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Government debt collection is approaching its tipping point

Matt Hartley blogs on the Cabinet Office’s Call for Evidence on Fairness in Government Debt Collection

Matt Hartley

Head of Public Affairs and Engagement at Money Advice Trust

Posted September 22, 2020

The Trust’s Head of Public Affairs Matt Hartley blogs on the Cabinet Office’s Call for Evidence on Fairness in Government Debt Management – and hopes it will prove a tipping point for this crucial agenda.

Every once in a while, when you’re buried in the detail of a project or a long-running piece of work, it pays to step back and take the long view. This week has been a moment to do just that, as the team here at the Money Advice Trust turn in 32,000 words of evidence to the Cabinet Office on improving fairness in government debt collection – an issue that we have been campaigning on for the better part of a decade.

Improving the way that government collects debt from citizens has been the very definition of a slow-burn issue on the public policy agenda – but a crucial one for the people we help at National Debtline and Business Debtline. More and more people are struggling to repay debts owed to central and local government. Last year 29% of callers to National Debtline had council tax arrears – up from just 15% 10 years ago. The proportion of callers struggling to repay benefit/tax credit overpayments – owed to DWP, HMRC or local authorities – has jumped from 3% to 22% over the last decade.

These trends have exacerbated long-running problems with the debt collection practices of central and local government – which lag significantly behind the private sector. Core activities around assessing affordability, communicating effectively, and supporting customers in vulnerable circumstances have simply not had the same kind of investment that we’ve seen from financial services and more recently, utilities – spurred by strong and effective regulation.

Our advisers hear the effects of this gap day in, day out. Large majorities of our clients report, when surveyed, that government debt collection activities have had a negative impact on their wellbeing – 80% of those who had debts to DWP, 78% to HMRC and 79% to local authorities – all significantly higher than impact we hear from the private sector.

As one debt adviser told us in response to our new sector-wide survey, government organisations “tend not to deal with the person – they only deal with the debt”. The Cabinet Office’s Call for Evidence is, we hope, a once-in-a-decade opportunity to change that.

Progress, but slow

That’s not to say there hasn’t been any progress in this arena – there has. The government’s forthcoming Breathing Space scheme is a major step forward, from next Spring offering crucial protections from creditors while people seek advice – including from on most government debts. The Debt Market Integrator framework now provides a single route for departments to access FCA-regulated debt collection agencies, bringing the benefits of FCA-compliant approaches on issues like affordability and vulnerability. Improvements have been made by individual departments too – such as HMRC’s increasing use of Time To Pay arrangements.

Progress is increasingly being driven across Whitehall by the Cabinet Office. Since 2016 I have been pleased to represent the Trust on the Cabinet Office-led Fairness Group, which brings together government departments, debt charities and the collections industry to make evidence-based recommendations for change. Over time the Fairness Group has started to deliver tangible results – for example, developing a new Vulnerability Toolkit for departments and local authorities – and all the signs are this progress will continue.

For all that, however, the progress made to date remains limited and slow – and certainly does not match the urgency of the problems facing people in financial difficulty daily.

This point is well illustrated by the Trust’s long-running Stop The Knock campaign, which aims to improve local government collection practices, including reducing the use of enforcement agents (bailiffs) to collect council tax and other debts. Our most recent research showed that council tax bailiff use remained stable between 2016/17 and 2018/19 – the first time this has levelled off, following a 10% surge in the preceding two years. But despite significant efforts from across the debt advice sector, the total remains at 1.4 million referrals for council tax arrears a year.

Since we began to lobby local authorities directly to improve their broader debt collection practices five years ago, 39 councils have committed to improve in some way in response to our six steps for local authorities. We’re proud of the work we’re doing – but the pace of change remains too slow, and the benefits to people in debt too small. The same is true of central government.

Approaching a tipping point

A tipping point is needed – and the good news is it feels like we may be approaching one.

The National Audit Office’s highly critical Tackling Problem Debt report in 2018 has had the galvanising effect it intended in Whitehall. And in April of this year the Centre for Social Justice published Collecting Dust – a first-rate piece of work on the case for change which has helped to finally give these issue the political momentum it needs, with a growing number of MPs and Peers now pressing these issues in Westminster.

If we make the progress on fairness in government debt collection that we all hope to make we may well look back at the publication of these two reports as the key moments that moved the dial – building on years of productive campaigning from across the debt advice sector. For now, the priority is to make the most of the opportunities that we have collectively created.

Fortunately, the Cabinet Office’s Call for Evidence includes encouraging signs the government is prepared to take the kind of wide-ranging, deep, first-principles look at the status quo that is required.

Bold reform needed

We have used our response to the Call for Evidence to make the case for a bold package of reform as part of a Government Debt Management Bill. Like the Centre for Social Justice, we too have come to the view that incremental change is not enough – new primary legislation is needed to underpin all government debt collection. This should embed proven affordability approaches through the use of the Standard Financial Statement, ensure fairer treatment of people in vulnerable circumstances and make the way that government communicates with people in debt more effective.

Crucially, we need to see urgent council tax collection reform as well as the independent bailiff regulation that we and other charities have long been calling for. One is insufficient without the other – the government should make its stated aim of reducing and reforming bailiff action, to give people in financial difficulty the protection from harm they deserve.

The government also needs to meet – and bring forward – its existing commitments on the Breathing Space and Statutory Debt Repayment Plan schemes. This includes filling the biggest gap in Breathing Space as it stands, by bringing forward the promised inclusion of Universal Credit advances and third party deductions into the scheme – and confirming a timetable for the introduction of SDRPs. It is worth reflecting on how much better prepared we would have been to help people through the financial impacts of Covid-19 had these schemes been in place – there is an urgent need to complete the Treasury’s work here.

You can read much more in our full Call for Evidence response here – and the team here at the Trust will be sharing this in more detail in a series of blog posts over the coming weeks.

For now, taking the long view – it feels like reform is coming. For our clients at National Debtline and Business Debtline, it cannot come soon enough. We look forward to working with the Cabinet Office as it develops its response to the call for evidence – in the hope this issue might be reaching the tipping point it needs.

Matt Hartley

Head of Public Affairs and Engagement at Money Advice Trust

Matt is the Trust’s Head of Public Affairs and Engagement and joined the charity in 2014. He leads the Trust’s influencing work and previously worked for StepChange Debt Charity, the Personal Finance Education Group and in Parliament. View all posts from Matt Hartley.

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