Contracts with bailiffs putting councils in a precarious position
‘Fees last’ is the practice whereby bailiffs tendering for local authority work effectively provide services free of charge, with an inevitable loading of fees onto the debtors after the debt has been recovered.
We can all understand the pressure on local authorities to reduce costs but there is no doubt in my mind that this type of arrangement falls outside the regulations. It’s a worrying trend which, in my view, has four unwelcome consequences.
- It opens local authorities up to legal challenges on contract awards
- It loads disproportionate costs onto debtors
- It mitigates against bailiffs who are tendering for work on the correct basis
- It encourages bailiffs to adopt a more aggressive stance towards debtors, which is strictly against government policy
As an industry we are looking forward to the introduction of a statutory fee structure as part of greater transparency, higher standards and a level playing field for bailiffs but local authorities have a part to play, too. According to Peter Howarth, managing director of SBV Ltd and managing consultant to the Society of Procurement Officers (SOPO) “the council reputation is at stake firstly in breaking the law but perhaps just as importantly from the bad publicity that may ensue from trying to collect debts in this way.
The extract from the Council Tax (Administration and Enforcement) regulations 1992 No. 613 Part IV Regulation 52 would appear to be quite clear on this issue, that ‘payments for services for the collection of debts should be discharged first’, to do otherwise would appear to be an illegal act.”
Does this leave any room for doubt? As regular participants in the Institute of Revenues Rating and Valuation programme we tend to be influenced by their stance. David Magor OBE, CEO of the IRRV, has taken a measured but clear position. He comments “This is really very straightforward – both enforcement agencies and local authorities need to read and observe the regulations with greater care to remain within the law and ensure that contracts are awarded in accordance with the appropriate provisions”.
In the public sector marketplace for bailiff services, however, there often appears to be scant respect for the regulations. In fact one major London authority has even signalled its intention to award a tender on the basis of shared fees with the bailiff, constituting what many will see as nothing more than a “kickback”. How will the public view the local authority that attempts to make profits out of debt collection?
Caroline Siarkiewicz is executive director of the Institute of Money Advisors (IMA) which represents many who work in Citizens Advice Bureau and other debt advice organisations. She is also an elected member of a major Midlands local authority. She says:
“The development of a fees last approach in awarding local authority bailiff contracts is a particularly worrying trend. The bailiff industry is under increasing pressure to adopt best practice and to operate a transparent service levying only reasonable costs and charges. Any squeeze of their fees from cash-strapped local authorities will do nothing to help embed best practice and fair charges; in fact it is more likely to have the opposite effect”.
What’s more, Alistair Townsend, revenues & benefits service delivery manager with Mouchel Government and Business Services, has said “many councils are contracting with their bailiffs to take fees last, ignoring the obvious breach of the regulations… this is bound to encourage more aggressive bailiff action”.
When our industry made the decision to merge its two industry associations (ESA and ACEA) into one (CIVEA) I had high hopes that we would, encouraged by the consultation process with the Ministry of Justice, be speaking and acting with a single voice. Now I am not so sure this is the case. I understand why bailiff companies feel compelled by circumstances to offer fees last as a means of winning tenders but it’s illegal and cannot be sustained. No service industry that is so heavily dependent on the number of man hours expended can possibly survive by pretending that it operates at no cost. The consultation document on our industry recently issued by the MoJ talks of “a fair, transparent and sustainable costs regime that provides adequate remuneration”. Meanwhile companies who proffer fees last solutions are either loss-leading or simply loading fees onto debtors. The first is unsustainable, the second is illegal.
To sum up, the practice of fees last puts councils in the precarious position of having their contracts challenged and potentially facing further action, while doing nothing to promote a transparent and competitive bailiff industry but unfairly loading debtors with unwarranted fees.
I only hope that local authorities will take the initiative and outlaw the practice before someone takes action against them.
Colin Naylor, co-chairman of the Civil Enforcement Association and managing director of Dukes Bailiffs