Poll Tax 20 Years On: Still Not Paying

Poll Tax 20 Years On: Still Not Paying

As we approach the twenty year anniversary of the Poll Tax being abolished, Alan McIntosh looks at what happened to the debt.

The Community Charge, or the Poll Tax as it was known, was introduced into Scotland one year ahead of the rest of the UK. It was to be the final nail in Margaret Thatcher’s coffin and arguably also the Scottish Conservative Party’s. The tax caused huge resentment and many saw it as evidence that Scotland was to be nothing more than a testing ground for the Tories.

Where it destroyed some careers, it made others, throwing the limelight onto Tommy Sheridan, Jim Sillars and Kenny MacAskill, who became the SNP’s Anti Poll Tax spokesman.

It was eventually abolished in 1993 after a massive campaign, which saw at its height one million non payers in Scotland and culminated in some of the worst riots in UK history, mostly notably with what became known as the Battle of Trafalgar Square.

However, despite abolition nearly 20 year ago, information obtained by freedom of information request shows Scotland’s councils are still pursuing over £322 million in community charge arrears, with some taking the view that all debts owed to them can still actively be recovered.

In England most of the debts were legally written off more than 7 years ago, but in Scots law it takes longer to extinguish debts that are legally constituted. Many will only be due to lapse now, although some accounts will still be recoverable for many years to come. Section 7 of the Prescription and Limitation (Scotland) Act 1973 means debts that have been legally constituted only extinguish after 20 years, providing they have not been relevantly acknowledged in that time; or the creditor has not made a Relevant Claim. Relevantly acknowledged means either a payment or a written acknowledgement of the obligation has been made by the debtor. Where a debt has been relevantly acknowledged, the prescription period runs again. A Relevant Claim could be raising a petition for bankruptcy against the debtor or executing diligence (wage arrestment, bank arrestment, attachment etc).

Despite this many local authorities have already taken the view to write off poll tax debts, with Inverclyde Council taking such a decision for its 2011/12 accounts. Other councils, such as Falkirk, have gradually reduced the amount owed by annually reviewing and writing off accounts as uncollectable. Glasgow City Council, however, is still owed approximately 27 pence in every pound that was ever billed (approximately £125 million) and has now taken the view it will still pursue those debts which have not been prescribed under the 1973 Act. Other local authorities such as Edinburgh are owed over £70 million, but cannot say how much is still recoverable, demonstrating the difficulty of doing due diligence on the collectability of such old debts, with many debtors now being deceased or gone away. It also highlights another problem in that in some cases, with old paper filing systems and the fact few debtors still have receipts 20 years on, where there are legitimate disputes, trying to resolve them fairly is impossible.

Debtors, however, are still being pursued and it is not uncommon for debt advisers to encounter clients still facing diligence or sequestration for debts which include amounts for community charge. The recent Scottish Diligence report by the Accountant in Bankruptcy illustrated this point by evidencing the fact that of the 84% of diligences executed in 2011/12 by local authorities, the debts being collected were not just council tax arrears but also community charge debts.

The poll tax was Thatcher’s legacy to Scotland and was widely seen at the time as hugely unpopular and unjust, evidenced by the fact its lifespan was so short and contributed to her downfall. Many of those ministers and councillors now in power will have marched and protested against the tax and been non payers themselves. It’s now therefore, not unreasonable to ask they urge all local authorities to clear old poll tax debts from their books. It’s ironic that where Scots were first punished with the poll tax, we will also be the last.

There is also the other issue of why debtors can still be pursued twenty years on and have diligence executed against them and be threatened with sequestration for debts which they were unable to defend in court in the first place.

John Wilson, the MSP for Central Scotland in the last parliament proposed a new bill to align the powers of councils to pursue tax debts with those of other creditors. Maybe now is the time to dust off that proposal.

The Iron Fist of Debt Recovery

The Iron Fist of Debt Recovery

It has been a decade since statistics were available into the use of diligence in Scotland. New figures show a country ridden with increased aggression in debt recovery, and a Sheriff Officer profession largely sustained by the enforcement actions of local authorities.

