The psychological effects of debt aren't just felt by those who hold the debt, they're often also felt by those...
As Licensed Insolvency Practitioners, we see every day the effect that being in debt can have on the people who owe it. Being unable to pay debt when it falls due is stressful enough, but when missing a single installment makes you instantly liable to pay the entire balance within a fortnight (to a creditor with more power than most) it’s clear that those who find themselves in Council Tax Debt are in particular trouble, especially due local authorities being especially aggressive when it comes to collection.
Treatment of Those With Council Tax Debt
When it comes to household bills, Council Tax is often one of the most expensive and for this reason, most people, rather than pay, for example a £1,500 annual bill in one go, they will pay it in installments which are typically 10 payments from March to December (in this case £150 per month), leaving January and February free. Even so, the installment plan offered by local authorities is just a concession which is lost if a household misses a payment, making the entire council tax debt instantly payable in full. Assuming that if a household could not afford to pay the first installment of £150 in a given year, they’d automatically be expected to find the money for an entire year’s bill in a very short time.
It’s clear why Citizens advice have been openly critical of the way local authorities typically try to enforce payment of the Council tax debt in full in these circumstances, labeling the Status Quo as outdated and punitive. It is likely unrealistic to expect a household which could not afford £150, to suddenly be able to find 10 times that amount within two weeks, plus recovery costs which, including court costs and bailiff fees, could increase that amount by around £400.
Council Tax Arrears are on the Rise and according to Citizens’s Advice, in the financial year from 2016 to 2017 alone, the just the fees relating to Council Tax Debt owed is estimated at around £560 Million, well over half of which being Bailiff fees.
Figures from the Ministry of Housing, Communities and Local Government show that last year that nearly 10% of all households which were liable for Council Tax were behind in their payments, with the sum of council tax debt owed exceeding £3 billion, a figure which doesn’t include any of the associated fees. This outstanding amount has grown by 30% since 2010, indicating that the problem of council tax debt is getting worse and reform is needed. The ministry has expressed an expectation that council should be “Sympathetic to those in genuine hardship and proportionate in enforcement”.
What changes might be made to the way Council Tax Debt is collected?
There are already discussions underway with regard to council tax debt and the way it’s collected and the government is currently reviewing the issue. Citizen’s Advice have spoken up and provided their own recommendations to the changes it wants to see.
The charity, first and foremost wants to see an end to the practice of making the entire debt payable if one payment is missed. Further to this CA also want to stop Councils being so quick to take debtors to court and instead requiring them to attempt to put an affordable payment plan in place first. As part of this, the ability of councils to collect debts by using processes (like courts and bailiffs) which instantly adds even more to the council tax debt is something Citizen’s Advice is challenging. Council Tax Debt is one of the few debts where it’s possible to end up in prison for not paying it. Citizens Advice also want the possibility of this outcome removed. In addition to these updates to existing laws, the charity also wants an independent regulator set up top govern bailiffs, something which the Ministry of Justice is already consulting on. Indeed, a treasury select committee labeled local authorities as ‘Worst in class’ for their debt collection practices.
What can I do about Council Tax Debt?
While there are clearly changes on the way to how council tax debt is handled, what should those already in council tax arrears do? In the first instance, those who have missed payment should get in contact with their local authority straight away. This advice comes straight from the Local Government Association who also say that such people would be supported.
As with any type of debt, you can also contact us for a free consultation and guidance on where to go next. As insolvency practitioners, we’re well used to helping people and businesses with their financial difficulties and we could we be able to provide just the guidance and support you need to get back in control of your finances.