Call for reform as council tax arrears rise to £4.4bn

New figures from the Ministry of Housing, Communities and Local Government have shown that council tax arrears in England have risen to £4.4 billion.

The figures show that In 2020-21 local authorities collected a total of £32.2 billion in council tax. This was an increase of £0.6 billion, or 1.9%, over 2019-20. This is lower than in previous years due to a combination of more support given to taxpayers through discounts and the use of local council tax support schemes because of the Covid-19 pandemic, which has reduced the amount due to be collected, and a lower rate of collection.

By the end of March 2021, they had collected £31.7 billion of council tax that related to 2020-21 and achieved an average in-year collection rate of 95.7%, a decrease of 1.1 percentage points over 2019-20. •

On 31st March 2021, the total amount of council tax still outstanding amounted to £4.4 billion. This is a cumulative figure and includes arrears that may stretch back a number of years. This is an increase of £841 million over the figure for 2019-20.

Commenting on the figures, Adam Butler, Public Policy Manager at StepChange Debt Charity, said “These stats underline how the pandemic has left many households facing increased financial difficulty. StepChange’s own research shows 4.3 million people are behind on household bills, with nearly 2 in 5 people affected by Covid falling behind on their council tax.”

“While councils have a duty to pursue this unpaid tax, they also have a responsibility to ensure methods are proportionate and take into account an individual’s ability to repay. Too often, this responsibility is not met, with councils still too quick to pass council tax debts to bailiffs. As these arrears are recouped, councils must ensure they do not fall back into old aggressive methods of collection, particularly for households with low incomes like those in receipt of council tax support.”

“Meanwhile, the Government has made it clear it will take a cautious approach to collecting debts from businesses hit by Covid; individuals struggling with arrears should be afforded no less flexibility. This can be achieved by introducing a binding pre-enforcement protocol for council tax arrears that prevents counterproductive enforcement action and requires a fair and constructive approach to debt collection for financially and otherwise vulnerable people. Financial support through the temporary increase in Hardship Funding, which has been used to reduce council tax bills for those least able to pay during the pandemic, should also be made permanent.”

 Joanna Elson CBE, Chief Executive of the Money Advice Trust,  said “Today’s figures highlight the significant impact that the coronavirus pandemic has had on people’s ability to pay their council tax bills, with £1.5bn of arrears accrued in England last year alone.”

“However, council tax arrears are not just a Covid problem. Arrears were rising at a worrying rate even before Covid-19 hit, and the total amount of arrears, which now stands at £4.4bn, is unsustainable both for local authorities and for individual households.”

“The Government now need to move to reform council tax collection rules to end the practice of people becoming liable for their entire annual bill after one missed payment, and to ensure people are given the time they need to repay.”

“More also needs to be done to prevent people falling behind in the first place. Emergency Covid funding provided to local authorities to reduce council tax bills for those on low incomes has been a vital support for many and, without it, the overall arrears figure would likely have been much higher. The Government should now look to make increased funding for local council tax support permanent, to help ensure no low income household is tipped into financial difficulty by an unaffordable council tax bill.”