My Lords, with the leave of the House, I shall repeat as a Statement the response to an Urgent Question given in the other place by the Financial Secretary to the Treasury on the activities of Concentrix in relation to tax credit investigations. The Statement is as follows.
“Mr Speaker, the Government recognise the importance of tax credits to individuals and families who are struggling to make ends meet. But it is also important that this support reaches the people who really need it. That is why HMRC works hard to check that it is making the correct payments, and to tackle any fraudulent claims.
We must acknowledge that error and fraud does exist in the system and should be addressed to ensure that taxpayers’ money is spent correctly. As part of this work, HMRC engaged Synnex-Concentrix Ltd in 2014 to help to check people’s eligibility. As a result, almost £300 million worth of incorrect payments have been identified.
I want to reassure the House on two key points: first, Concentrix was paid only when making the right decisions—it would not receive payment for taking someone’s money away wrongly. Secondly, Concentrix was not allowed to engage in “fishing expeditions” or pick on vulnerable claimants at random. Where there was evidence to suggest that a claim might not be correct, Concentrix wrote to claimants to seek further information and confirm their eligibility.
I realise that it can be stressful for someone to receive such a letter but it is right that we investigate the full picture, with contributions from claimants themselves, to ensure that we make the right payments. That is why both Concentrix, and HMRC where it does the same work, always send a letter and give claimants 30 days to provide information before taking any further action. It is important that people do indeed respond, and that they get in touch if they are struggling to respond to any of the questions.
However, despite the best efforts of the staff manning the phones, with a high volume of calls in recent weeks, Concentrix has not been providing the high levels of customer service that the public expect and which are required in its contract. HMRC has therefore given notice that this contract will not be renewed beyond its end date in May 2017. HMRC is also no longer passing new cases to Concentrix, but instead is working with it as a matter of urgency to improve the service that it provides to claimants and resolve outstanding cases. I can confirm to the House that 150 HMRC staff have been redeployed with immediate effect to help it to resolve any issues that people are having with their claims as quickly as possible.
I realise that colleagues on all sides of the House are concerned to get difficult cases resolved and assist vulnerable constituents appropriately. In addition to the resources that I have already referred to, I have arranged a drop-in session for parliamentary colleagues in Room B1 in Parliament Street between 9.30 am and 11 am tomorrow, at which HMRC officials will be available to offer guidance to colleagues, should that be helpful.”
My Lords, the House will be grateful to hear that the contract is to be terminated, but it is quite clear that Concentrix will still be involved over the next seven months, despite its deplorable record. We should recognise just how badly affected those who are dependent on tax credits have been through the operations of this company.
Only yesterday, the House assented to the Finance Bill, in which cuts to corporation tax and capital gains tax which benefit relatively few were agreed, but today, we have this appalling story of ordinary people—there are 4 million and more people dependent on tax credits—vulnerable to the operation of an American company which provides a public service for profit and has made very many mistakes. We need to hear from the noble Lord about not just the patch-up over the next seven months but the future operation of tax credits.
I am grateful to the noble Lord for his comments. I begin by apologising to all those who have been distressed by an unacceptable level of service, to which the noble Lord referred. I know from my experience in another place how distressing it can be if families who are, by definition, on low incomes, suddenly find that a flow of income is stopped. Referring to the action now being taken, a priority is to deal with those cases where payments have been stopped. As I said, HMRC has now seconded another 150 staff to tackle the backlog of cases, to see whether we can get them up to date. As for the future, the contract will not be retendered. At the moment, the bulk of the work is being done by HMRC and, as from next May, it will do all the work. Looking ahead, over the next six or seven years, those on tax credits will move over to universal credit, and that system will incorporate the lessons we have learned running the procedures under tax credits.
My Lords, I listened to the discussion of this Urgent Question in the other place and it is evident that, month after month, Members from across the House have been bringing their complaints not just to Concentrix but to HMRC and Ministers and have essentially been ignored until the BBC got involved in the process. Does the Minister agree that this is a good indication that for tax credits and other complex issues, we need a review of whether outsourcing is appropriate? I refer him to the comments of the right honourable Member for Chingford and Wood Green, who has asked Questions about this. Also, where contracts are outsourced, not only must there be proper training and resourcing for HMRC or the department supposedly managing it, it must understand that active, not passive management is necessary.
