Examination of Witnesses (Question Numbers
20-39)
DEPARTMENT FOR
WORK AND
PENSIONS
Q20 Mr Burstow: Thank you very much,
Chairman. I just wanted to do two things. Firstly, I wanted to
follow up on one of the questions that Mr Griffiths asked and
then go on to some questions about understanding your customers
and whether they are able to afford to pay back. The question
that I just wanted to follow up on in respect of Mr Griffith's
questions was about benchmarking. You acknowledged that you do
not really have much in the way of benchmarking at the moment,
and that is fine, but the thing that struck me was there is benchmarking
with the private sector. Have you sought to benchmark with other
public sector organisations in other countries where they are
operating benefits systems?
Sir Leigh Lewis: Yes, we have
made some attempts but I think it is fair to say without huge
success because otherwise I would mislead the Committee. We have
made various attempts to benchmark our debt recovery. We have
discussed this with our New Zealand, Irish, Australian and Canadian
counterparts, but we have not in a sense been able to get an awful
lot of real value because systems are so different. I think it
is probably fair to say—and I hope I am not doing a disservice
to colleagues from other countries—that in a sense they
seem to be more in listening mode rather than having a lot to
put forward themselves. We have also looked at other major organisations
ourselves in the public sector so we are working much more closely
than ever before with HMRC. We also commissioned a consultancy,
ATOS, in 2007 to benchmark our processes at a high level against
utility companies and some finance organisations, mainly insurance
companies, and they did make us a set of recommendations in April
2008, but they were actually largely based on doing things that
we were already in train to do or had done, such as automating
our input and deduction processes and moving more to e-referrals
and so on. We have not given up on this. We want to undertake
some further benchmarking next year and I remain anxious to see
if we could do more to benchmark against major financial institutions
in the private sector. It is fair to say that we have not so far
found this as rich a vein as we might have hoped.
Q21 Mr Burstow: I wanted to close
that particular thread off. The Report talks about the risk the
Department has around the evidence it collects about debtors and
their ability to pay and the affordability of payment and the
judgments that are arrived at based often on not a sufficient
set of information. It says that on page 20, paragraph 3.12. Could
you say a bit about what information provided by customers on
financial commitments is specifically checked by the recovery
staff?
Sir Leigh Lewis: I might ask Carol
to answer that in slightly more detail.
Mrs Sheridan: We tend to have
our telephony agents speak to the customers and in the first instance
we will send out an income and expenditure form and ask them to
complete that which will give details of their outgoings and from
that we will have a conversation with the customer to see just
how much money they have that is disposable which we could probably
ask them to repay the overpayment from. That is if they are not
receiving benefit. If they are receiving benefit and we can make
automatic deductions we still go through a similar procedure because
in some cases the deductions of £9.75 a week may place the
people in difficulties and so again we will accept some non-standard
deductions if we think that is fair and proper.
Q22 Mr Burstow: Having done all that
what are the subsequent checks to satisfy yourselves that the
customer has supplied all the information they could and what
they have supplied is correct?
Mrs Sheridan: In the main we rely
on the experience of our negotiators in telephone calls and certainly
there are some obvious things around the standard cost of a television
licence, for example, if people say they pay more than that, but
in the main at the moment we do accept what people are telling
us in good faith. However, we have commissioned a review of the
whole income and expenditure activity and from that we will be
looking at what else we need to do to actually verify the information.
Q23 Mr Burstow: So at the moment
the system is very much reliant upon that human judgment and human
honesty to be successful at recovering these debts?
Mrs Sheridan: Yes it is and it
is based on the training that we give the negotiators in terms
of understanding income and expenditure.
Sir Leigh Lewis: It is worth adding
for a moment that I have listened into some of those calls on
visits to debt centres and I have been quite impressed. There
are lots of experienced staff in Carol Sheridan's area and I think
they are quite good at probing away not aggressively but probing
away quite hard to see whether the information they are being
given feels right.
