More than £3bn of council tax debt went uncollected last year, and 10% of households were behind with their council tax out of 24.2m liable to pay, a new analysis has found.
Analysis of data from the Ministry of Housing, Communities & Local Government by the Citizens Advice Bureau shows that between 2010 and 2018, the amount of council tax debt grew by 30% and that council tax arrears have risen more than 6% in the last year alone.
The charity claims that outdated and punitive council tax regulations are encouraging local authorities to collect arrears aggressively, which is causing people “serious financial harm”.
Its research using shows that missing an average council tax payment of £167 in the first month of the financial year can escalate to a debt of more than £2,065 in nine weeks because they become liable for the rest of their annual bill after a fortnight. Court costs (typically £84) and bailiff fees (commonly £310) are then added to the debt pile.
Citizens Advice claims that more than £560m in fees were added to people’s council tax debt in 2016-17 alone, including £300m in bailiff fees.
The charity claims that this is “particularly concerning” as some of these fees have to be paid by the person in debt before any council tax arrears can be recovered by the local authority.
Gillian Guy, chief executive of Citizens Advice, claims that charging a full year’s bill after a single monthly payment is missed “show how broken the system is - they both tie the hands of councils and force people into debt.”
The government announced earlier this month that it will be engaging with charities, debt advice organisations and councils on changes to improve the current council tax collection system, before considering further reforms later this year.
Reforms could include ensuring affordability assessments are central to council tax collection processes, so individual circumstances are taken into account and people are given appropriate time to pay off arrears, and improving the links between councils and the debt advice sector.
Richard Watts (Lab), chair of the Local Government Association’s Resources Board, was welcoming of moves to reform the system. “Councils want it to be easier to recover money without having to go to the courts so would be in favour of a review of the regulations, including whether to remove the requirement for the entire annual sum to become payable if an instalment is missed,” he said.
“The LGA will be working with the government to identify best practice and update the current guidance.”
MHCLG’s plans form part of cross-government efforts to improve the treatment of vulnerable debtors which include plans for the Treasury to implement a ‘breathing space’ and statutory payment plan for people in debt and a Ministry of Justice review of bailiff regulations.
Ministry praises two districts’ innovative approach
St Albans DC and North Warwickshire BC have been highlighted by MHCLG as best practice examples.
St Albans staff proactively refer vulnerable residents to debt advice services and hold off from applying to the courts for Liability Orders – which give councils powers to collect debt – unless payments run beyond 12 months or multiple payment arrangements are broken.
The council has been able to maintain high collection rates (98.9% in 2017-18, compared to a 97.1% average across England).
North Warwickshire is building partnerships with advice agencies and charities to engage hard-to-reach people, for example by providing debt advice through a food parcel scheme. Their new approach contributes to their 98.6% collection rate in 2017-18 and has also led to less reliance on enforcement agents.