Councils need to rethink how they collect council tax

Budgets are being squeezed — but pressuring people to pay won’t help

Councils are preparing to set their 2018–19 budgets. But it’s important for them to think about how they collect tax as well as how it will be spent.

That’s because poor collection practices can worsen things for people struggling to pay, and increase a council’s costs. Our Council Tax Protocol, created in 2009 and updated to reflect today’s challenges, can help councils improve how they collect debts. This will benefit councils and the people who pay council tax — and we want all councils in England to sign it.

Councils are under pressure to collect more tax

Council budgets are being heavily squeezed. By 2019–20, the Local Government Association (LGA) predicts English councils will face a £5.8 billion funding gap due to cuts in central government funding and the rising costs of an ageing population.

This puts even more pressure on them to collect all the tax they’re owed. But councils are already good at this. In 2016–17, councils collected 97.2% of what was owed, and recovered £627 million of arrears. These high collection rates mean councils are now routinely pursuing people who often struggle to pay.

People are coming to us for help with council tax debts in huge numbers

At Citizens Advice, we have seen this firsthand. Since 2013, the number of council tax issues we deal with has risen by 50% to around 217,000 issues annually. As other debts have flatlined or fallen, council tax arrears has risen to become the single largest debt issue we help people with.

Poor collection practices can worsen debt problems. Our research found that councils still pass people’s debts to enforcement agencies when they are waiting to receive benefit payments. Of the 1,100 people in England we helped with council tax issues:

• 71% had extra charges added to their bills
• 48% were visited by an enforcement agent
• 50%+ said their council’s actions made it “much harder” to clear their arrears

How councils respond to people who are in crisis can also be poor. While 62% of people had discussed their arrears problems with a council officer, over 75% of this group complained that the council officer had not been understanding.

Poor debt collection practices cost councils money

If councils set people unrealistic repayment plans, finding a solution will take up their officers’ time. This costs money. When debt advisers get involved, it’s more likely that councils will collect the tax they’re owed. In Nottingham, for example, Citizens Advice helps their local council achieve a 70%+ success rate. It’s a slower process, but the people who owe money can better afford to pay it back and don’t need further support.

We know that 32% of the people we help who have mental health problems also have council tax arrears issues. Poor collection processes can affect people’s mental health. By improving its processes, a council can avoid adding to someone’s problems. They can prevent personal crises from emerging or escalating, saving the council money.

Councils need to rethink how they collect council tax. We can help.

We’ve got 27 recommendations to help councils improve how they collect tax

Our Council Tax Protocol makes 27 recommendations to improve every stage of the collection process, from the initial bill to recovery by enforcement agents. It was agreed with the LGA in June 2017.

To make it easier for people to pay their bills, we recommend councils introduce more flexible payment options. We suggest they make helplines available to people who are having difficulty and encourage them to get in touch early. When someone does get into trouble, we recommend councils give people breathing space from their debts whilst they seek advice from a debt adviser.

Councils should also use the Standard Financial Statement. How someone’s income and expenditure is calculated for repayment plans can often vary between agencies and even between council departments, creating extra costs.

We want councils to get on board

Many councils across England have already signed our updated Protocol. More are preparing to do so. City of Wolverhampton Council was the first. As Cllr. Andrew Johnson, Wolverhampton’s cabinet member for resources, explains:

“There are all sorts of reasons why people might struggle to pay their council tax bills and this protocol is all about how we can work with people to support them so that they can pay their bills without getting into greater financial difficulties.

We have a duty to collect the money owed, but we want to do so in a fair way and only go down the enforcement route when other avenues are exhausted.”

The Ministry for Housing, Communities and Local Government has advised all councils to adopt the protocol. Its guidance says the Protocol “shows how councils can work with debt advice agencies to develop fair debt collection policies, cut down on bailiff use and protect vulnerable residents.” The Money Advice Trust has also recommended that councils sign up.

Councils face enormous financial pressures for the foreseeable future. Our Protocol will improve how they collect taxes, helping people who are struggling to pay and the their own finances. That’s why we want all councils in England to sign up to it.