Why are councils sending vulnerable people to court? (Part 1 of 3)

Poverty and debt are significant issues in Barking and Dagenham (B&D), one of England’s most deprived local authorities:

• just under half of children aged under 16 (46.4%) live in poverty after housing costs (3rd highest in the country);
• more than a third (36.7%) of households claim Housing Benefits or Universal Credit with housing entitlement (7th highest in the country);
• just under a quarter of working age adults are economically inactive (23.8%); and
• more than 3 in every 5 households (62.4%) are deprived (highest in the country).

Poverty drives a reliance on borrowing and this often means high interest credit. We estimate 6,000 households in our Borough access 20,000 new loans each year costing £9.4m. Shockingly this translates into repayments of around £16.7m for some of the poorest people in the country. In addition, we have found that spiralling debt is linked with a host of other poor outcomes such as mental health issues, domestic abuse, use of social care and homelessness.

It is local authorities that work with people experiencing these poor outcomes and as such our sector talks a lot about the need for prevention (of e.g. homelessness, social isolation, domestic abuse) instead of dealing with the consequences once they have happened. But we don’t do it nearly enough. Part of the challenge is figuring out who to work with to prevent poor outcomes in the future.

Local authorities have live data feeds on council tax debt, social rent arrears and housing benefit overpayments, meaning that we can see people falling into debt in real time. In a separate part of the Council we have services that support people in debt. In B&D, our Homes and Money Hub works with thousands of people to help them get back on track through maximising the benefits they claim, securing discretionary housing payments, offering budgeting advice and signposting them to services such as housing advice.

Unfortunately, different departments within local councils often work separately. At the same time that debt advisers are supporting residents, the Council Tax department are sending thousands of red-letter demands threatening legal action. Of course, a high Council Tax collection rate is vital for the financial sustainability of a local authority so that it can continue to provide vital services. But threatening people who cannot pay (and may have other challenges in their lives as well) not only produces worse outcomes for those people; it also does nothing to improve council finances. Often money cannot be collected, but even if it can, payment can put increased strain on families which can push them closer to the poor outcomes we have discussed above.

That’s why B&D decided to test a preventative approach with debt. We know who needs help and we have ways to support them. There were two main hypotheses we wanted to test. Firstly, could we use our data to identify residents that were in debt and struggling to pay it off? Could we tell the difference between those that could pay and those that would need support? Secondly, could we design an approach that was human centred; so that it felt like someone was getting in touch to offer support rather than a council employee chasing for payment.

Our next two blog posts will describe how we ran two pilots to test each of these hypotheses. Follow us to find out what we learnt.

Words by Tim Pearse, Head of Insight and Innovation at Barking and Dagenham’s Insight and Innovation Support Team. Project team: Tim Pearse, Saumya Singhal.

This work was also the subject of a blog by our Leader Councillor Darren Rodwell for the Centre for Homelessness Impact.