Councils owed pounds 1bn in unpaid poll tax

Five years after its abolition, local authorities are still owed at least pounds 1bn from the Community Charge. But the debt could be considerably higher because only 60 per cent of councils in England and Wales responded to a survey by the Chartered Institute of Public Finance and Accountants (Cipfa).

On top of the poll tax deficit, most of which will have to be written- off, local authorities are owed pounds 574m in unpaid council tax, pounds 598m in business rates and pounds 47m in residual rates, abolished in 1990. Top of the outstanding debts table is Lambeth council, chasing pounds 176m in total, with pounds 75m in poll tax alone. Last year, the inner London authority only managed to claw back 6 per cent of its total amount of outstanding poll tax deficit. Westminster Council is chasing pounds 67,000 of poll tax arrears and pounds 4m in council tax.

The Cipfa survey, based on 1994-95 actuals, gives a clear indication that the problem of arrears is an urban one, with London boroughs and metropolitan districts facing difficulty tracking down non- payers.

Mike Dubock, financial officer with the Association of London Authorities, said: "Losses on collection can potentially have a knock-on effect on council tax bills and services provision. However, with the poll tax councils would have had to make assumptions about the debts."

The problem facing councils, under an obligation to chase arrears, is the high cost of recovery outweighing the income. The collection costs of all four debts for the 60 per cent of authorities which responded to the survey reached pounds 331m last year.

Mr Dubock points out that if councils are not seen to be pursuing the arrears residents may think they can avoid paying. "Clearly there is quite a lot of poll tax outstanding and the longer it goes on the more difficult it is to collect, but councils cannot be seen to allowing people to get away with it. If they apply that to the council tax we get into a rapidly downward spiral," he said.

However Martin Pilgrim, under-secretary for finance of the Association of Metropolitan Authorities, believes most councils are prudent enough to budget for outstanding debts. "Most councils have made provisions or written-off those amounts. It usually results in pushing the council tax up but many have over-provided for the poll tax losses and are now getting a bonus. However, it cannot be used for services, only for lowering the council tax.''

The survey indicates that council tax collection has proved easier than the poll tax. At the height of the protest against the Community Charge, local authorities were faced with arrears of 21 per cent of the collectable amount. The figure has now fallen to 7.6 per cent.