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Outsourcing and Tax Credits

Volume 616: debated on Friday 4 November 2016

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the change in Government policy in relation to outsourcing and tax credits.

Not yet.

I can confirm that there has been no change in Government policy on outsourcing. I suspect that the hon. Member for Sheffield, Heeley (Louise Haigh) has asked this urgent question in the light of the recent concerns surrounding the Government’s outsourcing contract with Concentrix.

Her Majesty’s Revenue and Customs places the utmost importance on providing a quality service to its customers. As the Government have made clear, high standards were not met in recent months by Concentrix, the company HMRC had engaged to help us in the important work of tackling fraud and error in the tax credits system. Once this became clear, HMRC took steps to rectify the situation and deployed HMRC staff as quickly as possible. From that point, no new cases were passed to Concentrix, and HMRC took back 181,000 individual cases that were being managed by Concentrix. I can reassure the House that not only have all the 181,000 cases been finalised, but HMRC has now restored the expected quality levels of customer service to ensure people receive the tax credits to which they are entitled. HMRC continues to review outstanding cases in which a mandatory reconsideration has been requested, and it has taken steps regarding the future of the contract with Concentrix.

On 14 September, the Financial Secretary to the Treasury informed the House that HMRC would not be renewing the contract with Concentrix. Last week, she informed the House that HMRC is currently in discussions with Concentrix to agree a negotiated early exit to the contract. These commercial discussions continue. I want to be clear that HMRC will not go back to the market to seek another partner to replace Concentrix and provide additional capacity to challenge error and fraud in the tax credit system. There has, however, been no change in Government policy on outsourcing, which can be an appropriate way to deliver both quality public services and savings for the taxpayer. I assure the House that HMRC is committed to learning the lessons from the problems that have arisen over the past months, supported by the independent review of the National Audit Office.

Thank you, Mr Deputy Speaker, for granting this urgent question. I think we all agree that the continuing fallout from the debacle surrounding Concentrix will not be going away soon.

Last Thursday, the day after a debate in this House, the chief executive of HMRC announced to the Treasury Committee:

“We will not go back into the market for this kind of thing”.

He also said:

“We will not be going back to the market to seek a third party to help us in any way with this kind of thing”.

He was obviously referring to the outsourcing of tax credits. This announcement was unequivocal, and it represented a considerable shift for the Government and their policy on welfare. The implications of such an announcement for private sector involvement in our welfare state are profound.

The contract between Concentrix and HMRC has revealed the grotesque consequences of the profit model in our welfare state. The chief executive of HMRC now clearly agrees that the private sector has no place in the delivery of welfare. He is absolutely right, but it is still embedded deep within our social security system. The company Maximus is still operating a £500 million contract to deliver the work capability assessments for personal independence payments conducted by Atos that are causing deep distress for thousands. If having a trade-off between profit maximisation and the principles of our welfare system has been deemed inappropriate for those on tax credits, why is it considered appropriate in other sensitive areas of our welfare state?

By setting this precedent, is the Treasury not accepting that, when it comes to the sensitivities around welfare, the private sector is uniquely incapable of determining the best interests of individuals on welfare? If not, what were the principles underlining the unequivocal announcement that there would be no longer be any third party involvement? Will this extend to the operation of universal credit? If not, many will see these words as a cynical manoeuvre to raise the hopes of many who should never again have to deal with a company that has so singularly failed them in the delivery of welfare.

Furthermore, I seek clarity on something the Minister’s colleague said in a debate in this House last month. The Financial Secretary said of the way in which Departments do something, that

“there are circumstances in which the use of a private company offers a cost-effective way”.—[Official Report, 14 September 2016; Vol. 614, c. 910.]

Are we now right in thinking that, after this announcement, the Government do not believe that those circumstances extend to our social security system?

Finally, I want to press the Minister to release the key characteristics used by HMRC to profile the individuals whom Concentrix was then unleashed to target. Given the unprecedented distress that the targeting by key characteristics has caused and the commensurate levels of error that they evidently caused, it is very clearly in the public interest that they are now released. I would be very grateful if the Minister gave me a firm commitment this morning to provide me with that information.

I have had the pleasure of responding to debates on this in Westminster Hall and in this Chamber, and this is now the third occasion I have had such an opportunity to respond. There are clearly lessons to be learned. The Financial Secretary has made the Government’s position very clear: Concentrix will not be providing the service in the future. However, there is no change to Government policy on outsourcing, which can be an appropriate way to deliver both quality public services and, importantly, to make savings for the taxpayer. We will have to wait to see what the independent National Audit Office review shows, but I am sure we are all looking forward to it. As I have said, there are many lessons to be learned.

Our constituents expect the Government to spend taxes wisely and efficiently. Is it not entirely right that the Government should seek to minimise error and fraud? Is this not a case of the Government having taken some action, discovered that it has not worked in the way they sought and then taken effective action to deal with that?

