Local authorities could save thousands of pounds by using digital debt recovery instead of resorting to traditional solutions like bailiffs according to new research by Essendex. Figures show that around £2.8bn of outstanding council tax was owed to local authorities in England as of March 2017 – with many councils struggling to claw back the money.
Traditionally, councils have used external enforcement agencies to help them recover funds, but a new report suggests that giving citizens more flexible ways to pay could see fewer debts being incurred, less stress caused to the debtor, a greater percentage of debts paid off, and councils spending less in the long run.
The research surveyed 109 authorities, found that a significant number are not keeping a separate record of the costs involved in chasing the late payment of council tax and business rates, with no breakdown of the internal spend or of funding the involvement of external recovery agencies. 68% of local authorities surveyed were also unable to say whether the costs of collection exceeded the monies recovered.
Sean Sutton, Esendex’s Head of Public Sector, said: “The collection of debt is ripe for the introduction of simple solutions which can significantly improve the financial position of authorities responsible for recovery whilst delivering a better service to citizens. The competing demands on council funding are greater than ever and reforming a ‘back-room’ function like debt recovery could free up significant sums of money to spend on frontline services.”
Research also suggests that citizens respond better to more automated forms of debt recovery – such as text message reminders, online payment systems, text chat and dedicated apps.
A survey carried out by the Citizens’ Advice Bureau suggests more than half of those being pursued for debts by Local Authorities believe the use of bailiffs and Court Orders not only makes it harder for them to clear their debts, but increases the amount they owe.
Automating the process and giving citizens options about how and when to pay, without them having to speak to someone face-to-face, can reduce the fear of judgement and help them to find a solution to tackling their debt, rather than ignoring it. It can also help reduce anxiety and stress for debtors, a significant proportion of whom may already be suffering from mental health problems.
For those local authorities that have revolutionised their payment services suites of easy-to-implement multi-channel solutions, like those developed by Esendex, have enabled greater engagement with debtors, more nuanced management of the behavioural and financial challenges behind debt, and significantly greater returns from debt books as a result.