Council tax regulations need ‘urgent’ attention as debt soars – new protocol could help | Personal finance | Finance

Council tax debt is a problem for UK consumers and the wider state. If a person’s personal debt becomes large enough, the government can take certain collection actions that could end up making the problem worse.

From August 23, visits by bailiffs will again be permitted following a temporary ban during the coronavirus pandemic.

This will be of concern for those who have encountered financial difficulties and are behind on their bills and StepChange is concerned about the additional costs that may be on the horizon.

Towards the end of May, the Local Government Association said councils had lost more than £500m in missed council tax payments.

Using this figure and other calculations, StepChange has conservatively estimated that up to £158m of additional costs could be added to consumers’ bills due to bailiff and legal fee additions.

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StepChange clarified that “this cannot happen” and they called on the government to put in place additional protections in light of the current financial crisis.

They explained that while the central government has allocated additional funds to local authorities and some additional flexibility in their own debt repayment, this does not resolve the particular pressure local authorities will face to resume execution by bailiff who only makes matters worse for already struggling households.

They said they wanted the government to introduce a council tax statutory pre-action protocol that would require councils to take certain steps before seeking a liability order for an enforcement action by bailiff, as well as to amend council tax regulations to allow local authorities to show greater flexibility.

This could benefit many people, as the charity’s research suggested around 820,000 people had fallen into municipal tax arrears during the pandemic.

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The same research detailed that more than four million people had racked up around £6billion in debt due to coronavirus.

Somewhat worryingly, StepChange clarified that council tax is one of the few financial obligations that fall under certain legislative allowances.

As they revealed: “While forbearance is a regulatory requirement in the mortgage and consumer credit landscape, this is not the case when it comes to public debt enforcement.

“Indeed, local authorities themselves can be financially penalized when they try to offer more compassionate, longer-term and affordable repayment plans to those who owe them money.

Phil Andrew, CEO of StepChange, concluded the charities findings with the following comments: Cinderella of the debt collection landscape.

“This is wrong at all times, but in the wake of the coronavirus, it needs urgent attention.

“Local authorities need both help and a centrally mandated process to ensure that their first and foremost objective in the current circumstances is to help their residents get back on their feet financially through affordable reimbursement plans, rather than subjecting those who cannot afford council tax to even greater costs and stress.

“We are calling on the government to change council tax regulations and introduce a statutory pre-action protocol on council tax, to ensure that those facing debt do not have their problems exacerbated by archaic elements of the regulations and tax practices of councils that are lagging behind. The government’s broader policy goals.

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