New Scottish Government figures have provided the first real look at how the use of diligence in Scotland has evolved over the last ten years with the abolition of poinding and warrant sales and the implementation of the Bankruptcy and Diligence Etc (Scotland) Act 2007.

What is revealed is that the use of diligence has increased by 134% in the last ten years and that local authorities are now responsible for 84% of all the 387,945 diligences executed in 2011/12. It is also clear Councils are now spending millions more in debt recovery than previously, with 76% of the total 338,701 charge for payments being served being done so for local authority summary warrants (prior to 2008 there was no requirement to serve a charge to execute diligence using a summary warrant.)

Non earnings arrestments have also increased with local authorities now executing more than three times the number they executed in 2002, which indicates increased aggressiveness by councils, but also possibly that more arrestments are failing and being repeated because of changes introduced by the 2007 Act, which introduced protection for minimum amounts in bank accounts.

Earning arrestment figures have also doubled, indicating changes in recovery strategy for councils and other non summary warrant lenders, but also possibly the success of the new s70A of the Debtors (Scotland) Act 1987, which introduced a new requirement on employers to inform creditors of employee’s new employment details when employment with them has ceased.

Not all diligences have, however, proved popular. The replacement to poinding and warrants sales only saw 2,758 attachments and 51 exceptional attachments being executed. Contrast that with the number of poindings in 1997 (18,980) and its clear to see the corporeal property of debtors is now safer than ever.

Money attachments have also not proved a hit with only 502 being executed nationally.

Some diligences are more common amongst certain creditors than others. HMRC, for example, most commonly use non earnings arrestments (6,437) rather than earning arrestments (467). They also are more likely to use money attachments than local authorities and other non summary warrant lenders.

Local authorities most commonly use non earnings arrestments (219,905) than earning arrestments (116,703) and rarely appear to use any other type of diligence.

Non summary warrant creditors in contrast are more likely to use earning arrestments (17,127) than non earnings arrestments (7,643) and are also the highest user of attachments (1,755), possibly indicating more intelligence based recovery as they are more likely to have information on debtors employment, unlike statutory creditors like local authorities. In one sheriffdom there were more earning arrestments executed for summary warrant debts than non earnings arrestments, but that was the exception.

A number of conclusions can be drawn from these statistics.

First, recent criticism that Scotland has become overly debtor friendly is not true, but clearly local authorities are struggling to recover local taxes.

Second, it is also obvious that although many of these problems may disappear should Scotland introduce a Scottish Income Tax, collected at source this will have a dramatic effect on Scotland’s legal debt enforcement system as sheriff officer firms are clearly over dependent on local authority revenue.

Third, if the whole purpose of the review carried out by the fist Scottish Executive into debt recovery which culminated with the Striking the Balance Report was to create a less coercive system then it’s failed. Even allowing for changes in tactics, no one could have imagined a 134% increase in the use of diligence. The recent growth in schemes like the Debt Arrangement Scheme, which now see over 3,000 people applying per year, is still not enough, when over 338,701 Charge for Payments are being served, 134,297 earning arrestments are being executed and 233,985 non earnings arrestments are being applied for. It is clear the collaborative approach that was hoped for is still not being achieved and legal debt recovery is still, in relation to local authorities at least, based on a hit and miss, threat based approach rather than one based on intelligence and working with debtors.

It also doesn’t help that the Scottish Government has still not implement S74D of the Debtors (Scotland) Act 1987, which requires lenders within 48 hours of executing a non earnings arrestment to serve on the debtor a Debt Advice and Information Package advising them where and how to seek advice on how to deal with their debts.

There is no easy answer to the current problems, but encouraging more people to seek advice and agreements with their creditors should be a priority for the Scottish Government; also a further review of local authority enforcement powers under the summary warrant procedure is now long overdue. It should be borne in mind that widespread abuse of these powers and the diligence of poinding and warrant sales is what eventually discredited that diligence and led to its abolition: we can avoid repeats with other diligences by acting now.