Council Tax Debt
Think Council Tax debt is a 'low priority' debt? Think again
by Myles Fitt, CAS Strategic Lead on Financial Health.
This article was first published in the Herald on 27 May 2023.
For nearly a decade, Council Tax debt has been the single biggest type of debt people bring to the Scottish CAB service, and frankly we are sick and tired of seeing it have this label.
We wanted to understand the drivers behind why people are continuing to get into Council Tax debt so we undertook some research, which we published earlier this week. Our hope is that our findings will lead policymakers at all levels to prioritise finding solutions to bring down the numbers of people in Council Tax debt.
What we found is that there are four main drivers that combine to push people into Council Tax arrears. The first is low income. People simply do not have enough money to pay all their bills, and this leads on to the second reason: people are making choices over which bills to pay, so food, energy and housing costs are taking priority over Council Tax. Why? Because these essential costs of daily living have immediate tangible consequences if these payments are missed – going without meals, lack of heating or no roof over your head. Not so with Council Tax, where a missed payment does not immediately stop your bins being emptied, schools being open and roads being maintained. Such prioritisation is perfectly understandable, especially in a cost of living crisis.
The kicker is the third driver, which our research established is the one people knew least about - that Council Tax debt collection is much harsher and faster compared to commercial debt collection for say credit cards. In a matter of weeks, you can go from falling behind in one Council Tax payment to having your bank or wages arrested to recover the arrears owed.
So much more needs to be done to raise awareness of this because in debt advice circles Council Tax is regarded as a priority bill, meaning it needs to be paid first before others due to the tougher debt collection process and the financial consequences for those involved.
This collection process links to the fourth driver: due to the speed at which Council Tax arrears are pursued, the process could do with offering more people more time to catch their breath and explore whether some form of staged repayment could be arranged. Our research shows that reminders from a human being rather than through letters could be more effective, while Sheriff Officers could do more to allow space to enable repayments to be made.
While there is some really good guidance out there, it may be time to consider ideas such as automatic referrals to money advice at the point of debt collection before it moves to enforcement. For many, being unable to pay Council Tax due to essential daily living costs is a sign of financial distress, and rather than vigorously chasing repayment we should take heed of this cry for help by providing income maximisation and budgeting support. Such an intervention may make repayments more likely, making it a win-win situation: the Council receives income and makes savings on debt recovery costs, while the person in arrears avoids bank or wage arrestments.
Having identified the reasons why people get into Council Tax debt, we hope this helps Scottish and local governments think of more solutions to help people avoid these problem in future.