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Treasury Committee: Debt to local authorities pursued “over-zealously”

Local authorities are too ready to resort to the use of bailiffs in order to pursue debts from members of the public, and risk driving them into further financial difficulty, according to MPs.

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According to a report produced by the Treasury Committee, arrears to local authorities are growing, with debts often pursued persistently and tenaciously and routine use of bailiffs. In addition to local government, the committee heard reports that central government can take an uncompromising approach to debt collection.

 

Written submissions to the inquiry recommended that the government improve practices around the collection of arrears to public authorities along that same lines that have been adopted by the utilities sector.  

 

“The public sector should be leading by example in their treatment of the most financially vulnerable; but the current approach risks driving them into further difficulty,” the report said. “By bringing central government and local authority debt collection practices consistently into line with industry best practice, the government has the power to make a significant difference to the burden of problem debt in a short space of time.”

 

In response to the report, Gillian Guy, chief executive of Citizens Advice, said that the committee was right to acknowledge that government debt collection was “worst in class”.

 

"They should be leading by example,” she said. “Reforms in 2014 were introduced to protect people from unfair practices, with a particular focus on how bailiffs collect debt.

 

"It is clear these changes have failed. Citizens Advice has seen a more than 25 percent rise in bailiff problems since 2014, and helped 42,000 people with 98,000 issues last year. We need an independent regulator to protect consumers from these unfair practices. The government must now show it’s taking the issue seriously, and rein in a sector that has been out of control for far too long."

 

Away from collections, aggregate levels of household debt have fallen relative to household incomes since the financial crisis, the committee found. Excluding student loans, household debt amounted to 125 percent of annual disposable income in 2017, up a little from 122 percent in 2015, but down from 144 percent in 2008.

 

The clear majority, 78 percent, of household debt is mortgage debt secured on dwellings, and therefore rises in house prices are a driver of the long-term rise in debt levels. Consumer credit is a relatively small part of overall household debt, around 12 percent, but has grown rapidly in recent years. The pace has eased recently, from a peak of 11 percent annually in November 2016 to nine percent in April 2018.

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