That is a fair point. It is worth saying that most of these problems are errors—there is always, sadly, some fraud as well—but this is about getting the balance right between, on the one hand, the taxpayer and, on the other hand, making sure that people receive the service they rightly expect. We have cut fraud and error in benefits to some of the lowest levels ever, making savings to the taxpayer. As I have said, there are lessons to be learned and there is a balance to be struck.

I thank my hon. Friend the Member for Sheffield, Heeley (Louise Haigh) for securing this urgent question, and for her brilliant work in bringing this issue to light. Like her, I do not understand why it was not deemed appropriate for a Minister to come to the House to make a statement on a significant change in Government policy last week, not least because that happened the day after we had had a full Opposition day debate on Concentrix. Having listened to the Minister, I am not sure whether the policy has not actually changed again this morning. How can the Minister reconcile what he has just told the House with the statement last week that there would be no further outsourcing for such matters?

As my Front-Bench colleague, my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey), made clear in the debate last week, our party continues to stand by the victims of this terrible fiasco, the majority of whom were single mothers. There is clear human suffering at the centre of this chaotic debacle. These people did not deserve to face the hardship and stress they suffered. In order to move forward, we need confirmation that those unfairly targeted by Concentrix will at the very least be properly compensated, and that that will happen as soon as possible. The Government need to announce as a matter of urgency the timetable for a comprehensive investigation into the increasing number of systematic failures that continue to be brought to light.

As we are continuing to hear the details of these terrible cases from Members on both sides of the House, it would only be proper and decent for the Minister to issue a formal apology on behalf of his Government for the distress and hardship that they have caused. We are pleased that the Government have conceded to the Opposition that this was an unacceptable episode. Such contrition is welcome, but now the Government must proceed by putting right the wrong that has been caused, and they must properly report to Parliament on their progress towards doing so.

Compensation is available where error has occurred. That has been made very clear. The hon. Gentleman asks whether I am prepared to apologise; I think this is now the third time I have done so. If people have not received the high-level customer service to which they are entitled and if mistakes have been made, I do apologise. I also say, however, that this is a necessary part of government and there are lessons to be learned. We will all make better decisions as we go forward. We will have to wait for the independent NAO report. That has all been said before.

May I commend my hon. Friend for his balanced and reasoned responses today? The Opposition seem to think that everything done by the state works perfectly and that whenever it is outsourced it may go wrong. I think they forget that, over the years, HMRC has had quite a few internal problems of its own—failing to answer the telephone and the chaotic initial introduction of tax credits, for example. It is absolutely right to look to securing savings through outsourcing to the private sector throughout Government Departments where it is the right thing to do.

As ever, my hon. Friend makes a valuable point and worthwhile contribution. He is right that there have been mistakes and lessons to be learned over a large number of years in a number of different Departments. What is important is that we get the balance right, pay the money that people—often the most vulnerable in society—are owed, while at the same time protecting the taxpayer from unnecessary overpayment, error and fraud.

While Concentrix certainly has questions to answer, the model for indiscriminately targeting low-income families was devised by the Conservative Government and designed to place the burden of the failing austerity agenda firmly on the shoulders of the most disadvantaged in our society. As tax credits are to be overtaken by universal credit, there have already been reports on the delay of the roll-out of UC as well as on continued problems with the system. With private companies such as Atos, Maximus and Concentrix under the spotlight for their poor handling of contracts intended to support social security claimants, does the Minister agree that we must ensure that all future contracts are kept under close scrutiny by his Department, that they are fit for purpose and that they protect vulnerable people?

I agree that everything that the Government do should be kept under close scrutiny. It is worth saying again that HMRC has reduced error and fraud in the tax credit system, so that it remains on target and is at a near record low since tax credits were introduced in 2003—some 13 years ago. We are always well advised constantly to check and ensure that the service we deliver is appropriate.

Does the Minister agree with this recent statement about the Government’s position on this matter:

“We welcome this recognition from the government”?

That was said by the general secretary of the Public and Commercial Services Union.

My hon. Friend makes a valuable point. It is, I think, important to say that, particularly for vulnerable people, overpayments lead to debt. That is why it is important to make sure that we get the payments right and do not make mistakes. We must act in a fair, appropriate and customer-focused way.

My constituent Ashley Davenport was one of many who suffered for three months under this contract. She had two children, one of them a new-born, and she contacted me after she had not eaten in days. Concentrix is not the first abysmal private company that this Government have allowed to fail in delivering sensitive public-service contracts. Since 2010, billions have been spent on the outsourcing of privately run public services. Is it not time that lessons were learned right across the board when it comes to welfare and benefits in order to mitigate any further hardship such as what we have seen in this latest shambles?

I would say three things in response. First, if the hon. Lady feels that her constituent has been wrongly treated, she should write and apply for compensation. Secondly, it is worth saying that the savings to the taxpayer are probably in excess of £200 million —not a small sum. Thirdly, yes, there are lessons to be learned—[Interruption.] I shall have to say that even more often, because it obviously gets a reaction. As a Government, we would be foolish not to learn lessons and not to make sure that the service we provide is as good and appropriate as possible. [Interruption.] The hon. Lady says from a sedentary position that this is turning into a debate, Mr Deputy Speaker. She asks whether we are going to come back and report. We shall have to wait for the independent NAO report.

