Council tax eclipses credit as the biggest personal debt

The Citizens Advice Consumer Challenges 2015 report delves deep into issues around consumer markets and debt in the post-recession period. It seems that problems with priority debt, particularly council tax arrears, have replaced credit card debt as the main area of financial concern for struggling Brits. Since 2012/13, Citizens Advice has seen the number of people seeking help for credit card debt, unsecured personal loans and mortgage debt decline. Yet those seeking help for essentials like rent, heating, water and council tax bills have risen in number.

In fact, while the debt charity is expecting to help 12% fewer people for credit card debt in 2014/15, they predict 20% more people will seek help with council tax arrears: making it the most common debt problem reported to Citizens Advice.

What caused this shift?

As the report highlights, credit requirements are tightening, reducing access to loans and other consumer credit tools. Meanwhile, low interest rates are easing problems with mortgage arrears. However, the flip side is the rise of the short-term lending sector, and the Consumer Challenges report suggests that this has played a part in exacerbating debt problems.

The Institute for Fiscal Studies also argue that many of Britain's poorest families are suffering from impact of changes to council tax benefits introduced in April 2013. These changes decentralised benefits to local councils, giving each body responsibility for their own benefit system, and accompanied the move with budget cuts of 10%.

In areas where families previously had no council tax costs, but now face big bills, Citizens Advice saw a 30-40% increase in people seeking help: suggesting a direct causal relationship.

What does this mean for councils?

Local authorities remain in a tough position. Hindered by their image as a "soft touch" on debt among tax dodgers and others besides, but facing potential backlash over changes to council tax benefits, councils must walk the line between recouping debt to provide the services tax-paying citizens deserve, while remaining sensitive to genuine stakeholder issues.

Here at Duke's Bailiffs, we believe that this balance is not just possible, it's the right way to approach debts. Our advisers can help you devise a plan to engage with debtors and find a way to recoup payments without forcing bankruptcies or repossessions. For support and advice, visit our Contact Us page.