Using behavioural insights to collect council tax collection – Medway Council

In 2015, the Behavioural Insights Team (BIT) worked with Medway Council to increase council tax collection rates. The project tested the effectiveness of altering the first reminder letter sent to households who failed to pay their Council Tax bill; comparing two new, behaviourally-informed letters to the existing letter. Both new letters significantly increased repayment.

Efficiency and income generation

The challenge

Approximately 96% of Medway households pay their council tax. However, this is only achieved because the council puts in place a lengthy and resource intensive collection process. Therefore, low-cost interventions that increase repayment rates early in the process are doubly beneficial; they bring revenue forward and they also save the council money on costly and time-consuming collection and enforcement activities.

The solution

We used a randomised controlled trial to test two new, behaviourally-informed first reminder letters against the existing letter. Our two new letters were:

  • Social norm letter – This was a simplified, action focused letter which included the social norm line ‘96% of Medway Council Tax is paid on time. You are currently in the very small minority of people who have not paid us yet.’
  • Diagram letter – This was a simplified, action focused letter which included a flow-diagram summarizing the collection process. The diagram also highlighted where the household currently was in the process, and the subsequent costs they would face if they did not pay (if households do not pay at this stage in the process, they lose their right to pay by instalments and have to immediately pay their full bill for the year).

The impact

Both behaviourally-informed first reminders increased payment rates compared to the existing letter (the ‘control’). The social norm letter increased payments by 19% and the diagram letter increased payments by 13%.

Households receiving the revised letters also paid more of their arrears (£70-90) than those receiving the standard letter.

The letter did not increase the proportion of households paying by Direct Debit.

If rolled out, we estimate that the social norm letter would bring forward about £2.7m per year to Medway council.

How is the new approach being sustained?

Medway Council has used these approaches in its Council Tax reminder letters and continues to try new approaches to maximize payment rates.

Lessons learned

Telling people what their peers are doing by using social norms can be a powerful approach, especially when compliance is already high. This corresponds with BIT’s previous findings on the impact of using social norms messages in tax and revenue collection letters.

It is important to be clear about the main focus of your project. BIT has found that it is difficult to increase both payment rates and Direct Debit sign-ups in council tax collection. We believe this is because many readers immediately focus on the single most salient message in the letter.

Contacts

BI: Tim.Pearse@bi.team

Medway Council: patrick.knight@medway.gov.uk