Keeping revenue flowing through the pandemic with innovation and smart systems
5 mins read
Local council employees collecting revenue and debts have battled through a perfect storm of challenges in the past year - citizens’ inability to pay due to redundancies, furloughs, ill health, business closures - and they’ve emerged bruised yet optimistic about keeping the revenue base on track.
Managers have high praise for their teams, who they feel have performed heroics in adapting to a constantly changing environment, new technology, policy amendments and changes in the course of the coronavirus pandemic that have disrupted how we live and work.
And yet significant challenges remain: the local council tax base has been slashed, and other effects will be felt when millions of people who have been on furlough during 2020 return to work in the coming months.
Experts who took part in a recent podcast hosted by Capita Revenue and Benefits Account Director Chris Berry explained how the pandemic has influenced and will continue to affect local government revenue.
Only the start
Simon Smith, Capita’s National Business Rates Manager, who took part in the discussion, believes that the pandemic - particularly the devastation it has caused in retail and hospitality businesses - will be a factor for years to come. “This is only the start,” was his message. “We probably have a good few years of challenges ahead.”
According to the Citizens Advice Bureau (CAB), about 4m households have accumulated £6bn in debt due to the pandemic, on top of those already struggling. Simon notes that, until the first lockdown, CAB data shows that there were about 2.8m council tax accounts in arrears. The Office for National Statistics records about 400,000 redundancies up to the end of November 2020, and HMRC data shows that approximately 4.7 million people were furloughed in January 2021.
However, it’s not just citizens’ ability to pay but also councils’ ability to collect that’s been affected. Traditional measures of collection are hamstrung, with court services and enforcement agents in limbo.
Simon says now is the time to take stock and look at strategy, as it’s been about adaptation and crisis management up to this point. Balancing the books, particularly in England, will become more complex, as some government relief falls away at the end of June.
“Hopefully, we’ll have more collection of arrears this year and in the next few [years], but we’re still a long way from coming out of the pandemic. We must start to look at how we’re going to collect and the cash-flow side,” he says.
Looking to the future, he says it’s vital to limit the number of people getting to the enforcement stage, to stop arrears accruing and work to accurately update information on people’s circumstances and ability to pay more quickly.
Martin Hinckley, Director of Revenues and Benefits at Westminster City Council, has been in the revenues collection business for 40 years and says London is “in crisis”, with many businesses closed, office blocks empty and a significantly reduced revenue collection base.
“Central London has seen a much greater effect than probably anywhere else. I walked down Oxford Street: it’s decimated. The council is doing a lot of things to try to resurrect that but, until we get back to some normality, it’s going to be difficult. We need to get people coming back to the city centre.”
While Westminster collects £2.4bn in a typical year, this year it will try to collect £1.4bn. Martin expressed concern about the Valuation Officer possibly amending the rateable values of properties after appeals by property owners, thus seriously affecting the collection of revenues. A significant reduction in the rateable values would “break” the Business Rates Retention Scheme, he says, which enables councils to keep hold of a large portion of the taxes that they collect from local businesses. In this scenario, some councils would have to get help from central government.
Chris Thomson, Head of Finance and Employee Services at Glasgow City Council, was asked about the future of revenues there. He says that it’s vital to get more information on what businesses can afford to pay: “We need to balance the need to generate income with the need to ensure those businesses are still viable and able to contribute.”
He says that, with the 100% council tax reduction scheme and pressures on revenues, the council hasn’t initiated meaningful recovery of non-domestic rates in the city this year. Some strategies to pursue could be longer instalments, and different instalment plans to get people back into the habit of paying.
Refining systems, developing automation and ensuring vibrant business communities will be critical in future.
Chris fears there will be a surge in applications for tax relief when the furlough scheme ends, and there are potential redundancies. “I think it’s inevitable. I just can’t see anything other than an upsurge.” And he believes that a lot of businesses that have had employees on furlough as they attempt to survive won’t re-open.
A particular challenge his team faces is having to collect payments for water and sewerage services. While there is relief for council tax, consumers must still pay for utility services. “This is difficult in the pandemic,” he says.
Keith Graddon, Head of Capita Product Strategy and Direction across Revenue and Benefits, was asked how the use of technology needs to change in the post-pandemic world and how software is used to support local authorities in meeting their operational challenges.
He says that council are still hesitant to adopt some technology: “It can be a bit big and scary on occasions, such as in the RPA [robotic process automation] and the use of unattended and attended robots for more repetitive, menial tasks.”
Capita is responding to requests from customers about how to simplify some aspects of the software, such as presenting information about council tax reduction schemes.
He discussed the immense pressure during the pandemic to get new grants and benefits paid and develop new systems at the same time. “There’s been so little time to develop new software. It’s been a case of ‘how can we get through this?’ In some cases, we haven’t been able to react as much as we’d wanted to, but conditions have been really awful, really challenging.”
Chris believes that council revenue employees have put in an incredible effort and more than risen to the challenge. “Honestly… I believe we’ve done brilliantly. We live in an environment that changes regularly. We have lots of challenges and must react to different economic situations and policy decisions. This has been the biggest challenge in my time — I think we’ve reacted brilliantly.”
He says that, like many others, they’ve had to move away from an entirely office-based environment, think on their feet and “react to every change that’s come”. He adds: “Collection of rates will not be where it was before, but, I tell you what, it’s nowhere near as bad as I thought it would be when this whole thing started.”
“Local government has been outstanding in relation to the pandemic,” adds Martin. “I use the analogy of a video game: every time you do it, you get to the next level. Each stage has got harder, but, at each stage, local government met the challenges.”
Podcast host Chris Berry likens the situation to fighting fires: “The fire is raging so hard that you can’t plan beyond what you can see.”
**The podcast is available here: The future of revenues in a post-Covid world
There will be further roundtable discussions held throughout the year. The next one, due in May, will cover the customer journey – how it has changed and how you need to do things differently now for your customer base.
To find out more about our services visit: Revenue and Benefits