Local councils in Scotland are writing off millions of pounds worth of unpaid debt this year, and are predicting they will write off even more next year, due to the financial strain the ongoing coronavirus pandemic is placing on personal finances around the country.
Why are Scottish councils writing off debt?
The coronavirus has had a huge impact on personal finances. For the people across Scotland who owed money to their local authority before the pandemic hit, repaying those debts has now become even harder.
They may work in industries where the pandemic has led to a decrease in demand, been placed on the furlough scheme by their employer, or be out of work altogether. Whatever the reason, having less money coming in during the pandemic has left many unable to repay what they owe, and forced local councils in Scotland to consider debt write-offs on a grand scale.
As with all creditors, councils will only consider writing off a debt – or a portion of a debt – if it becomes clear that they have no realistic chance of being able to collect the sum. Given the global pandemic has been with us in Scotland for most of 2020, this year has seen the amount of bad debt being written off soar.
How much debt is being written off?
The amount of bad debt being written off varies across the country, but the most recent example was in Fife.
Just this month, Fife Council reported they had written off £7m worth of debts, which council leaders say is due in large part to the impact of the coronavirus pandemic, and particularly the effects of the national lockdown in March this year.
The lockdown not only shut down industries that provided income to those in debt and helped them keep up with their repayments, it also directly affected local authorities’ ability to collect those debts, with the Scottish Government placing a ban on bailiff action throughout the worst of the pandemic.
Within the £7m top line figure, Fife Council has seen an 80% rise in unrecoverable council tax, from £1.33m in 2018/2019 to £2.4m in 2019/2020, clearly demonstrating the impact the virus – and subsequent lockdowns – has had on the public’s ability to settle their debts in Scotland.
What kinds of debts are being written off?
The majority of the bad debt written off by Fife Council was made up of failed council tax payments. Across the country, however, there are several different kinds of debts being written of by local authorities, including:
- Rent arrears
Individuals within the local authority who have fallen behind on their rent payments, and show no sign of being able to find the money to repay what is owed
- Non-domestic rates
A charge on non-domestic properties within the council area, held by the private, public, and third sectors (i.e. any buildings not for domestic use)
- Sundry debts
A name for a range of debts a person might owe to the council, which can be anything from failing to pay for hiring a football pitch, to owing money to the local authority for pest control services
Is the amount of debt being written off a problem in the long run?
While the amount of debt being written off by local councils is helpful to the individuals in Scotland who are struggling with problem debt, any debt not being collected by councils will take a toll on the public finances.
Les Roberston, Head of Revenues and Commercial Services at Fife Council, said: “It is likely the council will need to make provision in its budget for increased levels of debt [in the next financial year]…The main reason is because of Covid-19, but Fife Council is only experiencing what all other authorities across Scotland are facing and we are preparing for greater bad debt provision next year.”
With the virus continuing to rage in Scotland, and the Government placing the country in a ‘circuit breaker’ lockdown that impacts many peoples’ ability to work, debt write-offs look likely to continue for some time to come.
How do I get help with my debts?
If you are struggling with debt in Scotland and are worried you won’t be able to repay what you owe, there is help available to you.
Carrington Dean are Scotland’s debt specialists, and have helped over 20,000 Scots put problem debt behind them with our practical, affordable debt repayment plans.
