Yvonne Fovargue MP welcomes the Supportive Council Tax Recovery guidance for local authorities.
Council Tax arrears are a big problem for all concerned. Be it for those suffering in debt struggling to make ends meet, or local authorities needing to secure their income to fund vital services for their constituents.
Too many councils pass debts to outsourced bailiffs far too quickly.
It’s a problem that shows no immediate signs of going away, so I’m pleased to see The Money Advice Service (MAS) launch new guidance, published on 4 December 2018, on how we can encourage more progressive council tax collection – ‘Supportive Council Tax Recovery’.
High numbers of over-indebted residents
We know from MAS research that the number of over-indebted people in the UK is approximately 8.3 million, while a third of people seeking debt advice have missed payments for Council Tax. Especially at a time of year when household finances can be stretched to the limit, the situation is made worse because of the over-zealous debt recovery practices shown by many councils in collecting Council Tax arrears, particularly the overuse of bailiffs to enforce collection. Doing so often results in stress and anxiety for residents and often, worryingly, more debt. As bailiffs’ charges and other fees are often added to the amount owing, residents can be driven to seek out high-cost short-term credit to try and ease the situation. As we know, this can be a very slippery slope leading to more and more debt.
Put simply, too many councils pass debts to outsourced bailiffs far too quickly.
Research on debt, councils and bailiff behaviours
In fact, when it comes to collection practices, many local authorities are treating people in debt more aggressively than private companies, such as utilities companies and banks. A recent survey of StepChange clients reported that councils are twice as likely to have threatened them with court action, bailiffs or a demand for one year’s Council Tax in full as opposed to discussing an affordable repayment plan.
Enlightened practices aren’t just a ‘nice to have’; there is a building evidence base that suggests they can actually be more effective.
A few years ago this was highlighted by The Money Advice Trust ‘Stop the Knock’ report, while more recently a coalition of charities launched the ‘Taking Control’ campaign. It called for new rules on bailiff behaviour and proper regulation and oversight of the industry – something I fully endorse. It’s all too easy for the Government and others to blame this all on a ‘few bad apples’, the problem is far more endemic and embedded.
While this is important, it is also important that local authorities take ownership of this agenda. It is worrying that that the recent NAO report ‘Tackling Problem Debts’ revealed that only 19% of local authorities have adopted the Standard Financial Statement, the industry standard guidelines to determining affordability for those in financial difficulty.
Local authorities share good practice
Fortunately, there are some glimmers of hope out there. A number of councils, as highlighted in the new guidance, are looking at alternative options to offer a more supportive approach, such as affordable repayment plans and support for people who fall behind.
For example, Liverpool City Council – who featured in the new guidance – have been praised for their clear strategic direction to protect vulnerable people while growing the economy of the city.
Recognising that some residents may have difficulty in paying their bills and may need support, the council established a working party initially with Citizens Advice before extending out to other debt advice charities. They are also introducing a ‘Clean Slate’ pilot – offering a small initial cohort of Taxpayers a restructured payment schedule and an offer to pause recovery of all historic arrears.
Or take Croydon Council’s approach. In 2017, they approved the ‘Income and Debt Transformation Project’, and now the council is committed to embedding ethical debt collection practices, but also supporting residents at an early stage, therefore avoiding the need for debt recovery altogether. To do this, they use tailored engagement, communications and collections processes to ensure sustainable payment arrangements are in place where a resident is struggling to pay.
These are great examples of councils taking a progressive approach, but there needs to be more. And there’s no reason for others not to follow suit when it represents a win-win scenario.
Moving towards evidence-based supportive recovery
More enlightened practices aren’t just a ‘nice to have’, there is a building evidence base that suggests they can actually be more effective in getting Council Tax arrears paid. There are other gains to be had – for instance local government creditors pick up some of the estimated £8.3 billion social cost of problem debt. At the same time, those in debt are given more time to repay what they owe and are less likely to fall into a downward spiral of problem debt.
This is the thinking behind the new Money Advice Service guidance launched last week. It gives best practice guidelines to local authorities on how they can collaborate with debt advice agencies in England and Wales to take a more progressive approach to Council Tax collection.
I warmly welcome this enlightened initiative, and I hope that all local authorities seize on the opportunity to improve their debt collect practice. Of course, voluntary guidance only goes so far, and there may come a day when further action is needed, however it is great to see progress being made and, thanks to the work of The Money Advice Service and others, I look forward to seeing more councils adopting more supportive Council Tax recovery.