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Council Tax debt is now the most common reason that people seek debt advice

The Money Advice Service launches Supportive Council Tax Recovery guide

Tuesday 4 December 2018

Today The Money Advice Service (MAS) launched strategic guidance to support local authorities towards taking a more progressive approach to Council Tax recovery.

  • MAS evaluation reports show a third of people seeking debt advice have Council Tax arrears
  • New guidance designed to support fairer outcomes, improve resident engagement and sustainable arrears payments, through greater collaboration with debt advice agencies
  • The resource is modelled on best practice examples from councils in England and Wales.

The new guidance will assist local authorities to take a more progressive approach to the recovery of Council Tax, encouraging improved resident engagement, fairer outcomes and sustainable arrears repayments.

Across the UK, the number of overindebted people is approximately 8.3 million. Furthermore, a third of people seeking debt advice have missed payments for Council Tax, with MAS evaluation reports showing the volumes of people seeking support on an upward trend. This has in turn contributed to a rise in debt enforcement activity from some local authorities, while the debt advice sector has campaigned for a fairer approach.

Review best practice from private, public and third sector

There is evidence in some cases that local authority recovery strategies have fallen behind best practice in the private sector. The Supportive Council Tax Recovery resource developed by MAS will encourage best practice support for those with council tax debts, through greater collaboration between local authority revenue teams and the debt advice sector when recovering these debts.

The toolkit is modelled on more progressive approaches to council tax recovery already being employed by 10 councils, and the aim is to encourage the adoption of these best practice methods across all 348 local authorities in England and Wales. Their best practice approach has proven that a collaborative approach with debt advice agencies tend to collect a high percentage of monies owed, as well as supporting better outcomes for residents.

Eight ways to improve support for residents in financial difficulties

The guidance from MAS suggests there are eight steps local authorities can take towards better support of residents in financial difficulty, through improved collaboration with debt advice agencies:

  • Payment arrangements and enforcement: Build MAS recommendations into Council Tax revenues policies and use the MAS pre-enforcement checklist to create a fair and consistent approach to use of enforcement
  • Resident affordability: Support financial statements from debt advice agencies based on the Standard Financial Statement (SFS) spending guidelines and align all internal affordability processes with the SFS
  • Debt advice referral strategies: Use the toolkit to review all resident channels and help appropriate residents to easily access independent debt advice
  • Debt advice interventions: Track the benefits debt advice brings to residents as well as their ability to collect arrears payments
  • Local authority oversight of referral partners: Have oversight of what happens to residents after debt advice referral, agreeing on an approach with debt advice referral partners
  • Engagement and partnerships: Have day-to-day contact with debt advice agencies, utilising MAS guidance on getting the most from the relationship
  • Target specific resident cohorts for debt advice intervention: Our resource shares some examples and case studies of innovative partnership working with debt advice agencies.

Comments on the resource

Caroline Siarkiewicz, Head of Debt Advice from The Money Advice Service, commented:
“We are delighted to launch this resource as part of our ongoing commitment to enable more consistent creditor support for people in financial difficulty. A third of debt advice seekers have a Council Tax debt so this guidance is a timely intervention.

“We hope to shine a light on good practices that can be adopted across all councils to ensure more take a progressive approach that supports residents and helps them to maintain ongoing commitments.”

Yvonne Fovargue MP, Chair of the All-Party Parliamentary Group on Debt and Personal Finance, commented:
“Some debt collection practices, particularly the use of bailiffs, make matters worse not better. The toolkit put together by MAS takes a different approach, emphasising collaboration, engagement and affordability, and I warmly welcome its introduction.”

Cllr Richard Watts, Chair of the Local Government Association’s Resources Board, said:
“Councils have a duty to their residents to collect taxes, so that important services can be delivered for local people. However, councils do realise that times are tough and do their best to protect those affected the most.”

“It is good to see positive examples of councils taking a sympathetic and constructive approach to the way they collect unpaid tax highlighted by MAS. We would urge all councils to carefully consider the recommendations in this report in light of their own practice and local circumstances.”

David Magor OBE, Chief Executive of the Institute of Revenues, Rating and Valuation, said:
“The Institute welcomes the progressive approach of MAS in publishing the Supportive Council Tax Recovery Toolkit. It follows current Government thinking on this important issue. The Institute believes this will lead to the development of evidenced-based decision making that will result in positive outcomes for those in debt crises whilst protecting the integrity of local authority income.”