I am grateful to the noble Baroness for her comment. As I said, this contract was outsourced in 2014, when there was a coalition, and I would not rule out all outsourcing by government departments as a matter of principle. As for this particular case, as I have just made clear, it will not be outsourced in future; the work will be taken in-house. As we develop the new process of migrating from tax credits to universal credit, we will learn the lessons that have become clear in this case.
My Lords, my noble friend will have reassured many of us, but, further to the point made by the noble Baroness, Lady Kramer, does he accept that some things should never be outsourced? I suggest to my noble friend that this is one of them.
As for HMRC, this is the only enforcement function that has been contracted out. There are other contracted-out arrangements—for example, for IT—but this is the only enforcement contract that has been outsourced and, as I said, it will not be outsourced when the contract expires next May.
My Lords, I, like others, am delighted that we are bringing a lot of this back in-house—quite rightly so. We have had the history of G4S, Atos and now Concentrix. First, HMRC must introduce the system that applies to other benefits used by DWP, which is that before a decision to cut benefits is implemented, it is reviewed by a mandatory decision-maker—a more senior officer within the Civil Service—to ensure that no basic errors have been made. Secondly, the main reason why errors occur—errors far outpace fraud—is because there are so many changes of circumstances. Half of lone parents have 12 changes of circumstances a year; the computer never catches up. UC is intended to overcome this—and I hope it will—by using real-time information. Will real-time information be built into tax credits, because, given the recent security review of UC, it looks as though migration may now not be complete until 2022?
The noble Baroness speaks on the subject with great experience, having had ministerial responsibility for this. I will take back the suggestions that she has made about the action that needs to be taken before we move to the enforcement regime. As I said, the system of universal credits has a different approach with every person having a personal adviser right at the beginning, which of course is not the case with tax credits. I think that I am right in saying that Atos had its contract before the 2010 Government came to power but I take on board what she said about the need to be sensitive. I understand that we are moving over to a real-time information basis which should help those on tax credits. HMRC will have up-to-date information from the employer in real time rather than waiting for the claimant to notify it five or six months later that their circumstances have improved, and then, perhaps even later than that, getting a letter saying that they now owe huge sums of money. It is very important that any new regime should avoid that problem.
My Lords, I thank the Minister for the tone with which he has approached this somewhat embarrassing Question. Is it not the case that outsourcing was entirely inappropriate in this context? The constitutional position surely is that the Inland Revenue acts as an organ of state for the collection of taxes and exercises its functions in a quasi-judicial way. This is utterly contrary to that basic principle. Not only is it a breach of principle but, in so far as performance is concerned, it has been blatantly incompetent. Apparently 6,000 people found that their tax credits had been cancelled unlawfully and that 64% of the claims made against Concentrix have succeeded.
I am grateful to the noble Lord for what he has just said. As for mandatory reconsiderations which are the appeals against the decision, the noble Lord is right that 67.97% end up in the customer’s favour and 32.03% in favour of HMRC. At the moment, the number of mandatory reconsiderations awaiting decision is 2,197. That is when benefit has been stopped and the claimant has asked for that decision to be reviewed. I understand the point the noble Lord makes about outsourcing. I am not sure that I would go quite as far as saying that it was totally inappropriate ab initio to outsource this to the private sector. I hope that what I said in response to the noble Lord, Lord Davies, that this contract is not being renewed gives him some assurance.
My Lords, I take this opportunity to congratulate my noble friend the Minister on his appointment. Does this whole sorry saga not point to the fact that working family tax credits were simply too complicated in the first place and why they are in need of such fundamental reform?
I am grateful to my noble friend for her welcome and I miss sitting next to her in this House. The WFTC is a complex system and in the Statement and response that my honourable friend gave in the other place, she referred to the complexity. As I said in response to an earlier question, all these cases will over a period of time—some six or seven years—be migrating to universal credits. We hope to learn from the complexity to which my noble friend referred in devising a better system than the one we have.
The Minister spoke of 150 staff being taken on to do this work. Will new staff be taken on or will existing HMRC staff be stretched still further?
The answer is the latter but I would not use precisely those words. I would say that HMRC may have to reorder its priorities to cope with this additional responsibility.