LONDON SEES 51% SURGE IN USE OF BAILIFFS FOR COUNCIL TAX DEBTS

September 1, 2016
  • Over 19,000 low income, sick and disabled Londoners were referred to bailiffs in 2015/16, a 51% increase on the previous year
  • 26 of 33 London boroughs charge council tax to households previously deemed too poor to pay (up from 24 in 2015/16)
  • Eight London boroughs hiked minimum charges for 2016/17 (up from 7 in 2015/16)
  • Since April 2013 at least 318,000 households have been unable to pay their new council tax charges and received a court summons as a result
  • Almost 250,00 of those same households have been charged over £27 million in court costs

Three years after the localisation of council tax support (CTS) to London boroughs, council tax arrears are up and London has seen a 51% hike in the use of bailiffs to chase down the debts from the capital’s poorest households, a new report from Z2K and Child Poverty Action Group reveals.

The report finds 19,212 London claimants of council tax support were referred to bailiffs in 2015/16 for council tax arrears - up from 12,692in 2014/15.(1) This is despite a small decrease in court summonses issued.

Although fewer Londoners claimed council tax support in 2015/16, the number of households in arrears rose to 131,572 in the year to March 2016 - up from 123,000 in March 2015.

STILL TOO POOR TO PAY: three years of localised council tax support in London tracks the impact of council tax support schemes since they were set up in April 2013 to replace council tax benefit , as well as analysing changes in 2015/16.

It finds 98,723 Londoners were summonsed to court for arrears in 2015/16 – down from 102,204 in 2014/15 – most likely because claimant numbers are down. But the number of summonses as a proportion of working-age claimants has slightly increased, which suggests that a similar percentage of claimants continue to be unable to pay their council tax bill.

Just over 81,000 of those summonsed had court costs piled on top of their council tax arrears, an increase of 10,000 claimants - and a higher proportion of claimants – compared to 2014/15. Costs imposed varied between £65 in Southwark and £125 in Hillingdon.

Where bailiffs are used, their fees are added to a claimant’s council tax arrears – inflating the debt and making it harder for households to repay. And any money recovered by bailiffs goes first to paying their fees rather than to the council.

Council tax support is paid to eligible low- income households to help with council tax bills. But whereas council tax benefit covered claimant’s council tax bills in full, council tax support is determined locally with councils free to require a set contribution, or minimum payment, from claimants. In 2015/16 minimum payment requirements varied between five and 30%. In 2015/16, London’s 443,000 working-age CTS claimants were charged a total of £197 million in council tax, amounting to an average of £445 per working-age claimant.

While some boroughs reduced the number of court summonses they issued (for example Lambeth issued 6,300 fewer in 2015/16 compared to 2014/15), others increased summonses. For example after Barnet increased its minimum payment requirement from 8.5% to 20% in 2015/16, summonses went up 220% to 4,386. This suggests a link between the level of minimum payment and people’s ability to pay.

Seven London councils increased the amount they require claimants to pay in 2015/16. And for 2016/17, Richmond and Wandsworth started charging claimants for the first time - requiring a minimum of 5% and 30% (with exemptions) respectively.

The report recommends that central government should reinstate council tax support as a national benefit providing up to 100 per cent support for people not in work.

The report also recommends that if the benefit remains localised, London boroughs should reinstate 100 per cent support for their poorest residents, following the lead of the seven councils that still maintain it.

Chief Executive of Child Poverty Action Group Alison Garnham said:

“Our report shows that three years after the national council tax benefit was replaced by council-run local schemes, all but seven London councils are charging their lowest-income residents council tax – people previously deemed too poor to pay. Among those hit are a growing number of people in low- paid or part time work.

“The poorest families can’t cope. Arrears are up and as we already know, parents are having to get loans or cut back on food and other basics to meet the new liability.

“Several things need to change straight off if we are to avoid pushing hard-up Londoners into ever greater debt. London councils need to cover council tax in full for their poorest families. And they need to get smarter about engaging debtors and negotiating repayment plans to keep people out of court. Using debt advisers rather than bailiffs could help a lot.

“The Government’s own review of the impact of localising council tax support voiced concern about the evidence that people are cutting back on essentials to cover council tax. Ministers must respond to that concern. They must come up with a plan to reform council tax policy to make it fair and affordable for Londoners.”

Chief Executive of Z2K Joanna Kennedy said:

“Still Too Poor To Pay has uncovered that the majority of London councils are squeezing their poorest residents ever harder for council tax charges they just can’t afford.

“The past year has seen a shocking 51% rise in bailiff referrals for low income, sick and disabled Londoners. I can’t think of a group of people less suited to such aggressive enforcement action. For most of these people a bailiff visit simply serves to add significant fees on top of a debt they already can’t afford.

“But the report also shows that there is another way – either not charging council tax to these groups, as done by seven London boroughs or adopting best practice in collection practices that is sensitive to the vulnerabilities of low income Londoners. We hope councils will use this report as an opportunity to reflect on how they can do better and learn from the best practice of these boroughs”

Notes to Editors:

(1) This is likely to be an underestimate since some boroughs did not provide us with information on arrears and enforcement action.

(2) An embargoed copy of STILL TOO POOR TO PAY: three years of localised council tax support in London, is attached to this email. It includes a breakdown of individual borough’s charges, arrears, use of bailiffs and other enforcement policies and deployment of hardship funds. The findings are based on a mixture of publicly available information and responses to freedom of information requests to London local authorities.

(3) CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children.

(4) CPAG is the host organisation for the Campaign to End Child Poverty coalition, which has members from across civil society including children’s charities, faith groups, unions and other civic sector organisation, united in their campaigning for public and political commitment to ensure the goal of ending child poverty by 2020 is met.

(5) The Zacchaeus 2000 Trust (Z2K) is a London-based charity addressing poverty issues caused by unfairness in the law, legal and benefits system. We help vulnerable debtors to gain justice against these unfair systems. For more information see http://z2k.org/