StepChange’s Robbie de Santos explains how a tough stand on council tax debt can be counterproductive.
At StepChange Debt Charity we give people help and advice on repaying problem debt. Almost 600,000 people came to us for help in 2014.
Since 2010, we have seen a 372% rise in the number of people we’ve helped with council tax arrears. Only payday loans grew faster as a source of client debt in that time.
More than 4 in 5 clients engaged with their council over their arrears. But a majority of those who did then experienced threats of legal enforcement or demands for unaffordable lump sum payments. These actions make people three times more likely to take out a payday loan, twice as likely to borrow money from friends and family, and almost 50% more likely to fall behind on other bills to pay the demand.
Just a quarter were able to negotiate an affordable repayment plan with their council. Of those who weren’t able to agree an affordable repayment plan, more than half (52%) said the council instructed bailiffs. Bailiff enforcement led to yet further problems, with almost two thirds saying it put their family under more strain, and half saying it affected their concentration at work. Almost 6 in 10 people fell behind on other bills to pay the bailiffs’ fees.
Tough enforcement from councils leads to people falling into problem debt, which has social costs of £8.3 billion, some of which is shouldered by councils – including the cost of people losing their home and relying more on care and support services. It is a ‘false economy’ – councils’ drive to protect their revenue is simply displacing costs while pushing people into greater financial difficulty.
While we have good partnerships with a number of councils and work with them to institute more sustainable approaches to collecting council tax, it is clear that supportive practice across all authorities cannot be guaranteed with just voluntary guidance. This is particularly due to intense immediate pressure on budgets and the way that central government rewards councils for their in-year collection rates, rather than encouraging affordable, sustainable repayment – which may not neatly fall into the annual reporting cycle.
We’re concerned that, without intervention, people struggling with their finances will continue to experience enforcement and collections action that makes their financial problems worse.
We believe the next Secretary of State for Communities and Local Government should introduce a handful of statutory provisions to ensure that councils really try to negotiate an affordable, sustainable repayment plan before they pursue tougher action. This should be reinforced by a reporting framework where councils report on breakage rates of repayment plans and the percentage of cases sent to bailiffs. We also think people should have a right to protection from further enforcement if they are keeping to an agreed repayment plan.
Would this be enough to ensure all councils offered sustainable, affordable repayment plans before pursuing enforcement? We’d be interested to hear what councils think.
StepChange is the UK’s leading debt advice charity. You can read their full report on council tax debt here.
For more information, please contact Robbie de Santos, Senior Public Policy Advocate – Robbie.deSantos@stepchange.org