Are local authorities too aggressive when collecting unpaid council tax? Citizens Advice believes some are and wants new regulations so harsher collection methods, such as bailiffs, are replaced with a more understanding approach.
Council tax arrears account for about a third of the debt problems encountered by Citizens Advice, easily outstripping the 8% that involve credit cards. While about 97% of all council tax is collected by local authorities, arrears are rising.
In 2017/18, £3bn was owed by households in England compared with £2.5bn four years earlier. To some extent, the hands of councils are tied, says Joe Lane, policy manager at Citizens Advice. Regulations encourage councils to use legal powers as a ‘safety net’, meaning bailiff fees and court costs are added to money already owed by households. ‘We understand that local authorities are massively stretched and the pressure they are under to collect council tax,’ says Lane. ‘But regulations are pushing them to collect council tax in a way that’s counter-productive.’
Last year, the House of Commons treasury select committee called for changes to the ‘uncompromising’ way debt is pursued by local and central government. The Ministry of Housing, Communities and Local Government is promising guidance to create a fairer and more efficient collection system, but has not said when, or suggested regulations will be changed.
Nikki Bishop, corporate director of finance at Trafford Council and president of the Society of Municipal Treasurers, says the use of bailiffs by Trafford and other local authorities is only ever a last resort.
More households are asking for longer payment plans, typically 12 months instead of ten, but councils, she says, are keen to help people pay by instalments. ‘Politicians of all persuasions are increasingly uncomfortable with the number of letters they get from people who say they had a bailiff threat,’ says Bishop.
According to the Money Advice Trust, which offers debt advice, 30% of callers have council tax arrears, up from 15% a decade ago. But why do more households owe council tax?
A Citizens Advice report points to a range of factors, including benefit cuts and the localisation since 2013 of council tax support schemes. Many CTS schemes require households that previously incurred no council tax to make a minimum payment.
A study by the Institute for Fiscal Studies, published in January, found that 1.4m households which previously escaped council tax are now required to pay a portion. Only three quarters of the extra council tax being demanded following cuts in CTS is collected during the year it is due, says the institute.
Stuart Adam, one of the authors, says council tax is more difficult to collect from households that are used to paying none, as opposed to those that previously paid a small sum and are asked for more. ‘Council tax collection is not just about getting heavy with people,’ he says. ‘It can be about talking to people and helping them with their finances.’
The MHCLG is calling for councils and debt advice services to work together more closely to help people in arrears. Its new guidance is likely to build on a council tax recovery toolkit produced last year by the Money and Pensions Service (Maps), an agency at the Department for Work and Pensions.
Caroline Siarkiewicz, a director at Maps, says the way authorities collect council tax is mixed. ‘Instinctively there is a view that to get your money back you need to go in hard,’ she says. ‘If you can give people money advice and support, you can get your money back and the cost of collection comes down.’
Citizens Advice is critical of the way that, once a household misses an instalment, it can be required to pay an entire year’s bill in one go. Changes to regulations could also mean money owed in council tax is deducted from a family’s benefits without court orders.
At present, says Joe Lane, it can be difficult for households that owe council tax to set up new instalment plans once bailiffs and the courts are involved. ‘People take drastic steps to pay council tax,’ he says. ‘That can include borrowing on their credit card or other high cost credit.’
Across England, local authorities collected 97.1% of council tax in 2017/18, down from 98.2% in 2012/13. The highest rate of collection in 2017/18 was among shire districts (98%), with metropolitan districts reporting the lowest (95.4%).
In 2018/19, Croydon collected 97.25% of council tax. Direct debits are encouraged, with households that start one entering a competition to win one year’s free council tax. Last year, the borough issued 19,443 liability orders (giving it the power to chase council tax). Croydon’s CTS scheme requires a minimum payment of 15%, but residents that are struggling with universal credit and other issues are assisted through its Gateway service, set up to help with problems caused by austerity.
While the council may ultimately use bailiffs and enforcement agencies, money is collected in line with the Citizens Advice protocol, says Simon Hall, cabinet member for finance. ‘We seek to work ethically,’ he says. ‘It can be a challenge if we are not aware of the circumstances.’
In St Albans, interim revenues officer Richard Skilbeck agrees households are more likely to receive help if they inform the council of problems. St Albans collected 99% of council tax in 2018/19. It does not apply for liability orders unless households owe more than one year’s council tax or multiple instalment plans break down.
Officers are based at job centres to flag up its CTS scheme, which does not require a minimum sum from households on job seeker’s allowance or income support. ‘The council has always accepted that people on the lowest income should receive 100% support,’ says Skilbeck.
In Greater Manchester, Nikki Bishop acknowledges Trafford’s collection rate of 98% is partly due to residents being better off. The council can afford to offer 100% relief to households eligible for CTS, while councils with a higher percentage of residents out of work are more likely to require a minimum payment, she says.
‘We are not trying to collect people who can’t afford to pay,’ says Bishop. ‘The best thing the government could do is decide when people are going to get CTS so that it’s consistent across the country, and then fund that support.’