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Official Report (Hansard)

Session: 2007/2008

Date: 09 April 2008

COMMITTEE FOR 
FINANCE AND PERSONNEL

OFFICIAL REPORT
(Hansard)

Land & Property Services

9 April 2008

Members present for all or part of the proceedings: 
Mr Mervyn Storey (Deputy Chairperson) 
Mr Roy Beggs 
Dr Stephen Farry 
Mr Simon Hamilton 
Ms Jennifer McCann 
Mr Adrian McQuillan 
Mr Declan O’Loan 
Ms Dawn Purvis 
Mr Peter Weir

Witnesses: 
Mr Leo O’Reilly (Department of Finance and Personnel) 
Mr Arthur Scott (Land and Property Services) 
Mr John Wilkinson (Land and Property Services)

The Deputy Chairperson (Mr Storey):

The next item of business is the scrutiny of Land and Property Services. I remind members and witnesses that this session will be recorded by Hansard; therefore mobile phones must be switched off.

Representatives from Land and Property Services briefed the Committee on 27 February 2008. At that meeting, concerns were raised about the performance of the organisation; therefore, the representatives were asked to return.

A submission from Land and Property Services was included in last week’s members’ pack, and is included again in today’s packs. A submission from the secretariat has also been included.

I welcome Leo O’Reilly, John Wilkinson and Arthur Scott, and invite them to make their presentation. I apologise for the delay; the previous session ran longer than we had anticipated. Therefore, thank you for your patience.

Mr Leo O’Reilly (Department of Finance and Personnel):

Land and Property Services already provided the Committee with a detailed response to a number of questions that arose at the previous meeting. I expect there to be some follow-up questions to that response. Therefore, John Wilkinson and Arthur Scott have brought some material that they will present to the Committee.

I will outline the current position of Land and Property Services and what has happened over the past 18 months to two years. As Committee members are aware, Land and Property Services assumed its final form on 1 April 2007, incorporating other organisations into a single agency in the Department. Much of the work on the development and implementation of the new rating system was previously conducted by the Valuation and Lands Agency and the Rate Collection Agency.

The transfer programme for Northern Ireland’s new capital-based rating system ran for more than four years. It was a complex exercise involving the use — primarily by the Valuation and Lands Agency — of new and innovative IT solutions to tackle the challenge of revaluing the entire domestic-property base.

Much of that revaluation work was completed by January 2006, when the Department focused its programmes on using the new capital-valuation base to issue new rates bills from April 2007. Consequently, there were 12 to 15 months in which we were finalising arrangements for issuing new bills and managing the transfer to using new IT-based systems.

Such work is best done in a stable policy environment. In other words, the people whose job is to develop and implement new IT solutions capable of collecting payments from more than 700,000 households require a stable platform from which to work. The new IT systems had to be designed, tested and finalised in time for bills to be issued from April 2007.

Unfortunately, in 2006, significant policy development was still underway as the Government designed the new Northern Ireland domestic rating system. Although the Government had agreed to, and settled on, most of the system’s essential elements — particularly the concept of valuations being capital-based — Ministers continued to be lobbied about details, and several consultation exercises were ongoing. In light of that, throughout 2006, Ministers wanted to retain the capacity to adjust system details.

As the senior officer responsible for the programme, and its chairperson, I recall that there was a clear wish — and it was the stated objective of the Rate Collection Agency — that, by September 2006, the policy-framework system would be stable and the agency would know precisely what it had to do in order to deliver bills by March 2007.

In October and November 2006, further discussions, culminating in the St Andrews Agreement, took place between the Government and the local parties, and additional changes to the rating system were introduced and had to be taken into account. The Department had to make legislative changes, and, relevant to the design of the Rate Collection Agency’s IT system, changes had to be made to the maximum capital-valuation cap and to aspects of the rating relief system, in particular for pensioners.

Although, from a total of 700,000 rate payers, the number of people affected by those measures was relatively small, the challenge in dealing with the Government’s new commitments meant that there was a significant diversion of managerial effort from the Department and, particularly, the agency in order to ensure that those new reliefs could be, and were, in place by April 2007. Inevitably, those timescales meant that several manual work-arounds had to be instigated, and, in the context of today’s discussions, during autumn 2006, the board that I chair took a conscious decision to put some routine work — such as chasing up arrears — on hold in order to allow the Department and the agency to concentrate on ensuring that a viable capital-valuation based system would be ready for April 2007 and that the additional changes to which the Government had committed could be introduced in time for the new financial year.

