Local Government Finance Bill
Debate between Lord Stevenson of Balmacara and Lord Bishop of Oxford
Lord Harries of Pentregarth
My Lords, in adding my name to the amendment, I fully support everything that the noble Baroness, Lady Meacher, said, and I do not intend to repeat a single word of her speech.
I simply draw attention to subsection (d), which states that,
“the defaulter is experiencing financial hardship and is unable to pay the tax”.
Obviously, that raises the question: what is meant by financial hardship and how do you define it? Are there any indicators?
As has the noble Baroness, I draw attention to the work of the Zacchaeus 2000 Trust, which has worked for more than 40 years with benefit claimants and the most vulnerable people in society, and some recent research by Brighton University on indicators which the three departments could use. Of course, people will say that they are not very precise, but we believe that they are the best that can be done, emerging from people with real experience of what financial hardship means. Those people have put forward eight indicators which, I should point out, make no distinction between disabled and non-disabled because both suffer financial hardship.
First, hardship happens whenever incomes in work or unemployment are too low to cover necessary expenditure; and when such circumstances are beyond the control of its victims, it impacts with great severity on both the disabled and the not disabled. Secondly, necessary minimum expenditure includes food, fuel, water, clothing, transport, some personal necessities, rent, council tax, fines, insurance and pensions. Too often, as we know, choices have to be made between paying the rent, heating or eating.
Thirdly, necessary expenditure is increased by debts that include fines, courts, bailiff costs, liability order costs for council tax, payments of court orders, debt collectors, bank charges, the high interest to doorstep pay-day lenders and loan sharks, DWP overpayments, sanctions, civil penalties, caps and cuts. As your Lordships can see, there is quite a long list of possible debts that people at the bottom of the pile can incur before they know where they are. Fourthly, debts occur due to the innocent mistakes of both welfare claimants and officials in the delivery of welfare. People then borrow to eat or to pay bills or pay off other debts. A visit to a food bank is obvious evidence of hardship.
Fifthly, circumstances beyond the control of welfare claimants that lead to hardship include unexpected illness, divorce or separation from a partner who leaves when debts have not been paid, a serious accident in the family, a bereavement and funeral costs, a pay cut, redundancy and unemployment, flooding, and any accidents or theft for which the claimants cannot afford insurance. Sixthly, hardship leads to an inability to communicate with the authorities, courts and creditors, due to the lack of a landline phone and dependence on pay-as-you-go mobiles that run out of money when claimants run out of money—normally, on the basis of their experience, once a week.
Seventhly, as the noble Baroness pointed out, there are some very heart-rending cases of people running into huge debts because of mental health problems, or of such problems occurring because of all sorts of misunderstanding about the debt. The Royal College of Psychiatrists reports that 50% of people in debt have mental health problems. The figure is 50%, so, to put it the other way round, 25% of people with a diagnosed mental health condition are in debt. Those are startling figures.
The last indicator is that hardship exacerbates the risks of low birth-weight babies being born to women who are unable to afford a healthy diet before they conceive and while they are pregnant. As we know, the £71 a week jobseeker’s allowance is much too low to live on and, based on all sorts of very sound research, low birth-weight associated with foetal growth restriction is the strongest predictor of poor learning ability, school performance, behavioural disorders and crime.
Fraud is another area that results in hardship but I have not covered it because it is deliberate and should be rooted out. The circumstances of hardship that I have described happen because they are beyond the control of the victims. The purpose of describing these hardships, based upon the long experience of people working closely with those who are most vulnerable at the bottom of society—that is, welfare claimants and others on very low incomes—is to put them forward to assist the three departments involved in the hope that they might come together when drafting relevant laws, regulations and guidance and use some of these eight indicators to help them in that important task.
Lord Stevenson of Balmacara
My Lords, I declare an interest as the chair of the Consumer Credit Counselling Service, the national debt advice charity that has helped over 1 million people with unmanageable debt problems in the past few years. I strongly support this amendment, which provides a simple solution to a long-standing problem: how to ensure that financially vulnerable people struggling to pay council tax arrears do not suffer undue costs, worry and hardship as a result of bailiff action to recover those arrears. Nearly 9% of those who received phone or online counselling from our charity this year had a council tax debt, which is up from 7% last year. For many of them, problems in paying council tax were part of a complicated and serious multiple debt problem. Our median user owes just over £17,000 to seven different creditors, including credit cards, personal loans and overdrafts.
These are hard times. All the experience that our charity has in giving debt advice shows that people facing severe financial difficulties need help and support to get their household finances back under control. We think that everybody who gets into debt should repay their borrowings over time. We are not into debt forgiveness, but with support they can get themselves out of debt and back into a good relationship with credit.