Debt recovery: the high stakes challenge for local government

With rate capping, lack of citizen data and tight resources, councils need to think cleverly about how to reclaim unpaid funds

The introduction of rate capping in Victoria is going to have a pronounced effect on councils’ bottom lines and fundamentally change the role of local government in recovering debt, according to Chairman and head of Maddocks’ government group, Mark Henry.

The Andrews’ government won power in 2014 on a platform including limiting the amount which local governments could increase council rates — known as ‘rate capping’ or ‘rate pegging’.

The policy, which will come into effect for the 2016/17 financial year, puts the onus on councils to justify rate increases above the consumer price index (CPI) to the Essential Services Commission. According to a January report in The Age, CPI was at the time running at around 2.43%, while in the 2013/14 financial year council rates increased by an average of 4.23% to around $1725.

It’s not Victoria’s first foray into rate capping; in the mid-90s the Victorian Liberal government led by Jeff Kennett introduced the policy, while also significantly reducing the number of councils from 210 to 78. The cap was removed in 1999 by the incoming Labor Government led by Steve Bracks.

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