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The Council Tax Debt Crisis

An estimated 3.5 million people in the UK are in council tax arrears – more than half of them as a result of the pandemic. It’s the latest Covid economic fallout that threatens to widen inequality.

When 35-year-old Katie from Kent split from her partner at the start of the pandemic, she went from being in a joint-parent household with a steady income to a single mother of two young children. Katie applied for Universal Credit, which she found just about covered her rent. Then, as she began to adjust to her new life, her mother died, leaving her facing a large funeral bill.

As a result, Katie fell into council tax arrears of £1,787. The council granted her a three-month payment deferral – ‘But as soon as time was up,’ she says, ‘the demand letters started to arrive.’

Despite being able to prove to the council that her outgoings were more than what she received in benefits, the council sent bailiffs to her property to forcibly reclaim her debt by seizing possessions. Surprisingly, she says that the bailiffs were more reasonable than the officers that sent them, helping her to organise a payment plan and arranging a food bank parcel.

Katie’s situation is far from unique. A recent report from Citizens Advice estimates that more than 3.5 million people in the UK are in council tax debt, 51 percent of whom were not in debt before the pandemic.

Prior to Covid, council tax debt was already the most common type of debt Citizens Advice dealt with. Now, as the pandemic disrupts household finances and leaves many with a significantly reduced income, Citizens Advice Scotland warns of an impending ‘explosion of council tax debt in 2021’.

Non-payment of council tax carries particularly harsh consequences because the debt collection process is governed by inflexible and centrally determined regulations. Non-payment isn’t a criminal offence, but in England, those who fail to pay can still be sent to prison for up to three months under a ‘committal order’. Scotland, Wales, and Northern Ireland don’t impose custodial sentences for non-payment, but councils throughout the UK regularly send round bailiffs to collect debts.

Despite the unique circumstances of Covid, government advice encourages debt collection and enforcement to continue ‘in the usual way’.

Hayley from Doncaster attempted to register for council tax while she rented a flat in Forest Hill in 2019. It was only a year later, as the pandemic began, that she was suddenly asked to pay the backdated amount in full.

Faced with a bill of £700, Hayley called Lewisham Council. ‘I kept telling the council that I was out of work, and they’d just reply, “You’re just going to have to deal with it and find a way to pay.”’

‘I worked at Islington Square market, selling beer and wine, as well as working for a cured meat company, and in a theatre bar,’ Hayley tells Tribune. ‘Because I was technically self-employed, I only receive furlough from my theatre job, which comes to £60 per week. And I’ve only been self-employed for a year, so I received none of the self-employed grants.’

Haley’s Universal Credit came to £690 a month, which didn’t even cover her rent. On top of all that, she was dealing with £2,000 of debt from an old payday loan.

As the November lockdown began, Hayley’s landlord suddenly upped her rent by £100 a month. ‘I didn’t know how I was going to survive,’ she says, adding that she was ultimately forced to move back in with her parents up North. ‘I’ve been in London nine years, since I was 17, so it’s been a massive shock.’

Limited Support

The Citizens Advice report found that 11 percent of those who have been furloughed are behind on their council tax bills – a rate which jumps to 33 percent for those on zero-hour contracts. 22-year-old Louise* from Liverpool fell behind on her council tax after her partner lost his job in construction last April. Louise’s £16,000 salary from her admin job meant the pair were only entitled to £50 of Universal Credit – despite paying over £700 a month in rent.

‘The council repeatedly assured me that I could pay what I could when I could,’ she says, ‘but within a few months I started receiving letters of summons asking me to make a big payment to settle the outstanding amount. By the time they referred me to a council tax help fund, my partner was working again, but at a lower rate than previously, so we weren’t eligible for any help.’

Back in March 2020, the government set aside £500 million for a council tax hardship fund. However, this amount must be understood alongside the abolition of the Council Tax Benefit in 2013, which had supported low-income households with council tax payment; in its place, local authorities were required to design their own council tax support schemes, which would be subject to a ten percent reduction in funding.