In a sense, we are looking ahead, having come through a period of significant change and uncertainty. As John Wilkinson will tell the Committee, the rating system works on an annual, cyclical basis of building, recovery and follow-up, which means that there is a higher level of arrears in the system than anyone would wish for, which specifically reflects what happened to the rating system in 2006 and early 2007. However, Land and Property Services will focus on recovering the previous position. The programme will take between 18 months to two years to return us to the previous position in which we had a relatively low level of arrears in Northern Ireland and one of the highest proportions of collection in the UK.

That sets the context. Members will want to concentrate on where we are now and where we hope to be in the future. I will answer questions on any points after John’s presentation.

Mr John Wilkinson (Land and Property Services):

I will pick up from where we left of at the end of February, and I will begin by describing the cyclical nature of the rate-collection process. The component parts of the rate-collection process are interlinked and interdependent, and slippage in one area tends to have a knock-on detrimental effect to other parts of the recovery cycle.

The rate-collection process starts in March and April when we assess and issue 500,000 bills. The next point in the cycle is the cut-off point in the middle of May. If people have not made payments — either in full or in part — by then, we start to send them reminders and final notices. If people do not respond to that, the next step occurs in June when we initiate the court process and summonses. There are court hearings, and decrees are awarded for debt. People are advised of the decrees, and, if there is still no response, we move to enforce the debt in July. That process is handled by the Enforcement of Judgements Office, and statutory demands for debts over £15,000 are dealt with through bankruptcy and liquidation action. We come full circle, and the process starts again in March. The process of collection should be stemmed temporarily to enable us to make the assessments for the following year, and the process of recovery starts again.

I want to give the Committee a feel for what Land and Property Services does and how it intends to tackle the issues and challenges that it faces. We are going to adopt changes in approach in 2008-09. First, we have set a challenging target to collect 75% of the outstanding debt by the end of March. Last year, we set a target of 50%, which we achieved. We are also going to bring the debt-recovery process forward and ensure that the first cases will be heard in June, so the process will get off to an early start. We are also proposing a new measure, whereby we will contact ratepayers who have high debts to examine ways in which they can discharge those debts.

We will adopt another new approach by being tougher on people who have defaulted on their debts in one way or another. In the past, we have been lenient and assisted ratepayers who have defaulted. In future, we will insist that direct debits are set up or that monies are paid in full before we terminate court action. We will also examine other sources of data to help with that problem.

We have compiled a detailed recovery plan that covers all aspects of collection and benefits from 2008. The plan sets out volumes of work, tasks, monthly targets, required resources and how to tackle the backlog of arrears over the 18-month period. We have identified four critical areas to ensuring that recovery starts on time.

First, we need dated correspondence, so that everything is in order when we start to chase debt. By the end of May 2008, we hope to have decreased the volume of correspondence so that we can work within a 10-day turnaround.

The second step is to ensure that the first court hearings are brought forward, and we want to make an early start on that in June 2008.

The third component is the certificates of revision. When we start recovery action, everything must be correct. Therefore, we must ensure that certificates of revision are dealt with and are up to date.

Finally, we will follow up cases of broken payment arrangements earlier. We will contact people who have defaulted earlier and start talking to them to determine what help we can provide.

The Deputy Chairperson:

In 2004-05 the figure for arrears was £25 million, and in 2006-07 the figure was £49 million. In 2006-07 rate recovery was suspended to, as you put it, minimise risk associated with data migration and ensure the delivery of capital values. To what extent did the decision to suspend rate recovery influence the increase from £25 million to £49 million?

Everyone will receive a new bill because of the move from one system to another. Will an individual’s arrears appear on that bill or will arrears be dealt with separately?

Mr Wilkinson:

In answer to your second question, any arrears from previous years will be shown on the new bills that will be sent out in the next couple of weeks.

Several factors contributed to the increase in arrears from £25 million in 2004-05 to £49 million in 2006-07. First, there is an overall increase in the amount of rates that we collect. This morning, I compiled some figures dating from 2002-03 when we collected £687 million to last year, when we aimed to collect just over £1 billion. In round figures, there has been an increase of approximately 50% in the total amount. That has had a knock-on effect on all other aspects of collection, including the increase in arrears.

Another factor in the increase in arrears was that the vacant rating for non-domestic property was introduced in 2004, and we faced some problems in trying to trace owners to collect it.

Mr Weir:

Thank you. There is much to discuss. I may follow up some issues by writing to the Department. Some issues have been raised towards the back of the document, and there are other important matters to consider. Any answers that we receive raise two or three more questions. However, I wish to deal specifically with the arrears issue, about which I have a number of concerns.

The information that you provided on the forecast debt position shows a total debt of more than £148 million. There is a gap between that figure and the historic debt total of more than £40 million. The reason for that gap may be explained by what could be described as late payments: people dragging their feet either because they have difficulty paying, or are delaying. Is that the explanation for the gap between those figures?

