'Stealth tax' on recession victims
Ministers impose huge rise in court fees for those on brink of bankruptcy.
Saturday, 24 January 2009
Ministers were accused last night of profiteering from the soaring numbers of people facing bankruptcy after they announced huge increases in fees at debtors' courts.
Charges are to rise by up to 233 per cent for debt proceedings from next May, affecting hundreds of thousands of people who plunge into the red.
The move, which has been branded a stealth tax on those least able to pay, comes as a survey by The Independent reveals the depth of Britain's debt problem with the country now officially in the worst recession for 30 years.
Statistics gathered from local branches of the Citizens Advice Bureau (CAB) show the number of people contacting the charity for advice on how to manage their mounting debts rocketed across the country during the past three months of last year.
CAB in Birmingham received more than 3,000 debt advice inquiries between the start of October and the end of December, a 78 per cent increase on 2007. The total debt during the three months totalled more than £14m, almost double the £7.4m it dealt with the year before. In Liverpool, the number of debt cases dealt with by the largest CAB branch increased by 55 per cent to 1,824, while the deputy manager of another CAB in the city said the demand for help with rent and mortgage arrears had gone "through the roof".
In Stevenage, one elderly widow had racked up debts of £120,000. Overall, the number of calls to debt counsellors leapt by 70 per cent. But, under plans sneaked out by the Government, those who end up in court will be hit by dramatic increases in fees.
When a debtor is summoned to discuss his or her finances the cost will go up from £30 to £100, a 233 per cent rise. The charge when courts give permission for creditors to send in the bailiffs – as happened 310,000 times in 2007 – will go up by 186 per cent from £35 to £100.
The cost of committal proceedings allowing authorities to take residents who owe them council tax to court will increase by 178 per cent, from £90 to £250. The fee a court levies when a debtor is ordered to attend goes up from £45 to £50 – more than 27,000 debtors were summoned in 2007.
The plans for fee rises were set out in a Ministry of Justice consultation document. A spokeswoman for the ministry insisted: "We will listen carefully to the views of all those that respond."
The ministry, which has suffered a dramatic drop in income because of changes to child protection fees, calculates the fees will raise £38m a year. It argues the extra cash will only cover court costs but Dominic Grieve, the shadow Justice Secretary, protested that ministers were "cashing in" on Britain's growing levels of personal debt.
"It is bad enough that ministers should address their own budget problems by fleecing people struggling with indebtedness but to do so in the depths of a recession takes a special kind of cynicism," he said.
"While Gordon Brown mouths platitudes about helping people, he is plotting a stealth tax on those in debt."
Chris Tapp, director of the charity Credit Action, said the increases were "like pouring salt into the wounds". Britain was "going cold turkey on debt", with many people living on huge debts now unable to refinance loans or credit card debts when zero interest deals expired. He said: "For a lot of people, the credit crisis has been like turning the life-support machine off. People call the helplines too late. They call when they are on the edge."
Credit Action said one person went bankrupt or insolvent every 4.8 minutes, with the average consumer debt on credit cards, motor loans and unsecured borrowing standing at £4,893.
The National Debtline helpline reported a 70 per cent increase in calls during the final three months of 2008, with more than twice as many inquiries in December compared with 12 months earlier. A spokeswoman said calls during January were running at 1,600 a day, double the number for January 2008.
"Advisers are talking to more people with multiple priority debts. Normally, they talk to people with credit card or non-priority debts," she said. "Now they are talking to people with arrears in mortgages, council tax and gas and electricity bills." Most callers were £5,000 to £15,000 in debt; one in five owed £25,000 to £50,000. The Consumer Credit Counselling Service had its busiest day on record this month and calls in December were more than double those of last year, while its staff handled 22,558 calls in the first two weeks of this month, nearly as many as during all of last January.
Vince Cable, the Liberal Democrat Treasury spokesman, said yesterday: "We must give people proper advice on managing their debts.
Meanwhile, in the Government's strongest attack to date on bank executives, Labour's Minister for the City, Lord Myners, spoke of them as "grossly over-rewarded ... masters of the universe" and claimed the banking system had been "very close" to collapse on 10 October.
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