Council tax: how to tell the ‘can’t pays’ from the ‘won’t pays’

27 Nov 17

A public register of liability orders for council tax would benefit both councils and citizens, says Malcolm Hurlston, chair of Registry Trust.

Last month the Financial Conduct Authority published Financial Lives, a massive survey designed to track consumers and finance. Although designed to be comprehensive in its scope, the FCA only looks at what it regulates, so other key consumer financials such as utility bills and council tax are ignored. Although liability orders for non-payment of council tax are in the public domain, there is currently no way of understanding their role in the financial lives of both consumers and business.

To put this right, Registry Trust – the non-profit company which operates judgment registers in six jurisdictions and makes them available to the public and through credit reference agencies – has undertaken to work with local authorities to create a similar national register of liability orders, covering both council tax and business rates.  As well as looking to CIPFA for guidance about the practicalities of such a register, we are talking to the FCA about its potential.

What would the main advantages of such a register be to local authorities? First, as the chart below shows, there is strong evidence that better-off people are ‘gaming the system’ and choosing to pay credit debts in preference to local rates and taxes.

Registry Trust Won't Pays

This information was derived from an analysis of 120,000 liability orders issued over the past two years by three local authorities. When matched against records held by the credit reference agencies, we found that a surprisingly high proportion of those with liability orders showed no evidence of consumer debt problems of any sort.

Easier identification of ‘won't pays’ will save councils much wasted effort. One council, Nottingham, has already tested the effect of telling people liability order information might be shared with credit reference agencies. The notice produced an immediate 10% uplift in receipts.

Once a national register is complete, councils will benefit from:

  • better information for making policy, with all streams updated daily
  • data from adjacent areas where tax and ratepayers may already have history
  • higher collection rates with fewer defaults
  • cross-referencing council tax obligations with CCJs to be able to direct help to people in real need

 

To start the ball rolling Registry Trust is working with a small group of councils in spring 2018 (it is open for more to join). The pilot will:

  • identify savings, which will obviously vary from council to council according to their past practice
  • identify costs to councils (from our research it looks as if only a simple transfer of data should be needed since council information tested by the trust has proved to be of unusually high quality)
  • iron out practicalities.

 

The initial focus has been on council tax, because of the larger numbers and the data protection specifics, which needed to be resolved. Next year attention turns to business rates where the potential for councils to retain 100% creates a larger prize. Commercial credit reference agencies are so eager to work in close partnership with us that defaulting businesses will soon notice the difference.

This will be even more significant as new pilots requested by DCLG explore changed – even reversed ­– percentage splits between districts and counties in two-tier areas. More funds would become available to county councils to meet the social care and children's services for which they are responsible.

Registry Trust has Counsel’s Opinion which supports a public register. The trust’s tight licensing agreements with credit reference agencies, both consumer and commercial, will ensure that council data can only be used in controlled ways.

There will be a great and highly deserved benefit to those citizens who loyally pay their council tax! As the founder and president of a leading debt charity, I know lenders look kindly on people who don't have a CCJ and give them access to cheaper credit. They will come to look equally kindly on people who don't have a liability order – once they are able to tell.

At the same time councils will be able to increase support to the lower quartile in line with the social inclusion agenda, thanks to the extra revenue that will flow from higher collection rates, fewer defaults and an income stream that is both more timely and more predictable.

The Register of Liability Orders will make winners of both councils and citizens. Citizens who pay will be rewarded, citizens who can't pay will be better supported and the won’t pays will be more clearly identified.

For its part, the council will have more resource and smarter ways of applying it to the benefit of all.

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