UK_YPUB_Fines

This article was first published in the June 2016 UK edition of Accounting and Business magazine.

Public bodies around the world are developing new strategies to deal with the loss of traditional sources of revenue, such as taxes and central government grant. Many are considering innovative approaches to raise new sources of income so as to maintain long-standing spending commitments. Some are turning to fines for ‘misbehaviour’ as a way of making up for lost revenues.

The most extreme example is probably Ferguson in the US state of Missouri, where fines have been imposed for the most minor of offences. While the most commonly cited example is jaywalking, just as striking is the city’s penalty for allowing weeds to grow too high – US$102 compared with as little as US$5 in other US cities. An investigation by the US Department of Culture in the aftermath of riots in 2014 concluded: ‘Ferguson’s law enforcement practices are shaped by the city’s focus on revenue rather than by public safety needs.’

Less dramatically, there are allegations that in the UK too local authorities have been turning to fines as way to bump up revenue. The Clean Neighbourhoods and Environment Act 2005 gave councils the power to impose fixed penalties on residents who persistently left their bins out on pavements on the wrong days of the week, or failed to take them in after being emptied. The act permits councils to levy a fixed-penalty notice of £75, with a maximum fine of £1,000 if the penalty is ignored. In 2011/12, some 5,000 fixed penalty notices were issued by councils for breaches of wheelie-bin rules; Nottingham Council alone levied 853 fines in the year.

‘Bin bullies’

Three years ago, the government intervened to put a limit on councils’ ability to levy fines on waste offenders following a strong campaign from some tabloid newspapers. Eric Pickles, the then communities secretary, said: ‘For too long, barmy bin rules have allowed local authorities to slap fines on law-abiding people who make innocent mistakes. Putting out your rubbish should be a simple process, and it is ludicrous that we have a system where a milk carton in the wrong bin, or a wheelie bin a few inches out of place, can lead to people facing bigger fines than shoplifters. We’re bringing common sense back and reining in the town hall bin bullies.’

Councils did, though, retain their power to impose fines on severe instances of waste mismanagement, such as leaving bags of rubbish on the street, or fly tipping.

There have also been complaints about the imposition of fines for some traffic offences. In 2010/11, Liverpool Council issued 71,738 penalty notices to motorists who used bus lanes. This generated up to £4.3m, leading to allegations that the practice was motivated by a desire to raise revenue rather than manage traffic flows.

Joe Anderson, elected as mayor and executive leader of Liverpool Council in 2012, responded to a media campaign by annulling the policy the following year. A council spokesman said: ‘The mayor has experimented to see the effect if we scrapped most of the bus lanes. He was clear he did not want them used as a cash cow. We had about 25, now we have four, which are only used some times of the day.’

Councils in England outside London have been told by the Department for Transport that they should not seek to raise revenue from bus lane enforcement. Instead, fine income should be used to cover the costs of setting up, operating and maintaining bus lanes, including installing and managing CCTV cameras. Any surplus should go on public transport or local road improvements.

In Northern Ireland, a new system of bus lanes was introduced in Belfast last year, with enforcement by the Department for Regional Development through a network of bus lane cameras. This raised £1m in fines in the first five months of operation, with around 26,000 penalty notices being issued.

There are also allegations that councils impose unreasonable fines for breaching car parking rules. Analysis conducted for the RAC Foundation concluded that English councils raised £1.4bn from parking tickets, permits and penalties in 2014/15, generating a surplus over costs of £700m. The foundation says that Scottish councils raised £75m from parking fines and off-street car parking schemes, generating a surplus of £36m. Edinburgh Council alone achieved a surplus of over £17m, says the foundation.

‘It must be tempting to think of the income from fixed penalties as a handy top-up for cash-strapped councils,’ says Steve Gooding, director of the RAC Foundation. ‘But what we need to remember is that a penalty should only arise when someone has done something wrong. Ideally, the threat of a penalty should be enough to deter people who are tempted to break the rules. High levels of penalty income are a sure sign to the council that a different approach is needed to achieve the right traffic outcome.’

Luke Bosdet of the AA is also unhappy. ‘Is it acceptable for councils to make a surplus from parking tickets? In principle, no, because the idea of parking penalty notices is that it should be a deterrent. So when you get councils or anybody else issuing a ticket for parking infringements and acting on an industrial scale, then it has little to do with deterrence. Councils and parking operators have been doing it for so long they have come to expect it.’

‘Fleecing the innocent’

As with the ‘rubbish fines’, the government reacted angrily. Local government minister Brandon Lewis told the Daily Telegraph two years ago: ‘This government is taking action to rein in the town hall parking bullies’. He described the widespread imposition of car parking fines as ‘an unjust form of arbitrary taxation, corrupting Britain’s justice system and fleecing innocent drivers’. This was, he added, ‘an affront to fundamental constitutional principles and civil liberties in Britain, contrary to the long-standing principles of Magna Carta and the Bill of Rights’.

The difficulty with these arguments, says the Local Government Association, is that they are based on factually incorrect analysis. Department for Transport guidance specifies that councils must use any surplus from car parking fines on traffic management and improvement schemes. An LGA spokesman calls the criticisms from the RAC, AA and others ‘rubbish’. ‘It is a myth that councils make a profit from parking,’ says the LGA. ‘The reality is that income is spent on running parking services, and surpluses are spent on essential transport projects, such as tackling the £12bn roads repair backlog and creating new parking spaces.’

Yet the perception that local authorities are using fines to top up income persists. ‘People expect fines to be proportionate and only to be issued for serious transgressions that pose a danger or inconvenience to others,’ says Jonathan Isaby, chief executive of the TaxPayers’ Alliance. ‘But in many cases it is hard to shake the suspicion that fines are being used increasingly as a way of extracting extra revenue for local authorities.’

Paul Gosling, journalist