77% rise in council tax arrears during 2013, says Step Change


March 2014

77% rise in council tax arrears during 2013, says Step Change

2013 saw a ëhugeí rise in the quantity of individuals who were in arrears with their council tax, a leading UK debt charity has identified.
StepChange charity reported that they had experienced a 77% increase in the quantity of households who contacted them and asked for help with their outstanding council tax debt, up to 45,561 from 2012ís 25,000. 
The primary reason they cited for the sharp increase in the number of people in council tax arrears was the alterations the government made to the council tax benefit, which was replaced by the new council tax reduction last year as part of the coalitionís welfare reforms.  
The government argued that it was a necessary measure to bring down the public spending deficit, estimating that it was costing the Treasury and taxpayers over £4 billion each year. 
Step Change disclosed that the average council tax payer who was in arrears last year was £102 short of paying it in full, citing the soaring cost of living and stagnant wages as other key factors for the steep rise in the number of people in council tax arrears. 
A major debt charity has reported a "huge" increase in the number of people seeking help for council tax arrears.
"Stagnating incomes, changing work patterns, rising living costs and changes in welfare benefits are a toxic combination," said StepChange's chief executive, Mike O'Connor.
ëEnd something for nothing cultureí
The government officially restructured the council tax benefit in April last year, devolving powers to local councils, and announcing the replacement council tax reduction.
It also decreased council funding by £414 million, which councils have been utilising in order to set up local support schemes for people in debt.  
The government highlighted that the costs of supplying council tax related benefits had risen to £ 4 billion each year for taxpayers, which equated to £180 per household.  
Whilst pensioners have been given heavy protection from council tax rises, working households have been persistently subjected to council tax hikes, with the Institute for Fiscal Studies estimating that over £2.5 million people have been detrimentally affected.
Earlier this year, the IFS forecasted that the average household would be forced to stump up an extra £160 over the course of this year on their council tax, which will be difficult for many to overcome unless wages begin to pick up at a rate faster than inflation. 
The IFS also revealed that 80% of local councils in England had decrease the level of council tax help available to residents, as part of the governmentís broader programme to promote local enterprise and strengthen working culture across the UK.
"Localised council tax support has also given councils stronger incentives to support local firms, cut fraud, promote local enterprise, get people into work and end the 'something for nothing' culture," said Local Government Minister Brandon Lewis.
ëReform for breathing spaceí
The governmentís reform of council tax benefits has garnered widespread criticism from local residents and politicians alike, with many identifying that it is counterproductively contributing towards people failing to get work, as their incentive to do so has diminished.
This sentiment was reiterated by the Public Accounts Committee this week, who argued that as many as 225,000 people had had their drive and desire to work lessened by the changes in the council tax benefit system.
The PAC argued that the changes meant that some workers were being faced with paying as high as 97p for every pound they earn, and called for the government to consider new policy that would address this issue. 
StepChange have also urged the government to act now and address the financial deficiencies in their council tax 
reform, citing that the problem will only escalate from April 1st onwards when those in debt will have to pay higher fines to bailiffs. 

The debt charity has called for the government to consider policy that would see those in debt given a greater level of breathing space when struggling financially, with a reduction in council tax contributions for people such as these until that time that they recover. 

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