Council tax arrears cases up 372% in five years

_{9 March 2015}

The number of people contacting StepChange Debt Charity who have council tax arrears has increased 372% in the last five years and over the same period the average amount owed by clients has risen by £157, according to a new report (PDF) released today by the charity[1].

The charity’s research highlights how councils are more likely to engage in aggressive enforcement action through the use of bailiffs and threats of court enforcement, rather than offer affordable payment options to people with arrears. By resorting quickly to aggressive enforcement councils are negatively impacting on individuals’ finances and health and there is a lack of evidence that such aggressive practices lead to better returns for the public purse. People in council tax arrears are likely to be vulnerable yet councils are not covered by rules and codes of conduct which many other creditors are expected to follow.

Arrears on the rise

In 2010, just 13,353 people who contacted the charity were in arrears to their council, but in 2014 this figure had risen to 63,016. The average amount owed has risen from £675 in 2010 to £832. The charity believes that the difficulties many households have covering essential household bills combined with changes to council tax benefits are behind the rise[1].

Aggressive enforcement as the default option

While councils cannot add additional charges and interest, they have powerful enforcement options at their disposal, the use of which appears to be the norm, not a last resort. A survey of the charity’s clients found that even when people engaged with their council they faced tough action. After speaking to their council, 62% of people had still been threatened with court action, 51% had been threatened with bailiffs; while only 25% were offered an affordable payment option and only 13% were encouraged to get debt advice [2].

The impact of aggressive enforcement

The charity found that when councils pursue aggressive enforcement action it can lead people to engage in risky financial coping strategies and that it can impact on mental health. Of those who faced aggressive enforcement, 49% agreed to an unaffordable repayment plan and 47% fell behind on other bills. Of those subject to bailiff action, 93% said that it increased their levels of stress and anxiety and 63% said that it put a strain on their family [2].

Since the introduction of a new fee structure in 2014, people may face charges of £310 simply for a bailiff issuing a letter (£75) and visiting a property (£235). Charges that can easily exacerbate what may be relatively small debt problems.

Councils under pressure

Councils are under pressure from local government to collect council tax “in year” and are named and shamed based on these collection rates. Despite this pressure council tax collection rates fell in 2013/14, only the second fall in the last 20 years[3]. This is a clear indication that the increasingly tough enforcement employed by councils is not effective.

Action is required

The charity is calling on the government to implement the following changes:

• Changes to the Council Tax Administration and Enforcement Act 1992 to place guidance on a stronger legal footing, including ensuring that councils should evidence that they have tried to pursue an affordable repayment plan
• Ensure consistent incentives and messages to councils that reinforce the need for and importance of affordable payment solutions.
• A new individual protection against enforcement of unaffordable repayments for people seeking help with their debts

Mike O’Connor, chief executive of StepChange Debt Charity, said “It is shocking that many councils are less likely to be helpful to people in debt than banks are, and are more likely to take people to court.  The growth in people struggling with their council tax bills is only outstripped by growth in problems caused by payday loans. 

“Councils need to pursue debts but they must have a responsible and proportionate approach to dealing with people in arrears and not default to aggressive enforcement that often only serves to deepen debt problems.  There are examples of good practice such as Leeds City Council but all too often public authorities are neither behaving as responsibly as they should or using the best strategy to recover debt.”

Notes to editors

1. Council Tax Debt (PDF) – a report by StepChange Debt Charity
2. Based on a survey of 1,087 StepChange Debt Charity clients (February 2015)
3. Council tax and business rates collection: an update (November 2014) – Audit Commission