The Independent Revenues and Benefits Monday Discussion Group returned from its summer break with three subjects which, at first sight, had very little in common: the collapse of Whyte & Co, the growing debate around young people not in education, employment or training, and a Court of Appeal decision about storing boxes in empty commercial properties.
Yet, as the discussion developed, a common theme emerged. Each raised questions about systems which appear to work until suddenly they do not, the risks hidden behind apparently normal arrangements, and the consequences for councils when policy, regulation and operational reality fail to meet.
When a trusted supplier fails
Malcolm Gardner opened the first discussion by asking whether the sudden vulnerability of established organisations was beginning to feel a little like 2008. Whyte & Co had been a familiar presence in local government enforcement for decades. Its disappearance was therefore more than the failure of an individual contractor. It raised questions about how much confidence councils can safely place in long established suppliers and how quickly the consequences of failure can spread.
Kirsty Brooksmith of Hammersmith & Fulham brought that issue sharply into focus. The council had taken High Court action against the company and was left facing a substantial financial loss. She explained that, at 31 March, the amount outstanding had been more than £1.25 million. Although payments subsequently reduced the balance, the authority was still owed £567,038 and regarded recovery as unlikely.
For Kirsty, however, the experience was about more than the money. Whyte & Co had worked with Hammersmith & Fulham for around 35 years. She described the council as feeling “upset and bitter”, but above all disappointed. That long relationship had inevitably created trust, something Malcolm noted when reflecting on how difficult it can be to recognise the point at which a previously dependable organisation has become a serious risk.
The problems had not been immediately obvious. Kirsty explained how the council’s cyber incident had initially provided a perfectly credible explanation for delays in transferring money. Interfaces had been switched off, systems subsequently restored, firewall changes made, and the company itself had changed banking arrangements. Each explanation appeared plausible until the pattern of missing and increasingly small payments eventually became impossible to ignore.
That prompted Ian Savigar to ask one of the most important governance questions of the session. If client money was supposed to be held separately, how had this happened? Kirsty’s response exposed a potentially uncomfortable lesson for authorities. Contractual assurances may say that the appropriate accounts and controls exist, but how many clients actually ask to see the separate accounts and verify the arrangements for themselves?
Michael Fisher took the point further. Organisations holding client money can face a temptation to use it when they encounter financial difficulty, he argued, and councils therefore needed to think more carefully about contractual protection. In future procurement, his instinct would be to look explicitly for insurance or indemnity against this type of loss.
Kirsty pointed out that Hammersmith & Fulham’s agreement already required money to be kept separately. The requirement was there in black and white. The problem was not necessarily the wording of the contract, but whether what had been promised was actually happening.
That distinction between contractual assurance and active assurance may be one of the most important lessons from the discussion.
The consequences do not stop with the council
Tom Clark widened the discussion beyond the immediate creditor position. Supplier failure affects council finances and employees, but it also affects residents who believe they have paid their council tax.
Hammersmith & Fulham had received remittance information enabling it to credit residents’ accounts even where the corresponding money had not reached the council. Residents had therefore done what was expected of them and, from their perspective, their accounts were paid. The authority was deliberately trying to protect that position while asking residents to stop making further payments through the company.
Rachael Walker picked up the communication dilemma. The relationship of trust was not simply between the authority and its contractor. Residents had also built trust in the enforcement company. How, she asked, should councils explain what had happened without undermining that confidence or creating further problems?
There was also the practical difficulty of establishing subsequent payments. Tom observed that evidence of payment is increasingly easy to fabricate digitally, making retrospective verification potentially more difficult. Sean O’Sullivan asked the equally practical question of whether people could still mistakenly make payments. Nicki Duckworth checked the company’s website during the meeting and found that its payment page was directing users back to their local authorities.
