Urgent action needed to help millions struggling with Covid-19 council tax debt

The UK’s three largest debt charities have called on the Government to change ‘ineffective’ regulations on how councils collect council tax arrears to protect households who have fallen behind due to coronavirus.

Citizens Advice, the Money Advice Trust and StepChange Debt Charity fear that with council tax enforcement measures likely to restart soon, many residents who are already struggling as a result of the Coronavirus outbreak will soon face harsh enforcement methods pushing them deeper into financial hardship.

Citizens Advice estimate that over 2 million people have already fallen behind on council tax bills as a result of Covid-19, while people in the ‘shielded’ group are 4 times as likely to fall behind on a household bill compared to those not at increased risk from the virus. 2.2 million households were already behind on their bills before the start of the outbreak.

The three charities recognise the need for councils to recover arrears from those who can afford to pay in order to fund vital local services. However, they are concerned that with the financial impact of Covid-19 likely to be felt for many months and even years to come, existing regulations used by councils to collect debts will lead to heavy-handed tactics – such as using bailiffs – that will not recover much money for councils but instead push struggling households further into debt.

Existing council enforcement powers often result in bailiff action – 1.4 million council tax debts were passed to bailiffs in 2018/19 – that adds costs and fees onto people’s existing debts.

In addition, if someone misses one council tax payment, they become liable for their entire annual bill which can create further unmanageable debt, particularly for those dealing with the financial impact of coronavirus.

The three charities welcomed the government’s temporary ban on bailiff visits to enforce debts during Covid-19 restrictions but are concerned there will be a sudden escalation of enforcement when this lifts. To prevent this, they are calling for the government, as part of its Covid-19 response, to take the following measures:

  • Introduce a ‘pre-action protocol’ for councils to follow before beginning to enforce council tax recovery. This would include a requirement to set up an affordable repayment plan.
  • Encourage councils to collect debts over more than one year by changing collection rate targets.
  • Stop people becoming automatically liable for their entire annual bill when they fall behind on installments.
  • Provide more hardship funding to councils to reduce council tax arrears accrued as a result of Covid-19.

The charities have written to Simon Clarke MP Minister for local government outlining their recommendations.

Dame Gillian Guy, chief executive of Citizens Advice, said: “Coronavirus has caused huge financial uncertainty for local councils. But this pressure must not trigger a wave of aggressive debt collection against people who are themselves struggling to pay their bills. Aggressive collection drives vulnerable people further into debt and is inefficient. Councils get back just 27p for every £1 of debt passed on to bailiffs.

“The government must urgently change the rules so local authorities can collect council tax debts fairly and sustainably. Otherwise millions of people could face the prospect of heavy-handed bailiff enforcement on bills they can’t afford to pay.”

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “There can be no going back to ‘business as usual’ for council tax collection. With millions at risk of falling behind with their council tax bills, the government should move quickly to address the weaknesses in the way local authorities collect arrears from people in debt – to ensure that this is fair, proportionate and does not make bad financial situations worse. At the same time, councils need more funding for both existing Council Tax Support schemes and to support residents in hardship in other ways. This needs to be put in place right away, so that local authorities can play their part in supporting the nation’s financial recovery from the outbreak.”

Phil Andrew, chief executive of StepChange Debt Charity, said: “Council tax is often one of the bills that households experiencing financial difficulty struggle to pay, yet enforcement of it is harsher and more punitive than most other forms of debt. Particularly this early in the Council Tax year, if people miss a payment and become liable to repay the full amount, this is a worry. The Government needs to take steps both to support councils who will understandably be worried about their funding, but also to require them to adopt fair and compassionate approaches to residents who fall into arrears as a result of the current situation.”