Council Tax Collection

The Council Tax (Administration and Enforcement) Regulations 1992 requires the year’s unpaid council tax balance to become payable in certain circumstances. This provision, and the speed with which it is applied, can be the catalyst for someone’s debts to quickly escalate. It is not clear, however, how much discretion local authorities have to agree repayment plans that spread the value of the unpaid balance over the rest of the year. The council tax collection best practice guidance, published by the Department for Levelling Up, Housing and Communities, strongly implies that local authorities do not have to demand immediate payment in full, but evidence from stakeholders suggests that this message is not getting through.

We strongly urge the Government to clarify the provision in the Council Tax (Administration and Enforcement) Regulations 1992 that requires the unpaid balance to become payable in certain circumstances. If local authorities do, under this provision, have the discretion not to require immediate repayment of the full unpaid balance, the Government should make this much clearer, either by updating the regulations or by amending the best practice guidance by the end of this Parliament.

In addition, by the end of this Parliament, the Government should amend existing regulations to enshrine in law the principle that collection should be based on a resident’s ability to pay, including by requiring local authorities to offer people affordable repayment plans when an unpaid balance becomes payable.

The process for obtaining a liability order is inefficient and can hinder, rather than aid, the collection of unpaid council tax. We therefore strongly recommend that the Government make the liability order process less burdensome, including by allowing bulk applications, virtual applications, or both, so long as residents remain able to raise objections. (Paragraph 21) Supportive council tax collection

We are concerned that the threat of enforcement might mean people are putting their council tax payments ahead of heating and eating. In particular, we believe the ultimate sanction of imprisonment is using a sledgehammer to crack a nut.

The Government should amend existing regulations by the end of this Parliament to replace the sanction of imprisonment with more suitable deterrents, such as bank arrestment or community service.

The localisation of council tax support, and local government’s increasing reliance on revenue from council tax, has put local authorities in the difficult situation of occasionally having to collect council tax arrears from those in financial need. In this context, it is all the more important that their approaches to enforcement take account of individuals’ ability to pay. (Paragraph 39) 36 Council Tax Collection

Council tax is unlike other debt, in that it recurs annually, so it is in the interests of residents that arrears be collected swiftly so they do not quickly escalate. However, if an individual genuinely cannot afford to pay, rushing to take recovery or enforcement action will only waste a local authority’s resources, cause avoidable distress to the individual in financial need, and miss an opportunity to give appropriate debt advice.

The council tax collection best practice guidance, issued by the Department for Levelling Up, Housing and Communities in 2021, does not set out specific standards expected of local authorities. We agree with the Government that local authorities’ need some discretion, but we see no reason why a statutory code of practice would unnecessarily constrain local authorities’ decision making.

We recommend that the Government replace the council tax collection best practice guidance with a statutory code of practice, to which local authorities would have to have regard. Among other things, this code of practice should set out what steps local authorities should take before applying for a liability order, including the making of affordable repayment plans in which the unpaid balance is spread over the year. If the Government does not do this, it should say why not when it responds to our Report, and explain what measures it will implement to ensure best practice is followed.

The use of enforcement agents to collect unpaid council tax should always be a last resort, so we were pleased to hear that many councils and debt collectors engage with residents to collect arrears without needing to take enforcement action, and that some have a policy of never using agents against those in receipt of council tax support. We accept enforcement agents will sometimes be needed, in the case of those who wilfully refuse to pay, but it can never be justified in the case of those who genuinely cannot afford to pay. We urge the Government to direct local authorities to give it extra careful consideration before using enforcement agents against those in receipt of council tax support and in call cases to demonstrate they have exhausted alternative collection methods before resorting to enforcement agents.

We welcome the establishment of the Enforcement Conduct Board (ECB), and, most recently, the launch of its accreditation scheme, but we regret that the ECB is dependent for its funding on a voluntary industry levy. We are concerned that industry support for the ECB in principle might not be matched by the voluntary financial contributions needed in practice to make the ECB a reality. There is considerable merit in putting the ECB on a statutory footing, so we are pleased the Government has committed to a review of this within two years of the ECB’s establishment. This will be in November 2024.

