Tackling government’s problem debt

The National Audit Office (NAO) recently issued a report detailing the government’s struggles to understand and collect debt.

The extent of the problem
With 8.3M over-indebted people in the UK, and a total of £18Bn estimated personal debt owed to government, utilities, landlords and housing associations, this is an issue which cannot be ignored. Indeed, the NAO’s analysis states that current government debt collection practices, including intimidating actions and additional charges, are 15% – 29% more likely to make debts harder to manage and increase levels of anxiety and depression.

The issue only looks to be worsening too because 4 in 10 people in the UK cannot manage their money properly, and there are around 600,000 people who cannot get access to much needed debt advice.

However, tackling this problem may not be that straightforward, as the report also identified issues with government debt collection practices. For example, due to significant data issues it is not possible to gather a single customer view of an individual’s debt position; two of the largest four central government departments are not able to identify personal debt from overall debt data; and only 19% of local authorities use best practice promoted by Money Advice Service (MAS) in relation to affordability of repayments.

Learning from the private sector
The Treasury Select Committee concluded this year that the government “could make a significant difference to the burden of problem debt by bringing government debt collection practices into line with industry best practice.” To understand this best practice, we need look no further than the transformation that’s happened across the private sector in the last few years.

Since the Financial Conduct Authority (FCA) was launched, vast improvements have been made across retail banking and financial services, such as: debt collection targets based on cash collected have disappeared; most organisations have a view of the overall indebtedness of a customer both within its own organisation and externally (via bureau data); all organisations we deal with have embraced standard affordability measures that give focus to priority debts; signposting to money advice agencies is commonplace, and vulnerable customers now have a high profile focus.

Whilst the FCA still has work to do, it has been a force for good. Firms now take more time to speak to customers and work with them to set up affordable repayment plans, more money is being collected as a result of plans that have a much higher propensity to keep and instances of treating customers unfairly are reducing. For example, the proportion of typical credit card holders who say they were treated unfairly is at 21%, vs. 52% for bailiffs and 35% for local authorities.

Positive public sector initiatives
On paper, it looks as though some central and local government bodies are falling foul of practices that the FCA has already ruled out for private sector firms, and probably to their own detriment.

However, things are starting to improve as the NAO’s report identifies various initiatives including the Cabinet Office’s Digital Economy Act 2017 which allows specified public authorities to share data (pilots to be completed by 2020) and the Fairness Group which is a forum to examine governments debt management practices and make recommendations on how to improve them.

How can Arum help?
Arum has been transforming collections practices and capabilities in retail banking, financial services, utilities, telecommunications, and the public sector for 20 years.

Arum is currently working with central government and local council on a current state assessment (CSA), which involves performing a diagnostic of collections strategy and analytics, performance management, operational execution, organisation & culture, and technology.

The output of this process is a benchmark of the operation against best practice along with a roadmap for improvement, providing quick wins as well as medium to longer term strategic change. Arum’s experienced operational delivery team can also implement the recommendations.

Our clients have seen hundreds of millions of pounds in savings, bad debt charges improvement in a range of 7% - 12%, payments increase by c.16%, and efficiencies increase c.18%. – 27%.

About Arum
Arum is the only truly independent company offering services across the credit management lifecycle.


We have over 20 years’ experience helping our clients achieve their strategic objectives by improving their regulatory, credit risk and portfolio performance, whilst maximising returns on their technology investments. We provide a blend of professional services, consulting and unrivalled knowledge of the collections & recoveries software landscape, including benchmarking analysis across 30+ system vendors.


Our team includes highly experienced operational and program directors, project delivery leads and implementation experts, the majority of whom started their careers within the financial services sector working for major banks and software houses, with a passion for sharing their knowledge and expertise.


Headquartered in the UK and with clients spanning more than 20 countries worldwide, we work across financial services, utility companies, telcos, public sector, and the debt purchase and recovery industries.