Council tax pilot to recover debts direct from workers’ wages

The CIPP commented on news of the pilot, which will affect individuals in 29 different council areas in England. It said: “Information sharing powers were introduced by the Digital Economy Act (2017) where disclosure of information is allowed to reduce debt owed to the public sector.

“The government is seeking to help manage debts owed to the public sector more effectively. The Digital Economy Act creates a new gateway enabling information to be shared between specified persons, listed in a Schedule on the face of the Act, in relation to the debt owed to public authorities or the Crown. This is with a view to improving efficiency in dealing with debt owed to the public sector and using effective data-sharing to get a more informed view of a customer’s individual circumstances and their ability to pay.

“Each proposed data-sharing arrangement under this power will be subject to a pilot process which will be set out in a statutory code of practice to measure the effectiveness of the information-sharing.”

Birmingham City Council is taking part in the trial, working with HMRC, to be among the first to use the debt information sharing powers introduced by the Digital Economy Act (2017).

It said that during this trial, non-paying customers who are employed or have an income will be contacted to start paying their arrears, or they will face having their debt deducted directly from their earnings through their employer.

Citizens Advice has responded to the scheme, raising concerns that the council tax collection practices must not leave people with too little to live on.

Council tax arrears is the most common debt problem Citizens Advice helps people with. In 2018, its local services around England and Wales helped more than 96,000 people struggling to make their council tax payments.

The national charity estimates over £560m in fees were added to people’s council tax debt in 2016/17 alone. This includes £300m of bailiff fees, some of which have to be paid by the person in debt before any council tax arrears can be recovered by the local authority.

The mechanism and process for notification of the deductions is unknown, so the CIPP asked HMRC if they could provide any detail.

The CIPP said HMRC confirmed that a degree of coordination was provided by Cabinet Office and HMRC were involved to ensure data was shared and used legally. However, the pilot is not HMRC-led. Local authorities have lines to take for queries and know not to direct anyone back to HMRC.

The CIPP are trying to find out further information from the local authorities involved and will update you as and when we can.