Mr Wilkinson:

There are two aspects, which you have correctly identified. One is the fact that there are people who persistently will not pay their rates. We are careful to distinguish those cases from people who cannot pay. We have a different approach to each area of debt.

Mr Weir:

There are a couple of issues around the main figure of £41 million. I presume that the division of debt by council area has an impact on the amount of money that goes to those councils? Is it the case that they are deprived of moneys because of their individual levels of arrears?

Mr Arthur Scott (Land and Property Services):

No. The collection rates that the agency achieves do not adversely affect the councils. The councils are paid according to a formula. The amount that is deducted from a council represents the loss in collections from reliefs, vacancies or arrears that have been written off. Write-offs are small compared to the scale of the arrears. The local councils are in effect cushioned, and the regional rate bears the loss in collection.

Mr Weir:

The councils may not suffer, but the taxpayer in general will, because the money has effectively come out of the overall Northern Ireland pot.

Mr Scott:

The taxpayer will lose out, but locally, the councils are insulated until the debt is written off. That is when it would have an impact on the councils.

Mr Weir:

There are two other issues that I wish to explore. You mentioned that the arrears of around £41 million in Northern Ireland would proportionately be a good deal greater than in other regions of the United Kingdom. Can you give us some indication of the level of that gap?

Mr Scott:

I would turn the figures round the other way, because the level of arrears is a reflection of the collection performance. That is where it is easier to make the comparison. As Leo said in his introduction, we were previously one of the highest-performing collection authorities in the UK; we were in the top 25%. That was when our collection rates were close to 98%. We have slipped back from that to 90% or 91%, so our arrears, in that sense, have clearly increased. If the agency collects more, its arrears are lower.

Mr Weir:

I appreciate that, but you said that we were near the bottom of the table, improved, and then slipped back a bit. Where are we in the table at the moment?

Mr Scott:

Comparators are quite difficult. We are a regional collection authority that collects on behalf of all the councils, whereas in England there are over 400 collection agencies. It is a matter of scale; there are some areas with which comparison is difficult. No one collects as much as we do.

Mr Weir:

OK. I am not entirely convinced by that answer.

Mr Scott:

I cannot give you figures off the top of my head. I could put an analysis together, but I would have to look at various data sets.

Mr Weir:

The historic debt figures are broken down by year. I can understand the pressure to collect relatively small amounts from 2000 onwards. I am concerned that there is a figure of £1·75 million in arrears that is more than eight years old. Is that because relatively amounts of arrears are forgotten about or were not pursued vigorously enough? Are there amounts of money dating back 10 or 15 years that with the best will in the world can never be collected?

Mr Scott:

That is a good point. Our approach to writing off debt must be reviewed. Historically, the agency tried to pursue every debt. A great deal of that money would be made up of small debts that could not be collected because the ratepayer had gone away. There is clearly no chance of that money ever being collected, but those instances should have been written up.

As part of our overall recovery plan, we will look at the practices in the other collection authorities and update our writing-off procedure, so that resources focused on collecting debt are used to the best effect in recovering debts that are —

Mr Weir:

You said that the writing-off procedures resulted in quite a small amount. Nevertheless, we want to ensure that writing-off procedures are not used to bring down the figures. What do you quantify as the average amount of debt ultimately written off each year?

Mr Scott:

Our debt levels are around £2 million, £3 million or £4 million. In comparative terms, we are looking at some of the collection authorities on the mainland and trying to scale them up, because of the difficulties with comparisons.

Mr Weir:

Does that mean that we write off £2 million to £3 million each year?

Mr Scott:

Yes, although that is spread over the 26 councils. However, in comparison with some of the authorities in England, that figure — although very crude — could rise to £60 million. If we are going to look at how councils get paid, that would impact on their revenue, and it is something that would have to be done in consultation with policy colleagues in the Department and in the local authorities, as it could have a serious impact on the revenue available.

Ms J McCann:

Part of the review of rating reform was based on the fact that there would be a proactive campaign for people entitled to take up rates relief. What impact did Land and Property Services have on that? Will more people take up rates relief? In previous years, many people who were entitled to rates relief did not claim it. They felt that the process of applying was so difficult that it was not worth the bother. What are the levels of rate relief claims compared to previous years?

I have been contacted recently by people who have received letters telling them that they can not long pay their rates bill in cash. Can people who previously paid by cheque or cash no longer do that?

Mr Scott:

Yes, that is the case. People can no longer pay by cash at Land and Property Services’ offices. However, they can still pay by cash at post offices and through Payzone, which has many outlets across Northern Ireland. Part of the reason for not being able to pay at Land and Property Services’ offices is so that resources can be diverted from a service that can be provided locally with longer opening hours, to allow staff to deal with higher priority work, such as addressing and collecting arrears. Notification was sent to all those who paid their rates in cash to make them aware of the changes and the steps that they should take to alter their payment arrangements. Some ratepayers have expressed their concerns to me, and I have addressed those concerns. However, many people are converting to pay by direct debit, which benefits everyone in that it is a cheaper and safer way to make payments.

