HM Revenue & Customs had a bigger role in the failure of an outsourced contract to scrutinise tax credit claims than was previously acknowledged and should not run a new checks campaign ahead of an independent review, MPs have warned.
A Work and Pensions Select Committee report on the Concentrix debacle said that while the US firm’s ability to deal with phone calls from tens of thousands of people whose payments were stopped was part of the problem, the HMRC model it worked to was “flawed”.
MPs said the problems thrown up by the Concentrix debacle were “much more than a gross failure of customer service”, and warned the system used by the contractors was still in use at HMRC now the Concentrix work had been brought in-house.
HMRC "borrowing from Peter to pay Paul" with Concentrix redeployments – PCS
Concentrix row: HMRC chief Jon Thompson hints at early end to troubled tax credits contract
HMRC confirms early end to Concentrix tax credits contract
Concentrix was awarded a three-year payment-by-results contract to identify cases of fraud and error in tax credit payments. It started in May 2014 and initially targeted savings of £1bn, for which payment of up to £75m would be made.
The contract was terminated in last month, and MPs said the final figures showed the firm had identified more than 100,000 cases, which would save the Exchequer £193m, and for which the firm would be paid “approximately £32.5m”.
Despite the savings, tens of thousands of benefits claimants had their payments stopped over the summer for what MPs said was “no good reason”. The committee pointed to a 90% success rate for those claimants who chose to appeal benefit stoppages as underscoring the extent to which the process was flawed.
Work and Pensions Committee members said the government should commission an “independent root and branch review” of the process for compliance checks that would look at decision making and appeals, appropriate evidential burdens and timescales before any further high-risk review cycles began.
They added that the Department for Work and Pensions should also “consider carefully” the Concentrix “experience” before letting any similar contract.
HMRC "pressured their failing contractor"
HMRC chief executive Jon Thompson announced in September that Concentrix would not have its contract renewed in May 2017, following spiralling problems. The following month, he told the Work and Pensions Select Committee that while the contract had “failed from a customer service perspective”, it had paid dividends for HM Treasury.
The committee said HMRC had been in negotiations to renew the contract long after Concentrix’s inability to manage its calls workload had emerged, and only decided to cancel the contract following the bad publicity it was generating.
According to the report, HMRC was “not only complicit” in the decision-making process used by Concentrix, it “pressured their failing contractor to subject yet more claimants to it”.
“While HMRC had a responsibility to ensure their contractor acted fairly and properly, it is clear that their overriding priority was the maximisation of expenditure savings,” the report said.
Select committee chairman Frank Field said committee members had been “horrified” to learn of the “cut first, think later” approach that was deployed by Concentrix, and the apparent celebration of benefit-cut “strike rates” that left recipients reliant on food banks until payments were reinstated.
“While HMRC had a responsibility to ensure their contractor acted fairly and properly, it is clear that their overriding priority was the maximisation of expenditure savings" – Work and Pensions committee
“The damage caused to families’ living standards by this 'strike rate' is still being felt by my constituents,” he said.
“Although the committee welcomes HMRC’s decision to bring in house its tax credit compliance functions, we are clear that this will not automatically deliver a better service.
“Despite their protestations to the contrary and contrite performance before our committee, HMRC was negotiating renewal of Concentrix's contract until just four days before they announced otherwise and when they were well aware of the failings.
“They only pulled the plug under public, parliamentary and media pressure."
Public and Commercial Services union general secretary Mark Serwotka said the “utter failure” of the Concentrix contract showed why private profit should be separated from the delivery of public services.
“The Concentrix scandal should not just spell the end of the privatisation of tax credits work in HMRC, it should be the final nail in the coffin for the hiving off of our welfare state,” he said.
An HMRC spokeswoman said the organisation was "absolutely committed" to paying tax credits to everyone entitled to them quickly and accurately.
"We apologise to all those who were let down by our contractor," she said.
"We took swift and decisive action to end the contract early and took back all outstanding cases, which are all now resolved.
"If claimants are entitled to tax credits they are now back in payment. We have made it clear that tax credit error and fraud checks, which play a key role in making sure that people get what they are entitled to will in future remain in-house.”