Charity calls for urgent intervention in cost-of-living crisis as council tax arrears almost triple as high in the North than South of England

A financial education charity, The Centre for Financial Capability, is today calling on the Government to intervene in the growing cost of living crisis, as households across the North of England in particular struggle to make council payments.

New research published by The Centre has found that over the last five years, the number of households struggling to pay council tax has increased year-on-year, leading to huge increases in council tax arrears. The Centre found that over 4 million households across the UK in the last 5 years have struggled to pay council tax and have found themselves in arrears. This year so far more than 1 million households are in arrears, a number which is set to rise. In addition, The Centre looked at the use of special repayment plans and bailiffs by Councils and found that these have also seen significant increases over the last five years. According to the Government website, total council tax arrears across the UK stand are around £5 billion.

A set of FOIs to every council in the UK carried out by The Centre has also revealed that there is a growing divide between the North and South, despite the Government’s levelling up agenda, which shows households in the North owe almost triple the amount of outstanding arrears when compared to the South of England. Households across the North owe a total of more than £500 per household in council taxes, while this figure stands at just over £200 in the South.

The charity also carried out a regional analysis of Councils and found large amounts of arrears were owed across England. The North West in particular had the highest level of outstanding arrears of more than £700 million, an average of £227 per household. Cheshire East, Sefton and the Wirral Councils all had some of the highest levels of tax arrears across the country. All of these Councils score highly against the Income Deprivation Affecting Children Index (IDACI), which is used to measure the proportion of all children aged 0 to 15 living in income deprived families. Financial education lessons tend to be skewered towards London and the South, with less provision delivered in the North of the UK. The Centre for Financial Capability supports the ‘Money Twist KS2 programme’, developed and delivered by the financial education charity My Bnk. The yearly evaluation reports for this programme have shown that children who have lower financial capabilities make larger improvements by the time that they complete their programme. The Year 3 evaluation report shows progress for all young people averages at 7% across three independent evaluations, however, for young people most in need, it averages at 56%, showing that despite coming from poorer backgrounds, and having lower financial literacy skills, these children are much more likely to show quicker and more successful signs of learning and development after receiving the financial education programme, compared to children from less poor backgrounds.

The Centre believes that early intervention financial education is a critical element in the fight against financial vulnerability and poverty later in life and the case for building strong financial resilience is now stronger than ever. Prior to the impacts of the pandemic, 11.5 million people (or 22%) already had less than £100 in savings. An estimated nine million adults were borrowing money to buy food or pay their bills and nearly nine million people were already in serious debt. The current economic shocks resulting from COVID-19 and the war in Ukraine have plunged millions more people into financial uncertainty. Between March and October 2020, the number of adults with low financial resilience increased by 3.5 million, with more than 8.1 million expecting to take on debt in the near future. With academic research showing that a lack of financial literacy can be correlated with higher debt burdens, incurring greater fees, loan defaults and loan delinquency, it is clear that more must be done to prepare the next generation.

Carol Knight, Trustee of The Centre for Financial Capability, said: “Today’s findings are incredibly concerning and highlight the huge pressures that UK households are now facing in their ability to make everyday tax payments. As the cost of living crisis looks set to worsen, it is more important than ever that people are equipped with the necessary skills and tools to prepare for future economic shocks. While financial education is not a silver bullet policy and cannot solve the deep financial crisis of today, it is essential that preventative steps are taken now to protect the next generation and ensure no young person is left behind.

“In order to better support future generations, the Government must properly invest in prevention to ensure that future generations do not have to face the same levels of pressures and economic instability. With research from Cambridge University showing that financial habits are formed as early as age 7, the Government must invest in our young people now and ensure that every child in the UK develops the skills and behaviours necessary to navigate financial decisions in their life.”

Louise Hill, Trustee of The Centre for Financial Capability and Co-founder of GoHenry said: “The current cost of living crisis isn’t something any of us could have feasibly planned for.  However, on top of a turbulent two years we’re in a situation where, now more than ever, access to financial education is essential to equip the next generation with the tools needed to navigate periods of hardship. This new research shows just how critical it is that the Government boosts funding for financial resilience and education programmes to support UK households. One of the ways they can do this is through the Dormant Assets Bill, which The Centre is calling on to be used to provide greater funding for financial education to ensure young people have the best possible start in life.”