Ms J McCann:

What about those people who do not have bank accounts?

Mr Scott:

Those people can still pay at post offices with a giro card.

Ms J McCann:

Has that been made clear?

Mr Scott:

Yes, the literature sets out where to get help and what must be done to take up the various payment methods. The take-up is a constant challenge for us, and the Department is interested in that. A consultation study has been undertaken with the voluntary and community sectors to ask them to suggest to Land and Property Services how it might improve its efforts in that area. All the bills issued this year will include a booklet on how to apply and flyers about the new benefits in respect of the allowance for lone pensioners and the increase in savings for rate relief for pensioners. Again, we are using the media to help us get the message across. Our traditional partnerships with the voluntary and community sectors, such as Citizens Advice, credit unions and all sorts of community groups and organisations, have been briefed on the changes. People who go to those organisations for guidance will be helped to fill in the forms and be directed to the appropriate sources to access and avail of the benefits.

Mr O’Reilly:

Paragraph 5 of the background briefing paper provides some updated figures on that uptake. I have appeared before the Committee several times, and I am aware that this issue has been raised consistently. In response to those concerns, there has been an effort during the present financial year to increase uptake.

As the Committee will know, the key problem with uptake is in the owner-occupied sector. People who live in social housing can generally plug into the Housing Executive systems pretty rapidly to access housing benefit. The first set of figures shows that, in the owner-occupied sector, the number of awards of rate relief has increased from 52,000 to 55,700 — an increase of about 7% in the past year. However, none of us believes that we are anywhere near the point of saying that the uptake of benefits is satisfactory. As Arthur said, this is a challenge that we share with others, particularly those benefit professionals in the voluntary and community sector. We must find a way of ensuring that we get across the message about uptake.

Uptake has become even more of an issue since November, when the Minister of Finance and Personnel announced that further reliefs would be made available. There is to be a 20% discount for single pensioners, but, again, the problem is finding a way to pass on the message to that group, which will probably not readily access or understand the information. Similarly, people must be informed of the increase in the saving thresholds from £16,000 to £50,000, but many find it quite difficult to understand the systems and arrangements.

Mr Wilkinson:

Yesterday afternoon, I attended a training session in our office on the lone-pensioner allowance. We are considering distributing leaflets and getting out and about to explain to people about the various reliefs that are available. I agree with Leo; more work needs to be done.

Mr Scott:

The staff at Land and Property Services are sensitised to this issue. When a person comes to them for help, one of their first actions is to review the individual’s case and find out whether they have claimed all the benefits or reliefs to which they are entitled. On some occasions, they may detect that the person is entitled to social-security benefits. Our staff are not experts in that field, but they refer the ratepayer to the Social Security Agency as well to ensure that they receive their full entitlement.

Mr O’Loan:

You mentioned the word “inflation” and offered it as a defence, if you like, of the significant increase in the total amount of money to be collected over the years. Surely the simple volume of money is not necessarily the issue. Whether the agency is collecting £120 from a house instead of £100, it is still a bill. The agency does not present the information in that way. I see that the non-domestic vacant properties represent a new tranche, and that an increased number of bills had to be sent out and pursued for those properties. Can you clarify the extent to which inflation is a real defence of the problem with arrears?

You mentioned the “can’t pay” group — those people who have real difficulty in paying their rates —and how it is dealt with differently. Has there been a perceptible increase in the size of that group as a result of the significant hike in rates bills in recent years?

Mr Wilkinson:

I will start with your first question. There are many reasons for the debt and uncollected money. Inflation is one reason, but there are many others. Arthur may wish to elaborate a little on that topic.

Mr Scott:

An increasing number of ratepayers are experiencing difficulty with the larger rates bill because of wider economic conditions. Staff report that more and more people are looking for assistance or breaking their payment arrangements, which is one of the reasons why we think that they have been too lenient. Every ratepayer is given the opportunity to either pay in full or by instalment or to receive a discount on the domestic rate bill. Rating legislation sets out that if that arrangement is broken, the amount owing is due immediately. We would therefore be at liberty to take those individuals to court.

We have not adopted that approach in the past, and, as John outlined, we have been lenient. We must change that approach and inform ratepayers that rates are a legal liability. The advisory sector will tell them that it is a priority debt and that they must get their personal finances in order to meet the debt. It presents an added factor to the challenge of rate collection for the agency.

