The charity explained that the way councils collect overdue council tax means that within five to six weeks of missing a single council tax payment, residents could be hit with a fine for their full annual council tax bill, a court summons, plus “extra hidden charges and bailiffs at their door”.
Research by the charity found that vulnerable people are being “disproportionately harmed” by this process, with 73% of people in council tax debt who received a bailiff visit having a mental health problem.
Martin Lewis is now calling on the government to change how councils collect overdue bills, claiming they should give residents “a chance to at least earn another pay packet before they’re subjected to bigger bills and extra charges”.
Sharon described the system as “appalling”, adding: “I can’t manage it. As soon as I start hearing threats, I become incapable. But even when I’m well enough to contact them and ask for a payment plan to help me keep on top of my finances, they bin me off.”
Research by the Money and Mental Health Policy Institute, funded by the abrdn Financial Fairness Trust, found that around two million people with mental health problems in the UK had fallen into what they described as a “council tax trap”, missing one payment, then facing a “whirlwind of rapidly escalating debt collection activity, fees and charges”, which could exacerbate existing mental health problems.
The charity explained that within three weeks of missing one council tax payment, residents could be served a final notice from the local authority, requiring the full annual council tax bill within seven days. It explained that for the average UK household, this could mean a missed £140 payment results in a £1,668 bill weeks later.
If a resident fails to pay the full annual bill after a week, the council could apply to take your case to court and ask for a “liability order”, a letter which allows them to take more “aggressive” forms of debt collection, like bailiff action. The charity explained that the process from missing a payment to the debt being passed to bailiffs could take as little as six weeks.
It contrasted this to a credit card firm, which is required to go through more stages over a missed payment before asking for full repayment.
Martin Lewis’ charity explained that these practices can lead people with mental health problems to feel “hounded, helpless and at worst even suicidal” after being chased up for overdue payments.
“We spoke to 185 people with mental health problems, who said that the distress and strain that these processes cause makes it harder for them to engage with their council,” the charity said. “They also say that extra fees make debts insurmountable, and that council’s use of bailiffs leaves people feeling scared and ashamed.
“That results in people being too panicked to reach out and negotiate an affordable and sustainable repayment plan — which makes it harder for councils to recover missed payments.”
The Money and Mental Health Policy Institute called on the government to end the “council tax trap” and give people in arrears more time to catch up on payments before being hit by charges, court summons and bailiff action.
The study found that these practices are “widespread” among councils, with 87% of the 71 councils across England and Wales that share information about their debt collection processes being found to demand a full year’s council tax within three weeks of a first missed payment.
It urged local authorities to “take steps to protect those in vulnerable circumstances from harm before escalating debt collection to court or bailiffs”, explaining that some councils have already made steps to ease their debt collection practices. Gateshead Council, for example, gives residents twice as much time as regulation requires before demanding payment of the full annual bill or issuing a court summons.
Martin Lewis, founder and chair of the charity, claimed council tax collection practices in the UK are “so aggressive they’d make the banks blush”.
“The grotesque process couldn’t have been designed better to accelerate distress for people in council tax debt, especially those with mental health problems,” he added. “When someone misses a monthly payment, rather than asking ‘how can we help’, many councils say ‘now you have to pay 12 times that’ – it’s like a caricature of the worst loan sharks.”
Lewis explained: “Councils will recover just as much money, and keep their constituents financially and mentally healthier, by working with those who are struggling, signposting them to help, and working on repayment plans.”
While many councils are facing “major budget cuts”, with some “struggling to survive”, Martin Lewis claimed “punitive action” on people in debt will not fix budget gaps.
“While central government action is needed, while we wait for that, councils need to take a hard look at what they are doing and to mitigate the harms some are causing,” he said.
Mubin Haq, CEO of abrdn Financial Fairness Trust, added that while “councils have an obligation to collect the council tax owed to them”, current practices “risk further harm to [residents] health and well-being”.
“The safeguards we have in place for mainstream lenders need to be mirrored in the collection of council tax debt,” Haq said.
Do you have a story to tell or opinions to share about this? Get in touch and tell us more. Big Issue exists to give homeless and marginalised people the opportunity to earn an income. To support our work buy a copy of the magazine or get the app from the App Store or Google Play.
