Cash-strapped Croydon Council plans to chase benefit claimants for unpaid council tax as it claws its way out of bankruptcy.
The Conservative-run council is proposing to seek legal orders to have the benefits of those in arrears docked to pay the debts.
Since Covid, those on council support schemes for struggling to pay their council tax were not chased for arrears. However, the council now says that it cannot afford to write off £3.6m in uncollected tax.
The change was approved by Mayor Jason Perry on Wednesday night.
The "benefit attachment" orders require the DWP to pay a percentage of a claimant’s Universal Credit towards the debt. The council estimates this could help recover around £400,000 in the next twelve months by requesting up to 200 orders a month.
Documents setting out the change say that although those affected are “amongst the poorest in our borough with either low or no earnings”, it is not “financially viable” to write off the debt.
Labour said it was “very concerned” by the plan.
“We are very concerned by these proposals to start sanctioning residents’ benefits, in particular given we are in a cost of living crisis that is just as hard hitting for our residents as Covid was,” said opposition leader, Cllr Stuart King.
“The council should be improving its efforts to get hardship funding to these residents, not targeting their benefits.”
However, the Tory minority administration says it would seek to come to an arrangement with those in arrears before seeking any deductions from benefits and that not intervening is allowing some residents to sink further into debt.
It says those affected will be helped with a £2m support fund and debt support, and that it is fixing historic financial mismanagement from previous Labour administrations.
A council spokesperson said: "As a result of this hiatus in recovery, debts among residents in receipt of council tax support have risen sharply since 2020 and we have now decided to start recovering council tax to help support residents in dealing with debt.
"We are committed to supporting residents in breaking any cycle of debt, ensuring that debt does not continue to increase. Many residents were unknowingly accumulating council debt and these changes will put that right."
Croydon accrued £1.6billion of debt under previous administrations before the Conservatives took control of the town hall last May. The council declared effective bankruptcy last November for the third time in two years.
Council chiefs are modelling an increase in council tax of 4.99 per cent for the 2024/25 year, which comes on top of a record 15 per cent increase in March, the highest of anywhere in the country.
The town hall faces a budget deficit of £75m if it does not make any further savings or receive government support in 2024-25, according to draft budget proposals.
Officials say its budget will be balanced with £31m in efficiency savings and asset sales, but it will also require £38m of extraordinary government support.
