Council tax debt is spiralling across England as households struggle with cost of living crisis

Council tax debts at some local authorities have trebled in three years amid the impact of the pandemic and the cost of living crisis, in stark evidence of how economic turmoil continues to affect people across the country.

Unpaid council tax bills across England, accumulated over many years, rose by 53% between March 2020 and March 2023, from just over £3.5bn to just under £5.5bn, according to government figures.

But the national picture masks huge local variations. In Hackney and Bristol total council tax debts trebled, while more than doubling in 25 other areas.

The figures suggest many households are struggling to clear debts accumulated after years of austerity followed by the pandemic and cost of living crisis brought about by Russia’s invasion of Ukraine abroad and economic missteps at home. In the year to March 2023, national council tax debts rose by £600m.

“The growing numbers of people who simply don’t have enough to make it to the end of the month and are then falling into debt is a huge concern,” said Morgan Wild, head of policy at Citizens Advice.

“Missing just one council tax payment can have dire consequences. People who fall behind can quickly find themselves facing demands for a whole year’s worth of payments, extra charges and bailiffs at their door.

“People on low incomes should be able to rely on the system designed to support them with council tax, but a postcode lottery and reduced funding means that many aren’t getting enough or any help at all.”

While the number of people Citizens Advice helped with council tax arrears is still below pre-pandemic levels, it has risen markedly over the last three years, with more than 9,000 people seeking advice in March 2023. The average amount of council tax debt among those approaching Citizens Advice for support has remained stable over the last year at £1,100.

“Council tax arrears levels were on a worrying upward trajectory long before the current cost of living crisis,” said Jane Tully of the Money Advice Trust. “The latest figures confirm that the current rules are not working for struggling households or local authorities reliant on council tax income.”  

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Even one missed payment can lead to “a swift escalation in collection activity for debts” that often is not affordable, Tully continued, calling for urgent reform in how debts are monitored and recouped. 

“This should include stopping people becoming liable to their full annual bill if they fall behind on instalments and dedicated government funding so councils can provide council tax support to everyone who needs it,” she added.

In Hackney, accumulated council tax debts rose by 236%, from £28m in March 2020 to £93.5m in March 2023. While local authorities’ in-year council tax collection rates are normally above 95%, Hackney’s plummeted from 95% in 2019/20, to 85% the following year, to 64% in 2021/22, and only partly recovered to 78% in 2022/23 – comfortably the lowest collection rate in the country. Hackney Council did not respond to a request for comment.

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Bristol’s council tax debts rose by 223% in three years, from £16m in March 2020 to £51m in March 2023, although its in-year collection rate dipped by far less than Hackney’s.

A spokesperson for Bristol City Council said officials stopped recovering outstanding council tax payments to help households through the difficult period, but this built up “a deficit of approximately £38 million”.

“We continue to recover this debt in a way that is affordable for households owing council tax to ensure we meet the standards of our Ethical Debt Collection policy,” they added. “This approach prioritises the needs of low-income households to ensure that our own recovery action does not contribute to any financial hardship people face and aims to avoid the issues associated with spiralling debt.”

The amount of council tax debt per person also varies widely across the country, with London and urban areas in the north dominating the worst affected regions.

In Liverpool, council tax debt averages £385 per person, followed by Hackney (£361 per person) and Middlesborough (£312). Amber Valley, in Derbyshire, has the least debt per person of only £12, despite having a similar population to Middlesborough.

The problems are not limited to big cities. Council tax debts in North Hertfordshire rose by more than 180% in three years, as the cost of living crisis slowed people’s arrangements to clear their arrears.

In the Worcestershire district of Wychavon, council tax debts doubled in 2022/23, and have risen 144% in three years.

“We have certainly seen an increase in arrears over the last three years as a consequence of the pandemic,” said Alice Mason, Wychavon’s head of financial services. “There was much support available to our residents during the pandemic … and the deferral of payment in particular will have increased the level of arrears. It was not the council’s policy during the pandemic to pursue arrears but rather to support those residents in need.

“We would expect arrears, built during the pandemic, to start reducing as we work with residents to help them,” she added, “but this may be masked by the effects of the current cost of living crisis.”

Some councils have been criticised for using bailiffs and liability orders, which add the council’s legal costs to the amount of debt owed, to recoup debts from struggling citizens. A recent investigation by inews found at least 3.3m liability orders have been granted by courts in England regarding council tax debt since April 2021.

The Manchester branch of tenants’ union Acorn has been campaigning for the council – which saw council tax debts rise by 62% in the last three years – to end its use of bailiffs against indebted households. A Freedom of Information request by Acorn Manchester found that only 16% of cases passed on to bailiffs by the council were able to repay their council tax debts.

Nick Ballard, head organiser of Acorn pinned the use of bailiffs on “brutal” cuts to local government budgets, but called the practise “immoral” and “no solution to this crisis, adding additional stress to already difficult situations and forcing people further into debt spirals”. 

“Rather than spending public money hiring private bailiff companies to intimidate people into paying money they haven’t got, council’s should take a joined up, forward thinking approach, focussing on sensible, achievable repayment plans and the causes of this crisis,” he added.

He said that Hammersmith and Fulham council saw tax collections increase the year after it banned the use of bailiffs to enforce council tax debts in 2018. The government’s figures show that Hammersmith and Fulham’s total council tax arrears rose by 22% between 2020 and 2023 – the third lowest rise of London’s 33 councils – including a 16% fall in 2022/23, the sixth best performance of England’s 309 local authorities.

A spokesperson for the Department of Levelling Up, Housing and Communities said: “We have made clear that councils should be sympathetic to those in genuine hardship and always be proportionate in how they collect outstanding council tax.

“Councils operate their own Local Council Tax Support Schemes tailored to help people in financial difficulties with their council tax– and depending on the scheme, this can offer up to a 100% discount.

“We have announced £100 million of additional funding for local authorities to support the most vulnerable households in England, delivering on the manifesto commitment to protect taxpayers from excessive increases.”

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