Councils send in the bailiffs

Losses from rent arrears and unpaid council tax are falling as finance managers wise up, writes Paul Gosling

Local government finance managers won praise last week when the Audit Commission's annual performance indicators showed that some councils had dramatically improved their collection of council tax and housing rents.

Paul Vevers, director of audit support at the Audit Commission, is impressed. "Council tax collection has shown a good improvement, because collection rates were already high," he says. "It was difficult to achieve improvements when councils had already collected 94 per cent last year, and it is now almost 96 per cent. Each 1 per cent improvement is worth pounds 100m to local government as a whole. This is the sort of thing that local government is in fact very good at, especially when you consider the move from the poll tax to the council tax."

The Audit Commission advised councils to take four key steps to improve collection rates: to persuade more citizens to pay council tax by direct debit; to bring forward the due date for council tax to 1 April; to send reminders on overdue tax sooner (reminders are now sent out 21 days after a missed payment instead of 25 days, a 16 per cent faster response); and finally to do all this without spending any more money.

Councils, especially those with the worst collection record, have gone further than that. At one point Lambeth, in south London, was collecting just 60 per cent of its council tax and housing rent debts. Now the figure is 80 per cent, making it the most improved council in the country. It has combined the carrot with the stick. Five per cent discounts were given to early council tax payers last year, and a 2 per cent discount this year. People paying council tax by direct debit were entered into a prize draw in which the first prize was a round-the-world tour.

But Lambeth also threatened to send the bailiffs to call. "We had one particular firm of bailiffs who had the toughest cases, including some going back to the poll tax," says a council spokeswoman. "We ran a publicity campaign saying the bailiffs are coming, with a tough-looking bailiff on the poster. They had a specific target to collect from these cases, and they made enormous progress."

Liverpool council, which improved its collection rate by 5 per cent in one year, also took a hard line. Long-standing debtors had insolvency action initiated against them, which cleared a lot of old debts. The council also restructured its finance department to integrate housing and council tax benefits processing with council tax collection, producing a more efficient operation with fewer staff.

Manchester has taken a much softer line, while also speeding up debt collection; it cut its council tax arrears by 8 per cent within a year. New technology has released officials from mundane tasks, giving them the opportunity to recover old debts. When contacting debtors, the approach of staff has focused on money advice, and establishing a programme of payment to clear arrears.

It is the worst-performing councils that have improved the most, bringing most of them closer to the average English council tax collection rate of 96 per cent. "With rent collection there is a much greater variation," points out Paul Vevers, of the Audit Commission. Although Liverpool has improved its collection amongst the slowest paying tenants by 3 per cent, more than 15 per cent of the council's tenants still owe more than three months' rent. But this seems good compared with Haringey in North London, where more than a quarter of the tenants are three months in arrears.

The efficiency of the council is a much more important factor, says Mr Vevers, than the level of poverty of its tenants. "Some councils, such as Tower Hamlets, perform well in difficult circumstances," he says. "If they can do it, with their level of poverty, why can't some others?"

Redbridge, in east London, went from being one of the worst performing councils in collecting rent to one of the best, within three years. A spokeswoman says it managed this by "concerted, prompt action, by introducing debt counselling sessions and by improving procedures for monitoring arrears".

Ealing, in west London, has also improved its act dramatically. All new tenants are interviewed, and told how they are expected to behave as tenants, stressing the need for prompt payment of rent. Tenants who qualify for housing benefit are helped to fill in application forms, which are speedily processed to avoid delaying rent payment. All rent collection staff are trained in debt counselling, money advice and welfare rights.

Outside London, Lichfield in Staffordshire has shown one of the sharpest improvements in rent collection. The council admits that it was motivated by the terms of the contract by which it transferred its housing stock to a housing association last year. Only a proportion of the value of uncollected rents was to be included in the final sale price.

Many council officials bitterly resented performance indicators when they were established four years ago, but their beneficial impact is now easy to see. Greater transparency has led to significant service improvements. For once, they have also led to some bouquets being delivered to the finance departments, at least metaphorically. Treasurers should take loving care of these roses while the blooms last.