At this time of the year and well into March, more than at any other time, we see big increases in the numbers of people presenting at advice agencies with problem debt.
That is likely to continue with rising inflation and interest rates, changing and insecure employment patterns and wage stagnation. Credit is still relatively easy to access and we believe that problem debt will grow when this changes.
Our research tells us that 8.3 million people across the UK (up from 7.9 million last year) have missed three bill payments in the last six months or feel their debts are a heavy burden. That is around one in six people of working age. Increasingly, councils are caught in the middle of this. According to StepChange Debt Charity, 31% of their clients are in council tax arrears, an increase from 14% in 2011.
Council budgets are under pressure and councils are duty bound to recover what they are owed. Approaches to collection of arrears do vary massively with great practice in some areas and very old-fashioned practices in others. In November 2017, the Money Advice Trust debt charity published its Stop the Knock 2017 report, which revealed that in 2016-2017, councils passed 2.3 million debts to bailiffs with a 14% increase in bailiff use by lower-tier councils in two years.
Government guidance says bailiffs should be used as a last resort. This can be an expensive and misery-inducing approach to collection and can result in little gain, with long-term detrimental issues as outlined in The Children’s Society research Wolf at the Door 2015.
The trust’s research also found many councils are working better and differently. Nearly four in 10 are using bailiffs less than they did two years ago. One example is Hammersmith & Fulham LBC, which has shown how progressive practices can go hand-in-hand with effective debt collection. This year the council began using a new approach to debt collection, with an emphasis on identifying and responding to vulnerability. The council has been able to collect difficult debts by working with residents to arrange payment plans that work for them and without causing financial detriment to the council. The success of the new approach has led the council to announce that, from April 2018, they will no longer use bailiffs to collect council tax.
We support efforts by councils across the UK to develop alternative approaches to arrears collection. In July 2017, we published a strategic toolkit for creditors, which provides a suite of options. We urge all councils to review their practices, consider the business case and calculate the return on investment. We recommend councils examine our toolkit and use it to challenge their revenues collection strategies.
We are currently working with Citizens Advice, Money Advice Trust and StepChange Debt Charity to capture best practice for local authority debt collection specifically. This has included roundtable discussions with revenues professionals and debt advisers and visits to several councils. Findings will be published in the summer of this year. We invite any local authorities not engaged with our work to get in contact if they wish to be involved.
For more information contact: Kevin.email@example.com
Sheila Wheeler, UK debt advice director, Money Advice Service