Council has 'no prospect' of collecting single £1.9m debt after 'unfortunate' circumstances

Peterborough City Council (PCC) has “no prospect” of collecting a single £1.9 million debt after a set of “unfortunate” circumstances.

The figure came to light when the council’s auditing committee reviewed debts written off by its finance team as unrecoverable.

Most of the debts were for far smaller figures and came about because people who owe council tax have died or because businesses owing business rates went bankrupt.

But the outlier was spotted by Cllr Nick Sandford (Liberal Democrats) who pointed out that “quite a lot of them are for £20-30,000” while this one is “around eight times the size of any others”.

Finance chief Cecilie Booth initially said that she didn’t want to discuss the figure – disclosed in a confidential appendix seen by councillors but not available to the public – without going into a private session.

“This is a particularly tricky one that I don’t really want to discuss in the open but I can brief you on that separately if you so wish,” she said.

But after further questions from Cllr Sandford and Cllr Mohammed Rangzeb (Conservatives), she explained some of the circumstances around how it came about.

“It’s an unfortunate one and it’s a large amount, I agree,” she said. “We’re hoping to potentially recover some of it.

“There was an appeal dragging out as well, delaying billing and collection,” she added. “It is one we’re proactively looking at as we speak but there is no prospect of actually collecting any of that £1.9 million.”

“Bad debt of this size we would have spotted but because of the particular circumstances about this particular account it wasn’t spotted.”

The confidential appendix was made available to councillors after they refused to rubber-stamp a report summarising the debt write-offs in February.

£887K written off after Vivacity leisure centres closed during pandemic

The report showed that £1.6 million was written off in 2020-21, more than a third of the £4.7 million written off between 2008 (when the report begins) and 2022 (when it ends).

A Freedom of Information (FOI) request reveals that just under half of that £1.6 million figure (£707k) was the result of 14 businesses and one person going bankrupt, while £10,000 was because three individuals had died.

The rest – £887K – came about because of the impact of the Covid pandemic on Vivacity Leisure Trust before Peterborough Ltd took over running leisure facilities such as the Lido and the Regional Pool.

This debt initially looked unusual on the balance sheet because it was the only one listed under “service transfers/ commercial agreement/ negotiation” in any year since 2008, but a PCC spokesperson explained how it came about.

“The write-off in question relates solely to our previous culture and leisure trust. As part of our agreement with the trust, the council was paid an annual sum for use of its leisure assets,” the spokesperson said.

"Due to the impact of the Covid-19 pandemic, which was significant for the leisure industry, the trust had to close its leisure centres and visitor attractions and eventually served notice on the contract, handing services back to the council.

"As a result, an invoice for the regular annual sum was not paid in 2020/21. That said, a provision was set-aside in anticipation of this, and savings were found within cultural and leisure services to offset the outstanding payment."

Council to begin producing regular write-off reports

Most of the irrecoverable debts the council writes off are indeed provided for: in fact, more than 99 per cent are covered, meaning the impact on this year’s budget is just £3,637 according to council documents.

Part of the reason the figures appear so large is because the council hasn’t undertaken a “significant” write-off exercise since March 2020, it adds.

But going forward, Ms Booth said, reports will be produced every summer so the audit committee isn’t faced with such a backlog again.

Aside from deaths and bankruptcies, debts may be unrecoverable because the debtor can’t be traced or because the statute of limitations for collection has been exceeded.

The debts are made up of council tax, non domestic rates, housing benefit overpayments and sundry debts.

PCC says it will exhaust every option to try to recover its debts and that write-offs are the outcome of less than one per cent of them.