Bacs urges local authorities to increase number of council tax billing dates in 2007
Local Authorities looking to improve council tax collection rates during 2007 should introduce a choice of payment dates, allowing local residents to pay weekly or choose their preferred monthly date - that’s the latest recommendation to come out of research from Bacs, the not-for-profit industry body behind Direct Debit.
Every year, local authorities collectively spend over £1 billion on the collection of council tax payments. However according to the Audit Commission *1, significant transactional and administrative cost savings could be made if councils did more to actively encourage residents to pay by Direct Debit.
While many local authorities already proactively promote Direct Debit as the easiest way to pay, some feel they have reached saturation point when it comes to converting additional local residents to automated payments. Latest research from Bacs indicates however that this is not necessarily the case and that more can be done; particularly when it comes to low income households and people who are paid weekly, who can find it difficult to budget for large monthly bills and as such are at a higher risk of default.
Bacs figures show that in 2006, the use of Direct Debit in the local authority sector increased for the fifth consecutive year, with over 142 million council tax and business rates payments processed. And councils that have already heeded Bacs’ advice have reaped the benefits. In just the first six months of 2006, 59,000 UK households chose to pay their council tax by weekly Direct Debit – compared to just 18,000 UK households in 2005 as a whole.
These figures show an encouraging step in the right direction but Bacs is urging all councils to increase the flexibility of their 2007 billing calendar to help further decrease the number of people regularly defaulting.
Michael Chambers, Managing Director of Bacs explains more, “Each year, local authorities in the UK invest vast amounts of time and money collecting council tax payments, sending out reminders and even issuing court summons. Many of those people being chased fall into the financially excluded or low income bracket. Some don’t have a bank account so are unable to pay by Direct Debit. However, we know there are 6 million low income adults in the UK that have a bank account, but do not use automated payments because of concerns that insufficient funds will be available in their account to draw on. It is this group that we need to work together to target.”
Continuing he said, “Offering just one set monthly payment date for everyone can be prohibitive. By offering weekly payment options and the flexibility to choose a payment date more closely aligned to a resident’s pay day, local authorities can break council tax bills down into manageable chunks, build the confidence of low income householders and significantly increase rates of collection and payment recovery. At the moment, just a handful of local authorities in the UK are employing this strategy. However, our liaison with local authorities shows this is an approach that can pay real dividends - as illustrated by the uptake of weekly billing in early 2006 and specifically by the work of Wolverhampton City Council’s collection team.”
Wolverhampton is one of the most densely populated areas in England and has a population of 239,000 people. As such the City Council’s revenue and collection team faces a number of challenges when it comes to the collection of local taxes, not least the sheer volume of people to contact.
Malcolm Hayward, Support Services Manager for Wolverhampton City Council said: “Direct Debit is our preferred payment collection method for a range of services – it allows us to process payments efficiently and sits perfectly alongside our mission statement which is: “To bill and collect local taxes efficiently and effectively and continuously improve our services.”
To achieve this aim, Wolverhampton actively encouraged its customers to pay their council tax bills using Direct Debit. As part of the initiative, local residents who choose to pay by this method are given the chance to spread payments across either ten or twelve months, in forty weekly or twenty fortnightly instalments, quarterly, bi-annually or once a year - enabling them to stagger the cost of bills in the most efficient way possible. The overall campaign proved highly successful and resulted in 12 per cent of recipients switching to Direct Debit as their preferred payment method.
Concluding Michael Chambers, managing director of Bacs, said: “Encouraging further take up of Direct Debit is not always easy but the benefits far outweigh the effort required. Receiving automated payments via Direct Debit frees up resource and allows council employees to get on with other vital tasks. We urge Councils to continue in their efforts to be more flexible and by working together hope to encourage those not currently benefiting from paying by Direct Debit to do so.”
For more information about Bacs and our services visit Bacs key facts.
Contact Bacs press office.
*1 - £15 million Audit Commission saving
*2 - 16% figure provided by the Office of National Statistics (ONS) who profiled those at greater risk of having a low income, and therefore of being socially or financially excluded as: families/households where the adults work part time or unemployed; older pensioner couples; households headed by a member of a minority ethnic group; disabled people; tenants in local authority or housing association accommodation; those with no educational qualifications; lone-parent families; families with more than three children or a mother under 25; those living in inner London (although this area also includes many high income households);
*2 - According to Bacs, 17% of UK adults took home less than £10,000 in 2005.
Back to 2007 press releases Back to press releases