Martin Lewis accuses councils of acting like "worst kind of loan sharks" with council tax collection

Money Saving Expert founder Martin Lewis has attacked council tax collection policies as ”grotesque” and accused councils of acting like the worst kinds of loan sharks.

The Local Government Association (LGA) said councils should always try to work with people struggling to pay bills.

Mr Lewis, an influential personal finance adviser who founded charity the Money and Mental Health Policy Institute, said its survey of local council debt collection practices showed these “to be far more aggressive than financial firms, and driving unacceptable harms that disproportionately affect people with mental health problems”.

He said: “Council tax collection practices are so aggressive they’d make the banks blush.

“The grotesque process couldn’t have been designed better to accelerate distress for people in council tax debt, especially those with mental health problems.

“When someone misses a monthly payment, rather than asking ‘how can we help’, many councils say ‘now you have to pay 12 times that’ – it’s like a caricature of the worst loan sharks.”

He said piling on payment demands, court threats, charges and bailiff action was like ”setting a trap for people who miss a payment that they have no hope of escaping from, and that needs to stop”.

Mr Lewis said councils should instead work with people who are struggling by pointing them towards sources of help and devising repayment plans.

Council leaders were often “among the most vociferous protesters against the harms of dodgy private sector debt practices and big financial institutions”, and Mr Lewis said they should turn their attention to the actions their own authorities.

The charity said that within three weeks of missing a council tax payment, a final notice could be sent requiring payment of the full annual council tax bill within seven days, which for an average UK household meant a missed £140 payment results in a £1,668 bill a few weeks later.

Credit card firms were by contrast required to spend up to six months engaging people about a missed payment before demanding full repayment.

An LGA spokesperson said: “Councils strive to ensure they have fair council tax collection policies and should always try to work with people who are struggling to meet their council tax bills.

“We agree that bailiffs should only ever be used as a last resort and anyone having trouble paying their council bills should get in touch with their local authority for financial help and advice.”

The LGA said councils had a duty to collect taxes so services were maintained.

Record numbers of people now claimed a council tax discount, which added further pressure to council finances and “without enough funding to provide council tax support to those who need it, it is almost inevitable that bills will continue to be forced up for those who can least afford to pay”, the LGA said. 

Mark Smulian