Government departments and local authorities are worse than banks and other businesses when it comes to being “difficult” and “aggressive” in how they deal with people struggling with debt, three leading support organisations have claimed.
In evidence to cross-party MPs on Tuesday, Citizens Advice and the debt charities StepChange and Christians Against Poverty were particularly scathing about councils and their debt collection practices.
The organisations were speaking to members of the Treasury committee about current demand for debt advice as the cost of living crisis continues, and whether people are getting the help they need.
When asked to name the lenders and creditors that were “the most difficult to deal with”, Richard Lane, the chief client officer at StepChange, said: “In terms of the kinds of debts our clients present with that are the most problematic, it is government debt actually.”
This category of debt includes council tax arrears, child maintenance, benefit overpayments and tax owed to HM Revenue and Customs.
Lane said in relation to debt collection practices, national and local governments “could learn a lot from some of the best practice we see in the private sector”.
He added: “I’d much rather be having a chat with my bank if I’d fallen behind than my local council. I know I’d have a greater degree of confidence that I’d be treated fairly, be signposted to good support and advice, and have access to forbearance. Whereas … if you miss two council tax payments, we know that that debt can very rapidly be passed on to enforcement action, bailiffs and collection, which can hugely compound the problem for people.”
Kiri Adams, the social policy manager at the debt counselling organisation Christians Against Poverty, added that with council tax, if someone missed their payment and did not pay within seven days, “your whole year falls due”.
One problem with government debt, she said, was that “there aren’t really affordability checks before deductions take place. Deductions can be as much as 25% of your income, which I think for anybody, if suddenly 25% of your income – which is already low – gets taken away, that is a pretty harsh reality.”
If an individual’s universal credit is reduced to pay off their debts, the amount deducted is typically currently capped at a maximum of 25% of the standard allowance.
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Morgan Wild, the director of policy at Citizens Advice, told MPs the state had been good at setting rules for private companies, but “the government as a debt collector itself – there’s no one saying: ‘You shall collect debts in this way.’ The rules tend to be a lot more rigid … It’s not necessarily the case that taking this aggressive approach to debt collection – certainly for council tax – is the most effective approach.”
More than 3 million people had faced bailiff or enforcement action from councils because of council tax arrears in the last two years, Lane told MPs.
The committee also heard that Citizens Advice was currently only able to answer a third of the calls to its national debt helpline, which was “purely down to capacity not meeting the level of need”.
