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Council tax collection rules: the case for reform

Harriet Dines outlines the case for reform of council tax collection practices

Harriet Dines

Media and Engagement Lead at the Money Advice Trust

Posted February 23, 2023

Our Media and Engagement Lead, Harriet Dines, explores the issues around council tax collection practices and why now is the time for reform. 

The affordability of council tax payments has rightly risen up the political agenda in recent months, as higher costs across the board continues to put pressure on household budgets.

Higher costs on the horizon

In April, most households will face higher council tax with bills set to rise at the same time as support for energy costs is reduced.

Our advisers at National Debtline are hearing firsthand the impact rising prices are already having on the finances of people who contact us for help. In 2022, a quarter (25%) of all callers to National Debtline had council tax debt – the second most common debt behind credit cards.

Even where people are keeping up, one in ten (11%) of National Debtline callers surveyed said they had used credit to cover their council tax payments in the last 12 months, up from 4% the previous year.

And the challenge seems set to worsen. Nearly a third of callers we surveyed (31%) said they were anxious they wouldn’t be able to afford their council tax within the next six months.

All of this points to a situation where households are buckling under the strain, and many are teetering on the edge of falling behind on their payments.

Debts that escalate quickly

When it comes to the experience of falling behind on council tax payments, as our senior influencing manager Grace Brownfield outlines in this blog post, things can rapidly spiral. Due to long outdated rules determining how councils collect tax owed, one missed payment can lead to someone becoming liable for the whole year’s bill. 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. - and people who are unable to pay often find their debt passed to bailiffs.

The current cost of living crisis has certainly brought attention to many of these issues, but council tax arrears have been rising at a worrying rate for a number of years now. In the past five years alone, the amount of council tax arrears owed in England has risen by 74% (from £2.8 billion to £4.9 billion). It would be wrong to view this issue as simply a symptom of the current crisis. Which also means that the issue won’t be solved with a temporary solution.

The case for reform 

Reform of council tax collection in England and Wales is the subject of an ongoing inquiry by the Levelling up, Housing and Communities Committee. We’ve long called for reform of council tax collection regulations to ensure people are treated fairly and given affordable options to repay. As evidenced by this report from the Centre for Social Justice, reform wouldn’t just help people in debt, but councils as well by enabling them to recover a greater amount in the longer term.

This also needs to be matched with continued increased, ring-fenced funding to allow councils to provide better support for people with incomes too low to afford council tax payments in the first place.

The Government recently announced £100 million of temporary funding for local authorities in England to reduce the bills of people receiving local council tax support. This is welcome - and will provide some relief in the short term. However, it will equate to £25 per household for this year and doesn’t go far enough to deal with the systemic issue that struggling households face, or the challenges for councils looking to balance their books.

Trying to collect debt from people who simply cannot afford to pay is an inefficient and expensive activity for already stretched councils. Providing more support to low-income households to prevent arrears in the first place is vital not just for the individual, but for councils more widely.

Our own research from July 2021 found strong support for reform: three in five (59%) of UK adults supported the Government providing more funding to councils to allow them to discount council tax for people on low incomes. That was then, before the current crisis shed more light on the challenges for people grappling with rising costs. For those households, reform cannot come soon enough.

The Money Advice Trust’s Council tax after Covid briefing from July 2021 outlines the case for reform of current council tax collection rules.

Harriet Dines

Media and Engagement Lead at the Money Advice Trust

Harriet is the Money Advice Trust's Media and Engagement Lead. She joined the charity in January 2020 as Policy and Communications Officer, having previously worked as a Parliamentary Researcher and Communications Officer. View all posts from Harriet Dines.

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