Call for overhaul of council tax debt collection system

StepChange Debt Charity is calling for urgent action from the Government and local authorities to overhaul the council tax debt collection system, as it says current practices are causing significant harm to people struggling with their finances, including damage to their health, wellbeing, and relationships.

As it stands, there are no binding standards for local authorities to assist those in financial difficulty with council tax arrears, which results in a postcode lottery of support and interventions depending on council practices. What’s more, current rules mean that if someone misses one council tax payment, within a matter of weeks they can receive a demand to pay the full annual bill, threats of imprisonment and rapid escalation of debts to intrusive bailiff enforcement and escalating fees.

StepChange’s new report has revealed that aggressive council tax collection practices are commonplace and counterproductive, and the most vulnerable households are often on the receiving end. The research finds that the increasingly unaffordable burden of council tax, and the subsequent collection journey, can often worsen debt problems, and people are making impossible choices between utility bills, rent, mortgages, or even a healthy diet, to keep up with council tax.

The research showed that council tax arrears among StepChange clients and in the country are rising sharply, as affordability pressures persist through the cost-of-living crisis. YouGov polling shows that 6% of UK adults have fallen behind on their council tax in the last 12 months, which StepChange analysis estimates at over 3 million people, as the average amount of council tax arrears per StepChange client stood at £1,726 in 2023, up from £1,146 in 2019, an increase of 50%. Meanwhile, the latest figures from the Ministry of Housing, Communities, and Local Government show unpaid council tax topped £6 billion last year, an increase of 46% since 2018-19.

Existing regulations encourage councils to escalate debt quickly and take a blunt, aggressive approach to enforcement that causes harm and compounds financial difficulty. The survey found that only one in twenty (5%) clients said their council took their personal situation into account, including vulnerabilities, before taking further action on their council tax arrears, and a third of clients (34%) who agreed to a repayment plan could not keep up with it.

Communications from councils too often push people away from support. Tellingly, over four in five clients (85%) that StepChange surveyed said that the communications they received from their council about their arrears made them feel scared, anxious or depressed.

Enforcement action is deployed too often where clients are in vulnerable situations and escalation has negative impacts. More than half (53%) of clients surveyed who experienced bailiff action said enforcement agents put pressure on them to make unaffordable repayments during visits to their home, while a third (34%) said bailiffs displayed intimidating or aggressive behaviour. The vast majority of clients who experienced bailiff action said it negatively impacted both their mental (95%) and physical (91%) health and wellbeing, as well as their ability to get enough sleep (94%).

StepChange is urgently calling on the Government and local authorities to take three crucial steps: First, Central Government should prioritise council tax affordability, by increasing funding for council tax support for those who can’t pay. Second, overhaul national regulations and guidance, ending counterproductive demands for immediate repayment and the threat of imprisonment, and embedding a binding set of standards and steps to support people who are struggling to agree repayment to ensure escalation to enforcement is a last resort. Finally, establish a statutory regulator of the bailiff sector and stamp out poor conduct by putting the Enforcement Conduct Board on a statutory footing.

Vikki Brownridge, CEO at StepChange Debt Charity, said “Rising council tax and a postcode lottery of support are making it harder and harder for many people to keep up. Aggressive debt collection practices are counterproductive: from troubling treatment of arrears to unhelpful communication, to harmful enforcement action, the current council tax collection journey is at best outdated and at worst dangerous for people who fall behind on this bill. It’s creating harrowing outcomes for many vulnerable households. While we understand that councils need revenue to fund essential public services, a fundamental overhaul is needed to ensure the system is constructive for all involved.

“Looking ahead to the Budget, we want to see increased funding for council tax support and reform to council tax debt collection practices as a priority. Vital to this is the creation of a binding set of standards across local authorities to support those in council tax arrears. As part of a wider package of change, we want the Government and councils to look compassionately to support the most vulnerable, rather than push them deeper into hardship at a time when people are struggling to make ends meet.”