HM Revenue and Customs chief executive Jon Thompson has admitted to MPs that failings with an outsourced contract to scrutinise tax credit payments should guide the structuring of future awards.
Appearing before the Work and Pensions Select Committee to answer questions on his decision to axe HMRC’s contract with Concentrix, Thompson said the venture had “failed from a customer service perspective” – but insisted it had paid dividends to the Treasury.
The firm was given a three year payment-by-results contract with the tax authority in May 2014, and was tasked with identifying around two million tax credit cases that HMRC itself forecast would contain fraud or error. The session heard it identified £270m of wrong payments, for which it would be in line to be paid £27m.
However MPs also heard that problems began to emerge in August, when Concentrix became increasingly unable to deal with the volume of calls from tens of thousands of tax credit recipients, who had been told their payments were being suspended.
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Thompson told MPs the firm had started the month with more than 90% of calls being dealt with within the stipulated timeframe but had quickly plunged to a rate of fewer than 10%, a picture that had remained the case for the rest of the month and into September.
In mid-September, Thompson took the decision not to renew Concentrix’s contract when it came up for renewal in May next year, to stop referring new cases to the firm, and to draft in HMRC staff to help deal with the backlog.
Thompson told MPs he believed the firm had failed to properly match the number of call handlers it allocated to its HMRC work with a predictable level of demand.
“It’s perfectly reasonable for the government to question the eligibility of a benefit claimant for a benefit, and to seek as much evidence as possible to get the benefit calculation as correct as possible,” he said.
“But you need to also be able to interact with customers, so if I send you a letter saying ‘get in touch’ and you can’t get in touch, then the thing is going to spiral out of control.
“We haven’t had this conversation with [Concentrix senior vice president] Philip [Cassidy]. But on the face of it, the number of people who were planned to be on, and the number of people who were actually on didn’t quite work.”
Cassidy and Concentrix commercial manager Mark Oatridge told MPs that around 45,000 tax credit recipients had seen their tax credits stopped, and that more than 14,000 had demanded a mandatory reconsideration of the decision. Oatridge said the success rate of those who demanded a reconsideration was “typically” 90-95%.
Thompson said Concentrix’s inability to handle the calls it was receiving in an appropriate timescale had been completely unacceptable and was the root of the decision not to renew the firm’s contract.
He added that while the venture had clearly not been successful from a customer service perspective, it had achieved the kind of results it was set up to provide.
“They failed on the dimension of ‘did we put customers at the heart of this service in this period?’” he said.
“If you were the chancellor of the exchequer and you put in £27m and saved £270m, on that dimension you might regard this as having been rather a successful investment of £27m.”
Thompson said lessons to be learned from the debacle had to include a consideration of how to incentivise the private sector to deliver results without damaging customer service.
He said contracts such as the Concentrix one were “essentially based on commission earned”, and that the civil service had to ask whether that was “the right kind of incentive mechanism" for the delivery of such public services.
“Delivering public services is actually rather complicated: to what extent can private sector partners adapt in an agile way to delivering them?” he asked.
“In my experience, the best of the private sector actually can do public service delivery.”
HMRC director general for benefits and credits Nick Lodge told MPs that HMRC had taken the vast majority of Concentrix’s backlog of stopped cases back in house, as well as another 200,000 incomplete cases.
Lodge said he believed Concentrix had broadly 350-400 staff working on the HMRC contract, while the agency had “probably got 500-600 people” working on those cases now.