorities for the Council Tax Reduction Scheme in 2021/22. Local authorities are also able to draw on the £259 million included in the local government finance settlement in recognition of the additional financial pressures the pandemic has placed upon them, including an increase in the number of households becoming entitled to a Council Tax reduction.

The Scottish Government continues to promote take up of CTR as part of the Money Talk Team service. In the first two and half years of its delivery, covering November 2018 – July 2021, those who used the service gained almost £1,066,650 of CTR they were entitled to but had not applied for.

Council Tax is a local tax, set and collected by each local authority, and is important in ensuring each council is financially and administratively accountable to their electorate. Council Tax receipts play an important part in the funding of local public services, and as well as ensuring policies and funding are in place to protect vulnerable households from Council Tax liabilities they could not be expected to afford, the Scottish Government recognises the importance of ensuring that local authorities have the tools to protect their revenues – it is fundamentally unfair on the vast majority of people who do pay their taxes to allow some to avoid paying their way.

Local authorities therefore have a range of statutory powers they can use to formally recover outstanding Council Tax and these include the power to apply to a Sheriff Court for a Summary Warrant. However, local authorities are not obliged to use Summary Warrant or any particular collection method and are free to agree mutually suitable payment arrangements with a household. Decisions on what collection methods to use are for local authorities to make. Where debtors feel they have been treated unfairly or unlawfully they have recourse to the Scottish Public Services Ombudsman which can make recommendations in individual cases.

Importantly, advice is available to those who do find themselves in a position of having accrued arrears in Council Tax and there are number of statutory solutions available to assist them in meeting their debts. More information on accessing advice and dealing with debt is available in the Account in Bankruptcy’s Debt Advice and Information Package, available on their web site at www.aib.gov.uk. Overall, it is essential that anybody who is having difficulty in meeting their Council Tax liabilities should contact their council as soon as possible.

The specific matter of Protected Trust Deeds (PTD) was been the subject of a short enquiry by the Economy, Energy and Fair Work Committee of the previous Parliament. Following the Committee’s report, the then Minister for Business, Fair Work and Skills, Jamie Hepburn MSP, pledged to undertake and develop a wider review of Scotland’s debt solutions, chairing working groups with stakeholders. Further information regarding this is available on the AiB website at Wider review of Scotland's debt solutions | Accountant in Bankruptcy (aib.gov.uk).

It was agreed, that AIB, in agreement with trustees and creditors, could introduce operational changes in the short-term to improve existing processes and fill any gaps identified in the report.

In December 2020 the AiB PTD case operations team discussed this with the Protected Trust Deed Standing Committee and set up a working group to review the points raised by the Parliamentary Committee. The committee agreed key areas which could be addressed operationally and fed into further discussions on the other areas identified which may require legislative change.

The PTD protocol was developed, which sets out non-statutory changes to operational processes. The intention is to promote good practice, improve transparency and provide further clarity in support of the revised AiB PTD Notes for Guidance, better enabling trustees to manage debtor and creditor expectations in a PTD. The PTD Protocol will commence on 1 October 2021.

Lastly, the background information supporting the petition asserts “a 20% jump in [Protected Trust Deeds]”. This is not borne out by statistics published by the Accountant in Bankruptcy, published on their web site, which shows a marked decline in the numbers over the past two years.