There have been several significant events over the last few months that are driving a significant transformation in the way that council’s collect debt.
Firstly, the impact of Covid-19 is having a profound impact on both debt and vulnerability. The UK unemployment rate grew to 4.5% in the three months to August, and redundancies rose to the highest level since 2009 according to the ONS. On top of this many households are seeing increases in stress, anxiety and other mental health conditions, the physical impacts of “long Covid” as well as increases in domestic violence and child abuse.
In some cases, these increases in stress have been exacerbated by debt collection activity, resulting in an increasing number of high-profile cases where people have taken their own lives. These vulnerabilities were often known to other areas of the council and a more sensitive approach would probably have been taken to support these people if debt collection teams had been aware
These issues are set against the backdrop of a central government agenda to offer more support for people with problem debt and ensure that debt collection in the public sector aligns itself to the best practices of the private sector.
The Breathing Space programme is set to launch in May 2021 and is expected to provide up to 700,000 people with the space to sort out problem debts in the first year – rising to 1.2 million a year within 10 years. Given the current backdrop, these numbers may be conservative.
Alongside this initiative the cabinet office recently issued a call for evidence on the subject of fairness in government debt management. This was a wide-reaching document but was seeking information on the link between debt & vulnerability and how councils can best identify vulnerable individuals who are struggling with debt. This was fuelled by a letter to the Chancellor sent by more than 50 MPs and Peers calling for a Debt Management Bill to implement serious and systematic improvements to Government debt collection.
With all of these pressures & initiatives, councils will have to change the way that they approach debt collection, and the only way to achieve this is to break down the siloes that exist within debt management teams and the wider council and start to look at individuals at an holistic level to understand their wider situation and where appropriate provide support that is sensitive to their situation.
Whilst this agenda is likely to be imposed on councils through the new regulations, the benefits of taking this approach are huge. The ability to break out of the one-size fits all debt collection process into much more nuanced collection strategies will ultimately increase revenues, save money and in some cases save lives. It also has the capacity through broader transformation to significantly reduce costs in all other service areas where sending a bailiff to collect a £2k debt can lead to a £50k Looked After Child intervention, for example.
This level of partnership working and ethical data sharing is exactly the reason why xantura was created 12 years ago, and our OneView platform provides the infrastructure to achieve a single view of debt and vulnerability in a matter of months rather than years. As well as providing a single view of debt and vulnerability the solution also identifies additional benefits that debtors may be able to claim.
With councils and residents increasingly financially vulnerable and new regulation around the corner, this is a critical moment for councils to decide how they approach debt collection in the future. Without adopting a holistic approach, they risk falling foul of regulation, causing unnecessary costs, failing to optimise revenue collection, and putting the health of residents at risk.
Please read our previous Case Study below about the work we have implemented at Thurrock to create a Single View of Debt & Vulnerability which has just been awarded the Solutions Partner of the year at the Public Finance Awards 2020;