Should struggling households have their council tax debts wiped?
Reem Ibrahim from the Institute of Economic Affairs, a free-market think tank
Wiping council tax debts for struggling households may sound compassionate on the surface, but it would be deeply misguided in reality. Not only is it unfair to the millions of hard-working people who have diligently paid their council tax over the years, but it also risks violating the rule of law.
For some, the rules would simply not apply, and that is a dangerous principle to entrench. We cannot live in a society in which rule followers are punished, and those who do not follow the rules are let off.
Rather than writing off council tax debts, we should tackle the root cause of why these people can't afford their bills. Much of this is to do with housing.
More renters than homeowners are likely to have council tax arrears. This is unsurprising. Rents have been rising.
This has been caused by a severe shortage of housing, driven by a failure to build and increase supply. Coupled with decades of sluggish economic growth, sky-high taxes, and unsustainable levels of public spending, it is no wonder that more and more people are struggling to keep up with bills.
• UK household incomes 'will stagnate or shrink' by 2030
Statistics from the Institute for Fiscal Studies (IFS) suggest that state spending is about to swell from 45 per cent of GDP to as much as 54 per cent by 2050, under the government's plans.
The real solution to council tax debt is to rein in spending, reduce the tax burden, and build more homes to cut the burdensome cost of housing. Instead of punishing rule followers, we should solve these problems first.
A society that values fairness does not reward rule-breaking while penalising those who take responsibility. We should allow people to keep more of what they earn, and reduce the size of local and national government.
Writing off council tax debts may sound like a good idea in the short term, but it sends exactly the wrong message and fails to tackle the real causes of Britain's increased cost of living.
Toby Murray from Debt Justice, which campaigns to reduce unfair debt
Council tax bills have gone up 54 per cent in the past decade, according to Debt Justice calculations from official statistics. In comparison, household incomes have struggled to keep up, rising 6 per cent between 2009 and 2023, according to the IFS.
The result has been an explosion in unpayable council tax debt and the only fair response is to write this off and give debtors a fresh start to rebuild their finances.
We found that total arrears across Britain now stand at £8.3 billion, and the crisis has hit the country unequally. Women, young people, marginalised racial groups and renters are far more likely to fall behind on payments.
Council tax is regressive, with research by the Resolution Foundation, a think tank, suggesting that low-income households pay up to three times greater shares of their incomes than higher earners (4.8 per cent versus 1.5 per cent). A third of people in arrears live in poverty.
These figures point to one thing. People aren't refusing to pay, they simply can't.
Instead of support, they face punishment. Councils are the biggest users of bailiffs in the country. There have been reports of bailiffs harassing and intimidating people, while charging up to £420 plus interest, pushing struggling households further into financial crisis.
• Is your council tax about to get more expensive?
At Debt Justice, we organise and speak to people and communities around the country who face unpayable council tax debts. The situation was painted clearly by Jo, from our Manchester group, who said: 'Bullying those of us who are struggling is an abhorrent way to collect money. It won't change the reality that we simply cannot pay.'
This approach is neither fair nor sustainable. Councils should have a duty of care to their residents that would require them to prioritise support over enforcement, and address the root causes of a household's debt.
Writing off debt for struggling households would be transformative. A small council tax debt write-off pilot in Dundee, Angus and Perth & Kinross by the charity Aberlour led to significant improvements in the wellbeing and financial stability of residents.
This isn't about rewarding non-payment. Write-offs can be targeted and part of wider reform. When energy bills surged in 2022, the government acted by limiting bills. In 2024 Ofgem announced a write-off scheme for unjust energy debts. Council tax debt deserves the same urgency.
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