The non-domestic vacant rating debt applied to a new set of ratepayers who had not received bills for their properties. There was not a profile of how those bills would be paid. As was mentioned earlier, we discovered that there were 10,000 property owners in that category when the system was launched in April 2004. Due to the history of the land registration system in Northern Ireland, that information was not readily available from land registers; information was available only for properties that were registered. The information on properties in the registry of deeds was based on an index of names, and not map-based. Therefore it was impossible to trace the property owner if we did not know the party who sold the property and when it was sold. However, we have made progress, and there are arrears on only 600 properties on the non-domestic vacant rating. We have been unable to trace the owners, but efforts to do so will continue. That is one of a number of factors that make the collection of rates so challenging.

Mr O’Reilly:

We do not regard the present level of arrears as satisfactory or sustainable. The objective of the programme is to reduce that level of debt over the next couple of years. Due to the aforementioned factors that took place in the 2006-07 financial year — particularly the move to the new rating system, other ongoing changes and the need to ensure that a sound, reliable rating system was in place for April 2007 — the routine actions of the rate collection agency to issue court summonses to people who had defaulted did not happen. As Arthur can verify, previous experience tells us that there is a group of ratepayers who leave it to the last moment to pay their bill. We did not get to that group of ratepayers in the last financial year, and that factor has contributed to the level of arrears in the system.

Mr O’Loan:

Your tables show a variation in the amount of arrears across councils. I cannot compare those with the rate base or the total amount of rates due in those areas, but, considering my knowledge of the size of the councils, I have a hunch that they are considerable. Are the local offices responsible for bringing in the rates, or is it a central function?

Mr Wilkinson:

It is a central function. Since last year, we have moved away from local offices dealing with local rate bills. We have also tried to work as a large team and to use our resources more efficiently. A different approach has also been adopted in dealing with phone calls and enquiries to improve our position.

Mr O’Reilly:

It might help Mr O’Loan’s query if the table were supplemented by another column that showed a total rate base. That would demonstrate whether the proportion of debt outstanding is consistent or not consistent.

Mr O’Loan:

If it is a central function, there should not be any variation in council areas. We all would be interested in the outcome of that, because I was almost going to ask why you were giving that information. However, the figures will speak for themselves when we see them.

Mr Scott:

The variation is a reflection of the tax base. Although we try to achieve the 98% target, there will be differences in collection performance, because this is a reflection of the individual response of ratepayers to pay or not pay. There is more to it than how quickly the letters are processed and the ratepayer’s response to the measure. It is not inevitable that we will get the money back merely because a case has been taken to court.

We can end up receiving a certificate of unenforceability or of bankruptcy from the Enforcement of Judgements Office, which states that the ratepayer does not have the means to pay the debt. That is where we get to a situation of writing off arrears. Although we work corporately to achieve the highest possible collection level in each area, there will be variances between areas, which are a reflection of the socio-economic make up of ratepayers within that particular localised tax base.

Mr O’Loan:

A number of times you have told us about what happened in 2006-07, when rate recovery had to be suspended. We have been told that when the process was subject to the gateway review there were red lights which flagged up problems. It was very clear that there was a problem; indeed your shifting of resources from recovery to other areas indicates that you were well aware of it. You are now coming up with a plan of action for recovery. Should that not have been done two years ago, and should action not have been taken then? The collection of rates is a very important task for your organisation, so when the red lights made the problems apparent, why did you not take action at that instance, for example, by bringing in contract staff, or by introducing some other measure, rather than letting the situation get significantly out of control?

Mr O’Reilly:

I will ask Mr Wilkinson and Mr Scott to give an outline of the actions that have been taken to address the arrears position since April 2007, the start of the last financial year. To answer your question regarding the events of 2006-07; as I stressed earlier, during that year we were managing a complex transition to a new rating system, which had to be brought into operation by April 2007. There was absolutely no margin for changing that deadline. The concentration was on ensuring that systems would be in place to collect the more than £900 million of revenue that the

system required. As well as that — as I stressed — there were still options as to which type of rating system we were going to have, right up until the very days before the start of the new financial year in April 2007.

We had to manage ourselves in such a way that we could have coped either with “option A” rating system or “option B” rating system, right up until a few days before the start of that financial year. We managed that appropriately, however it did have an impact on other areas. A conscious decision was taken that the resources available over those three months at the end of that financial year had to focus on ensuring that we were in place to deliver in April 2007, and also to ensure that we were able to cope with whichever option was chosen. That diverted quite a lot of energy and attention, particularly from senior management, in the Rate Collection Agency, the Valuation and Lands Agency and also in the Department. That is the situation which we were in by 1 April 2007. As we then moved into that financial year with a new rating system, we were able to begin to get back into the cycle of recovery of arrears in the system; Mr Scott and Mr Wilkinson have been working on that for the past year.

