Article10 Jun 2020

How a ‘Single Customer View’ of Debtors Could Transform the Collection of Public Sector Debt

As of March 2018, around £23.5 billion of overdue debt was owed to central government (3.3% of revenue generated) ¹. This figure is likely to rise as the result of the financial hardship that citizens are facing during the current COVID-19 crisis. When looking to collect debt in a fair and effective manner, public sector organisations often perform checks with Credit Reference Agencies to see what the debtor owes to private sector creditors. This helps them to put together a responsible debt collection plan that is tailored to the debtor’s individual circumstances and their ‘ability to pay’. However, there is no way to see how much the debtor owes to other public sector creditors. To overcome this problem, the independent think tank the Centre for Social Justice (CSJ) is the latest organisation to call for the development of a ‘single customer’ view of debtors. Indesser agrees with this call. 

A ‘Single Customer View’ of public sector debt:

• Has been repeatedly proposed by both public and private sector organisations
• Brings together multiple debts that a citizen owes to government
• Enables better decisions to be made on the prioritisation of government debt collection
• Facilitates a fairer and compassionate way of supporting debtors back to financial stability
• Reduces duplication of debt collection activity without compromising revenue
• Needs ‘buy in’ from central (and local) government organisation to establish the extent of multiple debts, how a ‘single customer view’ of debtors would work, and the benefits that it would bring.

Support for a single customer view

The concept of a ‘single customer view’ of debtors is not a new one: the Committee of Public Accounts, National Audit Office (NAO), Indesser and CSJ have all supported a single customer view:

• In 2014, the Committee of Public Accounts found that public sector departments ‘do not have a ‘single view’ of the total amount each individual debtor owes them, let alone a single view of what an individual debtor owes to government as a whole’. It recommended that ‘departments share information and coordinate their debt management activities with a view to developing a single view of what each debtor owes to government as a whole’. ²
• When Indesser was set up in 2015, we proposed that government could use our data and analytical capability to create ‘a government single customer view, sharing data across multiple departments’. However, debt continues to be collected by department.
• In 2018, the NAO concluded that the inability to identify individuals who owe money to different departments ‘risks poor value for money as there is nothing to prevent debt teams competing for repayments from the same person’. ³
• In April 2020, the CSJ recommended establishing a centralised debt aggregator in the Cabinet Office’s Debt Management Function in order to reach a ‘single customer view’ of debtors with complex cases and with more than two government debts ⁴.

The current situation:

Across both central and local government, the issue of ‘debt’ is a highly diverse and complex one with the Government Debt Management Function indicating that there are as many as 500 different public entities with debts owed to them. The table below shows the key types of government debts and the organisations to which they are owed.

Govt. Organisation	Type of Debt
Child Maintenance Service	Child maintenance arrears
DVLA	Penalties relating to non-payment of vehicle tax
DWP / HMRC	Benefit overpayments, including:  overpayments of working and child tax credits;  income support,  job seekers allowance, employment support allowance;  universal credit; and other benefits
DWP	Social fund debts
HMCTS	Outstanding court fines
HMRC	Income tax arrears
Local Authorities	Council Tax arrears;  rent arrears;  Housing Benefit and Council Tax Benefit overpayments;  parking fines;  other sundry debts
Ministry of Justice	Court fines, compensation orders and other financial impositions
Student Loans Company	Student loan debt

 

As things stand, each of these government organisations only has a ‘view’ of their own debts. Moreover, some only have a ‘view’ of specific debt types within their organisation, e.g. a Local Authority department may be responsible for collecting Council Tax debt without being aware of other debt owed to the same Authority.

Furthermore, government organisations have their own criteria to determine which debts are prioritised for collection, and the means of then doing so, be it using in-house debt collection, external debt collection agencies, or enforcement agents (bailiffs).

Benefits of a ‘single customer view’ of debtors:

On the face of it, the call for a ‘single customer view’ of debtors across government sounds compelling as it could help solve a number of issues relating to a lack of debt data sharing, such as those highlighted by the NAO: debtors being contacted by multiple government organisations (or their representatives) to recover different debts, and the duplication of effort across those public bodies.

However, it should be noted that there is no up-to-date, empirical data on the extent to which citizens have multiple debts, either with the same government organisation or across different ones. The CSJ report states that:

‘Multiple government debts are common among the highly vulnerable and low-income client base CAP [Christians Against Poverty] work with. As many as one in two (49 per cent) of CAP clients now owe a debt to HMRC, DWP or their local authority, with over a quarter (26 per cent) owing more than two types of debt to government authorities’

While this provides some useful data, citizens seeking help with problem debt from Christians Against Poverty are not representative of all those citizens that owe money to government. Therefore, until more comprehensive data is available, the potential benefits that could result from a ‘single customer view’ of debtors are speculative. However, they might include:

