Improving efficiency of council tax collection

Transcription

1 Improving efficiency of council tax collection CAP s official response to the Department for Communities and Local Government s consultation October 2015 Lifting people out of debt and poverty

2 Christians Against Poverty (CAP) is pleased to contribute our views to the Department for Communities and Local Government s consultation on improving the efficiency of council tax collection. We agree that as there is a legal obligation to pay council tax, reasonable steps need to be taken to collect outstanding arrears. However, it is important to be aware that it is not just those who evade or avoid paying, or those who fail to pay what they owe through error or not taking enough care that fall into council tax arrears. Four in ten CAP clients are in council tax arrears when they contact us for help, and we have seen how easily these debts can spiral out of control, with severe implications for families in financial difficulty. In some cases these clients would have been entitled to Local Council Tax Support, but due to not having completed an application in time they were still liable for council tax arrears from this period. 81% of CAP clients who fall into council tax arrears have sacrificed meals while trying to cope with their financial difficulty, and 42% have thought about suicide as a way out. It is important when creating council tax collection procedures to recognise that this is the context in which clients will be acting. We are particularly concerned that the proposed approach will push more families into severe hardship, and that there are currently not adequate safeguards in place to protect against this. I hope that our response to this consultation will help inform policy considerations for council tax collection, and would be happy to discuss our experience in more detail. Matt Barlow UK Chief Executive Christians Against Poverty (CAP) helps thousands of individuals and families struggling with unmanageable debt each year. Through our network of 290 CAP Debt Centres based in local churches, CAP offers a free face-to-face debt management service, with advice and ongoing support provided from head office. In 2014, CAP worked with 12,295 households, with 2,534 of these clients becoming debt free in the year. In addition to this, CAP is the largest provider of face-to-face adult financial education in the UK. There are currently 850 churches providing the CAP Money Course, a three week money management course, equipping over 12,000 people each year to budget, save and spend wisely. CAP has also recently expanded to tackle more causes of poverty. To this end, CAP now operates 145 CAP Job Clubs and is piloting 31 CAP Release Groups to tackle both unemployment and dependencies respectively. Christians Against Poverty Jubilee Mill, North Street, Bradford, BD1 4EW info@capuk.org capuk.org 2

3 1. Currently following a liability order, HMRC can share employment data on a council taxpayer in arrears where the taxpayer is receiving a reduction through the Local council Tax Support Scheme. Do you agree that it would be beneficial to extend that approach so that it covers all council taxpayers? While CAP appreciates the importance of collecting council tax arrears, and that attachments of earnings are the best collection method in some circumstances, CAP does not agree that extending the proposed approach would be beneficial in its current form. It is also concerning that an attachment of earnings can already be implemented more easily for those in receipt of Local Council Tax Support, who are more likely to be on lower incomes. Before it is made easier to implement an attachment of earnings for all council taxpayers with a liability order, there should be safeguards introduced to ensure that it will not push the council taxpayer into hardship, and that they will still be able to maintain their essential expenditures and other necessary debt repayments. It should be appreciated that council taxpayers in arrears are also likely to be struggling to keep up with other expenditure and debt repayments, for instance 73% of CAP clients who had fallen behind with their council tax before seeking debt help were also in rent or mortgage arrears, and 81% were in arrears with their utility bills. An attachment of earnings does not sufficiently take into account the broader financial situation of the council taxpayer, and the amount deducted cannot be negotiated. Whereas only one attachment of benefits relating to council tax can be applied at a time and these tend to be at a low rate of 3.70 per week, two attachments of earnings may be deducted at once. This means for the average net income of a CAP client of 1158 per month, if this only consisted of earned income, up to could be deducted, leaving just It is essential that council tax repayments be at an affordable level, at which council taxpayers are able to keep up with rent or mortgage payments, preventing arrears that could result in eviction. Case study: Client D suffers from anxiety, depression and stomach ulcers caused by stress, which have been aggravated by visits from enforcement agents. She has also attempted suicide in the past, and is struggling to sleep and eat due to stress. D s net monthly earned income is 1,215. She has three council tax debts totalling 7,805. If these were collected by attachments of earnings, would be deducted from her wages, leaving her take home pay at just per month. After taking into consideration Child Benefit, Tax Credits and her expenditures, D will be left with around 90 a month to make repayments to her mortgage, electricity and water arrears, other council tax debt and six secondary debts totalling around 8,000. Case study: Client M earns 1,361 per month, and has deducted each month for two council tax debts, which have a total outstanding balance of 1,276. D also has deducted for child maintenance arrears. After paying his rent, council tax and utility bills, he can only afford to spend 8 a week on food, make token payments to his other priority debts, and cannot afford to make repayments to his secondary debts. Christians Against Poverty Jubilee Mill, North Street, Bradford, BD1 4EW info@capuk.org capuk.org 3

