ADD2367 Debt collection and low-income Londoners – consultancy support

1.1. London’s 32 boroughs and the City of London collect council tax from London’s residents, including a precept set by the Greater London Authority. In 2019-20, income from the precept will total £960.6m, covering around 8 per cent of the GLA Group’s spending plans.

1.2. There is growing evidence that the practice of collecting council tax from low-income households can be a cause of extreme poverty or destitution and may increase levels of problem debt.

1.3. Whilst there have been a number of attempts to define a set of criteria on collection practices that councils can adopt – and which the GLA promotes in its responses to boroughs’ consultations on changes to local council tax support (LCTS) schemes – even where boroughs have signed up, compliance tends not to be monitored or enforced. Furthermore, there is a lack of evidence of the business case for boroughs to sign up to specific actions.

1.4. Organisations including the Joseph Rowntree Foundation, the New Policy Institute and debt advice charity StepChange have met with officers and Assembly Members to request that the Mayor take action on problem debt and poor collection practices. In particular, they have suggested that the GLA could influence public authorities to improve their practices.

1.5. The GLA has entered into a number of funding agreements with boroughs to resource collections teams that pursue council tax arrears. These agreements have enabled boroughs to keep collections teams in-house. However the GLA has not so far sought to use these agreements explicitly as a means of influencing collections practices.

1.6. As well as its responses to consultations on LCTS schemes, as a precepting authority the GLA could seek further ways to encourage boroughs to sign up to voluntary codes of practice. The GLA could also promote specific measures within these codes, or actions that stretch boroughs to go further. Potential measures could include (but will not necessarily be limited to):

• not instructing bailiffs to collect arrears from LCTS recipients;

• not pursuing LCTS recipients for arrears through the courts;

• not charging LCTS households court costs or bailiff fees;

• establishing debt advice/support teams;

• adopting a common definition of disadvantage to overcome the shortcomings of LCTS receipt as a proxy; and

• better utilising borough datasets to identify households that may not be in receipt of LCTS but may still be vulnerable to falling into poverty/problem debt as a result of collection practices.

1.7. Key to engaging with boroughs to influence collection practices will be a deeper understanding of the costs to boroughs (and by extension to the GLA) from resourcing these practices or the foregone income that may result from implementing them.

1.8. The funding for this project (up to £20,000) will come from the Communities and Social Policy Programme Budget 2019-20 which was agreed via MD2461. In particular, this will form part of the Equality and Fairness programme focused on poverty, welfare and financial wellbeing, which aims to improve economic fairness by tackling the causes and effects of poverty and supporting low-income Londoners to improve their financial wellbeing.

2.1. The objective of procuring this project is to help clarify the role the GLA can play in influencing borough collection practices to better protect low-income households, by deepening the organisation’s understanding of the business case for implementing these practices.

2.2. Specific tasks will include engaging with borough collections officers (and others) to quantify the costs associated with implementing such practices.

2.3. The results will help inform further actions that the GLA could take or funding agreements it enters into to promote specific collection practices and evaluate the effectiveness of those actions. The project outcome is to reduce poverty experienced by low-income Londoners which is exacerbated by poor debt collection practices.

3.1. The Mayor’s Equality, Diversity and Inclusion (EDI) Strategy contains a number of specific objectives which align with particular aspects of the aims of this project:

Objective 13 - Child poverty: “To work with government, boroughs… to help address the root causes of child poverty. These include… the welfare system.”

• This is informed by evidence that some BAME groups, migrants and families with non-working mothers are at greater risk of living in poverty; and that women and children – especially those from BAME groups – and disabled people have lost out from welfare reforms. These groups are likely to be eligible for LCTS schemes and, depending on where they live, at risk from poor collection practices.

Objective 33 – Physical health: “To lead, and help co-ordinate, work to understand and address health inequalities and support at-risk communities to increase their health skills, knowledge and confidence.”

• This is informed by evidence of the link between welfare reforms and issues such as food poverty and debt and mental health issues. These aspects of extreme poverty have been linked to council tax collection practices and will have knock-on effects for physical health.

3.2. In addition, the recently published Survey of Londoners point to further evidence of the groups that are most likely to be represented in the group of roughly 500,000 Londoners that have household bills arrears, which include council tax bills. The groups include single parents (22%), Black Londoners (22%) and disabled Londoners (14%).

3.3. These are the groups that would be expected to benefit from any improvement in collection practices designed to prevent households being pushed into problem debt.

3.4. The GLA will ensure that the procurement meets the Public Sector Equality Duty.

Links to Other Mayoral Strategies and Priorities

4.1. Links to other work on poverty impacting on Disabled Londoners include:

• The Economic Development Strategy which considers how the high costs of living in London can create barriers and how those on lower incomes often pay more for essential goods and services (a poverty premium) – which again disproportionately affects disabled households.

• Fuel Poverty Action Plan –Disabled people are one of the key groups where fuel poverty is a concern.

• A recently established Economic Fairness team at City Hall that deliver a range of pledges through an Economic Fairness work programme. This team also convenes the Economic Fairness Steering Group.

• The Food Strategy which includes a specific section on reducing food insecurity, considering the role of poverty and inequality in what we eat.

• Health Inequalities Strategy which considers the wider determinants of health, including wealth and income.

Risk Management

4.2 Any practices that had the effect of reducing the amount of council tax arrears that boroughs collect would directly lead to reduced income for the GLA. This has to be balanced against the detriment that collection practices can do to low-income households. This project is designed to help inform the GLA’s decisions on how to strike that balance.

Conflicts of interest

4.3 There are no conflicts of interest to note for any of those involved in the drafting or clearance of the decision.

5.1 This project will be put to competitive tender. Bidders will be asked to provide a price for the tender, including a breakdown showing expenses, sub-contracting costs and VAT. Early engagement has identified a number of potential bidders that the tender opportunity will be shared with.

5.2 Expenditure of up to £20,000 will be funded from the Communities and Social Policy programme budget 2019-20 agreed via MD 2461. Specifically, it will come from the ‘Social Mobility – low-income Londoners’ budget code – GG.0280.002.004.002.