South Tyneside Council writes-off £76,000 in 'irrecoverable debts' - with fears figure will rise even higher due to covid pandemic

Companies being formally dissolved, rent arrears and a legal dispute over care costs were the latest issues putting pressure on South Tyneside Council’s books.

The local authority regularly reviews debt levels, with cabinet approval required to write off any debt above £5,000.

This week, the latest report was presented to council chiefs setting out debts that were considered “uneconomical to pursue further at this present time.”

Councillor Joanne Bell, cabinet member for resources and innovation, introduced the report at a cabinet meeting on March 17.

"The council issues 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," she said.

“The council continues 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."

Cllr Bell added: "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 all these debts may be written off within our accounts, further recovery will be undertaken where new circumstances arise."

According to a report prepared for councillors, three companies in South Shields and one company in Jarrow owed a combined total of £52,520.31 in business rates.

One case included business rates in respect of a pub, with a company being dissolved leaving a debt of £16,146.85.

A further £14,553.33 was left outstanding when a company linked to another South Shields pub was dissolved.

Another case saw around £16,313.10 owed when a company entered voluntary liquidation before being formally dissolved in 2021.

And a total of £5,507.03 in business rates was owed when a company linked to a public house was formally wound up.

Around £23,635.97 was also listed for ‘sundry debt’ write-offs including outstanding rent arrears of £5,522.69 for a council housing tenant.

But the majority of this figure, some £18,000, was linked to a legal dispute over costs for residential care.

According to a cabinet report, a person and later their executor, “failed and refused to pay the amount due as they believed [the person's] care and support should have been fully funded by the NHS” - with debt of more than £40,000 accrued.

Following lengthy legal dialogue between the council and the parties involved, the matter was due to go to court.

However both parties settled before the hearing with more than half of the debt paid from the person’s estate.

A council report added that “failure to agree the settlement was likely to mean no recovery of sums due would be made.”

The total debt write-offs of around £76,156 by cabinet this week aim to ensure that the balances shown in the council's accounts represent a "fair view of recoverable debt."

A cabinet report adds: "The proposed write-off amounts reflect only those debts where no further effective recovery can be taken at this present time.

"However, future action may be taken to recover these debts dependent upon receipt of new information or a change of circumstances.

"Other legal avenues are being explored to maximise future debt recovery."

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