Boosting council tax repayments with behavioural nudges
How could we encourage customers to pay their council tax arrears and avoid legal action with a very low cost intervention?
Project brief
Council tax is a tax levied by local councils to each household in their borough. In Barking and Dagenham (B&D), a significant number of people fall into arrears with their council tax payments each year. That usually means councils chasing unpaid debts from customers and undertaking enforcement action if payments are not made. This incurs added expenses to both customers and the council.
The B&D council tax department wanted to increase their revenue collection and were in search of a low cost but effective way to encourage customers in arrears to make payments and avoid progressing to legal action.
Team: Service designer (me), council tax service manager, council tax customer service specialists, data scientist
Discovery process
I started by conducting workshops with council tax managers to understand the process of tax recovery and identify customer touchpoints. Two key touchpoints are the Reminder letters and Final Notice letters that are sent to customers that miss payments, giving them a fixed number of days to pay off their arrears. Once they pay, recovery action on their account is stopped. If they don't pay following the Final Notice, the customer is summoned to court and legal proceedings begin.
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Our hypothesis was that
if we used behavioural nudges in the Reminder and Final Notice letters
then customers were more likely to take prompt action about their arrears and avoid progressing to legal action
Design process
Using behavioural nudges is a simple and low-cost way to improve the effectiveness of communications. We drew on well-evidenced behavioural insights to design the new letters. We conducted an analysis of best practices, looking at trials done around the world to improve tax collection and learning from their findings. We identified some key strategies and design principles to base the design of the new letters on:
A note on user research
This project didn't follow the traditional user research approach where we speak to users to identify their needs and behaviours, and use those insights to design the product. Instead, we took an informed decision to follow a behavioural science approach where we design products and interventions quickly using well-evidenced behavioural nudges and conduct a trial to test them with users.
Old letters: issues and challenges
With the design principles and behavioural strategies in mind, we identified multiple issues with the old council tax letters.
Redesigned letters
We redesigned the letters to be much more clear and concise, with plain language and better information hierarchy. On the first page, we ensured the actions were highlighted clearly - by including a call to action in the subject of the letter and having a separate "how to pay" section that draws the eyes and emphasises the actions. We also included a QR code that takes users directly to the payment webpage, making the desired behaviour as easy as possible to execute. On the second page, we focused on various different support options. We included support for digital literacy, language barriers, and financial difficulty - signposting to webpages or physical spaces where users could seek out help and support.
Evaluation methodology
The new letters have been live since November 2023, with anyone that went into council tax arrears after that date receiving the new letters. Five months later, we evaluated the impact of the new letters in comparison to the old letters.
The key outcome measure was progression of the account to legal action by measuring what proportion of people that got a Reminder Letter or Final Notice Letter progressed to court summons.
We measured the impact using pre-post evaluation.
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Treatment group: December '23 to March '24 - (4 months)
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Control group: July '23 to October '23 - (4 months preceding the new letters)
Impact
We analysed the outcome of thousands of council tax letters sent between the time period of July '23 to March '24.
% of council tax accounts that progressed from Reminder and Final Notice letters to Court Summons:
Control group: 23%
Treatment group: 19%
That is a 17% drop in progression to Court Summons with the new letters.*
*I would like to caveat that this is not a perfect measure. The % decrease cannot completely be attributed to the letters and is likely to be influenced by seasonal bias/variation in the billing cycles as well.