Concentrix were contracted by HM Revenue and Customs (HMRC) in May 2014 to provide additional capacity and expertise to check for possible fraud and error in tax credit claims and, if appropriate, reduce or suspend those benefits. This was the first time a private company had been delegated such a degree of decision making responsibility for UK benefit claims. In September 2016 HMRC announced they would not be renewing the contract, took much of the work in house and extended their MPs’ hotline. HMRC have since processed the majority of appeals against Concentrix decisions. In November 2016 they announced the existing contract had been terminated. We commend that decision.
Vulnerable people lost benefits to which they were entitled through no fault of their own. Some have been put through traumatic experiences as a consequence of avoidable failures.
HMRC gave Concentrix 1.5 million tax credit claims in an April-August 2016 review cycle known as High Risk Renewal (HRR16). Under the terms of that work, Concentrix could write to claimants asking for information to demonstrate that they were entitled to tax credits. They wrote to 324,000 people. Those claimants had 30 days to provide information to prove their entitlement or lose their tax credits. We heard evidence of gross failings of customer service:
These were failings of Concentrix; but they were also failings of HMRC. HMRC approved Concentrix’s plans; took three weeks to escalate the problems to senior staff; and added to their contractor’s workload by sending out 45,000 additional termination letters.
Tax credit claimants seeking to ensure continued eligibility for tax credits were faced with a decision making system stacked against them:
HMRC were not only complicit in the decision making process used by Concentrix: they pressured their failing contractor to subject yet more claimants to it.
The flaws in decision making are evidenced by the fact that more than 90 per cent of initial appeals, known as Mandatory Reconsiderations, against Concentrix decisions in HRR16 have been upheld. These are extraordinary figures for any appeals process, let alone one that left people in hardship as their benefits were stopped in the meantime. Yet those rates were accepted by both Concentrix and HMRC as a routine feature of the system. Many claimants may have not, for a range of reasons, submitted an appeal. We recommend that all Concentrix decisions in HRR16 to stop tax credits that have not been appealed are reviewed by HMRC.
The loss of tax credits could leave claimants in financial difficulty. We see no justification for tax credit refunds being given in instalments and recommend that all be made in a lump sum. We are deeply concerned that claimants may have further lost out by tax credit refunds taking them above income thresholds for other means tested benefits. We call on the Government to ensure that no households have received less in total benefits than they were entitled to as a result of a decision by Concentrix.
Despite protestations to the contrary, HMRC were negotiating a new contract with Concentrix until just four days before they announced their decision not to renew. At this stage they were well aware of their contractor’s failings. They only pulled the plug under public, parliamentary and media pressure.
We have grave concerns about the delegation of benefit decision making to private companies. This is especially true when payment structures incentivise the removal of benefits. We welcome HMRC’s commitment not to use private contractors to make benefit decisions in future. DWP should consider carefully the experience of Concentrix before they contemplate letting any similar contract.
HMRC monitored Concentrix decision making on narrow technical grounds. On those terms they were satisfied their contractor was doing a good job. It is right and proper that they sought to ensure benefits were paid only to those who were entitled, but while HMRC had a responsibility to ensure their contractor acted fairly and properly, their overriding priority was the maximisation of expenditure savings. HMRC and Concentrix described cuts to a single parent’s benefits as a “strike”. We struggle to marry that with a public service ethos.
HMRC continue to use the same flawed decision making processes that were used by Concentrix. Further delays to the rollout of Universal Credit means HMRC will be administering tax credits for at least six more years. We recommend the Government commission an independent root and branch review of tax credit compliance processes to report before any further HRR cycles are undertaken. This should incorporate decision making and appeals, appropriate evidential burdens and timescales, and the effects on claimants.
This was a sorry episode for the welfare state. It is imperative that it is not allowed to happen again.
30 November 2016