Debt charities see record Council Tax arrears problems

_{May 4, 2016}

• Council Tax arrears problems among clients have hit a new high
• Charities call for an end to the use of bailiffs for recipients of Council Tax Support

The Money Advice Trust and StepChange Debt Charity have called for an end to the practice of local authorities passing Council Tax debts to bailiffs for the most vulnerable residents. The call comes as new figures released today by the charities show Council Tax arrears problems among their clients are at record levels.

Analysis of StepChange Debt Charity’s clients found that in 2015, those with arrears on their Council Tax owed £961, up from £717 in 2011, an increase of 25%. In 2011, just 14% of the charity’s clients had Council Tax arrears, but last year this figure had increased to 30%. 

Figures from National Debtline, the free advice service run by the Money Advice Trust, show a similar trend – with just 14% of callers in arrears on Council Tax in 2007, rising to 25% last year. 

The Money Advice Trust’s recent ‘Stop The Knock’ campaign revealed that 2.1 million debts were passed to bailiffs by local authorities in 2014/15, an increase of 16 percent over a two-year period.  Of these, 1.27 million referrals related to Council Tax arrears.

Both charities are concerned that the increasing use of bailiffs, now known legally as enforcement agents, is adding additional stress and anxiety, prompting people to take decisions that can deepen their financial problems. A previous survey of StepChange Debt Charity clients with Council Tax arrears showed that:

• 62% of people struggling with arrears who contacted their council for assistance were still threatened with court action
• 51% were threatened with bailiff action
• Only 13% were encouraged to seek debt advice

A small number of councils including Islington, Bexley, Brent and Southwark have now adopted a policy of ruling out bailiff action in cases where the resident is in receipt of Council Tax Support. This is on the grounds that they have already been identified as being financially vulnerable. 

The Money Advice Trust and StepChange Debt Charity believe that this approach should be adopted nationwide, and that current voluntary guidance for Council Tax arrears should be put on a much stronger legal footing, including through requiring local authorities to report their debt collection methods and outcomes to DCLG to enable adoption of good practice to be monitored.

The charities also believe reforms are required to ensure a more balanced approach by councils to arrears collection, with a primary focus on supporting people via affordable repayment plans. By not defaulting to aggressive enforcement, councils can reduce the additional stress and anxiety of those in financial difficulty and would likely recover more money in the long-term.

A recent independent review, led by former MP Eric Ollerenshaw, raised local authorities’ increasing use of bailiffs to collect debts as an area of concern and made several recommendations to the Department for Communities and Local Government (DCLG). 

The charities are calling for a statutory ‘Breathing Space’ scheme that guarantees those seeking debt advice a temporary freeze on interest, charges and a halt to enforcement action in order to help a person recover their financial situation. Where people can repay their debts in an affordable and sustainable way, these protections should continue.

Joanna Elson OBE, Chief Executive of the Money Advice Trust, the charity that runs National Debtline, said:

“With Council Tax arrears continuing to increase, it has never been more important for local authorities to improve their debt collection practices.  Unfortunately many councils are still being far too quick to pass debts to bailiffs, with 2.1 million referrals made in the space of just 12 months alone.

“Bailiffs should only ever be used as a last resort – and they shouldn’t be used at all in the case of recipients of Council Tax Support, who councils have already identified as requiring additional help to keep on top of their finances.  The publication of Eric Ollerenshaw’s review gives the government a welcome opportunity to put this right.”

Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

“The increasing levels of Council Tax arrears are a continuing cause for concern. We know that often the default position of councils is to aggressively pursue arrears through the court process and by instructing bailiffs. It may come as a surprise to people that public bodies are more aggressive in pursuing debts than many private companies.

“This counterproductive approach needs to stop immediately and be replaced with one that is fairer and more constructive. It is up to both central and local government to implement systems that both incentivise affordable repayment and support those in financial difficulty”.