Over two million households are estimated to be struggling to pay Council Tax, according to a new report by the Warwick Institute for Employment Research for the Joseph Rowntree Foundation (JRF).
Council tax is the subject of an ongoing review but to date, there has been no attempt to identify how many or why households have problems paying it, says the JRF.
Struggling to pay council tax – A new perspective on the debate about local taxation, is the UK’s first study to explore the numbers and reasons behind non-payment.
The report also looks at the relationship between council tax valuation bands and low income as well as the experiences of those who receive council tax benefit.
The research calculates that nearly three million summonses for non-payment of council tax are issued each year.
There are a number of reasons why people receive a summons but the research estimates that over two million households are struggling to pay.
Author Dr Michael Orton said: ‘The report raises a lot of issues about how the current council tax system is affecting people on low wages.
‘Those interviewed as part of the research cited low income as the main reason for receiving a summons for non-payment of council tax.
‘Despite having a job, the struggle to pay council tax is part of the day-to-day difficulty of making ends meet for many people.
‘Low income creates vulnerability to missing payments and repaying arrears.’
A key issue is that council tax is regressive, ie it takes a larger share of income from those on lower and middle earnings than from those on higher incomes, stresses the JRF.
Low income households are more affected because they are paying proportionately more than those on high incomes.
Council tax accounts for 4.9 per cent of gross income for the bottom fifth of households; 3.7 per cent for households in the second to bottom fifth and just 1.7 per cent for those in the top fifth.
The JRF adds: ‘Within the current debates on local taxation, a lot of attention is paid to low-income households in high-value properties.
‘In fact, households with low incomes in bands F-H represent just 0.7 per cent of all UK households (including around 100,000 pensioners) but it is estimated that there are 5.7 million low income households in bands A-C (including nearly 3 million pensioner households).
‘Many of these low income households receive benefits.
‘However, the report found that interviewees’ experience of council tax benefit focused not on take-up, which in itself is poor, but at the low level of income at which people cease to be entitled, as well as administrative problems and the sheer complexity of the system.’
The report concludes that consideration should be given to making council tax fairer by revising the proportion of the tax levied on each valuation band.
There is also a need to move the discussion of council tax benefit beyond take-up: greater consideration should be given to the negative impact of council tax on ‘making work pay’.
‘Low income households in high value properties are exceptional. Consideration needs to be given to the position of the far larger numbers of low and middle income households who currently pay proportionately more tax,’ concluded Orton.
The report’s executive summary stresses that ‘Council tax is regressive, meaning that it accounts for a larger proportion of household income for those on low and middle incomes than for those on high incomes.
‘There has been no attempt to identify how many, and which, households are struggling to pay council tax.
‘There is considerable concern regarding the position of people, particularly pensioners, with low incomes in high value properties.’
The research included 51 in-depth interviews with people who had received a council tax summons, plus statistical analyses of currently available data sets, along with data from a sample of 22 councils.
The report’s conclusions are based on the following findings:
• It is estimated that close to three million summonses for non-payment of council tax are issued in England each year.
• Deprivation is a key factor in explaining the number of summonses issued by councils.
• One in four households in band A receives a summons, and one in seven in band B, but fewer than one in ten in bands E–H (based on a sample of 22 councils).
• Low income households in high value properties are exceptional: households with low incomes in bands F, G and H combined represent 0.7 per cent of all households in Britain.
• It is estimated that 181,450 households in Britain have a low income and live in bands F–H (including 101,008 pensioner households).
• It is estimated that 5,740,833 households in Britain have a low income and live in bands A–C (including 2,898,888 pensioner households).
Low income was the main reason cited by interviewees as to why they had received a summons for non-payment of council tax.
The largest group of interviewees were in employment but on low wages, and the struggle to pay council tax formed part of the day-to-day difficulty of making ends meet, despite having a job.
Struggling to pay council tax can also be part of a broader debt problem caused by a dramatic fall in income.
Examples of summonses being received because of administrative issues and the person’s own actions were found in all council tax bands and at all income levels – but low income creates vulnerability to missing payments and means problems repaying arrears.
For those in receipt of benefits, the administration of council tax benefit (CTB) was a problem, as was repaying arrears accrued when in employment and before being in receipt of benefits.
There are questions as to both the fairness and efficiency of collecting very small amounts of council tax from people in receipt of benefits, particularly Incapacity Benefit: in one case, the summons costs were higher than the interviewee’s annual council tax liability.
An example of a pensioner with a low income in a high value property raised issues about pension provision and equity release schemes.
Problems experienced by other interviewees with apparently low incomes in high value properties were more to do with fluctuating income.
Interviewees’ experience of CTB raised issues not about take-up but about the meanness of the scheme, administrative problems and the sheer complexity of CTB and its interaction with other benefits (including tax credits).
The key issue raised by interviewees was again low income and, despite being in paid employment, the struggle to make ends meet.
Council tax has a negative impact on making work pay for those on low incomes.
People in receipt of Incapacity Benefit questioned why they have to pay council tax at all.
Interviewees raised some issues regarding the administration of council tax at the local level, in particular relating to payment methods.
Interviewees expressed little enthusiasm for advice services or more affordable credit, but this perhaps reflected the fact that for most interviewees the struggle to pay council tax was part of the day-to-day experience of low income rather than being due to multiple debts.
