MPs condemn HMRC over use of US contractor to cut fraud

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HM Revenue and Customs has been castigated by MPs over the use of a US contractor to cut fraud in the tax credit system which saw tens of thousands of claimants wrongly stripped of their benefits.

The Commons Work and Pensions Committee described the performance of Concentrix as a "scandal" and said HMRC had been "complicit" in the firm's "gross failings" which left vulnerable claimants struggling to get by.

It said low income families were forced to take out expensive loans or fall into arrears with their rents, and called for all claimants who had their benefits reduced as a result of the firm's actions to have their cases reviewed.

In a statement, HMRC apologised to "all those who were let down by our contractor" and said it was committed to ensuring tax credits were paid "quickly and accurately".

However the committee said that "despite protestations to the contrary", HMRC had been negotiating a new contract with Concentrix until just four days before it dramatically pulled the plug on the firm amid a barrage of criticism from the press and MPs.

"The human consequences of the Concentrix scandal are all too real. Vulnerable people have been put through traumatic experiences as a consequence of avoidable failures," the committee said. "It is imperative that it is not allowed to happen again."

Concentrix was originally contracted by HMRC in 2014 to provide additional capacity in checking for fraud and error, with the power to cut or suspend tax credits where appropriate - the first time such a degree of decision-making had been handed to a private company.

Between April and August 2016 it was given 1.5 million claims to check in a review known as High Risk Renewal - or HRR16 - which led to 324,000 claimants being sent letters warning they had 30 days to prove their entitlement of face the loss of benefits.

In the chaos that followed, some claimants never received their letters and only learned they were being docked when they checked their bank accounts, while the systems used to check the evidence were described as "at best slow and at worst unreliable".

Phone banks set up by Concentrix to handle queries were understaffed and in August the system "completely collapsed" leaving claimants waiting for hours to speak to an adviser.

Despite growing evidence of the problems, the committee said it took HMRC three weeks to "escalate" the problem to senior staff while it continued to add to the firm's workload by sending out a further 45,000 termination letters.

"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 MPs said.

Right from the outset claimants found the system was "stacked against them" with the "merest hint" that a claim contained more than a "zero risk" of fraud or error being enough to trigger a compliance check.

Those who did not - or could not - reply were treated as guilty until proven innocent while the letters from Concentrix contained no details of the suspicions against them, making them "unnecessarily difficult" to disprove.

The flaws in the system were underlined by the fact that in 90% of cases where claimants made an initial appeal against a ruling it was upheld, a figure described as "extraordinary" by the committee.

It also expressed "grave concerns" at the way Concentrix was "incentivised" to claw back as much as it could for the Treasury with a cut to a claimant's benefits being described as a "strike".

"We struggle to marry that with a public service ethos," it said.

Committee chairman Frank Field said they had been "horrified" by the firm's "cut first, think later" approach.

"The damage caused to families' living standards by this 'strike rate' is still being felt by my constituents needing to rely on food banks while their claims are reinstated," he said.

In September, HMRC announced Concentrix's contract would not be renewed but Mr Field said that until just four days before they had been in negotiations on a new contract. The existing contract has since been terminated completely.

An HMRC spokesman said: "We apologise to all those who were let down by our contractor. We took swift and decisive action to end the contract early and took back all outstanding cases which are all now resolved.

"We have made it clear that tax credit error and fraud checks, which play a key role in making sure that people get what they are entitled to will in future remain in-house."

Public and Commercial Services union general secretary Mark Serwotka said the "utter failure" of the Concentrix contract showed private profit should have no place in the running of public services.

"The Concentrix scandal should not just spell the end of the privatisation of tax credits work in HMRC, it should be the final nail in the coffin for the hiving off of our welfare state," he said.

A Concentrix spokesman said: "We welcomed the opportunity to engage with the Work and Pensions Select Committee in its inquiry. This was a hugely complex contract and programme, and as the committee has highlighted, a number of challenges and issues emerged at the outset.

"We welcome any further investigations into the contract, including the National Audit Office investigation, to ensure all lessons can be learned."