Theresa May has announced plans to give people with serious debt issues a six week grace period, free from enforcement action and interest charges, in order to seek financial help. This move honours a pledge in the Conservative Party's 2017 General Election manifesto, and has been welcomed by consumer campaign groups.
In spite of this positive reception, it is likely that the changes proposed will have a significant impact on how councils and other creditors collect debts.
Council tax is chief among arrears
A huge number of Britons currently struggle with debt issues – more than 300 thousand people contacted the debt charity, StepChange, for help during the first six months of this year. The charity's statistics show that council tax arrears are among the most common types of debt, with over 30% of their clients reporting that they have difficulty paying it.
Statutory repayment will be standard
Once the legislation comes into force – likely in 2019 – there are concerns that it will put the brakes on council tax recovery. However, the proposed 'breathing space' is only temporary and is likely to be accompanied by a statutory re-payment plan. Martin Lewis, founder of Money Saving Expert, believes that this will work out well for creditors in the long term. He told The Sunday Telegraph "... when people are in crisis they cannot repay their debts. This will actually increase the likelihood of repayment."
Councils should look north of the border
The Treasury's 2018 consultation seemed to suggest that the new UK policy would be loosely based on the Scottish Government-backed Debt Arrangement Scheme (DAS). Having a basic understanding of the DAS – and how Scottish councils work with it – should help local authorities in the rest of Britain put provisions in place. It's worth noting that Scotland's DAS does have some exemptions. People with only one form of debt, for instance, are not eligible to apply.
With local councils facing an estimated funding gap of £5 billion by 2020, recovering council tax is more important than ever. For in-depth advice about the upcoming legislative changes, or assistance in recovering arrears, contact Dukes Bailiffs for a consultation.