Council tax arrears hit record levels with £1.4bn hole

Council tax arrears have reached record levels, leaving a £1.4bn hole in local government financing. The outstanding debt, which leapt by £200m last year, is the highest since council tax replaced poll tax in 1993.

The Government has ordered councils to crack down on non-payers as ministers faced growing embarrassment over the mounting debt. The level of the arrears – equivalent to 0.5p on the basic income tax rate – was condemned last night by the Conservatives.

John Bercow, the shadow Chief Secretary to the Treasury, said: "This is an extraordinary amount of money that's been lost to the Treasury. Whether the Government is concerned about it I don't know, but it is massively jacking taxes at the same time as council tax is not being properly collected."

One of the biggest levels of arrears is in Birmingham, which faces a £38m bill for unpaid council tax. Its city council has admitted that some of the debt will eventually have to be written off. Coventry is owed £17m, while Leicester has said £11m is uncollected.

Martin Barnes, director of the Child Poverty Action Group, called on local authorities and the Government to do more to publicise council tax benefit, aimed at low-income families.

He added: "The rise in property values has increased the number of people on low incomes living in expensive homes. The paper value of the home may be high, but meeting the bills is often a struggle."

According to a Commons written answer from Sally Keeble, a Housing minister, the level of council tax arrears has risen from £0.8bn in 1995, when an estimate was first made, to £1.4bn last year.

A spokesman for the Department of Transport, Local Government and the Regions said the level of arrears had risen in line with the overall income from council tax. The arrears now amounted to about 10 per cent of council tax income.

He said: "It is in the interests of local authorities to ensure the amount of arrears is kept at a reasonable level or reduced as it is their money which could be spent on the provision of local services."

The Government was keen that collection levels were improved, he said, and was working with the Audit Commission and members of the Institute of Revenue, Rating and Valuation to help councils with substantial arrears.

Earlier this week, the Conservatives accused the Government of ignoring large rises in council tax bills and red tape.

Council tax bills are rising by an average of 8 per cent from this month.

The disclosures came as Stephen Byers, Secretary of State for Transport, Local Government and the Regions, announced a plan timetabling the practical steps the Government will take in an attempt to realise its new vision for local government.

The plan takes forward Local Government White Paper proposals, which aim to give local councils substantial new freedoms to respond to the needs of their communities and establish a new partnership between central and local government to deliver high-quality public services.

"Implementing this plan will have a profound effect on the opportunities and quality of life for people in our towns, cities and countryside, improving children's education, providing better care for the vulnerable, making communities safer and cleaner places to live in and improving public transport," he said.