4 2. Are there other legislative or data barriers to efficient council tax collection that, if addressed, would reduce the burden on council taxpayers? Where possible, please supply evidence of the reduction. Firstly, there needs to be recognition that a significant group who fall into council tax arrears are genuinely struggling financially and also facing other difficult life circumstances, such as bereavement, mental illness or unemployment. The pace at which enforcement action is taken against these council taxpayers does not necessarily help them resolve their situation, and in CAP s experience they are too overwhelmed to take appropriate action. Small debts can escalate very quickly, and it is extremely difficult for those on low incomes to pay when the remainder of the year s bill becomes due in one go, especially if this is near the start of the financial year. Collection from these council taxpayers, would be better achieved by facilitating their engagement though the right support and debt advice. It should be legislated that at the point of missed payment, details of free debt advice services are provided to the council taxpayer. Some local councils have already successfully adopted this approach, and will postpone a final notice if the council taxpayer engages with a debt adviser to resolve their situation. CAP would like to see initiatives such as this extended across all local councils, and a closer working relationship built to cancel further enforcement action when a debt management plan is negotiated through a debt adviser. In addition, more transparency and consistency in the council tax collection process would help council taxpayers effectively resolve their arrears. In CAP s experience, some local councils will negotiate payment by instalments before obtaining a liability order, whereas some will not until this has been obtained, and others will still apply for the liability order despite an instalment plan being in place. There seems to be inconsistency in the understanding and application of legislation, which makes it difficult to know how best to negotiate repayment across all local councils. Furthermore, it is not always made clear enough to council taxpayers that after a liability order is obtained there is a narrow window in which there is potential to negotiate an instalment plan, before a statement of means is issued. Clear communication about what do if struggling to pay council tax, and how arrears can be paid at each point, would reduce the need for further enforcement action in some cases. It is also not helpful that different years of council tax arrears are dealt with separately. CAP s caseworkers have experienced instances where it has been difficult to find out a client s total liability, especially when a client has moved house or has previously had shared liability. This also means a council taxpayer could be required to negotiate with different enforcement agents at one time, as well as having perhaps an attachment of earnings or benefits, which can be difficult. CAP would recommend it would be easier to amalgamate, or more closely link, multiple council tax debts to help council taxpayers understand their full liability and manage repayments more effectively. Case study: Client J approached CAP for help after an abusive relationship broke down, and she found herself with over 20,000 worth of debt. J s only income is Employment and Support Allowance of per fortnight. She also receives full Housing Benefit and 80% Council Tax Support. She is currently being chased separately for four debts relating to council tax, two of which are with enforcement agents. Christians Against Poverty Jubilee Mill, North Street, Bradford, BD1 4EW info@capuk.org capuk.org 4

5 Requests for further information This response has been written by Rachel Gregory, External Relations Analyst for Christians Against Poverty (CAP), with contributions from: Kathryn Hardeman, Specialist Adviser Rose Kyte, Client Setup caseworker Katie Toghill, Client Setup caseworker Jim Goodchild, Resolutions Team caseworker To discuss any queries and to request further information, please contact: Rachel Gregory External Relations Analyst Christians Against Poverty Jubilee Mill, North Street, Bradford, BD1 4EW capuk.org 5

6 Christians Against Poverty Jubilee Mill, North Street, Bradford, BD1 4EW capuk.org 6