Tuesday 17 January 2017 6:01 am

National Audit Office: Concentrix £1bn tax credit outsourcing delivered savings of less than a fifth than was expected

A catalogue of errors in relation to outsourcing tax credits has been laid bare in a damning report by the public spending watchdog.

Highlighting a series of shortcomings, the National Audit Office (NAO) today released its findings into HM Revenue & Customs’ (HMRC) controversial outsourcing arrangement with Concentrix.

HMRC estimated £1bn of savings could be made by outsourcing work to crackdown on personal tax credit payments as part of a three year contract awarded to Concentrix in May 2014.

But having terminated the contract early in November last year, the NAO revealed savings made were less than a fifth of expectations – totalling just £193m.

Concentrix limped away with £32.5m of fees, compared with the estimated £55m-£75m it had previously expected to book. This led to the firm shouldering a £21m loss from the contract that saw reports of “suicidal calls” and a backlog of 181,000 cases in September last year.

A Concentrix spokesperson said:

This was a hugely complex contract and programme, and as the report highlights, a number of issues emerged at the outset which laid the foundations for the challenges experienced throughout, particularly last year.

We look forward to discussing the report with the Public Accounts Committee in order to ensure all lessons can be learned.

On 25 January, representatives from HMRC and Concentrix will be hauled in front of MPs from the public accounts committee to answer questions on the contract.

Payment-by-results

Today’s report highlighted that HMRC previously told the committee “there was a question about whether a payment-by-results contract was the right mechanism for this public service”.

Whitehall sources indicated this could have wider reaching consequences for future government contracts.

MPs may also focus on why, when Concentrix was failing to meet over half of the its performance targets, HMRC approved a near threefold increase to the commission paid to Concentrix – from 3.9 to 11 per cent.

Another finding from the NAO's 72-page report was that upon terminating the contract with Concentrix, HMRC planned to give the firm just 15 minutes of notice before publicly announcing its decision. This was only extended to 90 minutes so that Concentrix could inform the hundreds of staff working for the firm that its contract had come to an end.

Following the contract termination, 243 staff were transferred from Concentrix to HMRC to continue work on tax credit error and fraud interventions.