To learn more about wage arrestments visit my page on them here.
New statistics, produced by the Accountant in Bankruptcy Office show that in 2018-19 Scotland’s Local Authorities increased the number of times they instructed Sheriff Officers to recover Council Tax debts by over 15%, adding, it is believed, up to £30 million in Sheriff Officer fees to those in debt.
Also, the type of action the Local Authorities have been instructing Sheriff Officers to take appears to be focused on one particular type of enforcement action: Bank Account Arrestments, which many believe are a particularly harsh form of debt recovery.
Bank Account Arrestments for Council Tax Increase by 21%
In 2018-19 there were 167,356 bank account arrestments by Local Authorities for Council Tax debts (up 21% on the 138,021 there was in 2017-18).
When a bank account is frozen, any funds that are held in the account that are above the Protected Minimum Balance of £529.90 are frozen, up to the level of the debt that is owed.
So if there is £1,000 in an account and £1,200 is owed, then all funds that are in the account that are above £529.90 are frozen. If only £200 was owed then the first £529.90 would be protected, the next £200 would be taken by the Sheriff Officers and the remainder of the balance would be returned to the bank account holder.
The problem is people are usually only left with the £529.90 and this frequently leaves them without enough money to pay their mortgage, rent, gas, electricity or to buy other household essentials such as food.
If the funds held in the account are below the Protected Minimum Balance of £529.90, then the Bank Account Arrestment fails, but the Sheriff Officers fees are still added to the debt and most banks will still add a £25 administration fee to the person’s account.
So for most, whose only income is social security benefits, and whose funds in their account are never above £529.90, the pointless arrestment plunges them more into debt.
In contrast to the sharp increase by Councils in their use of Bank Account Arrestments is their use of other types of arrestments, such as wage arrestments, (there were 71,835 in 2018-19, which only increased by 4% on the 68,858 there were in 2017-18).
Wage Arrestments are not as harsh as Bank Account Arrestments, as although the first £529.90 per month is protected, the amount that can be taken after that is only a percentage of the remaining funds, based on a sliding scale, meaning people are not just left with £529.90.
The increased use of Bank Account Arrestments by Local Authorities is, therefore, an indication that they are opting to increase their use of one of harsher forms of debt recovery, even if it means forcing more people into hardship.
This is not a proportionate debt recovery strategy.
Increased use of Sheriff Officers to Recover Council Tax Debts
What the Scottish Diligence Statistics also clearly shows is that Local Authorities are now some of the most aggressive creditors in Scotland.
Whilst their use of Sheriff Officers increased by over 15%, other creditors (Banks, Credit Card Companies Etc.) saw their use fall by 42%.
What this suggests is whereas commercial creditors are not using coercive debt recovery tactics, possibly because they don’t consider it to be effective, Councils are increasing their use of it.
If the Commercial Creditors are correct and it is not an effective form of debt recovery, then Councils have to show why their increased use of it is, as in addition to causing hardship, it is significantly increasing the levels of debt that people owe.
With nearly 90% of all legal debt recovery procedures executed by Sheriff Officers now being for Council Tax arrears, the picture that is being painted is one where Sheriff Officers are almost exclusively working for Local Authorities.
The question has to be asked is this increased use in the best interests of local authorities or is it in the best interest of those Sheriff Officer that advise them?
The figures also demonstrate, that contrary to claims that Scotland is better than the rest of the UK, where the over-use of Bailiffs has been criticized by bodies such as the House of Commons Treasury Select Committee, the situation here does not appear to be much better.
Local Authority Debt Recovery Strategies Need to be Revised
Scottish Local Authorities now need to revise their debt recovery strategies by increasing the amount they are investing in free money advice services, which are believed to have been cut by 45% between 2014-2017 and is now believed to be worth less than £11.72 million per year.
Contrast that with up to £30 million in fees it is believed Sheriff Officer action is adding to people’s Council Tax Debts each year.
In addition to this the Scottish Government need to accept some responsibility.
If they are going to allow Local Authorities to increase the level that Council Tax rates can be increased by next year, they must also ensure with that power comes the responsibility to ensure those who are most affected can access advice and assistance to help mitigate the worst effects of any hike.
This could be done by increasing funding for free money advice by introducing a Scottish Debt Advice Levy and also national best practice guidance for Council Tax Debt Recovery, that places an emphasis on ensuring Local Authority Debt Recovery departments work in collaboration with local advice agencies and current year council tax is prioritised over arrears.
The Scottish Government could also, as part of the Accountant in Bankruptcy’s review of Diligence, look at how bank account arrestments are working in practice.
In particular they could review whether the Protected Minimum Balance of £529.90 offers sufficient protections and whether the process to recall or restrict a bank arrestment could be made more effective, by transferring the powers from the Courts to the Accountant in Bankruptcy, with a right to appeal to the Courts only on a point of law.
The Scottish Parliament could also take a leaf out of the House of Commons Treasury Select Committee’s book and independently launch an inquiry into the issue of Council Tax debt recovery.
Then again, the Scottish Government could just see through on its promise and reform local government taxation and introduce a more progressive model of Local Government funding.
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.