Councils across England and Wales have today (Monday 8th July) launched a pilot a scheme that will help local authorities recover unpaid Council Tax – currently costing local authorities tens of millions every year.
Twenty-nine local authorities will take part of the trial working with the Department of Work and Pensions (DWP) and Revenue and Customs (HMRC) to be the first to use powers introduced by the Digital Economy Act (2017).
Through the trial, non-paying customers who are employed or have an income will be contacted to start paying their debts, or they will have their debt deducted directly from their earnings through their employer – should they be in a financial position to do so. This is an Attachment of Earnings and is commonly used to recover debt. However, if a person fails to or refuses to supply their employment details, Councils have been unable to recover unpaid Council Tax using this method.
The Act allows Councils to obtain employer and income information from HMRC for people who have failed to pay their Council Tax and have an order to pay by the local magistrate’s court.
The pilot scheme allows Councils to work with HMRC to share employment information that will allow the Council to recover millions of pounds per year in unpaid Council Tax, which could otherwise be used to improve services to residents. If a person is found to be unemployed or does not hit a low-income threshold, their debt will not be taken from them automatically.
The pilot will last one year before being reviewed, after which a decision will be made whether to role the programme to all Councils in England and Wales.
Citizens Advice has responded to the government’s pilot scheme to recover unpaid council tax through deductions. Gillian Guy, Chief Executive of Citizens Advice, said “Our research shows harsh collection methods added half a billion pounds in fees to people’s council tax debts in 2016/17 alone. It’s encouraging to see local authorities trying to reduce bailiff use but any collections must be affordable and should not leave people on low incomes with too little to live on.”
“The government needs to fundamentally reform the regulations governing how local authorities collect debts and give them more flexibility. People should not be charged a full year’s bill after a single monthly payment is missed or threatened with imprisonment.”
Citizens Advice says that Council tax arrears is the most common debt problem helps people with. Last year, its local services around England and Wales helped more than 96,000 people struggling to make their council tax payments. On average Citizens Advice clients in council tax debt have just £14 a month disposable income.
The national charity estimates over £560 million in fees were added to people’s council tax debt in 2016/17 alone. This includes £300 million of bailiff fees which is particularly concerning as some of these fees have to be paid by the person in debt before any council tax arrears can be recovered by the local authority. That is equivalent to adding nearly £278 to every households’ debt that was in council tax arrears.