You are here

A type of debt that you particularly need to avoid

by Myles Fitt, CAS Strategic Lead on Financial Health.

This article was first published in the Herald on 9 March 2024.

It’s March, so of course Council Tax (CT) is dominating the news again. As the talking heads ponder the big political issue – to freeze or not to freeze - we’ve just published research showing that 170,000 people per month in Scotland missed a CT payment last year, and so got into arrears.

You may think everybody falls behind sometimes, don’t they? What’s so special about CT debt? Well, the answer lies in what happens to those people: what’s the consequence of missing a CT payment? You’d be surprised how fast and drastic the consequences are.

When you miss a CT payment, it can lead to the Council taking the whole year’s payment from you. Not just the month you missed, the whole year. In one lump sum. Oh, and with a 10% late payment fee added on, plus a £86 charge to be notified in writing about the legal steps for debt recovery. This can be all done and dusted in a matter of weeks.

Surely, this can’t be right? Well yes, it is. Local authorities are just following the legal process. For over a decade now, CT has been the most common type of debt that Scottish CABs deal with. Every week our advisers speak to people who are caught out by the speed of the debt recovery process and stressed about how they are going to pay what is owed.

So, if you wonder why Myles is always banging on about CT debt, this is why. It’s actually one of the worst kinds of debt you can get into. Worse than commercial debts to credit cards, banks, or telecoms. All of these are serious but will tend to give you a bit of time to sort out a solution. With CT, the debt recovery process can be both quick and painful.

It’s true I’ve been scribing regular columns here about CT debt for over four years now, ever since this column first began in fact.  And all the while we’ve also been lobbying the Scottish Government and others to make the system more geared towards understanding and helping a person’s financial situation.

And on this I can actually report some progress.

The Government has now endorsed Guidance for how Councils can improve the policies, processes and practices around CT debt, working collaboratively with advice providers. Indeed. it has funded pilot schemes testing this out.

There is also more clarity now on why people get into CT debt. Research by CAS has found that the cost of living forces people to prioritise their payments, and the harshness and immediacy of the CT collection process is not well known, so they wrongly give it lower priority.

Most people take CT in their financial stride, but if you’re struggling it’s vital that you get advice – ideally before you have to miss a payment. CAB advice is free, confidential and impartial, and is available online, by phone or in person.

And as well as helping the individuals who need it, we’ll continue to advocate behind the scenes for a fairer approach. My personal hope is that in the coming years I will write fewer of these columns on this subject because CT debt will finally have been knocked off its perch as our number one debt issue.