Downturn hits council coffers

Head of Financial Services, Nadine Muschamp
Head of Financial Services, Nadine Muschamp

AN opposition councillor has questioned whether Lancaster City Council is chasing its debts with enough “vim and vigour” after figures revealed it is owed almost £8.2m in unpaid council tax, business rates, and housing benefit overpayments.

Coun Peter Williamson, leader of the local Conservative group, said: “There are quite a lot of issues facing the council at the moment, like the market situation and the issues facing the Storey, and quite a lot of them cost money.

“You do wonder whether sufficient vim and vigour is being used by the council to recover debts.”

Coun Williamson added that the council’s performance in debt reocvery need to be compared to that of other local authorities.

Wyre Borough Council, which has just over 50,000 households compared to the 60,000 in the Lancaster City Council area, has council tax arrears of almost £3.2m – just over half the amount owed to Lancaster. It is owed more in business rates however – £728,000.

The Wyre housing benefit overpayment debt, was £581,000, just over half the Lancaster amount.

Coun Abbott Bryning, Lancaster City Council’s Labour cabinet member for finance, said: “In my experience the council has been good on collection, but in these tough economic times, you would expect it to be more difficult.

Lancaster’s figures show that council tax of £1,058 is outstanding on a number of debts from 1993/94, the year the levy was introduced, with the largest single debt £9,200 currently being paid back on an arranged schedule.

The council wrote off £209,000 in council tax debts in 2010/11 and £97,000 last year, with reasons ranging from an inability to trace the debtor to their death.

The council is owed £2,371 on a business rates debt from 1995/96 and the largest amount owed is £69,000, which is also now being re-paid.

Write-offs of business rate debts totalled £162,000 in 2010/11 and £283,000 last year.

Business rates initially go to the treasury but are then re-distributed to councils based on the size of the population in the area they cover.

In 2011/12 the council sought 4,575 liability orders through Lancaster Magistrates Court in an effort to recover council tax and 348 to recover business rates.

Currently, it has just over 1,000 cases with bailiffs to recover council tax and 74 to recoup business rates, but the council says few of those would get to the stage where people’s goods were taken away.

Other ways of recovering debts include deductions from benefits and wages and bringing bankruptcy proceedings, which could entitle the council to proceeds from the sale of assets including property.

Councillors on the council’s budget and performance panel were earlier this month briefed on housing benefit overpayments.

A report by the council’s accountancy services manager, says overpayments occurred when claimants failed to notify the council of changes in their circumstances, sometimes fraudulently, or took longer to flag up changes.

The report says that overpayments last year equated to just 2.5 per cent of the £40.5m paid out by the authority in benefits.

The largest housing benefit overpayment owed is a huge £27,000 but it is now clawing the money back through benefit deductions.

Overpayment write-offs amounted to £13,000 in 2010/11 and £80,000 last year.

The council says the amount of overpayments recovered in 2011/12 actually rose from £1.1m to £1.25m, attributing the increase in debt to a number of reasons, including the economic climate.

Last year, 15 cases were referred to Lancaster County Court to try to recover housing benefit overpayments, down from 69 the previous year. The council says the reduction in cases is due to use of other remedies.

Other options open to the council after reminder letters have been issued include deductions from housing or other benefits and use of bailiffs.

The benefits and revenues services at Lancaster and Preston city councils merged last autumn, saving £2.6m, with the number of staff being cut from 178 to 138.

Nadine Muschamp, the council’s head of finance, said the merger would help recovery of debts, with the councils using more efficient ways of working and technology.

She added that the housing benefit subsidy received from government was unaffected by overpayment, meaning overpayment recovered was extra income.

“It is a case of distinguishing between those who can’t pay and those who won’t pay,” she said.

“We will try and help those who can’t pay by talking to them and coming to an arrangment while targeting those who won’t pay to try to get recovery action going.”