Funding pressures in local government could mean councils are pursuing debt repayments ‘too quickly and too aggressively,’ a report by national auditors suggested today.

A National Audit Office (NAO) study of the UK’s problem debt – estimated to have reached £18bn - warned public bodies against aggressive use of bailiffs to pursue debts.

It highlighted the knock-on effect this can have on residents’ mental health and the eventual cost to local authorities of increased use of public health services, or the provision of more emergency and social housing for those made homeless.

Auditors estimated that increased use of public health and housing services by people with problem debt costs taxpayers £248m each year.

The NAO urged the Treasury and other public bodies to take a more sensible, joined-up approach to pursuing debts.

A report by the Treasury Committee in July found that councils and other public bodies were often worse than consumer creditors when it came to the ‘over-zealous’ collection of debts.

Local government sources said many councils had already changed how they operate, moving away from ‘counter-productive heavy handed debt collection in the public sector’.

Hammersmith & Fulham LBC last year launched an ethical debt collection programme that aims to help residents at risk of falling into debt, treat those in debt with a greater degree of dignity and save money for taxpayers by avoiding higher legal costs.