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Andrew Feinberg
White House Correspondent
Some council tax collection practices “couldn’t have been designed better” to accelerate people’s distress and are like a caricature of loan sharks, consumer champion Martin Lewis has said.
The Money and Mental Health Policy Institute, a charity founded by Mr Lewis, said processes are driving unacceptable harms that disproportionately affect people with mental health problems.
Mr Lewis said: “Council tax collection practices are so aggressive they’d make the banks blush. The grotesque process couldn’t have been designed better to accelerate distress for people in council tax debt, especially those with mental health problems.
“When someone misses a monthly payment, rather than asking: ‘How can we help?’, many councils say: ‘Now you have to pay 12 times that’ – it’s like a caricature of the worst loan sharks.”
The research, funded by abrdn Financial Fairness Trust, indicated that around two million people with mental health problems in the UK have fallen into a council tax “trap” – missing one payment and then potentially facing rapidly escalating debt collection activity, fees and charges when some people may be too unwell even to open their post.
It’s like a caricature of the worst loan sharks
Martin Lewis
Money and Mental Health said that, within three weeks of missing just one council tax payment, people may find themselves being hit with a final notice from a local authority requiring them to pay a full annual council tax bill within seven days.
For an average UK household, this could mean a missed £140 payment results in a bill of around £1,600 three weeks later, the charity said.
People who fail to pay their full annual bills could also be hit with a liability order – a letter that lets councils step up debt collection, including potentially sending in bailiffs.
Debts can potentially be passed onto bailiffs just six weeks after the first missed payment, the charity said.
Money and Mental Health’s analysis indicates that people with mental health problems are more than twice as likely to be in council tax arrears than those without mental health issues.
The charity highlighted the case of a 55-year-old woman who has borderline personality disorder and bipolar disorder.
She described to researchers how she received a letter on Christmas Eve – which had arrived late because of postal delays – saying that she needed to pay her council tax bill by Christmas Day.
I was a mess, I couldn’t do anything. I’d already bought Christmas presents for the grandkids
Woman who was told to pay by Christmas Day
She said: “I was in meltdown. I ended up taking out more credit and took out a credit card with 40% interest just to be able to pay it off.”
The woman added: “I was a mess, I couldn’t do anything. I’d already bought Christmas presents for the grandkids, but I couldn’t spend any time with other family because I was so stressed.”
Money and Mental Health is campaigning for central Government to end the “council tax trap” and make collections fairer and more consistent.
It wants the Government to change regulations which dictate how quickly local authorities chase missed payments.
Council tax debt collection should be brought at least in line with consumer creditors, who often wait three to six months before demanding full repayment of an overdue debt, the charity said.
The report added that the Welsh Government has capped charges for issuing liability orders at £70, but while welcome it is still too high, given that a third (34%) of people behind on council tax payments say they could not afford to pay any unexpected bill.
It said local authorities should urgently look at their own debt collection practices. Some councils are already taking steps, for example by focusing on providing more support and advice to people in arrears.
Mr Lewis added: “Rapidly piling on payment demands, court threats, charges and bailiff action isn’t a fair or productive way to respond to someone missing a payment, either through limited funds, or personal life crisis.
“It’s like councils are setting a trap for people who miss a payment that they have no hope of escaping from, and that needs to stop. Councils will recover just as much money, and keep their constituents financially and mentally healthier, by working with those who are struggling, signposting them to help, and working on repayment plans.
The safeguards we have in place for mainstream lenders need to be mirrored in the collection of council tax debt
Mubin Haq, abrdn Financial Fairness Trust
“Of course, councils have faced major budget cuts, and some are struggling to survive – a policy challenge the new Government must address.
“Yet plugging budget gaps by ramping up punitive action on people in debt, a significant majority of whom have mental health problems, won’t fix that. That’s why we also need central Government to change the rules and stop allowing councils to behave in a way no commercial lender would ever be allowed to.
“It is ironic that some of the council leaders who are ultimately responsible for overseeing this process, are likely among the most vociferous protesters against the harms of dodgy private sector debt practices and big financial institutions.
“So I’d ask them to turn that focus on their own organisations. While central Government action is needed, while we wait for that, councils need to take a hard look at what they are doing and to mitigate the harms some are causing.”
Mubin Haq, chief executive of abrdn Financial Fairness Trust, an independent charitable trust, said: “Piling debt onto people who are financially struggling not only risks further harm to their health and wellbeing, it may ultimately put further pressure on other parts of local authorities’ budgets, such as emergency discretionary assistance funds.
“The safeguards we have in place for mainstream lenders needs to be mirrored in the collection of council tax debt.”
Without enough funding to provide council tax support to those who need it, it is almost inevitable that bills will continue to be forced up for those who can least afford to pay
LGA spokesperson
A spokesperson for the Local Government Association (LGA), which represents 350 councils across England, said: “Councils strive to ensure they have fair council tax collection policies and should always try to work with people who are struggling to meet their council tax bills.
“We agree that bailiffs should only ever be used as a last resort and anyone having trouble paying their council bills should get in touch with their local authority for financial help and advice.
“Councils do have a duty to their residents to collect taxes so important services are not affected but realise that times are still tough for many low-income households.
“Record numbers are claiming a discount on their council tax, which is adding further pressure on this already underfunded vital local safety net.
“Without enough funding to provide council tax support to those who need it, it is almost inevitable that bills will continue to be forced up for those who can least afford to pay.”
A Ministry of Housing, Communities & Local Government (MHCLG) spokesperson said: “While the collection and enforcement of council tax is the responsibility of councils, we expect local authorities to be proportionate and sympathetic to those in genuine hardship when determining the most appropriate action to collect unpaid tax.”
