Concentrix — House of Commons, 2016-10-26
Topic: Macroeconomics
Richard Michael John Ogilvie Graham (Conservative, Centre-right): Today’s debate is primarily about the HMRC contractor, Concentrix, the delivery of its contract, its customer service and the impact of its work on those receiving tax credits who were wrongly suspected of fraud or error. The hon. Member for Stretford and Urmston (Kate Green) made some valid points about her constituents who have been affected, and other hon. Members have spoken equally movingly about some of theirs. The debate is about more than that, however. It is about the relative value, efficiency and service of third-party contracts as against the direct delivery of services by the Government or by Government agencies. It is also about how the Government—in this case, HMRC—reacted to the unexpected crisis when mandatory reconsideration appeals rose by 95% in August while the "success" in handling calls dropped off a cliff. It is about how quickly contingency plans were put in place, and what those plans were. It is also about whether the structure of the incentives and the contractor’s commission were appropriate for this type of public service delivery It is too early to offer definitive answers today, while the internal investigation is still going on. However, the inquiry by our Work and Pensions Committee and the measured comments from the Financial Secretary to the Treasury today offer some clues. To this, I add my own experience as an MP dealing with constituents who have been affected, and the observations that we made in the Select Committee The first point has to be that the goal of reducing HMRC’s estimates of fraud and error was the right goal for the Government to have. The 2014-15 estimates, which are the most recent ones, suggest a net £1.2 billion of fraud and error on tax credits, potentially involving 500,000 people. The Government cannot spend billions of pounds of taxpayers’ money on welfare without ensuring that it is spent properly, just as we expect the Department for International Development to ensure that its accounts are correct and its money is spent in the right way. We also expect the European Union to account correctly for the money it receives from its taxpayers, including our own The hon. Member for Paisley and Renfrewshire South (Mhairi Black) is absolutely right to say that rich people, and every company, should pay the right amount of tax. I would add that this is not a case of either/or. It is a case of both. The Government were absolutely right to increase HMRC’s resources for collecting the right amount of tax from those who have tax to pay and to ensure that the right amounts of welfare benefits are received by the right people. It is worth noting that the £270 million recovered through this programme will make a decent contribution to reducing fraud and we must ensure that it is made available to the people who need it most Secondly, there has been a cost during this process to our hard-working, not-well-off constituents. In each of the dozen or so cases that I or my office staff have replied to, there has been a degree of hardship and, in some cases, considerable hardship. HMRC’s response to such cases is therefore important. My sense, from our Select Committee inquiry, is that HMRC’s chief executive, Jon Thompson, is looking at how quickly HMRC has responded. It is true, however, that the moment HMRC took a grip, beefed up resources and put extra staff on to the MPs’ hotline, my office—and, I suspect, those of other MPs—was able to resolve these tax credits cases very fast. I am unsure whether all the cases were resolved within 48 hours, but all were done within three or four days, and some within a few hours. Indeed, the Work and Pensions Committee Chairman, the right hon. Member for Birkenhead (Frank Field), said that he could not "recall an experience where, thank goodness, the Executive, whether Government or delegated, has acted so quickly when they have seen a crisis." That should be on the record. It is credit to how HMRC responded. In the evidence we took from affected people, there was one particularly gracious "thank you" to HMRC for resolving one individual’s crisis so quickly. My third point relates to contracts to third parties and the incentive system within them. The National Audit Office recognised this as a complex area, and the jury is still out on how successful the system has been over the past few years. HMRC’s chief executive responded to my question on that with an interesting remark about "the balance of incentives on third parties in these kinds of contracts" which "is essentially based on commission earned." He asked: "Is that the right kind of incentive mechanism for this kind of public service delivery?" It is a valid question, and other Members have mentioned it. The HMRC chief executive reflected on it. I also have no doubt that the NAO investigation will discuss whether bringing this sort of contract in-house would ensure better quality control, more experience of handling citizens who are on tax credits, and possibly even a reduced cost. From the evidence to the Committee, it broadly looked like Concentrix will have been paid about £27 million by the time its contract comes to an end on £270 million of fraud or error identified, implying a 10% commission. That feels high, but the figures are probably hypothetical at this stage and will need to be confirmed in due course by the investigation In all of this, the Government, HMRC and Concentrix have been absolutely right to start with an apology to those who have suffered. When mistakes are made, it is important that they are recognised immediately. HMRC and Concentrix started the Select Committee sessions by making their apologies—the Minister has added hers on more than one occasion—and that was important. There is the issue of compensation for those most affected, and the fact that, as the amendment states, the Government should "ensure that those people"—people on tax credits— "are treated by HMRC in future with dignity and respect." That should happen all the time for everyone with whom the Government deal, particularly where monopolies such as HMRC exist. We all have a duty to treat our constituents with dignity and respect. That is what happens most of the time. My experience is that HMRC is helpful on every occasion with constituent issues In conclusion, today’s debate has been measured and the tone has been reflective and thoughtful across the House. Clearly, there are lessons to be learned. It is correct that tax collection is done, that welfare benefits are spent in the right way on the right people, that mistakes are responded to rapidly and that agencies such as HMRC should hold contingency plans. Poor service should be treated and amended as quickly as possible. I therefore welcome this opportunity to discuss some preliminary thoughts on the lessons that can be learned and I look forward to the NAO report in due course.