Taxes targeting the poor?

Fuel and council tax bills are 'pushing' people into debt a charity has warned.

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Taxes targeting the poor?

By Jim Scott

The cost of fuel and council tax bills are "pushing" people into debt, a charity which helps those on the breadline, have claimed. The debt relief charity, which offers advice to people facing debt problems, said as people fall behind on their bills, there doesn't seem to be any let-up from local authorities to help those struggling with council tax.

According to StepChange, the charity behind the claim, around 30 per cent of their clients claimed they were behind on their council tax. The charity said local authorities were chasing "aggressively" for collection of council tax arears. At present council tax bills are regarded a "priority" bill which means it must be paid, or serious consequences like debt collection could most likely follow.

Customers unable to pay their household bills, owed on average £999 in unpaid council tax and £1,260 on their gas and electric bills.

The Guardian report council tax should be "fair and progressive". Using the example of a £1,376 council tax bill for a Grade 2 listed seven-bedroom home in Westminster whilst a small bungalow in Nottingham has to pay the higher sum of £1,645 per year.

Last year it was revealed that the poorest 10 per cent of homes in Britain paid a higher percentage of income tax, including council tax, than the richest 10 per cent. The Independent reports that statistics revealed those in the bottom 10 per cent spent just under half their income on taxes.

Dr Wanda Wyporska, Executive Director of The Equality Trust called for "sensible reforms" and said: "When the super-rich are paying less in taxes than their cleaners, you know something has gone disastrously wrong with our broken, regressive tax system.

"Time after time we see sensible reforms attacked and rejected in favour of tax cuts for billionaires. These do nothing for ordinary people struggling to keep a roof over their head."

But for those who cannot afford to pay council tax, the collection process in place is "medieval" and "adds insult to injury" for those suffering high levels of debt, an opinion piece in the Guardian comments. Figures also revealed that councils had used bailiffs to collect unpaid council tax 1.4 million times in the between 2016 and 2017. Meanwhile councils also took court action for the imprisonment of over 4,500 people, the Financial Times revealed.

Just weeks before the Conservative Conference in Birmingham, Labour leaders pleaded a "radical" reform of council tax to Theresa May. But there has been no specific mention of potential reductions for those in poor areas despite May pledging to end austerity in her conference on Wednesday.

As Thursday's annoucement that taxes and fuel prices were "pushing" people into debt. Only at the start of the week did energy supplier British Gas announce its second price hike this year for gas and electricity customers, The Money Saving Expert reports. In addition, British Gas was also recently criticised for charging its customers £895 per year for its boiler insurance, up from £740 in the year previous.

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Council tax and energy bill hikes fuel problem debt

Nearly a third of people struggling with debt said they’re behind on council tax payments while a charity is also seeing a rise in those unable to pay energy bills following price hikes this year. In the first six months of 2018, debt charity StepChange reported that 30% of new clients were behind on council tax – the biggest category of arrears.

It found that 50% of these people had a budget deficit, with more money going out than coming in.

But with local authorities often pursuing debt aggressively with the overuse of bailiffs and with poor practice widespread, the charity urges for more humane alternatives.

The charity has also seen a rise in people coming to it for advice after falling behind on utility bills.

In the first half of the year, 13.1% of all new clients were behind on gas and electricity bills, up from the 11.4% in the previous year.

It said the rise could be due to recent price hikes, with some companies hiking tariffs twice this year already.

While energy switching may be an option for many, for others, they’re worried they may be caught out and face greater financial difficulty.

Another area of concern relates to the use of short-term high credit debt, including payday loans.

Last year, 16.8% of those who came to StepChange had a high-cost short-term debt with a loan attracting an APR of more than 100% due to be repaid within a 12-month period. But this number rose to 18.3% for the first six months of 2018.

It added that 29% of those it helped were aged under 25.

While a price cap on these loans was introduced in 2015, StepChange said this “helped reduce the worst harm caused”, but “far from eradicated the problems”.

In total, nearly 327,000 people contacted the charity for help with their debts in the first six months of 2018, with the majority of those who received full debt advice being under the age of 40.

Phil Andrew, CEO at StepChange, said: “We saw some particular worries in the first half of this year in the form of a resurgence in high-cost, short-term credit among our clients, more people behind on fuel bills, and a stubbornly high incidence of council tax arrears. Council tax is especially concerning in light of mounting evidence that government debt collection practices are lagging far behind best practice.”

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