Does the Minister agree that there is a great deal of amnesia on the Opposition Benches? I well remember the misery caused to my constituents when 50% of all tax credits were paid incorrectly during the course of the last Labour Government. I welcome what my hon. Friend said about Concentrix. What financial penalties will the Government impose on Concentrix for the cock-ups it has made?

My hon. Friend is right to highlight amnesia. It is sometimes easy to forget how things were in the past and by how much things have improved today. There are penalties in the contract. Concentrix will be penalised for not doing the job that was intended. That is right and proper—not only for the people who have suffered through Concentrix’s mistakes, but for the taxpayer as well.

Some of my constituents have lost other moneys. They have gone into rent arrears and have bank charges to pay, for example. Will the Minister undertake to make sure that either Concentrix or HMRC compensates those people for their actual losses—caused, it must be remembered, when they were accused of having an undeclared partner who was dead or a previous tenant they had never known. This has nothing to do with my constituents and has everything to do with rank maladministration. I hope that the Minister will stand up today and confirm that these people will be compensated by Concentrix or HMRC.

The hon. Lady will be pleased to know that HMRC does run a compensation scheme. If her constituents—or her as their MP—would like to write, I am sure they will have some success.

Does my hon. Friend agree that the key objectives must be that the rules laid down by this House for the payment of tax credits or welfare benefits are followed accurately, and that fraudulent claims are identified and stopped? Does he further agree that these two key objectives are equally applicable whether the delivery is by the public sector or the private sector?

My hon. Friend is absolutely right. Those are two key objectives and it is important to get the balance right between them. Whoever delivers—whether it be the private sector or the public sector—must deliver what is most appropriate. We have been clear that in the case of Concentrix, it was not the most appropriate way to proceed. We must ensure that what is done is fair, reasonable and represents value for money.

I am sure it was inadvertent, but I do not think the Minister fully answered the point made by the hon. Member for Shipley (Philip Davies) when he asked what penalties Concentrix would suffer as a result of its failure. Is it not the case that, in fact, because the Government are ending the contract early, Concentrix are the ones that are going to be compensated? Will the Minister clear that up for us right now?

The contract is still under sensitive commercial negotiation. As for the exact penalties, the contract states clearly and transparently that penalties will be imposed for a failure to fulfil elements of it. I can tell the hon. Gentleman that HMRC will be seeking the best possible deal for taxpayers and, indeed, people who are entitled to these payments, and we fully expect to get the best possible deal.

The Minister is in a contrite mood this morning. I wonder whether he will extend the balm of that contrition to the PCS members working in HMRC who will have to clear this mess up. Will he tell the House whether there were any formal discussions with the PCS before the contract was awarded to Concentrix?

I am not aware whether there were or not, given that I am a Minister who is relatively new to the Treasury and given that I am dealing with a subject that is not in my portfolio, but I am sure that I can write to the hon. Gentleman clarifying the position.

I pay tribute to the hard-working staff in HMRC, who have helped to resolve what was a very difficult situation. HMRC took back 181,000 cases, and the staff have done a brilliant job, extending the helpline hours and specifically helping MPs. We should all be grateful for that.

It is no wonder that the Chancellor is not here today to respond to the urgent question. We have heard an announcement of no change in policy: in other words, “Do not adjust your mind, reality is at fault.” Apart from the structural weaknesses of this and so many other contracts, time and again we are seeing Ministers and Departments failing to monitor contracts, and failing to react and respond when those failures are pointed out. Once again, we are hearing the same lame old excuse: “Lessons will be learnt.” I ask the Minister, “When will they ever learn?” For a start, will Concentrix be barred from tendering for any future contracts with the Government?

The right hon. Gentleman speaks of a failure to respond; the Government responded very quickly, which is why we are in this position, having cleared up the mess that we found. He asks when we will learn our lessons; we have learnt lessons, which is why the Concentrix contract is coming to an end. We shall all have to wait for the independent report from the National Audit Office, and there will be further lessons to be learned, but the Government have taken this matter very seriously and have acted quickly, and I think that we have done reasonably well in the circumstances.

May I press the Minister once more on the financial issue? He talked about the HMRC compensation scheme. Will he tell us whether the payments under that scheme will be recovered from Concentrix?

What I can say is that the penalties referred to in the contract will be taken from the money paid to Concentrix and will go to HMRC, and that any compensation that is appropriate and due will come from HMRC.

I think we have got the message that the Minister wants lessons to be learned. Will he assure us that all that the minutes, recordings and transcripts relating to the process that led up to the tendering of the contract will be published?

I understand that the independent National Audit Office will be looking at all those and will report in due course—let us hope that it does so sooner rather than later—and we will learn lessons from that independent report.

On a point of order, Mr Deputy Speaker. In the age of emojis, is there any way in which Hansard will be able to report the look on the Minister’s face when he responded to the question asked by the hon. Member for Manchester, Withington (Jeff Smith)? It said it all.