Q24 Mr Burstow: And apart from monitoring
of that sort, which is obviously commendable and useful both for
training and other purposes, can you say what are the targets
you set around this to measure performance in terms of following
through a case as to whether or not what was said actually turned
out to be true? Are there any targets you have set?
Mrs Sheridan: Again at the moment
we do not. We accept information in good faith and we then negotiate
a deduction rate based on that. However, as a regular review of
those cases we will go back to the individuals some months down
the line and again review the information that they provide on
income and expenditure.
Q25 Mr Burstow: What has triggered
the review that you are now undertaking?
Mrs Sheridan: We have regular
scans that will go through our debtor base and we will set BFs
at times when the system will automatically present those cases
to us again for review.
Q26 Mr Burstow: Sorry, I meant you
referred to the fact that you were undertaking a review of the
process and I just wondered what triggered that decision to commission
that piece of work?
Mrs Sheridan: I think it was probably
the discussions that we had with the National Audit Office.
Q27 Mr Burstow: So it is the NAO
Report that has triggered that piece of work?
Mrs Sheridan: Yes.
Q28 Mr Burstow: What are you hoping
now to get out of that piece of work?
Mrs Sheridan: We are looking first
of all at what we should be looking at in terms of income and
expenditure. We are then looking at whether we need to subsequently
verify and whether that is cost-effective. We are also in contact
through HMRC with the private sector data reference agencies and
again we are starting to get information from them about what
sort of things we should be looking for in terms of income and
expenditure and whether that is the way to go or maybe we should
be looking at the credit reference data which might perhaps give
us a better picture of people's position in terms of the information
we have across the board of their income and expenditure so, rather
than dealing with the individual customer, looking through the
credit reference agencies at the things that they have in chain.
Sir Leigh Lewis: Can I add to
that because I hope you will find it helpful. As a result of the
Report—and it is as a result of the Report and the work
that we have done on the Report—I have set in hand a review
which certainly includes all of those elements that Carol Sheridan
has mentioned but it actually goes wider because I thought that
the review brought to a head a number of questions which I did
not think we had completely bottomed in the Department. John Codling
is overseeing that review for me. I am asking us to look at our
write-off policy. It feels not bad but are we really—this
is the Chairman's question—writing off the right debts and
not the wrong ones? How much are we using our private sector partners,
too much or too little, in a kind of way as the law of diminishing
returns? I think we could look at that. There were some slightly
wider questions as well that I have asked myself and they did
not all emerge from the Report but the consideration came from
the Report: for example, should we sell debt in some circumstances?
That is very typical in the private sector. At a certain point
a private sector organisation typically will sell its debt for
a proportion of its value to another organisation and it therefore
takes in a given amount of money and if that organisation can
recover more, they are doing well and they make a profit, or less,
well, that is their risk. We do not do that. Should we think of
doing that? One other one which I would quite like to look at
is should we in a sense incentivise people, particularly those
who are off benefit, for paying their debt off in one go? I do
not think it is fanciful to say that you might offer somebody
a discount on their debt of some figure if they pay it all here
and now. I want us to think about some of those bigger questions
and I have asked John Codling to lead a review for me on some
of those questions.
Mr Burstow: We await with great interest
the outcome of that particular work. That is my questions over.
Chairman: Thank you, Mr Burstow. Ian
Davidson?
Q29 Mr Davidson: Am I right in thinking
that things are getting worse in as much as the stock of debt
is continuing to rise?
Sir Leigh Lewis: I do really think
that is looking at the half empty bottle.
Q30 Mr Davidson: Fine, I just wanted
to be clear that things are actually getting worse but there is
a way of looking at it that says it is not nearly as bad as that
and it depends really on whether or not you are buying or selling.
