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Asking all the right questions: Levelling Up Committee inquiry into council tax collection

Grace Brownfield sets out where the focus should be for improving council tax collection practices

Grace Brownfield

Senior Influencing Manager at Money Advice Trust

Posted January 26, 2022

There has rightly, been a lot of talk lately about rising energy bills. It’s a worrying time for many households, but sadly it’s not the only financial challenge people are facing. Among one of the largest bills households have to cover is council tax – and the picture here is concerning too.

That is why I am pleased to see the Levelling Up, Housing and Communities Committee –a cross-party group of MPs – announce an inquiry into council tax collection.

The issue

In 2021, over a fifth (22%) of callers to National Debtline had council tax arrears. While this is the average for the year, in recent months we have seen a steady rise in the proportion of clients struggling. By December last year, 27% had council tax debts.

More broadly, our research from last year found that more than 7 million adults in Great Britain (14%) were worried about being able to afford their council tax bills over the coming 12 months. This is before we factor in any likely bill rises coming in April, and further cost of living pressures on households.

Of course, council tax funds vital services, and many local authorities are facing huge financial challenges – putting more pressure on them to collect as much council tax as possible. However, it’s vital that people struggling to pay are treated fairly and that council tax collection practices don’t risk pushing people further into financial difficulty.

Parliamentary Committee’ focus on council tax collection 

The Levelling Up, Housing and Communities Committee call for evidence closed this month and we have submitted our own insight about the experiences of the people we support, setting out what we think needs to change.

As part of this, it is important to recognise that there is good practice out there. Many councils showed additional forbearance at the height of the Covid pandemic, and in August 2021, the Department for Levelling Up published new best practice guidance on council tax collection.

The challenge, however, remains that councils are constrained by rules that mean people become liable for their entire annual bill after missing just one monthly instalment. The amount owed often escalates quickly, and the focus on collecting outstanding amounts within the tax year can make it difficult for people to negotiate affordable repayment plans.

While best practice guidance is welcome, we have seen only small, incremental changes in recent years. This suggests that the impact of a voluntary approach, based on guidance alone, will not be enough - changes to the regulations are needed. That’s why it is positive to see the Committee explicitly asking whether there need to be changes to the legislation on the recovery of council tax arrears?

Reforming the regulations 

Our answer is a resounding yes. We want to see the Department for Levelling Up reforming the current regulations, with the aim of preventing the fast escalation of council tax collection and ensuring councils have more flexibility to collect debts in an affordable way. This should include:

  • Stopping people becoming liable for their entire annual bill when they fall behind.
  • Introducing a statutory ‘pre-action protocol’ for councils to follow before beginning to enforce council tax debt – including a requirement to set up an affordable repayment plan.
  • Replacing the costly and ineffective liability order process with a more effective consumer safeguard.
  • Removing the sanction of imprisonment for non-payment of council tax in England – as is already the case in Scotland, Wales and Northern Ireland.

Preventing arrears: through 100% council tax support 

It’s not just about how arrears are collected - it’s also about preventing people falling behind in the first place. I’ve written previously about our research on the link between declining generosity of local council tax support schemes and rising arrears levels.

This is clearly something the Committee is interested in exploring too.

There’s growing evidence that the current system and funding isn’t working well for anybody – including councils. Many recognise the affordability challenges faced by some residents, but the limited funding they have for local council tax support means they have to charge them anyway, before attempting (often unsuccessfully) to collect the inevitable arrears.

We want to see the Government increase funding for local council tax support in England (with corresponding rises for Wales) over the longer-term, so that all local authorities can offer 100% support to residents most in need – taking them out of paying altogether.

We hope this is another area the Levelling Up Committee will consider as part of their inquiry. With increasing focus on how we can help households struggling with the cost of living, improving local council tax support will be a key part of the solution.

So, at a time where rising household bills are on most people’s minds, the Committee is certainly asking the right questions. We look forward to seeing their full report and recommendations in the months ahead and – hopefully – some positive action from Government in return.

Read more about our research and recommendations on council tax in our Council Tax after Covid report. 

Grace Brownfield

Senior Influencing Manager at Money Advice Trust

Grace is the Money Advice Trust’s Senior Influencing Manager. She previously worked in the policy team at StepChange Debt Charity. Before that she worked on issues related to the financial impact of cancer at Macmillan Cancer Support and NSPCC. View all posts from Grace Brownfield.

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