Government urged to prevent council tax loading of £158m fees

The Government must act to prevent council tax loading £158 million in bailiff and court fees on to people who can’t pay following the pandemic according to debt charity StepChange.

Bailiff visits, often used to enforce debt owed to local authorities in the form of unpaid council tax, will start up again from 23rd August, following a temporary ban during the coronavirus emergency.

StepChange says it is deeply worried about the impact of the enforcement restart and says on a conservative estimate, people who owe more than £500 million of arrears accumulated on council tax since the pandemic, and who cannot afford to pay, could be hit by up to an additional £158 million of costs purely as a result of the bailiff and court fees that could be added.

Before Parliament rises for recess, the charity has urgently called on the Government to put in place additional protections in light of the ongoing financial crisis. While central Government has allocated some additional funding to local authorities and some additional flexibility about their own repayment of debt, this does not address the particular pressure that local authorities will face resuming bailiff enforcement, which the charity says, just makes things worse for households already struggling.

StepChange is calling for the Government to introduce a statutory pre-action protocol for council tax that would require councils to take certain steps before seeking a liability order for bailiff enforcement action, as well as amending the council tax regulations to enable local authorities to show greater flexibility.

The Local Government Association said in mid-May that 2020/2021 council tax receipts were already £506 million down. Further research suggested around 820,000 people had fallen into council tax arrears during the pandemic. The same research showed that over 4 million people had accumulated around £6 billion of debt and arrears attributable to financial shock caused by the pandemic.

It is very clear that the financial consequences of the public health crisis on households are not going to be resolved any time soon. Many people will lose their jobs, some of whom will not currently be aware that this will happen; many people who retain their jobs will nevertheless see their income reduced; many of those not currently in work will find it even harder to get into work and will be forced to rely on the benefits system for an extended period.

While forbearance is a regulatory requirement across the mortgage and consumer credit landscape, this is not the case when it comes to the enforcement of Government debt. Indeed, local authorities themselves can be penalised financially when they try to offer more compassionate, longer term and affordable repayment plans to those who owe them money.

It is perhaps then no surprise that local authorities are the highest users of bailiffs – referring 2.6 million debts to bailiffs, of which 1.4 million were for unpaid council tax, in the 2018/19 year. Yet bailiff firms, who are often dealing with some of the most vulnerable households, are subject to no universal statutory regulation. Too often this results in poor practice and excessive fees which exacerbate the financial difficulties already being faced by affected households.

StepChange CEO Phil Andrew said “The issue of how commonly local authorities use bailiffs to enforce unpaid debts, piling shocking levels of fees and fear onto already struggling households, seems to go unnoticed as the Cinderella of the debt recovery landscape. That is wrong at any time, but in the wake of coronavirus it needs urgent attention.”

“Local authorities need both help and a prescribed process from central Government to ensure that their first and foremost aim in current circumstances is to help their residents get back on their feet financially through affordable repayment plans, rather than to subject people who can’t afford to pay their council tax to even higher costs and stress.”

“We call on the Government to amend the council tax regulations, and to introduce a statutory council tax pre-action protocol, to ensure people facing debt do not see their problems exacerbated by archaic elements of council tax regulation and practice that are lagging behind the Government’s wider policy objectives.”

In response to the call Russell Hamblin-Boone, Chief Executive Officer of CIVEA said “StepChange has no good reason to prevent one of the few remaining professions not to get back to work. StepChange consistently and deliberately blurs the lines between enforcement and debt collection. In fact, councils collect 97% of debt themselves and civil enforcement is only used when people fail to respond to the council’s final demands. The problem of unpaid council tax cannot be solved by misdirected attacks on the enforcement industry. Enforcement visits are essential for councils to be able to provide the right support to their residents, and with councils struggling to cover the shortfalls in their budgets, local communities face higher costs and reduced services unless everyone pays what they owe.”

“Those who oppose the resumption of enforcement are primarily concerned about council tax debt. They fail to understand that the courts have a backlog to clear, so there will be a lag of many months before overdue council tax is enforced. The priority will be to recover magistrates’ courts fines, traffic offences and other penalties. Of course, councils do not want to pursue people who can’t pay, but we need enforcement visits to be able to identify those in need and get them help. StepChange’s proposal leaves vulnerable people at risk and damages the local economy. These are unusual times and the enforcement sector has led the way in publishing a plan that enables councils to recover much-needed funds safely and responsibly.”