Not since the witch trials of the 17th century, or the ill-fated poll tax which ended the premiership of Margaret Thatcher in 1990, have so many vulnerable and impoverished people ended up being taken to court at one time, as is now happening with the council tax. Not only has council tax debt become Britain’s biggest personal debt problem – eclipsing credit card default in 2014 – but it is also a cause of homelessness, with the danger not confined only to those in rented accommodation. It is also striking homeowners as cash-strapped councils implement ever harsher recovery tactics.
The period 2013-2016 saw a 40-50 per cent increase in the number of people taken to court for council tax non-payment, as revealed in the Ollerenshaw report on council tax support schemes, presented to parliament in March last year. Now, in 2017, more than three million people can expect to be issued with a liability order made by magistrates’ courts in England and Wales or by the sheriff court in Scotland.
Adults of working age face paying up to 45% of annual council tax, even if unemployed or on means-tested welfare
Unsurprisingly, the liability order is now the most commonly issued court judgment in the UK. Relatively few debtors actually attend their hearings, and in the absence of representation, the few who do can seldom effectively defend themselves, or seek adjournments or appeal. Councils discourage attendance, and corner-cutting can be rife, most hearings providing little more than a rubber-stamping of the debt and an opportunity for the local authority to impose extra costs.
The actual cost of summonsing is £3, yet councils are routinely adding amounts of £100 or more for undefined ‘court costs’ on to the amount owed in tax, for what is an almost entirely computerised process. Worse still, many debtors may not even realise a liability order has been granted until a bailiff comes knocking – frequently the first human actually encountered. But the use of bailiffs is only one of a raft of severe enforcement measures. When pursuing council tax, local authorities have extraordinarily wide powers, including methods that result directly in the taxpayer losing their home.
Once armed with a liability order, not only can a local authority send in bailiffs but it can deduct from your wages or benefits and, if you are a homeowner, pursue a charging order to sell your house or flat or make you bankrupt. In England and Wales (though not Scotland) defaulters with means may be imprisoned for up to three months. Enforcement by these measures can all cause loss of your home, by either making existing housing liabilities unsustainable or by bankruptcy and charging orders, which trigger further costly court action.
Such is the complexity of the council tax system and recovery that local authorities often lose control of their own processes. Mistakes easily accumulate, a product of fragmented decision-making involving a long line of seemingly small steps, which the beleag-uered debtor is unable to correct or alter. With bankruptcy and charging orders, the sums owed spiral to pay fees claimed by insolvency practitioners and debt lawyers, and courts themselves often do not properly understand the law. It is ultimately enforcement costs – far exceeding the tax concerned – that lead to debtors losing the roof over their heads. Furthermore, recovery proceedings can be begun in error, often concerning alleged overpayment of benefits from earlier periods which taxpayers struggle for months or even years to resolve.
The actual cost of summonsing is £3, yet councils are routinely adding amounts of £100 or more for undefined ‘court costs’ on to the amount owed in tax
The long, drawn-out nature of enforcement means it seldom receives media attention or comment, save where death occurs. One instance that did make the news were observ-ations by a Dunstable coroner in June 2013, at the inquest of Peter Williams, a 63-year-old inventor who killed himself after losing his home following a council tax bankruptcy. Although not blaming the council, the coroner commented that the increase from a disputed sum of £1,350 to £70,000 with costs “may strike the man in the street as remarkable”.
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Sadly, cases of wrongful enforcement, including imprisonment, are far from uncommon. In January 2017, the High Court quashed the imprisonment of Melanie Woolcock, an unemployed single mother wrongly jailed by Bridgend magistrates. She had already served 40 days of an 81-day term before being freed on appeal. This was despite the law having been clearly established for 25 years that imprisonment is not a punishment and should not be utilised against those who have no money to pay.
That those lacking means should not be jailed for local tax default was a point previously hammered home by the High Court in more than 1000 appeals and judgments between 1991 and 2001, the first arising from the wrongful jailing of an unemployed and homeless man, Steve Benham in Poole, Dorset, in 1991 (a case that also went to the European Court of Human Rights). Indeed, after a court has enquired as to a person’s means and found inability to pay, it actually has powers to remit the debt. But it seems both the council and court were entirely ignorant of any of this when jailing Melanie Woolcock in July 2016.
Unfortunately, although council tax recovery is fraught with the risk of errors, legal aid restrictions have significantly reduced the chances of representation and challenge for taxpayers. Furthermore, free advice services are simply not trained or equipped to deal with the mounting volume of complex cases reaching their doors.
In the case of inventor Peter Williams the disputed sum of £1,350 rose to £70,000
There are some important truths that have to be faced about what is going on.
The vast majority of people failing to pay council tax simply cannot afford it. Many of them have been affected by the welfare changes and reductions in benefits introduced since 2009. Failures in the administration of benefits meant that the numbers in default were already on the increase before 2013 but the problem has escalated after the removal of national council tax benefit which – in theory at least – protected low-income adults.
In its place, following the Local Government Finance Act 2012, more than 300 local support schemes now operate, varying in detail between authorities, and which may require all adults of working age to pay anything from zero to 45 per cent of the annual council tax, even if unemployed or receiving means-tested welfare. Yet at the same time, these same adults are the ones who have seen their benefits cut as a result of the housing benefit caps, the overall benefit cap, the bedroom tax and sanctions on Jobseeker’s Allowance, or their wages frozen. For them, council tax is now less a system of local taxation but rather a mechanism for creating debt.
It is also one that is currently going unchecked as councils set about drawing up council tax bills for 2017-2018, due out around now.
Alan Murdie, LL.B, Barrister, is editor of the Council Tax Handbook (published by CPAG), chairman of Nucleus Legal Advice in Earl’s Court and director of Council Tax Legal Services