The Citizens Advice report found that nine in ten of those with council tax arrears have at least one other debt. Like Hayley, Louise says: ‘Council tax wasn’t the only bill I fell behind on due to my work situation last year. Honestly, I just worried a lot. Debt isn’t a fun thing to have. It’s always at the back of my mind.’

It doesn’t help that communications from the council are often confusing. Hayley found it almost impossible to get through. ‘The information is all over the place,’ she says. ‘At one point I was just making up random email addresses. I updated my home address, but the council continued to have my old address on the system, so all the letters have been sent to my old landlord.’

It was only after she tweeted Lewisham Council directly that someone got in touch. ‘Thank god for Twitter,’ she says, ‘but what about elderly people or those who aren’t tech-savvy?’

The Poll Tax Legacy

Any explanation of why local councils are so aggressive in their pursuit of people in council tax arrears requires an understanding of the current financial context, as well as the context in which council tax was created.

A decade of austerity has plunged local councils into a funding crisis. Councils primarily rely on three sources to raise revenue: business rates, central government grants, and council tax. A 2019 report from the Local Government Association found that between 2010 and 2020, councils will have lost almost 60p in every £1 of central government funding. As councils become increasingly reliant on council tax, they feel they have little option but to pursue everyone—even the poorest—to balance budgets.

Introduced in 1993, council tax replaced the short-lived Community Charge, known as the ‘poll tax’, a deeply unpopular policy that inspired riots, as well as a strategic widespread campaign of nonpayment as a means of protest. As a result, when central government drew up the 1992 Council Tax Administration and Enforcement Regulations, the assumption around non-payment was that people didn’t want to pay, not that they were unable to.

This assumption encourages aggressive debt collection tactics which fail to take the broader financial context of people with council tax debt into account. For instance, regulations mean that people who miss one monthly payment can become liable for their entire annual bill, creating scenarios in which one missed payment of as little as £167 snowballs into a debt of over £2,065 in just two months.

Since councils require any arrears incurred to be repaid within the financial year they arise, the repayment schemes offered are often wildly unrealistic. Katie’s repayment scheme was set at £75 a month, and Hayley’s at £180 – amounts that neither could afford.

In 2014, the Tribunals, Courts & Enforcement Act transferred the cost of a bailiff from the local authority to the person in debt. This meant that Katie was initially charged for the bailiff’s visit to her property, although the council has now taken this back.

The Impact of Covid

Despite the government setting out £762 million to ‘compensate local authorities for 75 percent of irrecoverable loss of council tax and business rates revenues’, as well as making another £7.2 billion available, local authorities went into the pandemic facing a funding shortfall. Covid has further increased demand on local council services, particularly homelessness services and adult social care, while reducing their revenue.

Robert Jenrick, minister for Communities and Local Government, claims that councils ‘have the resources they need’ to serve communities, and are ‘not under any obligation to increase’ their council tax, but many report feeling the opposite: this year, Jenrick is allowing councils to increase council tax by up to 5 percent. In London, the increase is expected to be almost 10 percent. Alarmingly, council tax rises will take place in April, coinciding with the possible end of furlough.

The inequities of the system were made literal in October 2020, when Dominic Cummings was allowed to escape paying backdated council tax on his second home. ‘You read about it and think, in what way is that fair?’ Hayley says. ‘You can’t write off a massive council tax bill for someone who can afford to pay it, and then send someone who can’t pay because they’ve lost their jobs to prison.’

This is a sentiment seconded by Naima Sakande, Women’s Justice Advocate at the legal charity APPEAL, which is currently campaigning against custodial sentences for council tax debt. ‘Imprisonment is a Dickensian response to households that are under more pressure than ever before,’ she tells Tribune. ‘Struggling families need compassion and support as the economic effects of the pandemic set in, and local councils need to be doing everything possible to provide that at this difficult time. Poverty is not a crime and should never be treated as one.’

For Katie, the council recently issued another court summons, expecting payment by March. ‘We have never lived like this before, hand to mouth,’ she says. ‘It’s terrifying.’