Council Tax: we’ve got to pay it, but what happens when we can’t afford to?
Introduced in England, Wales and Scotland in 1993, Council Tax pays for a lot of things, from education and social work to infrastructure, street lighting and even taking our rubbish away. We pay for these services to keep our local communities running, but it doesn’t come cheap. The average band D Council Tax bill in England in 2018/19 cost £1,671 per year.
Paying Council Tax can be a particularly heavy burden for those who are struggling financially. At Christians Against Poverty (CAP), we saw that Council Tax was the most common priority debt amongst clients in 2019, with almost half (46%) of those coming to us for help having arrears. Priority debts are those that carry the most serious consequences when not paid; for example, your mortgage or rent.
What about COVID-19?
Amidst the coronavirus (COVID-19) pandemic, Council Tax still needs to be paid, but many households are living on reduced incomes. The Government tried to pre-empt the risk of arrears by providing councils with a £500 million hardship fund to reduce the bills of those households in receipt of Council Tax support. A good step, but is it enough? Many of the households facing income shocks wouldn’t have been existing benefits claimants and so they would not have been receiving Council Tax support. In these instances, these households wouldn’t be eligible for help from the hardship fund.
Citizens Advice estimates that two million people have already fallen behind with their Council Tax bill as a result of COVID19. The Local Government Association has also reported that £506 million in Council Tax has gone uncollected in the past three months as people struggle to pay bills during the coronavirus crisis. With the economic landscape growing ever bleaker, and with a fixed end-date for the coronavirus ‘emergency period’ of 23 August in relation to taking control of goods, more needs to be done to protect those who cannot afford to pay.
This is not a new problem. CAP and others in the debt advice sector have long been raising concerns over how councils collect unpaid Council Tax. CAP clients report that debts owed to government authorities, such as Council Tax, make them feel more powerless than others. It might surprise you to know that banks and mortgage lenders have a better track record when it comes to supporting people in financial difficulty than Council Tax collections.
As it stands, not paying Council Tax can have some serious consequences. In England in 2020, if you don’t pay your Council Tax you can end up in prison! Thankfully, the number of people convicted is actually low, but many in arrears get letters threatening imprisonment, unsurprisingly creating high levels of anxiety and fear amongst those who can’t make ends meet.
Normally if you miss a Council Tax installment and fail to make it up, you immediately become liable to pay the year’s remaining balance in one go (liability order). Research from the Money Advice Trust (MAT) showed that in 2018/19, over half (54%) of all cases sent to enforcement agents were for Council Tax arrears. For those unable to pay in full, the next step taken by most councils is to obtain a liability order through the Magistrates Court.
Most councils also want you to pay all the Council Tax the year it’s owed, making it almost impossible to spread the repayment out for longer. This is because Local Authorities are ranked on a league table based on the percentage of payments they collect, which means they have an incentive to collect payments within the same year they were due. CAP is working to influence change in both these areas.
What needs to change?
Simon Clarke, Minister of State (Housing, Communities and Local Government) stated, ‘The Government expects authorities to be sympathetic to those in genuine hardship and proportionate in their use of any enforcement action’. This is exactly what we want, but sadly it is not the current experience.
At the moment, apart from a temporary hold on collections and the new hardship fund, nothing has really changed. If you fall behind and don’t engage, you may still be visited by enforcement agents, and you may still be threatened with imprisonment (in England), causing many sleepless nights. The number of people with Council Tax arrears is increasing, yet there is no new collections structure.
We are not sitting still. CAP is joining forces with the other major debt advice agencies to call on the Government to make changes. We want to see change in how arrears have to be paid, with more flexibility and forbearance. We also want to see councils do more to help people through the introduction of a pre-action protocol. This would require councils to take additional steps before seeking a liability order, going to court or sending out enforcement agents, such as setting up an affordable repayment plan. In Scotland, CAP is joining with Money Advice Scotland and StepChange to write a letter to the Scottish Government
Before enforcement action restarts, we will be living in the calm before the storm. We will continue to stand up for CAP clients and influence change and will keep this blog updated on our progress. If you are interested in reading more, in 2018 CAP released a briefing paper about clients’ experience of debt collection by central and local government, called Powerless people, which you can read here.