More local authorities are being forced to step up bankruptcy actions against individuals, as council tax debts reach an “unsustainable level” of £2.5bn.
The claim came from accountancy firm Moore Stephens, which has researched total council tax debt levels across Great Britain and authorities’ recovery methods.
Its study found that 32 per cent of local authorities in Great Britain used bankruptcy orders to recover council tax arrears last year, a rise from the 20 per cent that took this action in 2009/2010.
Michael Finch, partner at Moore Stephens, says: “Council tax debts are now approaching unsustainable levels, and local authorities are no longer able to stand by while defaults continue to mount.”
Based on information provided by local authorities, Moore Stephens estimated that councils petitioned to make 1,100 tax defaulters bankrupt in 2013/2014.
Finch claimed that an even higher proportion of councils in England and Wales now use charging orders.
The research shows that 48 per cent of local authorities used charging orders last year, compared to 26 per cent in 2009/2010.
Moore Stephens’s study shows that many local authorities scaled back their debt collection efforts at the start of the recession to give struggling taxpayers financial breathing room, but the rising level of council tax debt has started to threaten front-line services in some areas.
Statistics from the Department for Communities and Local Government last year showed that the level of council tax arrears across the UK has risen from £2.2bn to £2.5bn since 2009/2010, including £105m of arrears in Birmingham and £98m in Liverpool.
Last year, Citizens Advice reported that council tax debt is now the most common debt problem the charity advises on.
Moore Stephens also claimed that upcoming changes to bankruptcy thresholds will leave councils with the less-effective charging order as their only option.
Finch added: “Charging orders mean that councils are at the front of the creditor queue in case a debtor sells their property, but that is likely to mean a long wait and this too depends on the debtor owning a property.”
By Marcel LeGouais