For Malcolm, the broader warning was the amount of additional work that can suddenly cascade through a council following the failure of even a relatively small supplier. Tom agreed, noting that the disruption caused by a comparatively small enforcement business offered a sobering indication of what failure involving one of the largest suppliers could mean.
It left the group with a question that extends far beyond enforcement: do councils understand the financial resilience of critical suppliers, and are contractual promises being verified rather than simply accepted?
NEETs, or are we asking the wrong question?
The conversation then moved to an Institute for Fiscal Studies report examining young people not in education, employment or training.
Malcolm highlighted one particularly striking finding. Around 300,000 young people within the NEET population claim no benefits at all and are consequently largely invisible to the administrative systems normally used to identify people who may need support.
Bob Wagstaff posed the deliberately challenging question: if some of these young people are simply being supported by the “bank of mum and dad”, and their families are content to support them, why should government be worried?
Rachael Walker’s response challenged the usefulness of treating NEETs as a single homogeneous group. She argued that the term has acquired a pejorative quality, suggesting young people dependent upon the state, when the reality may include graduates taking time to decide what they want to do, young people supported by relatively affluent families, and others experiencing much deeper disadvantage.
The data supported some of that distinction. Malcolm noted that 37 per cent of the group claiming nothing came from the highest third of household incomes, compared with 30 per cent from the lowest third, while four in five lived with their parents.
Rachael described this, somewhat provocatively, as a distinction between “problematic” and “non-problematic” NEETs. Her underlying point was more serious. The policy concern should perhaps be less about fitting young people into a statistical category and more about understanding why an individual is outside education or employment and whether that situation is likely to cause them harm.
Robert Fox disagreed with any suggestion that financially supported young people could simply be ignored. Even where there is no immediate cost to the state, he argued, councils have a policy interest in ensuring young people gain qualifications, skills and routes into employment. Failure to intervene today could create a much greater social and financial cost later.
Liverpool’s alternative: from NEET to LEET
Tom Clark provided a practical example from Liverpool, where the NEET rate is relatively high and considerable work is undertaken to connect young people with opportunities.
Interestingly, he explained that Liverpool prefers the term LEET, “looking for education, employment or training”, because it describes someone in terms of what they may be moving towards rather than what they currently lack.
That small linguistic change points towards a rather different policy philosophy.
Liverpool has invested heavily in initiatives such as the Youth Trailblazer and works particularly closely with care leavers, including using apprenticeships and opportunities within the council itself. Tom stressed that this cohort does not necessarily fit the picture of a young adult comfortably living at home with their parents. For care leavers, the absence of family support can make the consequences of economic inactivity very different.
Sean O’Sullivan raised another barrier. For an under-25 claimant, the amount of Universal Credit available may be relatively small when set against the conditionality attached to claiming and the practical cost of complying with it. In rural areas, travelling to appointments may itself be expensive.
When Malcolm asked whether free bus travel might help, Sean offered perhaps the most concise observation of the morning:
“You can give as many bus passes as you want. There’s no buses.”
It was humorous, but the policy point was serious. Support cannot be designed in isolation from the infrastructure people actually have available to them.
A label hiding very different lives
As the discussion became more personal, Ian Savigar described his experience supporting his daughter after she left college. Family support may keep someone away from the benefits system, he said, but that does not necessarily mean there is no problem. Without some impetus to move forward, inactivity can continue and place pressure on the whole household.
Michael Fisher made a similar point. In his view, the term NEET risks concealing a whole collection of different circumstances, particularly poor mental health. Some young people may remain invisible precisely because parents are able to support them. Others may not claim Universal Credit because the process itself is difficult to navigate.
Once someone has spent several years outside employment, Michael argued, returning becomes progressively harder. Conversely, obtaining work can have an enormous positive effect through contact with other people, routine and the sense of self-worth that employment can provide.
This brought Malcolm back to the central policy problem. By focusing upon the NEET label, there is a danger of hiding the issues beneath it.
