South Tyneside Council writes off £56,000 in debts - with more expected as pandemic bites

Companies collapsing into insolvency and a housing benefit overpayment were the latest issues putting a dent in the authority’s finances.

The individual debt cases, totalling £56,384, were considered “uneconomical to pursue further at this present time.”

Councillor Ed Malcolm, cabinet member for resources and innovation, revealed the figures in a report to cabinet on Wednesday, November 4.

As the country enters a second national lockdown, the council chief said the “challenging economic circumstances” ahead would lead to even more irrecoverable debts.

“The council issue bills for over £30million per year for business rates and despite collecting over 98p in every pound, regrettably there are some debts which we’re unable to collect,” Cllr Malcolm told the meeting.

“The council has continued to apply all available legal methods to recover debt, this includes instituting insolvency proceedings and seeking director disqualification where appropriate, taking control of goods through enforcement agents and requiring substantive evidence from landlords on the existence of a commercial tenancy.

“However, there are circumstances beyond our control where further pursuit of debtors would not be viable – for example where a business has fallen into liquidation.

“Due to the very challenging economic circumstances arising from the Covid-19 pandemic, the level of irrecoverable debts will increase in the coming months.

“Whilst some of these debts may be written off within our accounts, further recovery will be undertaken where new circumstances arise.”

Under council rules, cabinet approval is needed to write off any debts above £5,000.

According to a report for councillors, several premises in South Shields owed a combined total of around £50,137.52 in unpaid business rates, with all available recovery action ‘exhausted’.

One of these was a company linked to a pub, which ceased trading with debts of more than £11,150.

A further £22,731 was left outstanding by a company which traded from several premises, shops and a public house before going into liquidation.

Another case saw around £8,746 owed when a company ceased trading at a village pub and was subsequently wound up.

At a town night spot, around £7,500 in unpaid business rates were owed by a sole trader.

The final case included an individual owing around £6,246 due to an overpayment in housing benefit linked to an unreported change in income.

While the change was assessed as a ‘non-fraudulent claimant error’ by the Department for Work and Pensions, a debt relief order was put in place for the individual.

A report to cabinet adds: “If no action is taken to address these irrecoverable debts, a build-up of arrears against which no effective action can be taken, will continue.

“This would mean that the balances for amounts owed shown in our accounts would not represent a fair view of recoverable debt.”

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