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December 8, 2022

Proactive debt outreach - Why do Local Authorities send residents who are vulnerable and cannot pay their debts to court?

Councillor Darren Rodwell

Councils hold a lot of data and have a very wide-ranging brief to support their most vulnerable residents. As a sector we must double down on prevention as well as react to need in our communities. We must never forget we serve people, and it should be this that focuses our energies. 

Poverty and debt are significant issues in Barking and Dagenham, one of England’s most deprived local authorities. We have one of the highest rates of unemployment in England and among the highest number of in-work Universal Credit claimants, a measure of in-work poverty.  

Poverty drives a reliance on borrowing and this often means high interest credit. We estimate 6,000 households in our Borough access 20,000 new loans each year costing £9.4m. Shockingly this translates into repayments of around £16.7m for some of the poorest people in the country. In addition, we have found that spiralling debt is linked with a host of other poor outcomes such as mental health issues, domestic abuse, use of social care and homelessness. 

Local authorities are rightly focused on delivering everyday services like bin collections and maintaining parks – it is why most people think they pay their council tax. Our work supporting the most vulnerable people in society is often an afterthought for many people. 

Perhaps that is one reason why, as a sector, we talk a lot about prevention but don’t do it nearly enough. Part of the challenge is figuring out who to work with to prevent poor outcomes in the future. 

The interesting thing about debt is local authorities can see people are struggling before their very eyes! We keep council tax records and some of us manage social housing arrears. We have services that support people in debt. In Barking & Dagenham, our Homes and Money Hub works with thousands of people to help them get back on track through maximising the benefits they claim, discretionary housing payments, budgeting advice and signposting them to services such as housing.

Unfortunately, different departments within local councils often work separately. At the same time as debt advisers are supporting residents, so those working in revenue and benefits teams are busy sending thousands of red-letter demands threatening legal action. 

We all need to pay our taxes but this is not the way to lift people from vulnerability. Threatening people who cannot pay (with all the other challenges that are happening in their lives) not only produces worse outcomes for those people but it does nothing to ease the burden of our own bureaucracy. The reality is, bailiff action is often futile because there is no money to be collected.

That’s why we decided a more preventative approach was needed, and why we decided to run a pilot across housing, revenue and benefits, money advice and other universal services. 

As an insight and innovation team there were two crucial things we wanted to test. Firstly, could we use our data to identify residents that were struggling, probably couldn’t pay and that we could help? The acid test was whether we could use our data to reach more than those walking into our debt advice shops at the end of their tether. Secondly, we also wanted to ensure that our outreach was human centred. 

The first pilot aimed to contact residents we thought could pay but were behind due to the pandemic (in early 2021). We used our predictive analytics platform, OneView, to identify a group of residents with lower Council Tax debts, who hadn’t fallen into debt before. The behavioural hypothesis was that they were struggling to pay off their debt in one go and ignoring the issue even though setting up a payment plan would mean avoiding court, bailiffs, and additional costs. 

Next, we gave them a call. The idea was to say we knew that they were behind and whether they thought a payment plan could help (many had not been in debt before so we thought many were unaware of this option). 

For those that could, they were connected to the Council Tax department. For those that couldn’t that was the end of the conversation. 

Finally, if a vulnerability emerged during the conversation, the resident was connected to the suitable part of the Council. 

Crucially we didn’t call everyone in the group we identified. The people we didn’t call flowed through the process as usual. 

We then measured the difference in outcomes for the two groups to gauge efficacy of the pilot.

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What did we find? 

Well, we got through to a reasonable proportion of residents – 32%. 14% of those we called set up a payment plan. 

When we looked at payment rates, we found the proportion having made a payment was twice as high in the group we contacted than the one we didn’t (35% versus 17%) one week after the trial. We measured this again once the court process had finished and found the group we called still had 50% higher rates of payment (45% versus 30%). This is a great result and justifies the power of a friendly call – which ultimately had more impact than sending people to court. As expected, significantly fewer residents we contacted ended up with bailiff action compared to those we did not try to contact (36% versus 47%). This approach has improved payment rates as well as outcomes for residents. 

But what about value for money? 

We found the difference in payment rates meant that calling people had brought in an additional £30,000 during the trial. It should be noted that payment plans can be broken but even assuming a 33% default rate (historically high) this still leads to £20,000 additional revenue (not including costs avoided of court etc). Given that the cost of making the calls was £1,300 the approach was very good value for money.

For our second pilot we wanted to make three changes:

  1. given the resource cost of the approach we wanted to target residents with greater support needs; 
  2. we wanted to get rid of the ‘hand off’ between the team that did the outreach and the team that took the payment (we lost people in this transfer, which was a shame); and
  3. we wanted to try a lighter touch outreach approach. 

Using OneView we identified a group of residents with both Council Tax and social rents debts, who had wider vulnerabilities, and who had not visited our Homes and Money Hub before, and for whom we had a mobile number. 

Again, we split this group in two, with the first group receiving a personalised text offering support. If they replied yes to this, our Homes and Money Hub made contact and worked with them on their financial issues.

We reached 26% of our sample – which is good given the challenges faced by this group with greater vulnerabilities and simply receiving a text message from us. 

We tracked interventions delivered to both groups and found those we reached out to were far more likely to receive some form of support. Very interestingly, many residents used the support they received to set up a payment arrangement. This surprised us given we were working with a more vulnerable group and the focus was on support.

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When we add up the financial support we were able to get to residents we found this exceeded £400,000. The figure per resident was much higher (more than double) the support we are able to provide to residents that walk into the Homes and Money Hub. 

Over the four months of the pilot the residents we worked with paid £75,000 more of their arrears back than the group we didn’t work with. It also reduced court and enforcement action.

Many of the residents identified in the data were very vulnerable but were not well known to the Council. Often they were eligible for support but did not know it and would not have received it otherwise.

We are working on how we build this into our business as usual, for example, ensuring we proactively contact anyone who is vulnerable and would benefit from debt advice. 

In summary, the work has been a great success. Data has enabled us to identify people who need support and we can work with these people to achieve better outcomes for them as well as bring in more money for the Council. No mean feat in a cost of living crisis and a second decade of austerity funding for local government. 

Councillor Darren Rodwell is Labour leader of the London Borough of Barking and Dagenham Council and our latest End It With Evidence campaign ambassador. Find out more about our campaign to end homelessness through the application of evidence and data and sign the pledge.

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