Councils Are Paying Dodgy Bailiffs to Collect Tax Debts

There's a 'factory line' of council cases being handed to private debt collection firms.

by Andrew Kersley

25 July 2023

Members of the Acorn union. Acorn
Members of the Acorn union. Acorn

Housing activists are demanding councils stop using bailiffs to collect council tax debt, amid mounting concerns over the rising use of out-of-control debt collection agencies.

Earlier this month, members of community union Acorn met councillors in Manchester, to demand a stop to the practice.

And last Monday, members of the union marched on Haringey council in north London, saying that the council’s “ethical debt policy” isn’t working. The council had previously claimed that it had reduced its bailiff use by 67% since 2021, but later admitted the real reduction was just 22%.

Last year, as the cost of living crisis began to bite, the cumulative total of unpaid council tax nationwide hit £5bn, a record high and £540m more than the figure recorded the year before.

Manchester is one of the worst hit areas. Tens of thousands of residents in the city have had their council tax debt handed over to bailiffs, as record numbers of people across the country struggle to keep up with payments during the cost of living crisis.

According to council data uncovered by campaign group Debt Justice, 8,459 Manchester households – making up almost 4% of residents – had their council tax debts handed to bailiffs in 2021/2022. The debt collection was handled by one of four firms: Jacobs, Bristow and Sutor, Newlyn plc and Marston Holdings, the latter of which stopped collecting council tax debts for the council in October 2022.

Since the middle of 2021, some £2m worth of council tax debt has been collected by these agencies for Manchester council.

And that has given bailiff firms the chance to make serious money. Newlyn saw its operating profit double in 2021 (the last year it filed accounts).

It’s not possible to know just how profitable Bristow and Souter is, because its immediate parent company Copper Bidco, operates out of Jersey which is outside of British business jurisdiction, where accounts must be filed annually to Companies House. But in 2017 private equity firm – Sovereign Capital Partners – which was founded by scandal-hit Tory donors Lord John Nash and Ryan Robson bought the debt collection agency.

The reason this work can prove so lucrative for enforcement companies comes down to the fact that they can often levy huge costs on debts as “fees” for collecting.

Bailiffs add an average statutory charge of £310 per person for those struggling to pay council tax, sometimes even charging just for the act of sending a letter. In one case in Bristol, a charge of £310 was put onto a £1 debt owed by a resident by Marston Holdings.

“Lots of local authorities, even if you have no earned income and live off state benefits, you still have to pay some council tax. If you’ve got no income, you’re just not going to pay that,” said Jamie Thunder, a former debt advisor and policy and public affairs officer for charity Z2K.

“£310 is a figure I know well. That’s £75 for a letter through the door. And the first time they come and visit you that’s £235. Those are set out in legislation and there’s no variation based on the size of the debt.”

In theory councils and bailiffs both have a safeguarding duty to protect vulnerable or impoverished residents from being handed over the bailiffs, but given both bailiffs and councils have a financial interest in any money owed being collected in full, that duty is rarely being enforced, according to Thunder.

The system now is more a “factory line” of council cases automatically being handed to bailiffs, he said, with bailiffs specialising in “exploiting grey areas” of the law to collect that debt.

There is a long history of misconduct claims against the bailiff firms used by Manchester Council.

Newlyn plc has faced a litany of controversies over the years. In one case, a Coroner’s Court found that the 2016 suicide of teenage courier Jerome Rogers was in part driven by the stress of hundreds of pounds of additional debts piled on by Newlyn agents. The case was featured in a BBC3 docudrama, “Killed by My Debt”. Newlyn told the BBC that it had “acted in accordance with best practice and the coroner found that our enforcement agent acted in a lawful and appropriate manner” but reiterated its “sympathy” to Rogers’ family.

Campaigners in Manchester have been fighting to end the council’s use of bailiffs since August last year. Last week, members of Acorn met with councillors and were told that the council would continue using bailiffs, but were prepared to consider changing the wording on the debt collection letters it sends to residents.

“During our campaign we have spoken to countless Manchester residents, who have shared their own experiences of mistreatment at the hands of bailiffs. However, what is shocking is the scale and variety of abuses,” said Sam Booth, an organiser with the Acorn Manchester branch.

The news follows increasing concerns around out-of-control bailiffs. Novara Media previously reported on one bailiff firm – S&K – that was accused of dressing its agents up like police officers, with canine units, tasers, stab-proof vests and police-style vehicle trim.

Some local councils including in Bristol, Southwark and Hammersmith, have scaled back their use of bailiffs to collect council debt. Hammersmith council actually saw council tax collection rates go up after the change, leading social policy analytics company Policy in Practice to suggest that there was “no clear relationship” between using bailiffs and higher council tax collection rates.

Councillor Rabnawaz Akbar, Manchester city council’s executive member for finance, told Novara Media that “unprecedented hardship” facing residents was a “key consideration for us when managing resident arrears of any kind”.

“Council tax is used to fund essential council services in the city and although we are obliged to attempt to recover council tax when it is not paid as planned, we will always try and work with our residents to agree a plan that does not impose further unnecessary hardship – or put residents into an untenable position, such as making them vulnerable to homelessness. Residents are also given numerous opportunities to speak to us before a case is passed to agents.”

They said the council was reducing the share of cases being referred to bailiffs as “we look to work with residents to work through their arrears directly before deferring to the legal route”.

A Bristow and Sutor spokesperson said the firm was “subject to the same laws and regulations as any other enforcement firm” and it was “supportive of the establishment of the Enforcement Conduct Board and the oversight of the industry that this provides” – referring to a new industry-funded body which has no legal powers.

A spokesperson for Marston said that it ceased to provide active “council tax recovery services” to the council in October 2022, but continued to collect council business rates and parking debts.

They added that they operate “strictly in line” with the CIVEA code of practice and ministry of justice rules, and had a “certified welfare team to assist where vulnerability is identified”.

Newlyn did not respond to a request for comment.

Andrew Kersley is a journalist.

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