Fife writes off over £5m of bad debt – almost half of it in Council Tax

Fife Council has written off £5.458 million of bad debts this year. The total includes just over £2.8 million Council Tax debts - which represented the biggest portion of write offs this year. Approximately £1.1 million in rent debt was written off - a figure which is significantly lower than usual.
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Debt write-offs are standard practice for local authoritiess around the country, and Fife's total is well within acceptable limits.

Fife’s revenue and commercial services, and housing services presented the finance, economy and corporate services scrutiny committee with its annual ad debts report on Thursday for scrutiny.

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The £5,458 million total included Council Tax, rental income, business rates (non-domestic rates) and sundry debts.

Fife Council's write off figure is well within acceptable limits. (Pix: Pixabay)Fife Council's write off figure is well within acceptable limits. (Pix: Pixabay)
Fife Council's write off figure is well within acceptable limits. (Pix: Pixabay)

“There will always be a small percentage of debt which will not be collected, usually between 1% to 2.5% of charges raised,” committee members were told.

This year, Fife has managed to get the figure even lower. The level of debt written off in 2022-23 accounted for just 0.73% of the amount charged. The council is also writing off less than it did in 2021/22.

It “actively pursues” the collection of all debt - taking “robust action” against residents who choose not meet their obligations. However, a committee report said debt write off is unavoidable and occurs when individuals and businesses cannot pay their debts.

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Sometimes debtors move away and can’t be contacted for payment; sometimes people pass away with debt to their name; sometimes businesses are liquidated with outstanding debts. In these cases and others, the council can choose to write off the irrecoverable debt to help balance its books.

“Write-off is only considered where there is no realistic hope of recovery or where it is not economic to pursue recovery further,” the committee was told.

Overall, Fife has seen a 21% decrease in the total amount of debt written off this year compared to last.

Rental debts are one of the areas with the biggest debt write off decrease because less court action is being taken against tenants in debt.

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“It is expected when activity restarts this will revert to earlier levels,” the report said.

Business rate write offs have also seen a notable decrease because more businesses have managed to keep their doors open this year.

“The level of (business rate) debt written off in 2022-23 amounts to £0.572 million which is a significant reduction from the 2021-22 write off amount of £1.376 million,” the report said.

“This is good news for Fife as fewer businesses in Fife have ceased trading and thus the lost revenues in terms of debt write off has reduced.”

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Council tax write offs have increased slightly from the previous year, but the totals are still “well within the bad-debt provision,” according to the committee report.

The increase in council tax debt write off was put down to multiple factors - including increased tax rates and the general economy.

“The increase in debt write off is due to the overall economic situation. Clearly the pandemic and cost-of-living crisis are going to affect ongoing debt recoveries,” the report explained.

“Council Tax charges have [also] been increased. When the overall charge is increased, the level of debt write off will naturally increase due to the increased charges.”

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Revenue and Commercial Services added that previous pandemic moratoriums were lifted, which have also created a “catchup effect.”

The scrutiny committee asked a few clarifying questions on Thursday, but generally noted and passed the report with no argument.

Councillor Rod Cavanagh (SNP for Kirkcaldy East) said: “I’m pleased to see the council has such robust policies in place for the recovery of debt as well as sensitivity in relation to vulnerable households.”

The council stressed that it offers “support to vulnerable customers who need it” during the process of debt collection and it strives to support households struggling to meet their obligations through rent and council tax allowance schemes.