Council tax arrears rise to £6 billion a year – report

Some 1.3 million households are struggling to pay their council tax bills, according to a report by the Centre for Social Justice.

(Joe Giddens/PA) (PA Archive)

Council tax arrears have risen to £6 billion a year – two thirds more than before the pandemic, a report says.

Some 1.3 million households are struggling to pay their council tax bills, many of them on the lowest incomes, according to a report by the centre-right thinktank the Centre for Social Justice (CSJ).

Those in arrears face harsh enforcement measures imposed by town halls and carried out by bailiffs, as well as the threat of imprisonment, the CSJ claims.

The average amount of council tax owed by those who have approached debt advice charities has more than doubled in the past 10 years, from £756 in 2013 to £1,726 in 2023, according to figures within the new “Still Collecting Dust: Ensuring fairness in council tax collection” report.

It calls for a “smarter and longer-term” approach to collecting arrears for the tax, with a clearer distinction made between those who cannot pay because of a lack of money and those who wilfully refuse to pay.

Those facing genuine hardship should be helped with tailored repayment terms and advice on how to apply for the existing official scheme offering reductions on bills for those facing financial hardship, the report says.

The report also calls for better oversight of the bailiff industry by putting the Enforcement Conduct Board, a voluntary oversight body set up by the debt advice and enforcement industry in 2021, on a statutory footing when the Ministry of Justice reviews the policy in November 2024.

It also urges a relaxation of existing rules and the amendment of the Local Government Finance Act 1992 to end the requirement to pay a full annual bill after one missed payment.

Instead, local authorities should be explicitly allowed to redistribute missed payments prior to moving to a liability order.

The report says: “We find that households who fall behind on their council tax are significantly more likely to be on a low income and show signs of deprivation.

“We find that lower council tax collection rates are significantly correlated with income deprivation. We also find that higher enforcement use is correlated with income deprivation.

Our evidence shows that the majority of non-payers are unable to meet their commitments and the often harsh repayment methods used by many local authorities are making repayment rates worse, not better

Matthew Greenwood, CSJ

“Debt collection is an important function of Government, but where households are clearly vulnerable, they should be treated sensitively to enable them repay.

“But the structure of our collections system incentivises against this by providing opportunities for local authorities to quickly advance to enforcement (action by bailiffs).”

Matthew Greenwood, head of debt at the CSJ, said: “The further steep rise in council tax arrears to a historic high of £6 billion is yet more evidence that in many cases, the process of collection is failing local authorities and taxpayers alike.

“Some people won’t pay their council tax even though they have the money and they should face the full force of the law. But our evidence shows that the majority of non-payers are unable to meet their commitments and the often harsh repayment methods used by many local authorities are making repayment rates worse, not better.

“Adopting a more proportionate collection system would drive up the amount of money brought in by councils in the long term.

“Enforcement is an invasive procedure by its nature and putting the Enforcement Conduct Board on a statutory footing would ensure that vulnerable households have practical recourse to protection should things go wrong.”