STATE-RUN DEBT COLLECTION AGENCY: An alternative to cuts and taxes

A State-run debt collection agency would reap huge sums for the Exchequer, says Juno McEnroe

IRELAND still has to continue belt-tightening until the books are balanced. At the very least, this will see a further two budgets with a mix of cuts and taxes loaded onto people before the next predicted general election.

Such consolidation could see ministers go looking for savings out of the economy amounting to €2bn next year and the year after. No final decision on the consolidation has been made yet though.

Having snatched the low-hanging fruit in measured savings in departments such as health and local government, the Government has few remaining choices without directly curtailing services.

An alternative to cuts and stealth taxes, though, could be found by recovering debts owed to the State. This is not just spare change under the couch for the Exchequer but potentially hundreds of millions of euro.

A review of debt management across five public sectors has been carried out for Public Expenditure Minister Brendan Howlin. It sheds some light on the wasted resources used in sectors such as health and local authorities to chase debtors and those who have been overpaid by the State or owe bills for services.

The 134-page report outlines how over €230m could be recouped in some sectors through a central collection agency, if it enjoyed the same powers as Revenue.

The report looks at debt collection systems in the HSE, local authorities, the departments of social protection and agriculture, and the Courts Service.

Outdated debt collection methods, costly legal routes, inept follow-up systems, and a lack of penalties to incentivise debtors to pay are some of the problems identified in the sectors.

Such a central unit could help recoup over €160m alone in local authorities by recovering more rates, housing rents and loans, the report concludes.

Tánaiste and Social Protection Minister Joan Burton has already homed in on overpaid welfare claimants. Her department targeted €710m in “controlled savings” last year, which included recouping overpayments. Legislative changes allow her officials deduct up to 15% of someone’s welfare a week, where they have been overpaid or fraudulently made claims.

The review for Mr Howlin gives the coalition further options on how to make savings in other departments.

This is especially helpful, given that Labour and Fine Gael TDs are even more conscious of suffering a scalping in the general election after the beating they got in May’s local elections.

Hospital bills, fines for offenders, excessive farming payments, rates from businesses, and overpaid welfare payments could all be recovered at much higher levels, the report finds.

A combination of penalties, legislative changes, e-billing, upskilling for department workers, and the initial use of outside debt collection teams would bring in some quick wins for departments.

Ultimately though, a State-run central collection agency would reap huge amounts, but over a longer period.

Potentially, the new unit could be part of Revenue.

National debt management agencies in Norway and British Columbia in Canada are good models for the Irish unit. Norway’s agency was set up in 1990 but now collects 160 types of debt, is highly automated, has 370 skilled employees, and recovers €500m annually.

An effective regime would be needed though to boost collection levels here. Mr Howlin’s review suggests radical sanctions for debtors, such as the concept of a “debt clearance certificate” and strict conditions where an individual or company has a track record of debt problems.

Some methods could involve withholding grants, refunds or benefits for citizens. Other sanctions could include withholding licence renewals for businesses or withdrawing access to some state services, it is suggested.

Nonetheless, any changes would have to see a balance struck between chasing debtors and giving vulnerable cases or individuals some leeway where money is owed.