Mr Wilkinson:

My first task was to analyse the problem and see what had been done previously, which I did during my first few months in office. I then took a series of decisions and made a number of changes to address the difficulties. First, I moved Mr Scott from his corporate services role back into a rate collection one. It was clear that further work needed to be done to the IT systems, so one of the early actions I took was to ask for support from the delivery and innovations division of the Department, which has been helping us to stabilise the IT systems over the months.

Concurrent to that, Arthur and I discussed and agreed on several measures with regard to how we operated; one was that which I have just mentioned — rather than working office by office, we considered more centralised approaches towards tackling some of the issues and problems. For example, at our previous Committee hearing, certificates of revision were mentioned. We have tried to tackle that backlog using a centralised team. As the year progressed, we stabilised the IT system and then examined in more detail the resources that were needed for the current financial year. In recent months, I have discussed and agreed with the Department an additional budget and resources with which to tackle problems. The agency will put in place a fairly detailed plan in conjunction with the permanent secretary. With regard to additional resources, we have put together a detailed recovery plan that covers all matters. We shall progress towards that during the current financial year.

Mr O’Loan:

I believe that that is the first time that the Committee has heard about additional resources. My question, therefore, remains: why were those further resources not sought and introduced when problems were identified? The problems were bad in 2006-07. Rather than stabilising them in 2007-08, they actually got significantly worse. Only now are measures being taken and extra resources being brought into play.

Mr Wilkinson:

During the previous financial year, we were grappling with the stabilisation of systems. I took the view that until the systems problems were resolved, additional resources would not have a great effect on the situation. It was only when we resolved the systems issues that I believed that additional resources could be put to good use towards alleviating problems, volumes and backlogs. Therefore, since we stabilised the system, we have moved to the next stage, which is to put additional resources in place.

Mr O’Loan:

A future challenge will come your way. Professor Hillyard’s first report suggested that a water-charge element would be included in household bills in 2009. Seemingly, that has been endorsed by the Minister. What preparations have you made for that, given the many challenges that you already have?

Mr O’Reilly:

The Independent Water Review Panel’s strand-one report recommended that the option of a single bill for rates and water should be considered. That is slightly different from a single rates charge that includes a water charge. The idea is to have a single bill that includes charges for water and rates so that people can see the total amount for their household. Having heard previous statements from both of the Ministers involved, members will be aware that that option is being followed up. Work to determine whether it is feasible to bring the two systems together technically, within a certain timescale, and whether such a single bill could be issued, has not been completed. Analysis and recommendations will be put to both of the Ministers involved — the Minister for Regional Development and the Minister of Finance and Personnel — on the feasibility of producing a single bill for water and rates, and what the timescale would be if they wanted to ahead with it.

The Deputy Chairperson:

Recent press reports on the matter focused on the fact that Northern Ireland Water is a private company. Is that an issue?

Mr O’Reilly:

The question that arose in those media reports, which reflected on enquiries that we have received, is whether the rating-legislation statutory framework confers the power to collect bills on behalf of the water company.

The answer to that question was no. The rating legislation does not have the power to do that. If and when the Ministers go ahead with a water-charging regime, the statutory basis for that regime will be the water legislation or the rating legislation. Therefore, if people were, for example, receiving a single bill — and that is one of the difficulties with which we are grappling — the statutory basis for the rating part of that bill is distinct and separate from the statutory basis for the water charging part of the bill. That, in turn, raises further legal issues concerning the structure and presentation of a bill and to whom the bill is payable. The media reports have been accurate: there is no statutory basis within rating legislation to collect money for a water company.

Mr Beggs:

Will the bills to be issued this month be just rates bills or will there be at least a line indicating that a proportion of the bill is going towards water?

Mr O’Reilly:

The bills coming out this month will be straightforward rates bills. However, there will be an explanatory leaflet, reflecting a commitment given by the Executive, in which the element of the rates bill that is calculated to contribute towards the cost of running the Water Service will be highlighted. There is also a commitment that if and when next year the Executive commits to a new water-charging regime, then individual rates bills will be adjusted in line with the estimated amount that people currently pay towards water in the rates bill. This year, the bill with be a straightforward rates bill.

Mr Beggs:

What about the single-pensioner discount for the over-70s? A colleague looked on your website a week ago but could not find any information on that subject. When will information on the single-pensioner discount be in the public domain?

Mr Scott:

That information is available now on the website. There will be a leaflet with the bills telling people where to find the information.

Mr Weir:

Am I correct in saying that there will be an information leaflet included with the rates bills explaining how to claim the discount and what procedures they must follow?

Mr Scott:

Yes — as well as what proof and documentation is needed.

Mr Beggs:

According to the document in our packs, as of 5 March the total rating debt was forecast to be £148 million. I see in the handout today that there is a target to collect 75% of rating debt, which is £132 million. Has there been a significant improvement or is that £132 million only the 75% figure, and has there been a worsening of the debt? Why are there two different figures?

