I have had a few experiences of representing people who are being pursued by their local council for money and in my experience the conclusion of the National Audit Office (NAO) that local councils and government departments are viewed as worse than payday lenders for the heavy-handed way in which they collect debts and manage people in arrears is spot on.
As The Times reports, the NAO has criticised the government for its limited understanding of how problem debt feeds into the economy. They have concluded that: “The government lags behind the retail lending sector in following good management practice,” with only 19 per cent of councils adopting best practice guidelines.
The paper adds that the National Audit Office estimates the cost to taxpayers from people sinking into problem debt is £248 million a year, while the wider economy suffers by £900 million a year. At the same time they say that 81,000 people a year suffer mental health problems from escalating debts:
Lack of communication between different government departments means that different debt collection teams sometimes compete for repayments from the same person, it says.
Public sector organisations are some of the biggest creditors to people in debt trouble. Councils are owed £3 billion in tax arrears and another £336 million in rent arrears. HM Revenue and Customs and the Department for Work and Pensions are owed £7.2 billion because of tax credit overpayments and £2.6 billion in benefit overpayments.
The proportion of debt problems reported to Citizens Advice that related to money owed to government rose from 21 per cent in 2011-12 to 40 per cent in 2017-18, according to the National Audit Office. Councils and government departments may be pursuing unpaid debts “too quickly and too aggressively” because of funding pressures, it says.
Thirty-five per cent of people seeking debt advice reported being treated unfairly by councils. That compared with 32 per cent who complained about payday lenders or other short-term credit firms and 22 per cent complaining about high street banks.
Only bailiffs scored worse, with 52 per cent of respondents to a study by the charity Step Change, quoted in the NAO report, saying that they had been treated badly.
Obviously, councils need to get what is owed to them, especially given the pressure that public services are under. But they need to follow proper guidelines in doing so and ensure that their actions do not cause somebody in debt to get into a worse position.
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