Rachael went further. Too much policy discussion, she argued, concentrates on what is supposedly wrong with the young person rather than examining the environment around them. Local workforce planning, educational opportunities and reduced education resources all matter. Targets for reducing NEET numbers achieve little if appropriate jobs, training and educational opportunities simply do not exist locally.
Bob eventually returned to his original question and modified his position. The hidden population could indeed become a “ticking time bomb”. Family support may mask the immediate cost, but unless the underlying issue is resolved, that cost has merely been transferred from the state to households.
Malcolm made the related observation that this means part of the country’s true welfare cost is effectively hidden. Families are providing support that never appears in public expenditure figures.
The known unknowns
For Rachael, wearing her analytics hat, the most frustrating feature of the IFS findings was the population that sits entirely outside administrative datasets.
Policy analysts know these people exist, but cannot easily identify who they are, why they are outside the system or whether their absence represents disadvantage, deliberate choice or something in between.
As she put it, people outside a dataset are an extraordinarily difficult cohort around which to develop policy.
Perhaps that is the real challenge. Before government decides how to “solve” NEETs, it may need to become much better at distinguishing the very different people currently placed beneath the same label.
Finally, some boxes
For the final topic, Malcolm deliberately moved to what appeared to be a lighter subject: business rates and the practice commonly known as box shifting.
The model is familiar. Empty commercial premises receive an initial period of empty property relief. A company temporarily occupies the premises, perhaps by putting boxes into the building, after which the property becomes vacant again and a fresh relief period is sought.
The Court of Appeal ruling discussed by the group concluded that storing boxes without a genuine commercial purpose did not amount to occupation for these purposes. For councils, the implications could be substantial because artificial occupation can translate directly into lost business rates income.
Rachael immediately identified the wider significance. The judgment appeared to introduce or strengthen the concept of commercial benefit when considering occupation. If so, this might reach considerably further than boxes. What about Bluetooth speakers placed in warehouses, or other arrangements designed principally to manufacture periods of occupation?
In her view, the judgment potentially opened “a can of worms” across a much wider range of rates avoidance arrangements.
Robert Fox supplied the practitioner’s reality check. Even if a council successfully decides that an arrangement is avoidance and refuses relief, that does not mean the rates will be collected. The company may simply be wound up and replaced with another entity. What the authority acquires may therefore be a legally correct decision and an uncollectable debt.
His conclusion was that councils ultimately need clearer powers and clearer rules around beneficial and commercial occupation.
Michael Fisher agreed that the judgment appeared significant because earlier case law had allowed rates avoidance itself to constitute a benefit of occupation. That approach had opened the door to many of the schemes authorities subsequently encountered. The latest ruling potentially begins to close it, although, as both Michael and Robert observed, billing somebody and actually collecting the money remain entirely different things.
Tom Clark was cautious about retrospective exercises. Given the transient nature of occupiers and the repeated use of phoenix companies, reconstructing historic occupation periods could involve considerable work for comparatively little return. The judgment may therefore be more valuable in shaping decisions from now on than in attempting wholesale recovery of the past.
Three subjects, one recurring challenge
What began as three unrelated topics ultimately produced a surprisingly consistent message.
Whyte & Co demonstrated the danger of assuming that longevity and familiarity remove supplier risk. The NEET discussion demonstrated the danger of allowing a single administrative label to conceal fundamentally different circumstances. Box shifting demonstrated the gap that can exist between establishing a legal liability and turning that liability into actual revenue.
Across all three discussions, the answer was not simply another process or another dataset. It was better scrutiny, better understanding and a willingness to look beyond what the system says should be happening to what is happening in practice.
And, perhaps appropriately for the first Monday Group after the summer break, there were few easy answers. But there were plenty of better questions.
Files to download
Please note that the handout contains additional slides covering other items of interest in the news and job adverts, which are provided in partnership with Business Smart Solutions (https://www.businesssmartsolutions.co.uk/).