• the provision of a better, more holistic understanding of the debt owed to the government, including debts that might be considered unrecoverable and so written off;
• a more comprehensive understanding of the financial status of citizens who are in debt, making it easier to adopt the Standard Financial Statement across all government organisations, and implement ‘breathing space’ measures / the proposed statutory debt repayment plan;
• the ability to use this new understanding to develop and implement improved and more cost-effective debt collection strategies that deliver:
  • better, and more-informed, prioritisation of debt cases based on the total amount of debt owed to government;
  • efficiency savings, e.g. from a reduction in the number of letters generated and other debt-collection activity for the same citizen; 
  • more sustainable payment plans based on the debtor’s individual circumstances;
  • the collection of more debt;
• improvement in ‘treating customers fairly’ and compliance with the Cabinet Office’s ‘Fairness Principles’ through:
  • provision of a clear and transparent view of all debts that they owe to government
  • implementation of a fairer, more equitable and compassionate way of supporting debtors back to financial stability, i.e. ‘getting people out of debt rather than debt out of people’
  • better identification of those citizens who are the most vulnerable in society, enabling appropriate communication / engagement where vulnerability is identified
  • informed referral of debtors to independent debt advice

Potential barriers and how to begin overcoming them

If a ‘single customer view’ of debtors was to be created, then a number of key issues would need to be addressed before it could be deployed. These include:

• Participation: if maximum benefit is to be derived from the creation of a ‘single customer’ view of debtors then it is essential that the maximum number of government organisations contribute. The data sharing powers under Section 48 of the Digital Economy Act 2017 - i.e. ‘Disclosure of information to reduce debt owed to the public sector’ - could be used as an enabler to achieve this.
• Data Matching: the name and address details of a debtor with multiple government debts might vary across individual government organisations, either due to variations in how they have been supplied / captured or due to changes over time, e.g. marriage or moving house. In order to ensure an accurate ‘single customer view’ of debtors, it would be necessary to deploy sophisticated data matching routines that catered for such differences, bringing together all relevant debt cases.
• Maintenance: once the initial ‘single customer view’ of debtors had been created then, clearly, it would necessary to keep it up-to-date with details of new debts, payments made, any additional costs incurred etc. The newly-updated ‘view’ would then need to be reflected in the subsequent prioritisation and treatment of the debt, as described below.
• Data Enrichment:  once a ‘single customer view’ of debtors had been created, then enriching it with data from third-party organisations - e.g. Credit Reference Agencies - would provide a greater understanding of the debtor and their personal and financial circumstances that went beyond the government’s ‘view’. Such data could verify the data provided as part of the Standard Financial Statement, identify debtors that were in ‘vulnerable’ circumstances, and help establish a sustainable repayment plan that reflected the debtor’s circumstances.
• Prioritisation of Debt Cases:  as described above, the creation of a ‘single customer view’ of debtors would enable better and more-informed prioritisation of debt cases to be performed based on the total amount of debt owed to government by the debtor. This would require the current classification of ‘priority’ and ‘non-priority’ debts to be reconsidered. However, it could cause problems for government organisations with smaller-value debts - e.g. some Local Authorities - if their debts were never prioritised, resulting in a loss of revenue for them.
• Application of Debt Treatment Strategies: the creation of a ‘single customer view’ of debtors would provide the opportunity to revamp current debt collection processes, finding the balance between ‘collecting debts in the name of fairness for the taxpayer (and as a deterrent to non-payment), while also recognising the vulnerability of some of our poorest individuals and families’ ⁴. This would require the various debt collection strategies currently used by Central and Local Government to be brought together into a range of focussed and proportionate ones based on ‘Fairness Principles’ (further developing those adopted in the Code of Practice to the Digital Economy Act 2017).

As suggested in the CSJ report, litigation would remain an acceptable option where it was proportionate and appropriate in the circumstances, e.g. if the debtor defaulted on a payment plan or for repeat ‘offenders’. However, the automatic referral to enforcement agents (or ‘bailiffs’), and the process of adding costs to the debts of those already struggling to pay them - pushing them deeper into debt - would be reduced.

Allocation of Debt Payments Made: the CSJ report recommends that ‘The Cabinet Office DMF should then broker an agreement between all departments involved to establish a sustainable repayment plan given the debtor’s circumstances’. This begs the question of how partial payments of a debtor’s total debt are split between the various government organisations that ‘own’ them.

This is a highly-complex issue and, if handled badly, could leave some government organisations with significant amounts of unpaid debt. However, there are a number of existing models that set a precedent for establishing a fair and sustainable Debt Management Plans - such as those operated by the debt charities like StepChange - that could be used as the starting point for use with a ‘single customer view’ of debtors.

What next?

It is six years since the Committee of Public Accounts first called for the development of ’a single view of what each debtor owes to government’. However, with the COVID-19 crisis having a significant detrimental effect on both the public finances and those of citizens, the need for fairer, more effective debt collection has never been greater.

As I have highlighted, there are a number of questions that need to be addressed regarding exactly how a ‘single customer view’ of debtors would operate across government, but there are clearly major benefits to be gained from doing so. However, in order to justify the time and costs necessary to develop, implement and operate such a ‘view’ it is first necessary to run a ‘pilot’ exercise to establish the extent to which citizens have multiple debts across government, and then to evaluate the impact on both debtors and on revenue collection. This would require the buy-in from a number of central (and local) government organisations.

If such a pilot proved successful, and outcomes for government and for citizens were measurably improved, then a wider implementation across government could follow.

Sources:

1. HM Treasury - Whole of Government Accounts: year ended 31 March 2018
2. House of Commons Committee of Public Accounts - Managing debt owed to central government - July 2014
3. National Audit Office - Tackling Problem Debt - September 2018
4. Centre for Social Justice -  Collecting Dust - A path forward for government debt collection - April 2020