Nowhere to hide for council tax dodgers

People who deliberately avoid paying council tax by moving between local authorities are to be targeted by a government initiative which, if successful, could net councils £100m nationally and reduce soaring council tax bills.

The Office of the Deputy Prime Minister (ODPM) is finalising the details of a data exchange service that will eventually be launched nationally to enable councils to track householders who have failed to pay the tax. At the moment, councils employ bailiffs to collect outstanding payments, if they know the whereabouts of the debtor, or pay tracing agents between £25 and £75 for each person they need to locate.

The Liberal Democrats, who are proposing to replace council tax with a local income tax, said last week that council tax was 'a bureaucratic nightmare to collect' and that every family in England could have £30 back if everybody paid their council tax. They were speaking after the Government released new figures showing that nearly £600m of council tax went unpaid last year, with London boroughs being some of the worst performers. Hackney, for example, failed to collect almost 15 per cent of the tax owed.

The data exchange service is one of a number of projects that successfully bid for a share of £6.2m offered in the first round of funding by the ODPM as part of its e-innovations initiative. The project is a collaboration between TDX Group, which specialises in devising strategies for effective debt collection; Agilisys, a technology company; the ODPM; a group of local authorities; and the cabinet office.

'Our council tax collection rate would very likely be higher if we could trace people more effectively,' said Peter Stuart, head of revenues, benefits and corporate improvement at Mid Sussex district council.

The local authority will lead the initiative when it launches in October. Stuart continued: 'The idea with this is we have a national database which we can post details on to when someone owing council tax moves out of their area. Assuming they don't change their name, they can then be traced when they move into a new area.'

Stuart says that the service will only be 'as good as the data put in' so it relies on all councils signing up. Consequently, the service will be free to local councils in the first few months after launch as an incentive to get involved.

A spokesperson for the ODPM said it was 'premature' to say whether there would be a knock-on effect on council tax rates at this stage or whether any money saved would be used for that purpose. However, the consensus among those involved is that it will have an impact on bills.

'Every bill you pay has an element in it which you are paying because others aren't paying their bills,' said David Maddison, policy officer on local tax collections at the Local Government Association. 'When setting council tax rates, local authorities have to make a provision for losses, which tends to be a maximum of 2 per cent of the rate charged. It follows that the more you collect the less you have to pass on.'

Stuart said: 'There is a hardcore of people who do try and evade paying council tax by moving around. This scheme should save money, firstly by getting rid of tracing agents, and secondly by increasing the amount of council tax collected so that council tax is kept lower.

'There should certainly be less of an increase in future bills rather than necessarily a reduction.'

TDX estimates that if the service is used by all 354 billing local authorities, an extra £100m a year could be collected. It says that, as an additional part of the service, it will help councils to analyse non-payers' individual circumstances and match this with a suitable approach for chasing up the debt. 'Someone who may have fallen behind because of over-indebtedness requires a different approach from someone who can pay but repeatedly chooses not to do so,' said Mark Onyett, CEO of TDX Group.

Sarah Teather, the Liberal Democrats' local government spokesperson, said of the initiative that 'it will take more than just tinkering with the system' to make council tax work. 'If the government want people to pay they need to have a tax that people are able to pay,' she added.