With the Government’s constant cuts to local authority funding, council budgets have never been more stretched. Which is why one of the most agonising parts of my role is writing-off ‘irrecoverable debts’.
A vast number of transactions are undertaken with the council over the course of a year and in a small number of cases an individual or an organisation fails to pay what they owe. Crawley has one of the best track records in the country for recovering debts, yet debts cannot always be recovered.
Sometimes there are genuinely tragic reasons for this and in such circumstances people would expect the council to act compassionately. However, in most cases those responsible have either absconded or used legal processes to make recovery of the debt impossible. Auditors require councils to write-off such debts to avoid spending decisions being taken on the basis of money which will never be recovered.
Most of this debt comes in the form of business rates, which the council collects but has to hand almost all of which over to central government. In total, the amount lost is relatively little, but nationally such tax avoidance is estimated to cost the public sector £250m per year, with the Local Government Association now seeking greater powers to tackle the problem.
The UK has one the lowest rates of corporation tax and places amongst the fewest social obligations upon businesses of any economically developed country, so on the one hand we should do everything we can to ensure that businesses pay what they owe. On the other hand, the businesses which fail to pay their rates tend to be small and struggling.
Business rates trace their roots back to 1572, at a time when agriculture’s dominance meant that it was reasonable to assume that land and business success were the same thing. We need a new system, one which reflects the components of business success of the coming decade and which can afford to fund the public services we deserve. Because, ultimately, the best way to avoid writing-off irrecoverable debts is to ensure people don’t get into debt at all.