Council tax changes have negative effect on arrears

Changes to the way in which council tax is calculated which were brought in last year have had a negative effect on arrears in many areas of the UK, latest figures show.

Both the Department of Communities and Local Government and the Citizens Advice Bureau have come up with research that suggests the new system has led many households to be forced to pay council tax, despite the fact they would have been exempt under the former scheme.

Based on the information that has been provided by the Department of Communities and Local Government, total arrears in the UK rose by more than a fifth during 2013-13 – from £691 million to £836 million.

Meanwhile, the Citizens Advice Bureau has revealed that council tax payments have now overtaken credit cards and personal loans as the biggest source of personal debt.

The troubles for many residents have stemmed from the decision to take away council tax benefit from many low income families in April 2013 – creating an extra financial pressure that was not present before.

In place of the benefit scheme, councils have set up their own individual support systems. This was designed to give local authorities more flexibility to tailor the structure of council tax the the individual needs of the area.

However, 235 of the UK's 326 local authorities have seen arrears increase since the new measures came into place – most notably in areas that have a higher minimum threshold.

Chief executive of Citizens Advice Gillian Guy explained that more work needs to be done by some authorities to ensure that those facing the biggest pressures are not penalised.

She said: "They must ensure that the resources available for their local council tax support schemes are focused on those who are most in need."

With the figures indicating a worrying trend for many British families, there is likely to be evermore focus on debt management schemes in the coming months and years.

By Joe White