#local-authority

Should council tax arrears fees drive bailiff firm profits?

By Alison Blackwood, Senior Policy and Campaigns AdvocateNew analysis by Citizens Advice estimates that over £560 million in fees a year are added to people’s council tax debt, with £300 million accounted for by bailiff fees. Yet the ends often don’t justify the means, as people struggle to pay the fees, let alone the underlying arrears.This comes hot on the heels of analysis undertaken for StepChange showing that in 2016–17 bailiff firms made an average 27% profit — far more than the 10–17% anticipated by the Ministry of Justice when it introduced reforms to the sector in 2014. Pursuing council tax accounted for about 44% of bailiff firm workload in that year — against the MoJ’s projected expectation of 29%.The risk is that bailiff firms, under instruction from local authorities, end up being the beneficiaries of the aggressive pursuit of council tax arrears.The Treasury Select Committee last year pointed to central and government debt collection practices as being “worst in class”, an assessment backed up by the National Audit Office’s report concluding that aggressive enforcement action can be counter-productive, and exacerbate harm to people at times when they may be very vulnerable.Given the fact that council tax arrears are worsening rather than improving, along with the fact that even bailiff firms themselves often point to their local authorities’ service requirements as a driver of poor practice, it all begs the question “what’s the point of aggressive local authority debt collection?”Local authorities would say there is a simple answer — their budgets are under massive pressure, and it’s their statutory duty to taxpayers to recoup money owed to them so that it’s available to spend on public services.Of course we can all see that this is true, but there’s a real risk of failing to see the wood for the trees. While that may be the underlying intent of the local authority, the end result can be punitive — effectively, punishment for being in debt.Being in debt already feels stressful to people experiencing it, without extra pressure being layered on through outdated and inappropriate debt collection tactics.Although this is true for all creditors, it’s an uncomfortable truth that some of the worst aggressive debt collection is for local authority debt. We’re caught in a permanent Catch 22 of local authorities feeling they have little choice, and so the cycle goes on.Yet — as we have remarked before — it doesn’t have to be this way. As Intrum have previously blogged for us, there are alternatives — more empathetic ones, that work with the grain of behavioural insight rather than against it — which can help local authorities to fulfil their duty to maximise the repayment of debt owed to them, without exacerbating people’s vulnerabilities or making their debt problems worse.In our view, the government needs to do two things —regulate the bailiff industry; andoverhaul government debt collection to drag it into the 21st century and align it with credit collection practice.The recent announcement of potential reform and revised guidance to local authorities to improve practice is a step in the right direction, as long as changes to practice materialise as a result.It’s about time both central and local government woke up to the benefits of doing things differently, and stopped making bailiff firms the ones profiting out of the whole sorry council tax arrears explosion.We look forward to providing support to the government to help achieve positive change.