Council writes off £56m in ‘irrevocable debt’ during last financial year

By Adrian Zorzut, Local Democracy Reporter

A London council has written off £56million in ‘irrevocable debt’, and business rates are the biggest contributor.

Westminster City council said it cleared £35million in unpaid business rates and £9million in parking charges during the 2023/24 financial year, a Freedom of Information (FoI) request has shown.

It also cancelled plans to reclaim £10.3million in council tax and housing benefit overpayments. Another £650,000 in adult social care debt and rent arrears was also forgiven. The council said the figures cover debt accrued over multiple financial years.

The FoI shows 876 accounts failed to pay business rates during the 2023/24 financial year. That figure jumped to 21,498 when it came to failed council tax payments and to more than 61,000 for parking charges.

The council said the amount of irrevocable debt it writes off will differ between financial years because reviews are not carried out on a yearly basis. They said the last review involving business rates and council tax debt took place during the pandemic and figures were higher than normal.

Westminster City council said the amount it wrote off is ‘relatively small in percentage terms’ and pales in comparison to the roughly £2.27billion in business rates and £160million in council tax it collected last year. This is then handed to the Treasury where it is redistributed across the country.

It’s believed business rates write-offs are primarily due to insolvencies, like liquidations, administrations and dissolutions, and that local authorities, like private businesses, cannot avoid these from their bottom lines. It’s understood those leaving behind debt without providing a forwarding address is a particular problem in Westminster due to the borough’s transient resident population.

A council spokesman said: “As home to more businesses than any other local authority area, Westminster collects the most business rates in the country on behalf of the Government. Our collection rates are in line with neighbouring London boroughs.

“Local authorities routinely write off council tax debt for a variety of reasons, including debtors absconding without a forwarding address or insolvency bankruptcies. Overall, the council aims to recover debt as soon as possible, while always taking account of the current cost of living crisis that residents are facing.”

Pictured top: Westminster city council headquarters in Victoria Street (Picture: Google Street View)