S-O-T City Council Plan To Write Off £4.3 Million of Debts
Stoke-on-Trent City Council is being asked to agree to write-off debt that is ‘irrecoverable’, at a cabinet meeting on March 27. The write-off rate for the entire period that the report covers is 0.08 per cent. Over the last six years alone the overall invoices raised totals £2bn. The Council plan to write off £4.3 Million of debt.
The decision comes as a central part of governance arrangements for councils and forms an integral part of financial management for the local authority. If approved, it will allow the council’s accounts to show a clear picture of the financial position of the authority.
The write-off procedure was last used by the council in 2015 when it wrote off £3.8 Million and is part of recognised national practice for all businesses and trading organisations – not just public sector. It is also a core financial principle supported by the Charted Institute for Public Finance and Accountancy’s (CIPFA) code of practice on local authority accounting. The city council raises bills and invoices for council tax, business rates, rents and goods and services totalling approximately £360m each year. A total of £3,820,443 worth of individual debts under £25,000 and £490,258 for debts more than £25,000 will be put forward as ‘irrecoverable’. The value represents 0.08 per cent of the total raised during that same period of £2bn.
The council also wrote off £3.8 billion of council tax arrears in 2010.
It is not legally possible to pursue 62 per cent of the irrecoverable debt, due to death or bankruptcy.
Other reasons for non-collection include:
- The debtor has served a custodial sentence for non-payment of council tax as a result of the city council using its full powers to refer debtors to the courts.
- The Magistrates’ Court remits part of the debt after a hearing to consider the financial position of a debtor.
- It is decided that it is not in the public interest to pursue as the debtor may have mental health issues, be in permanent care or have no assets or the debt may be uneconomical to pursue.
- All collection activity has been fully exhausted so the case has been recommended for write-off, for example debtors have no assets to be taken to recover the debt when bailiff action is taken.
- Debts over six years where all recovery options have been pursued and where there is a legal time limit in place.
Deputy council leader Abi Brown, who is the authority’s cabinet member for finance, said: “The council works extremely hard to collect every penny possible and we maintain a very good record in pursuing outstanding payments. Debt collection rates remain high and when all other avenues have been exhausted – and only then – do we consider writing off any debt. This is a very last resort.
“We take a zero tolerance approach to collecting debt. At the same time, like for all organisations, we know that not all debt is recoverable – whether for example because someone has sadly died or where a company has been declared bankrupt.
“As any well-managed financial company, we know it is impossible to pursue 100 per cent of the debt owed to us so we take a prudent approach by setting aside money annually to cover this. This is usual practice and one which is while always regrettable, entirely sensible to take.”