Councils told backing BACS could save £100m

Councils are currently making an estimated 74 million housing benefit payments and 25 million to suppliers each year through cheques and cash.

But BACS has estimated that on average, direct credit payments save £1 on the more traditional methods, implying a switch could save £99m year.

Some councils are using direct credit but the majority are being slow to take it up, due in part to a lack of understanding, adding to fears the government target of making all of its services online by 2005 may be becoming a noose around its own neck.

Adrian Stafford-Jones, managing director of Albany Software, said: ‘There are many benefits to be gained from electronic payments, however the slow uptake of this service by many local authorities echoes a common theme in the progress towards getting local government online and confirms that the 2005 e-government deadline is an unrealistic target.’

He added: ‘The harsh reality is fewer than a third of local authorities in Great Britain are even using direct credit for housing benefit payments Ñ let alone being anywhere near full e-business adoption.’

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