Insights ¦ Measuring vulnerability in council tax collection

Key Take Aways

1. Vulnerability among households in council tax collection is widespread, with 97% of those behind on payments exhibiting at least one sign of vulnerability across multiple drivers.

2. The most common overlapping vulnerabilities include low resilience, negative life events, limited capability, and poor health, with 64% showing signs of at least two drivers.

3. Vulnerability is both wide (many vulnerable individuals exhibit multiple traits) and deep (many display multiple characteristics within each driver), necessitating nuanced engagement approaches.

4. The financial conduct framework’s four key drivers of vulnerability are essential for understanding risks in debt collection, especially in the context of public sector enforcement.

5. Contemporary enforcement standards emphasise the importance of recognising and supporting vulnerable consumers, but data limitations hinder consistent identification.

6. Better data sharing and access—particularly regarding income and personal circumstances—are crucial to improving the early detection of vulnerability.

7. There is a recognised fluidity in vulnerability; households often move in and out of vulnerable states, requiring flexible, case-by-case responses.

8. The report advocates for categorising vulnerability to guide standards, allowing enforcement bodies to tailor support appropriately without overly reductive definitions.

9. Effective engagement with vulnerable households remains challenging; early and varied contact methods are vital, but some households avoid engagement until enforcement measures become severe.

10. Support tools like the Standard Financial Statement are underutilised, despite their potential to promote consistency and enhance tailored help.

11. Designing council tax support schemes with built-in buffers or bands can prevent households from losing entitlement due to minor income fluctuations.

12. Tailoring collection strategies to recognise vulnerability can lead to better outcomes, supporting both fiscal sustainability and individuals’ well-being.

Key Statistics

• 3.3% of UK adults report falling behind on their council tax in the last six months, amounting to approximately 1.7 million adults.

• 64% of individuals behind on council tax exhibit signs of at least two drivers of vulnerability; 14% show signs of all four drivers.

• 97% of those who missed at least one council tax payment display at least one vulnerability characteristic, compared to 47% of the general population.

• The average council tax debt for clients of debt advice providers has increased from £633 in 2009 to £1,726.

• 6.40% of households (around 1.8 million) reported falling behind on council tax in wave 14 of Understanding Society (2022-2024), an increase of about 400,000 households.

• 54% of households in arrears report mental health impacts, 39% face threats of legal action or disconnection, and 24% experience aggressive collection practices.

• 96% of consumers behind on council tax showing vulnerability indicators exhibit at least one low resilience or health trait.

• Approximately 20% of those behind show at least one poor health indicator, with 66% displaying multiple health-related vulnerabilities.

• 38% of households behind on council tax show at least one limited capability characteristic, such as limited knowledge or confidence.

• 42% of those behind on council tax report at least one negative life event, with 13% reporting multiple such events.

• Almost all (96%) of those impacted by arrears exhibit characteristics of over-indebtedness.

• Over 50% of vulnerable consumers exhibit multiple overlapping vulnerabilities, especially low resilience combined with negative life events.

Key Discussion Points

• Vulnerability in council tax collection is prevalent and multifaceted, requiring a nuanced understanding for effective engagement.

• Vulnerability is fluid; households can move between vulnerable and non-vulnerable states, often influenced by episodic factors like ill health or sudden financial shocks.

• There is a need for clear categorisation of vulnerability to guide enforcement standards while recognising the complex, overlapping nature of risks.

• Early engagement and proactive outreach are vital; households tend to respond more when approached before enforcement escalates.

• Data limitations impede local authorities’ ability to accurately identify and support vulnerable households; improved data sharing is critical.

• The use of credit reference data and other alternative sources could significantly enhance the understanding of household financial resilience.

• Legislation alone cannot address vulnerabilities; culturally competent, flexible support and tailored communication are essential.

• Support schemes like the Standard Financial Statement are underused; wider adoption could improve decision-making consistency.

• Designing council tax support with buffers or bands can mitigate the negative impact of income fluctuations on entitlement.

• Enforcement agencies need to recognise and act sensitively towards signposts of vulnerability, aligning practices with guidelines and standards.

• There is a robust case for articulating distinct vulnerability categories within enforcement frameworks to ensure proportionate responses.

• Supporting vulnerable households benefits both the fiscal health of local authorities and individual wellbeing, fostering sustainable debt management.

Document Description

This article examines vulnerability in the context of council tax collection in the UK, leveraging the Financial Conduct Authority’s financial vulnerability framework and survey data. It highlights how households behind on payments often exhibit multiple overlapping vulnerabilities and advocates for improved identification, data sharing, and tailored support strategies. The piece discusses policy recommendations, including categorising vulnerability, adopting better data sharing practices, revising council tax schemes with buffers, and promoting early engagement. Its insights aim to inform senior managers and policymakers in financial and enforcement sectors about managing vulnerable consumers more effectively while ensuring sustainable revenue collection.