First published in IRRV Insight Magazine in August 2015.
According to Citizens Advice in a recent article which appeared in the Guardian, the number of council tax debt cases handled by the charity has increased by 21% in the last year to 193,000. Similarly the StepChange Debt Charity also reported a 372% increase in the last five years of people contacting them who have council tax arrears. The Guardian article also reported that the increase in arrears corresponded with the abolition of council tax benefit in April 2013 and that seven out of ten clients who were behind with council tax payments had at least one other debt problem too.
As the problem appears to show no signs of abating now might be the time to explore some options for Councils on how to take a more considered approach to debt recovery and collections. The first step in doing this is to have a better understanding and all round view of the debtor and the debt they have built up across multiple areas within an Authority. This has been a challenge in the past because you are dealing with multiple systems and teams managing different types of debt.
Thankfully technology has moved on and there are now tools which can be used to harvest data from multiple debt systems to present a single view of debt in one portal. Forward thinking Authorities have bought into this approach and are starting to reap the rewards. Cameron Smith, Performance and Policy Manager at Bury Council comments “The Council has a responsibility to collect debt in an ethical way. If someone has built up a lot of debt, it is important to take account of their whole financial situation. This provides you with information you need to put together a repayment plan they are more likely to meet, without causing them additional hardship that could require expensive support from elsewhere in the public sector.”
Working with companies like Civica and Destin Solutions, Bury Council are now able to collect debt data from different parts of the council and consolidate it so that Recovery Managers can make more informed decisions on recovery approaches. It also enables them to look at outstanding debts and identifies larger debts or multiple debts at the touch of a button, this ensures not only that Bury Council can maximise its recovery resources, but also means debt can be collected more efficiently.
Councils can also take a smarter approach to informing citizens about their debt. Rather than a customer receiving four or five calls, texts, letters or visits from different departments chasing for payment which can create more anxiety and stress, one contact can be made providing a total amount of debt owed and a more considered approach applied.
This technology which Civica has now become a main distributor for in the UK, can be used not just to report on debt but also to analyse it for more informed decision making. By viewing trends and patterns amongst customer debt and cross referencing this with demographical information, Councils can start applying recovery approaches more suited to the customer and start flagging earlier on where potential problems may arise. A typical example might be using text messaging for payment reminders for the under 25’s. Similarly if analysis of debt data uncovers that those citizens who live in a specific postcode are twice as likely to default on payment of Council Tax, recovery teams could be more proactive in creating more bespoke repayment terms or offering incentives for earlier payment.
Ultimately if Councils can reduce the amount of administrative costs and reduce duplication of effort across the different teams associated with recovery and collection these savings could be used to invest in more ethical approaches to debt collection. For instance further investment in analysis as to why the debt is building up in the first instance, are there any commonalities across debtors? Is there the potential to roll out new initiatives such as Bury Council have done to start charging more Council Tax on empty properties, this could act as a supplement for the debt which then needs to be written off. Could the costs associated with chasing up non-payment of Council debt be forgone, to remove additional pressure from debtors? Similarly could more high profile campaigns be launched encouraging potential debtors to come forward in advance to admit they may have a problem meeting payments and to assist them in how to plan for financial budgeting in future.
The issue of non-payment of Council Tax is getting more and more airtime in both local and national press. Those Councils who can demonstrate they are taking a more considered approach to recovery and collection from citizens will not only win more hearts and minds of residents, but if handled in the right way may also be able to improve on collection targets.