In preparation for this review, we recommend that the Government start to collect the necessary data, so that it has a strong evidence base on which to make a decision, and that it keep us updated on the progress of the review. In the meantime, it should require all local authorities only to employ enforcement agencies registered with the Enforcement Conduct Board. (Paragraph 65) Council Tax Collection 37 Date collection

We welcome the many initiatives, by local and central government, aimed at improving data sharing, particularly the pilots being carried out under the Digital Economy Act 2017 and the creation of the Office for Local Government; but overall we remain concerned that barriers to data sharing are impeding councils’ efforts to identify vulnerable residents. Being able to identify and engage with residents who are at risk of falling into arrears at an early stage will help to prevent residents from building up problem debt and will also improve collection rates. We are especially concerned that some local authority data protection officers might not fully understand the circumstances in which information concerning vulnerable individuals may be shared between teams.

The Government should not wait for local authorities to approach the Cabinet Office to learn how they can make better use of data sharing, but instead create an environment where this happens easily and consistently. We recommend that: • an application for universal credit automatically trigger an application for local council tax support; • the memorandum of understanding between HMRC and DWP be reviewed so that council teams can share relevant benefits data with their council tax teams; • the Digital Economy Act pilots be rolled out more widely; and • the Government consider further ways of enabling and encouraging greater data sharing between different groups for the purpose of identifying residents who are at risk of falling into council tax arrears; this may require the Information Commissioner’s Office either to clarify the relevant provisions of its data-sharing code of practice, or to raise awareness of it within local government, if there is evidence of an overly cautious approach being taken to data sharing within local authorities.

The Minister said it was for local authorities to understand the drivers of council tax arrears in their areas, but we believe that central government has a vital role to play in building a national picture of the causes of arrears and in understanding how causes of arrears vary between local areas. We are particularly concerned that the Government has no data on how the level of council tax arrears in an area correlates with the prevalence of short-term private accommodation, where tenants may well move on before the council is able to collect the council tax owed. We are also not satisfied that the Government adequately understands the relationship between levels of council tax arrears and local council tax support schemes. Central government developing a better understanding in this area is not incompatible with localism. In fact, it could support localism by helping councils to adjust their schemes and so reduce arrears.

The Government should carry out and publish research to assess different types of local council tax support schemes and how they relate to council tax arrears. In addition to collection rates and levels of arrears, the Government should also publish local authority level data on: methods used to engage with debtors; collection methods; the 38 Council Tax Collection number of affordable repayment plans set up; and reasons for arrears. The new Office for Local Government should have a role in collecting, analysing and publishing this data.

We are closely monitoring the establishment of the Office for Local Government which we believe could help to improve the functioning of local government. However, it is regrettable that the Secretary of State has not yet confirmed that the position of Oflog Chair will be subject to pre-appointment hearing by our Committee, despite our having first written to him about this matter in January 2023. We also find it regrettable that that Oflog does not yet have a permanent Chair. We consider the position of Oflog Chair to be critical to the functioning of local government and believe that Oflog, more widely, has a vital role to play in supporting taxpayers. We urge the Secretary of State to confirm in writing immediately that the position of Oflog Chair will be added to the list of posts subject to pre-appointment hearings by our Committee. (Paragraph 88) Council tax reform

The entire system for collecting council tax is outdated and not meeting its desired purpose. This has become increasingly problematic because councils are becoming ever more reliant on council tax for their budgets. In 2015/16, council tax made up 49.1% of core spending power. It now makes up 56.9% of core spending power in 2023/24. Councils are having to put up their council tax to provide much needed public services, which makes more and more residents vulnerable to falling into arrears.

In November 2022, the Secretary of State agreed there was a case for reforming council tax and said he had asked the previous Minister to look into it. Unfortunately, the previous and current Ministers have since cast doubt on the Department’s commitment to reviewing council tax.

We stand by our previous conclusions, and those of our predecessor Committee: the council tax regime is in desperate need of reform and updating. We recommend that the Government reform council tax by undertaking a revaluation of properties and introducing additional council tax bands, and in the longer-term, consider options for wider reform. (Paragraph 102) Council Tax Collection 39