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Covid-19: Debt Collection

Volume 804: debated on Thursday 23 July 2020


Asked by

To ask Her Majesty’s Government what action they are taking to reform debt collection processes (1) during, and (2) after, the COVID-19 pandemic in response to (a) the report by the Centre for Social Justice Collecting Dust: A path forward for government debt collection, published on 26 April, and (b) representations from Citizens Advice, the StepChange Debt Charity and the Money Advice Trust.

My Lords, we welcome the Centre for Social Justice report and look forward to advice sector representations. We responded to Covid-19 by pausing outbound debt collection and on 29 June published a call for evidence to inform post-Covid policy in this important area. Central Government have for some time had a debt strategy that advocates the use of the widely welcomed fairness principles. Each local authority, however, is responsible for its own autonomous interpretation of the relevant debt management legislation on, for example, council tax enforcement.

I thank the noble Lord for his positive response. A debt management Bill would establish clear protocols and an independent regulator for bailiffs as proposed by the Centre for Social Justice and others. Does the Minister agree that heavy-handed debt collection processes, principally by some local authorities owed council tax, are costly, ineffective and often ruinous for those concerned? Will the problem not get much worse post Covid, if we do not act now?

My Lords, as the noble Lord will know, action was taken in 2014 in relation to enforcement agents. This is an area under examination. We have recently launched the call for evidence to inform policy, as I mentioned. That will obviously influence the consideration of whether a debt management Bill is a proportionate and reasonable response.

My Lords, over 1.3 million households are estimated to have built up council tax debts because of coronavirus. They will be counting down the days to 23 August, the day that the bailiffs can arrive—or debt D-day, as the coalition charities have called it—with complete dread. The Government can help to avert this disaster by ensuring that local authorities put in place these charities’ proposals to have sensible schedules for repayment of council tax debts in ways that do not resort to sending in bailiffs. Will the Minister commit today to doing so?

My Lords, noting the noble Lord’s title, I congratulate him on last night’s events at Anfield—all we need now is for Notts County to get back into the league, where they belong. He asked an important question. Local authorities should be sensitive. Obviously, with Covid, the ban on enforcement visits was imposed. As the noble Lord says, that is currently due to come to an end in August, but I follow him in urging restraint on all in the current situation.

With his vast experience in local government, does the Minister agree that we need urgently to review the council tax administration and enforcement regulations in the light of the current difficulties? Does he further agree that, post Covid, there is a key role for financial technology—fintech—to help with debt management and enable everyone to have a much greater sense of their finances and how best to manage them?

Yes, a consistent understanding of the problems of debt using such techniques is extremely important. The regulations on council tax were promulgated, I believe, back in 1992—now a sort of Neanderthal age, when I was in No. 10. The Local Government Minister has announced that MCHLG will update its guidance to councils on collection and enforcement of council tax.

I am sure that my noble friend is hearing the strength of view on this issue. I hope that he has seen the letter that 55 cross-party Peers and Members of Parliament wrote to the Government at the end of May to support the CSJ report. Is there more that the Government could do, not just to encourage local authorities to show appropriate sensitivity in relation to these bills, but to require them to do so, given that local authorities themselves are asking the Government for restraint in chasing money that they owe the Government?

My Lords, I am of course hearing what noble Lords are saying and I endorse the principles of the Centre for Social Justice report. I am very proud of having done public service in local government. Local councils are custodians of their whole community and community interests. They should be sympathetic and act proportionately towards anyone in genuine hardship. I will reflect on the points that my noble friend has made and pass them on to colleagues in the department.

Does the Minister agree that government, especially local government, needs to take a leaf out of the commercial sector’s book and adopt more humane and effective methods of collecting debt? Will the Government postpone the reintroduction of bailiff visits until a new government debt management Bill can be introduced?

My Lords, those are two important questions and I have touched on each. The call for evidence that we issued last month will inform policy in these areas. I hear what the noble Baroness and others say in relation to enforcement agents. I can only repeat that local authorities can act responsibly and many councils have responded positively to the challenges and have indeed signed up to the protocol developed by Citizens Advice, which was referred to in the original Question. I hope that more will consider doing so.

My Lords, being in debt is a tremendous burden. What can local authorities do now to relieve people who cannot pay in full or at all from this distressing burden?

My Lords, local authorities have discretion to act, as indeed central government does. This Government have made a clear commitment to introduce a breathing-space protocol to assist with the effective management of problem debt.

My Lords, returning to my noble friend’s Question, is the Minister aware that, last year, councils used court action 2.3 million times and bailiffs 1.4 million times to collect council tax debt? The bailiff fees added £200 million to people’s debts. Given the expiry date of 23 August, to which the noble Lord, Lord Wood, referred, will the Minister bring forward, in advance of the review, a specific examination of pre-action protocols?

My Lords, again, I hear what the noble Lord says. I find myself in the position of answering on behalf of a department that manages the group in relation to government debt. Obviously I will pass on to my colleagues in MHCLG the points that he and noble Lords are making. I repeat that they had announced last year that they would update guidance to councils on collection and enforcement.

My Lords, I declare an interest as a former chair of StepChange, the debt charity. I thank the Minister for his very full replies to these questions today. To follow up my noble friend Lord Wood’s question, recommendation 3 of this excellent report states:

“Council tax debt is the only form of civil debt for which people can be sent to prison in England.”

Will the Government consider repealing Regulation 47 of what he called the “Neanderthal” 1992 council tax regulations, as recommended?

I fear that I referred to “Neanderthal” to mean the age-old days when I was young but, certainly, part of the call for evidence and part of the appropriate and proper management of debt would be reflection on experience since that time. I can only repeat that my colleagues in MHCLG have said that they will update their guidance to councils on collection and enforcement.

What lessons have the Government learned from the progressive reforms that have been made in Scotland on the use of sheriff officers, the equivalent of bailiffs in England, by local authorities for debt collection and, more recently, the Bankruptcy and Debt Advice (Scotland) Act 2014, which have made major strides in restoring dignity and support for people in repaying debt and have proved to be more effective for the public purse? Will the Government make sure that it is not just a call for evidence but a proper review of those other examples from across the United Kingdom?

My Lords, I am sure that all those experiences will inform things going forward. I am a strong proponent of local authorities working together and pooling experience. I would say that this Government have acted consistently over a period in seeking to improve management of debt centrally with a code of practice, government debt standards and fairness principles. It is a constant learning curve from which we can all learn—we all have a duty to govern and manage sensitively and I take the noble Lord’s point on that.