17.01.17
NAO: Risks of outsourcing HMRC tax credits ‘outweighed the benefits’
HM Revenue & Customs (HMRC) will not use another third-party provider to review and correct tax credit payments after its disastrous contract with Concentrix, a new report has said.
The National Audit Office’s (NAO’s) report into the failed contract revealed HMRC’s decision that the potential risk to customer service of using a third-party provider again “outweighed the benefits” offered.
HMRC signed a three-year contract with Concentrix in 2014 to provide additional capacity to review and correct personal tax credit payments, while HMRC continued to manage awards.
However, the pair agreed to terminate their contract in November last year due to Concentrix’s poor performance after complaints that claimants’ credit awards were incorrectly suspended or terminated.
“The chief executive and permanent secretary for HMRC highlighted that HMRC has learned five lessons from its contract with Concentrix,” concluded the report by Sir Amyas Morse, the comptroller and auditor general.
“These are: a need to prioritise claimants in delivering a public service; more thorough assurance about contingency planning; the speed of escalating issues to decision-makers who can resolve them; whether third parties can understand the subtleties of delivering a public service; and whether a contract with financial incentives for reducing error and fraud is the right mechanism to ensure good customer service.”
HMRC estimated in November 2013 that Concentrix would allow it to investigate a further 1.5 million tax credit awards a year, saving £1bn throughout the course of the contract, the NAO said.
However, HMRC later reduced its expected savings to £405m which it said was due to a two-month delay in the contract start date and Concentrix working fewer cases than had been expected.
The NAO found that Concentrix “consistently failed” to achieve over half its performance targets between November 2014 and September 2015, with staff answering an average of 4.8% of calls within five minutes in July 2015 despite the company’s target being 90%.
Concentrix had been failing to process compliances cases in accordance with its plans, leading to more contracts being terminated than expected and meaning that “resourcing in call centres was not sufficient to meet the resulting increase in customer calls”, the NAO said.
In August 2016, Concentrix was unable to cope with the unexpectedly high volume of claimant calls in part due to IT failures, in one week receiving 48,000 calls of which 18,000 were left unanswered. This led to HMRC taking steps to mitigate the impact on customers, reallocating a weekly average of 670 staff to tackle the backlog before terminating the contract, the NAO said. HMRC has also paid £86,815 in compensation for complaints relating to how Concentrix handled cases.
Despite the furore, the NAO found that HMRC still made substantial savings from the contract, which delivered estimated savings of £193m against a payment of £32.5m to Concentrix. Concentrix reported making a £20.5m loss as a result of the contract breaking down.
The step-by-step account of the fiasco has been slammed by the Public and Commercial Services Union (PCS), which represents most Civil Service staff.
“The failures at every level of the Concentrix deal, from mail handling and customer service to a lack of staff and poor contract management, shows perfectly why our public services should not be farmed out for profit,” said the PCS general secretary Mark Serwotka.
“All our warnings about privatising this work were ignored by HMRC senior managers who had fanciful ideas about the savings that could be made after having their budget slashed by the government.”
In November last year the Public Accounts Committee (PAC) said that HMRC and the Department of Work and Pensions (DWP) need to crack down on tackling benefit fraud and error following the collapse of the Concentrix contract.
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