The impact of the cost-of-living crisis on local authority debt

The cost-of-living crisis, exacerbated by Brexit, the COVID-19 pandemic, and rising inflation, has had profound effects on local authorities. As the cost of living rises and council tax bills increase, local authorities are struggling to meet the demands of their constituents while also grappling with mounting debt and budget constraints that have persisted since the global financial crisis in 2008.

Rising costs and council tax bills

The cost-of-living crisis has hit many citizens hard, with increasing prices for essential goods and services. In response to these rising costs, some local authorities have had to increase council tax bills to cover their growing expenses. However, the question remains, are these increased council tax bills enough to cover the escalating costs?

The challenge of budget cuts

Over the last fifteen years since the credit crunch, local authorities have faced significant budget cuts, which have already strained their resources. The recent economic turmoil has further exacerbated the fiscal challenges faced by local authorities, who must now grapple with balancing budgets while maintaining crucial public services.

Impact on council tax payers and businesses

The rising cost of living has had a significant impact on many people’s ability to pay their council tax. The financial strain on households, caused by a combination of increased living costs and council tax hikes, poses a serious threat to the financial health of local authorities.

Additionally, businesses have been affected by the current economic situation, particularly in terms of Non-Domestic Rates (NDR). These challenges require innovative solutions to help local authorities stay afloat and maintain essential services.

Section 114 and local authority bankruptcy

Local authorities that find themselves unable to manage their finances effectively may be at risk of entering Section 114, a process that designates them as ‘in administration’, ‘bankrupt’ or ‘close to bankruptcy’.

Several local authorities have already faced this precarious situation, namely, Birmingham, Croydon, Hackney, Hillingdon, Northamptonshire, Northumberland, Nottingham, Slough, Thurrock, and Woking. This highlights the urgent need to address the financial crises faced by local authorities.

How Excel can help

Excel plays a vital role in helping local authorities recover much-needed revenues and manage debt. Here are several ways we can contribute to alleviating the financial burden:

• Recover unpaid council tax and NDR: we can assist local authorities in collecting outstanding council tax, parking fines and NDR payments, ensuring that the revenue stream remains consistent
• Payment arrangements: working with customers to establish reasonable payment arrangements can facilitate the settlement of arrears while minimising financial hardship
• Debtor profiling tools: leveraging data analytics and profiling tools can help local authorities make informed decisions about debt management and collection strategies
• Communication tools: effective communication tools can encourage debtor engagement and facilitate dialogue to find mutually beneficial solutions
• Easy and secure payment options: providing convenient and secure payment options makes it easier for individuals and businesses to fulfil their financial obligations
• High Court enforcement: in cases where judgment enforcement is required to recover sundry debt, our sister company High Court Enforcement Group can be instructed
• Our tools, expertise and collaboration with local authorities is essential to maintaining their financial stability and ensuring they can continue to provide crucial public services to their citizens.

“Excel goes above and beyond, especially with difficult cases. Excel sets high standards, has a good collection rate, a great ethical ethos and can support us with bespoke requirements. They are an extension to our team and they care. The support Excel provides is outstanding – they have trained our teams, support us with complex cases, help us improve our collection rates and maintain our reputation.”
- Lucy Gallyer, Revenues Operations Manager, Basingstoke and Deane Borough Council