Sir Leigh Lewis: No, I am not
going to sit here quietly and just let that go past me. On every
objective test we are doing better. We are recovering more debt
for the taxpayer by a substantial margin at a reduced cost and
with greater efficiency than ever before. Although the debt stock
is really important, and I absolutely understand the underlying
point that you are making, one of the reasons why that debt stock
is going up is precisely because we are doing better at identifying
and referring for recovery debt that previously went completely
unidentified in the Department.
Q31 Mr Davidson: Right, so things
are getting better because the stock of debt is rising because
you are no longer not identifying mistakes that previously went
unnoticed?
Sir Leigh Lewis: Yes, I think
that is basically fair. We do not believe and nor did the NAO
when they came to look at that that we were systematically within
our delivery businesses identifying all the potential debts that
were out there. Some were undoubtedly being missed. We are now
identifying a far higher proportion of all of those debts.
Q32 Mr Davidson: So things are even
worse than the figures that we have in front of us because we
do not know how deep the bottomless pit of debt potentially is
because it has not all been identified?
Sir Leigh Lewis: I am afraid I
am going to take slight issue with that as well.
Q33 Mr Davidson: Is any of that untrue?
Sir Leigh Lewis: Yes I think so.
I do not think there is a bottomless pit.
Q34 Mr Davidson: How do you know
it is not bottomless?
Sir Leigh Lewis: Because we have
both our own auditors and the NAO's auditors who routinely as
part of their annual audit sample a number of cases, so out of
that sample you get a pretty robust—
Q35 Mr Davidson: Okay so how deep
then is the pit? How much debt is there out there which you believe
has not been identified and allocated to individuals?
Sir Leigh Lewis: Okay. We believe
the target that we are seeking to meet this current year—and
it is a target in a way set us by the NAO—is to identify
95% of all the debts there so that either recovery action is commenced
on those debts or, if they are below a certain figure, that we
write those off consciously. The number of referrals that we are
aiming to make this year will be far higher than we have ever
made before.
Q36 Mr Davidson: I understand the
good news elements of it. How much of the debt is actually being
pursued at the moment by payment plans in the sense if you say
there is a whole raft of debt that is in the process of being
cleared I am not aware of what percentage of the overall identified
debt that is. Can you clarify that at all?
Sir Leigh Lewis: I will give you
a headline figure and then I will ask Carol Sheridan who may have
more expert information to give you. Of all the debts that we
have in about two-thirds of the cases we recovered some money
last year, if you see what I mean.
Q37 Mr Davidson: So unless people
fled or died two-thirds of the debt would be recovered because
you are in the process of recovering it?
Sir Leigh Lewis: No, not two-thirds
of the debt, I do not think that is right. In two-thirds of the
cases we are recovering some debt but that could be a very long
process to try and recover all of it.
Q38 Mr Davidson: I understand that
but in two-thirds of cases you are in the process of recovering
the entire debt unless circumstances change, people die or go
away and so on?
Sir Leigh Lewis: Yes, if you look
at the people who have been on Debt Management's books for at
least 12 months we think that between 60% and 65% of those customers
made at least some repayment in the last year of that debt on
the way to recovering it all.
Q39 Mr Davidson: Let us be clear
about this. Making some payment on the way is not quite the point
that I am trying to elucidate. What I am trying to clarify is
whether or not there are two-thirds or a half who are actually
on a process that will lead to repayment because under your categorisation
somebody making one payment or one payment and then another payment
nine months later would count as being "on the road".
What I am seeking to clarify is were it not for the constraints
which have been placed on you for understandable reasons about
how much you can take off people at a time, how much of the debt
would be recovered in the natural order of things?
Sir Leigh Lewis: I will pass over
to Carol at this point. It is worth saying that for people on
benefit typically we are recovering a given amount every week
and for people off benefit unless they are willing to settle by
a single payment, which sometimes they are, our aim is to arrive
at an instalment plan. Carol?
Mrs Sheridan: If I may could I
send you a note on that because I have not got the exact figures
in front of me at the moment.[1]
1 Ev 13 Back
| 