Mr Scott:

The figures that were given in response to the briefing were for the forecast position. The position is obviously improving all the time in terms of the money that was collected as we approached the end of the financial year. Our provisional return figure is around £132 million; however, there was some end-of-year work and adjustments to be made; and, finally, the audit. Therefore, the figure will be 75% of whatever that final total is set at. The £132 million is just a reflection of the improvement in the amount of money that was collected, thereby reducing the forecast of what we expected would be outstanding.

Mr Beggs:

Looking at table 4 in the document that you prepared — the aged profile of historic debt — there was a significant worsening in 2006. I am very conscious that when debts start to age, they becoming increasingly difficult to recoup. In 2004, there are fewer than a million small amounts of outstanding debt. That figure jumped in 2005 by three million; then, over the next year, the number increased by 30 million. That debt is now two years old and starting to age significantly. Is there a danger that much of that debt will become uncollectable?

Mr Scott:

There is a strong likelihood that it will be collected. We hope and aim to collect most of that money under the statute of limitations, which covers the current year plus six years. The explanation for the growth in 2005 is probably attributable to the non-domestic vacant rating arrears and our difficulty, as I explained earlier, in tracing people to bill. However, we have made improvements in that area.

The increase in 2006 reflects the difficulties that we expected before going live.

Mr Beggs:

There was talk of writing off the pre-2000 debt. Can the debt be held against a property so that, should it ever change hands, the Department can access the money? Are you careful that you do not write off debts that may be recoverable in such a fashion?

Mr Scott:

Yes. Those are secured debts from early orders, charging lands which we secure through the Enforcement of Judgements Office and Land Registry. Those debts are held as secure debts.

Mr McQuillan:

A company recently applied for rate relief and was presented with a 22-page form to be filled in. That level of bureaucracy must account for the low uptake of housing benefit. That is ridiculous: a 22-page form to be filled in by someone of 70. Such bureaucracy should be simplified.

Mr Scott:

That is regrettable. Unfortunately, housing benefit is a complex, means-tested benefit. We have worked hard with our partners in the Social Security Agency and the Northern Ireland Housing Executive to improve and make our forms easier for people. However, we have been unable to come up with anything better.

A vast amount of information is required to apply the regulations and ensure that entitlement is justified. At our local offices, we offer to help people. For those who cannot make it to the office — the elderly, those with domestic commitments or those unable to use public transport — we offer a home-visiting service. When resources permit, we will go out and help people to fill in the forms. The voluntary and community sector are helpful and supportive in that respect.

However, there is no easy answer.

Mr McQuillan:

Such bureaucracy must have an effect on uptake. People to whom I have spoken told me that they decided to pay the rates and forget about the relief. It is a big problem.

Mr Scott:

You have a fair point: it is a daunting form.

Mr McQuillan:

This week, the service must be commended for assisting communities to come to terms with the closure of post offices in many communities. It is good to see a Government agency sticking with the Post Office and using it. More needs to be done in that vein: more government agencies should use the Post Office as a means of payment.

Ms Purvis:

In your briefing, you refer to use of private contractors to help with housing benefit. Have you plans to use contract staff for recovery of rates?

Mr Scott:

We always consider the options in relation to the workload; however, we have no definite plans for that at this stage. We would not rule it out.

Ms Purvis:

In paragraph 7, you have referred to “recovery activity” and state that:

“We use the following rate-recovery process.”

How long does that process usually take?

Mr Scott:

From the issue of the rates bill to completion of all the stages takes around 60 working days.

Ms Purvis:

How much does it cost to recover debt? Are you able to measure that? Is there a benchmarking tool by which, by comparison with other agencies, that cost may be measured? For example, how much does it cost to recover £1 in debt?

Mr Scott:

We used to have that information, and it was published in the Rate Collection Agency’s report, but as a result of the amalgamation process, we no longer have it.

Ms Purvis:

Do you plan to regain it?

Mr Scott:

Yes. The operational plan of Land and Property Services provides for the reintroduction of such measures. There has been much restructuring and reorganisation of cost centres, so that information has not been as readily available as hitherto.

Ms Purvis:

You spoke earlier of the amount of debt written off. Why is debt written off?

Mr Scott:

The debt is written off when we have exhausted every available means to recover it: when we have been through the process, tried to find the ratepayer and further pursuit is deemed to be uneconomical. Small sums — for example, £25 — it is written off after a year: for bigger amounts it is a three-year period. However, there is a long list of criteria that must be satisfied before a debt will be written off. That is scrutinised by the Northern Ireland Audit Office.

As I mentioned earlier, we must bring that up to date to reflect the situation and to ensure the best use of resources to recover debt.

