How to address tax arrears sustainably

By Paul Rudd | 29 September 2021

COVID-19 has impacted council budgets in a way never seen before and we’ve seen new types of council tax and business rates debtor emerge as a consequence. To recover funds in a way that’s both practical and sensitive to the situations citizens find themselves in, councils will benefit from a personalised approach based on data.

Council tax arrears are a crucial resource for rebuilding council finances damaged during the pandemic. But the recovery process must be appropriate to the difficult financial circumstances many reliable payers have found themselves in.

Many of today’s debtors are people who’ve always paid before but as new debtors, they may not know where to seek support. When they recover, they are likely to return to being regular payers. Heavy-handed enforcement and recovery actions could push debtors over the edge when all they may need is more time to pay.

The good news is most councils already sit on a wealth of insightful data which can help inform a new approach. By rethinking how they collect, manage and use data, local councils can tackle council tax arrears in a way which is sustainable and in the best interests of everyone concerned. Here are three ways to achieve this.

Clearly identify different types of debtor: Councils hold insightful data on customers, particularly in relation to council tax. This can be used to identify defaulters who would pay if referred to debt recovery and help understand why others are not paying. Debtors can also be further segmented by looking at their overall financial position, not just council tax arrears. So if this shows large and consistent debt across services, then traditional debt recovery is likely to be the best route.

Tailor recovery: One size does not fit all so applying debt segmentation is key to a more successful and ethical recovery strategy. Data-driven techniques help councils use the best recovery action for each citizen or business.

Increase support capacity: Many councils see the need to shift from collections to support to deal effectively with new debtors. Ideally, this is a job for skilled teams but with headcounts under pressure, services such as our OnDemand resource can free up capacity without the need to hire or redeploy people.

All local authorities are focused on council tax arrears as they try to balance the books; and they hold a huge store of valuable citizen data. This resource can help to take a targeted, effective approach to recovering revenue and securing their finances so they can continue to deliver high quality services for the future.

Paul Rudd is Director of Service Design at Civica

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