HM Revenue & Customs staff had to review more than 70,000 cases in which tax credit payments were stopped or altered following the failure of an outsourced fraud-and-error checking contract with Concentrix, it has emerged.
Official Treasury minutes of actions conducted in response to recommendations made by MPs on the Public Accounts Committee revealed that HMRC staff conducted around 42,000 mandatory case reviews and 31,000 voluntary ones after the contract was brought back in-house last year.
They said that completing the mandatory reviews and closing some 181,000 open cases that should have been dealt with by Concentrix had cost £30m in lost staff time, while the non-mandatory reviews – requested by MPs on the Work and Pensions Select Committee – effectively cost a further £8m.
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US-owned Concentrix was hired by HMRC in 2014 to conduct checks aimed at saving around £1bn by reducing fraud and error in tax credit payments through a payment-by-results contract.
Concentrix staff based in its Belfast office were tasked with investigating cases handed to them by HMRC because they were deemed likely to be either wrong or fraudulent. But their system went into meltdown in summer 2016 when the firm was unable to cope with the volume of calls from tens of thousands of benefit recipients whose payments had been stopped.
In September, HMRC announced that it was bringing the fraud and error-checking service back in-house because key performance measures were not being met.
Perm sec Jon Thompson subsequently conceded to MPs that payment-by-results may not be an acceptable basis for such contracts, but said Concentrix had identified £270m of wrong payments, for which it would be paid £27m.
The latest Treasury minutes said HMRC had now reviewed all cases where decisions made by Concentrix had resulted in payments being amended or stopped.
“This has included dealing with around 42,000 mandatory reconsideration requests,” the minutes said.
“The department also went further and reviewed around 31,000 additional cases where no mandatory reconsideration request was made, in line with the recommendation from the Work and Pensions Select Committee.
“As a result, the department is confident that payments have been reinstated in all these cases where entitlement has been confirmed.”
The document said HMRC and the Department for Work and Pensions had worked together to identify whether other benefits could have been affected by Concentrix’s actions – or by any subsequent remedial action by HMRC – and no such cases had been found.
“Where a claimant has demonstrated actual financial loss as a direct result of Concentrix’s actions, HMRC has paid redress,” the minutes said. They did not give a figure for the "redress" payments.
The minutes added: “The opportunity cost from the department’s staff completing Concentrix’s cases was £30m in foregone [average monthly earnings] savings. This included the closure of 181,000 open cases and the processing of mandatory reconsiderations.
“The subsequent review of 31,000 cases where no mandatory reconsideration request was made has resulted in an additional opportunity cost of £8m in foregone AME savings.”
In January, the Work and Pensions Select Committee suggested 87% of an initial 36,000 tax credit payments suspended by Concentrix had been reinstated when recipients had appealed the decision.
In the spring, MPs on the Public Accounts Committee said HMRC had lacked the capacity to make the Concentrix contract work, and that its collapse had been “entirely predictable”.
Committee chair Meg Hillier said HMRC had been “woefully ill-equipped” to design the contract and needed to demonstrate it had the capability to prevent “similarly dismal performance” in future contracts.
“Clearly it placed too little importance on customer service,” she said.
“But it was also driven by an inappropriate payment-by-results model, was renegotiated on terms less favourable to the taxpayer, and ultimately achieved less than a fifth of the savings expected.”
Concentrix told the PAC it had lost £20.5m on the contract.