This morning the Children’s Society published their new report ’The Wolf at the Door – How council tax debt collection is harming children’. The report is a much welcome and very timely contribution to the evidence that Council Tax debt is a growing problem.
The report finds that 1.6 million children, living in 920,000 families, are now dealing with council tax debt. This is a growing problem with the number of court summons issued for non-payment rising by a third to almost two million between 2012/13 and 2013/14.
Unsurprisingly the abolition of Council Tax Benefit and the introduction of minimum payment Council Tax Support schemes has played a significant role in these rising arrears. A third of families surveyed for the report said the changes to council tax support were a key contributing factor to finding themselves in arrears.
But the report finds that not only are these changes a problem but the way that Council’s enforce debts is making it worse. Just under half of families in debt felt their local council was either not helpful at all or extremely unhelpful when they contacted them to discuss their debt. To make matters worse council’s were also extremely unhelpful when families tried to negotiate a repayment plan, with nearly half saying it was challenging to negotiate or they were unable to negotiate at all.
As a charity with a long history of supporting low income families struggling with Council Tax debt these findings are unsurprising to us at Z2K. Too often councils treat all debtors as though they are wilfully refusing to pay, failing to recognise that many simply can’t. They demand the full amount of council tax owed and even when we intervene to produce a means statement showing the maximum rate a debtor can afford to repay our attempts to negotiate are often rebuffed as the council demands more.
The report highlights the use of bailiffs as an area of major concern. Those families who’s debt was referred to bailiffs often experienced threatening and aggressive behaviour that left children scarred and intimidated. Overall 19% of those in debt had their case referred to bailiffs but use of bailiffs differs from council to council. Some councils saw minimal or no increase in bailiff referrals but for those councils who had an overall increase the average rise was 25%. This seems to indicate some councils are aware of the negative impact of bailiffs and are trying to avoid using them while others continue to rely on bailiff referrals as their default means of enforcement. This shows that it is perfectly possible for authorities to refrain from using bailiffs against vulnerable debtors.
Another area of concern is how councils collections practices can simply serve to push families deeper into debt. Of those surveyed who had struggled with council tax debt over half had borrowed money to pay their bill, while 1 in 10 had got this money from a payday lender. Borrowing money on such terms simply makes it hard to pay Council Tax in the long run as families get trapped in a disastrous debt cycle.
The sad fact is that these aggressive collection practises aren’t even in the interests of the council as in many cases they simply make it harder for them to collect the unpaid tax. For low income families an affordable repayment plan is the only way to pay off a debt without a significant negative impact on their standard of living. That some councils place obstacles in the way of achieving this outcome is simply scandalous.
We wholly support the recommendations contained within this excellent report and hope that Local Authorities take them on board. You can join in the Children’s Society’s campaign against the use of bailiffs here.
This article originally appeared in the March edition of Credit Collection and Risk (Public Sector)
This April marks the first anniversary of the Taking Control of Goods regulations, which now govern the actions of enforcement agents. As a charity that has long history of supporting vulnerable debtors on the receiving end of aggressive enforcement action we warmly welcomed the replacement of the complex and arcane muddle of bailiff rules with a clear set of unified regulations.
Although the new regulations have much to commend them they fall short in a number of areas and have the potential to produce some perverse outcomes. The new fee structure is to be applauded in its transparency and uniformity but it has led to an increase in the fees charged for the collection of council tax debts. One outcome of these newly inflated fees appears to be that some authorities are taking steps to establish their own internal enforcement agencies, in order to keep the fees for themselves and turn a profit on collecting their own council tax debt.
Indeed, taking into account set up and operational costs, Lewisham is forecasting a ‘net surplus income’ of £400,000 in 2015/16 from establishing their own agency. For those of us in the voluntary sector who have long argued for proportionate and reasonable council tax collection this is a definite cause for concern.
If a Local Authorities’ budget is predicated on collecting a certain amount from Enforcement Agent fees then this creates an obvious disincentive for arrears to be collected prior to reaching the enforcement stage. In this context it is possible to envisage authorities making only minimal effort to collect arrears prior to seeking a liability order and sending the bailiffs in. This prospect of authorities discarding council tax collection best practice procedures and simply sticking to their statutory duties is particularly concerning in the wake of the abolition of Council Tax Benefit.
Up and down the country hundreds of thousands of low income households are now struggling with council tax bills, when they previously paid nothing. These households in particular require a more sensitive and proactive approach to collection that could easily fall by the wayside in the rush to collect enforcement fees.
We are of the opinion that enforcement action is a completely unsuitable means of recovery against such vulnerable household. Yet in London over 15,000 council tax support claimants in arrears were referred to bailiffs in 2013/14. In these cases the £75 compliance charge followed by the £235 first visit fee, on top of court costs, only serves to vastly inflate the debt to completely unmanageable levels that are almost impossible for a low income household to pay.
With local government as a whole facing unprecedented financial pressure the worry is that other authorities will be watching closely the example set by Lewisham and other authorities such as Redcar and Cleveland. If it proves a money spinner they may well follow suit. We hope that our fears prove unfounded but it is difficult to deny that such a move creates a contradiction between good collection practice and the financial interests of an authority. We will be closely monitoring authorities that take this step to ensure we don’t see an increase in unnecessary enforcement action.
Earlier this week the Government published it’s response to last year’s discussion document on the Department for Communities and Local Government’s review of conditions in the Private Rented Sector (PRS). In our view this response manifestly fails to deal with the multitude of problems in the PRS.
We were surprised to read in the original document that only “a small minority of properties in the sector are in a poor condition.”, particularly when the most recent English Housing Survey shows that the PRS remains the sector with the highest rates of non-decency at 30%. Indeed although this appears to be a significant improvement from 47% in 2006 the actual number of non-decent homes remains the same, the percentage has only fallen due to the increase in the total number of PRS dwellings. Continue reading