The government is considering allowing local authorities to deduct unpaid council tax debts directly from people’s wages, in a move that could shore up councils’ finances and reduce their reliance on bailiffs.
A trial scheme involving 4,000 people in arrears across 29 districts will begin on July 8, with Britain’s tax authority providing councils with the debtors’ employment information.
It comes after local authorities were criticised by MPs and debt charities for using bailiffs to collect council tax arrears from millions of homes.
Council executives say that if the programme is rolled out nationwide it will dramatically reduce the need to employ bailiffs, whose fees and charges can increase a missed council tax payment by more than 1,200 per cent, disproportionately affecting those on low incomes.
But some debt charities are concerned that, with many Britons sinking into arrears to pay household bills, income deductions to cover council tax debt will worsen the financial distress of those who were unable to pay.
“If the reason why people aren’t paying is because of far wider financial problems, then it may actually worsen or exacerbate that situation,” said Sue Anderson, a spokesman for Debt Charity Stepchange.
Local authorities are currently the biggest employers of bailiffs but their use has been criticised because of the high costs, as well as the aggressive tactics debt campaigners say some bailiffs use.
Grants to councils have fallen sharply since the implementation of the government’s austerity programme in 2010, and local authorities have become increasingly reliant on council tax, with many unable to balance their books. A third of local authorities have said they will run out of money for statutory services by 2022.
Barrie Minney, chairman of the Local Authority Civil Enforcement Forum, which represents councils’ debt enforcement teams, argued the new plan to take council tax debts out of people’s earnings would help people on low incomes.
“When we looked at the 4,000 debtors in the pilot project, we found that a good number of them are on low incomes or in gig economy jobs,” he said. “Those are the people we never wanted to send the bailiffs round to.”
Local authorities already have the legal power to deduct money from earnings, but until now they have been unable to access information about where debtors work. In the trial, this will be provided by HMRC.
Britain’s lowest-income households were exempt from council tax until 2014, when the law changed to allow local authorities to levy a discounted rate on their poorest residents. This brought 1.4m households into the council tax net, but around a quarter of these new payers have fallen behind on their payments, according to the Institute for Fiscal Studies.
According to Citizens Advice, the average person who approaches the charity over problems with council tax payments has just £14 of monthly disposable income.
Barrie Strain, acting head of revenues at Coventry City Council, which is participating in the pilot project, said that his authority hoped it would now greatly reduce its reliance on bailiffs; at present it uses them on 12,000 cases a year.
If the pilot became national practice, he said “it won’t drive bailiffs out of business, but I hope it will reduce the amount of council business they get to deal with”.