“We’re concerned that all too often debts, like unpaid council tax, are passed to bailiffs too quickly without recognizing that the person may be struggling and need help like repayment plans.”
Their press release goes on to state:
“Evidence from CABs has found private bailiffs frequently overstate their powers, act aggressively and bump up debts by levying excessive and illegal fees and charges.”
This got me thinking about the challenges the public sector face when it comes to collecting debt.
In recent years, and in the wake of elevated scrutiny, an ever increasing focus on adherence to regulatory standards and ensuring that we all treat customers fairly (TCF) has meant a revolution in the way that financial services companies have recovered debt.
In contrast, amid a climate of austerity and biting budget cuts, Local Authorities seem to have evolved very differently. The release of last year’s English councils’ collection rates for council tax and national non domestic rates (business rates) was met with much fanfare, however, the marginal improvement overall (0.1% percentage points on 2011/12) seems somewhat underwhelming when compared with the pace of change experienced in the private sector since 2008. What’s more, there is an argument that council tax collection rates are actually likely to fall in the present year because of the impact of welfare reform and the localisation of the council tax support scheme, meaning many people will be getting a bill for the first time. If this proves to be the case, clearly headlines will be very different. Interestingly, reading the facts and figures supplied by CAB on their website, 87% more people sought online advice about council tax this April compared to the same month in 2012 – and that’s before the real extent of the changes start to kick-in.
So why do most councils have such a reticence to change? Having met with a good number of local authorities around the country I certainly don’t take the view that lack of change is due to any perceived public sector passivity - quite the contrary, in fact. The main problem here is a system that makes the ‘recovery method of last resort’ – bailiffs – the cheapest option. When compared with other methods of collection the cost of bailiffs is extremely high, however, these fees are born by the debtor so, from the councils’ point of view, the service is free. As a result, the innovative services and technologies widely used across the private sector have not been widely adopted because, whilst their overall cost is lower, they represent an incremental cost to the authority.
I appreciate the obligations of public sector bodies when spending tax-payers money, however, allocating all defaulted accounts to a bailiff relatively early in the process may be a short sighted view. Field enforcement has its place; however, a diverse recovery strategy can have significant benefits in terms of increased revenues and time to recovery. What’s more, engaging with citizens in a way that it is tailored to their situation is not only morally right, it creates an environment where the problem is less likely to recur the following year.
Local government is undergoing significant change and revenues departments are not exempt. The impact on recovery of the imminent setting of bailiff fees into statute under the Tribunals, Courts and Enforcement Act is as yet unknown. Whilst it is a long overdue shake-up of the enforcement industry, those councils with diversity of strategy will be best placed to manage the regulatory change. I do think, however, that these changes will offer a wider opportunity for local authorities to take a look at their collections and recovery strategy as a whole. By way of example, Most are already performance managing bailiffs to some extent; however some of the tools used in the private sector could greatly improve this process. In addition authorities should also consider initiatives such as e-collections, data sharing with the private sector and utilising the huge experience available through the specialist debt collection industry (DCAs). With the new charging structure coming into force in April a single bailiff visit is likely to cost the debtor £400 (assuming an inflationary rise and the addition of VAT) this will be politically very challenging for many debt types and the availability of alternatives will be crucial.
As has so often been the case in the past, challenges around procurement and contracting should not be used as a barrier to progression. In a climate of increased financial hardship, only by having a well-designed strategy, properly segmenting debt and having multiple channels for recovery can authorities increase collection rates, reduce operational cost and improve the citizen experience.
Paul Fielder, Strategic Account Director, TDX Group