Ms Purvis:

Rate relief regulations will be introduced, including the Lone Pensioner Allowance, which has an estimated administration cost of £300,000. How will that affect the projections to reduce staffing levels over the next 3 years? How will it affect efficiency savings? Do you have those figures?

Mr Wilkinson:

We have constructed detailed plans on those issues. We discussed and agreed plans with the Department on how to utilise resources and staff to deliver the reforms — some of which came on stream last week. Our efficiency plans will be included in the long-term plans. An initial period will be required to develop systems, training and the skills and, therefore, there will be a spate of activity in the first year. For example, when the bulk of the Lone Pensioner Allowance payments are on the system, in subsequent years people who are 69 years old, or almost 70, will be added. We have factored that in to future plans.

Ms Purvis:

The recent Economic Research Institute of Northern Ireland report into small-business rate relief raised several issues and made a number of recommendations to LPS, including that LPS should adopt a standard industrial classification for businesses. Have you seen those recommendations and are you planning to implement them?

Mr Wilkinson:

No, that is new to us. Perhaps we can submit a written response to that.

Dr Farry:

Has any research been undertaken to try to rationalise the distribution of historic debts of local councils? I am interested in the social factors behind that, as the distribution seems uneven. Declan has offered an explanation for the different approaches to debt collection adopted by local offices. Are there external factors beyond your control that explain that distribution?

Mr Scott:

There has been no comprehensive analysis; we usually discuss out-turn and performance with each of the council officials and share information about it. However, no comprehensive analysis or area-to-area comparison has been conducted.

Dr Farry:

Is such an analysis planned? Research of that nature could suggest ways to aid debt collection, or could uncover issues that are not already obvious.

Mr Scott:

We sought professional help from the Northern Ireland Statistics and Research Industry to assist with our key performance indicators. We are keen to develop that area and, therefore, I note your statements and will ensure that they are considered.

Dr Farry:

We need to conduct proper research into people in debt, analyse their reasons, and conduct social analysis to attempt to uncover issues of concern.

Mr Scott:

We have been involved in localised projects, and a few years ago, we worked with community groups in north-east and west Belfast to consider how to help people in debt. Such a system does not operate across all 26 council areas, and we usually respond to the needs of each council area by discussing with officials and examining their particular circumstances. There is merit in considering a more comprehensive analysis and how that can make improvements locally.

Dr Farry:

My second question is a broad one, and perhaps Mr O’Reilly should answer it: how does such large debt affect the Budget and the accounting procedure? Presumably, it does not raise cash-flow implications in the short term, but it may create accounting problems. Which Department takes the hit for the shortfall? Is it split evenly across Departments or does DFP bear it centrally?

Mr O’Reilly:

At the start of each year, as part of the Budget-setting process, DFP takes account of the available resources when it is concluding allocations to Departments to spend during the forthcoming year. One element of those available resources is the forecast levels of rates receipts, which account for around 7% of the total resource spend — quite a large proportion. Even in previous years, when levels of arrears were lower than they are now, there was an element of uncertainty. For example, a particular level of rates was to be collected. However, we always discounted from that as we knew that that level would not be collected, resulting in a shortfall against that level of collection.

During the financial year of 2007-08, we had a more difficult position to manage because the level of actual collection was below our forecasted shortfall. That meant that we had to work closely with Land and Property Services to revise our anticipated levels of actual receipts over the year. That was fed into the overall management of the block position so that not only were Departments identifying pressures or easements, but DFP was factoring in any anticipated shortfall against that which we had previously forecast.

At one stage, the shortfall was between £400 million and £440 million. I will check the figure but, from memory, the final differential between our opening forecast and the final position was in the region of £25 million. That figure remains to be collected; the money is not lost. DFP will continue to closely monitor the position throughout the year with Land and Property Services (LPS). We will adjust our in-year position as we move along, depending on what the LPS forecasts in actual receipts against what we assumed the receipts will be at the start of the year. Broadly speaking, that is how it operates.

The Deputy Chairperson:

Will it be possible for the Committee to have the LPS performance targets that are in place for 2008-09?

Mr O’Reilly:

Yes, we can provide those.

The Deputy Chairperson:

This morning, you referred to a forward operating plan for 2008-2010. Is it possible for the Committee to have that?

Mr O’Reilly:

Yes, we can also provide that.

The Deputy Chairperson:

Other questions may follow on from today’s session. As with previous sessions, are you happy to receive those?

Mr O’Reilly:

Yes, and we also agreed to provide further work on a comparative breakdown of the distribution of arrears across district council areas against the rating base. That shows the level of variation.

The Deputy Chairperson:

Once again, I thank Leo O’Reilly, Arthur Scott and John Wilkinson for their time and for their information.

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