When things go very wrong with decision-making by public bodies (and their private contractors)

Today we learned that the cases of 23,000 claimants who did not appeal a decision on their tax credits will have their cases reviewed (see here). These are decisions made by Concentrix, the private contractor hired by HMRC in May 2014 to help cut alleged fraud in the tax credit system. The contract with Concentrix was terminated late last year after the poor quality of its decisionmaking was exposed by the Work and Pensions Select Committee and others.

The Committee has been conducting an inquiry into the handling of tax credits by HMRC and Concentrix. Its report, published in November 2016, commended HMRC for terminating the Concentrix contract but noted that it did so only under pressure from the public, Parliament and the media.

In what was described as ‘a sorry episode for the welfare state’, the Committee’s report criticised both Concentrix’s decision-making and HMRC’s oversight. The report stated that ‘vulnerable people lost benefits to which they were entitled through no fault of their own. Some have been put through traumatic experiences as a consequence of avoidable failures.’ On the process of requesting a review of an unfavourable decision via Mandatory Reconsideration, the Committee stated: ‘Tax credit claimants seeking to ensure continued eligibility for tax credits were faced with a decision making system stacked against them.’

‘The flaws in decision making are evidenced by the fact that more than 90 per cent of initial appeals, known as Mandatory Reconsiderations, against Concentrix decisions in HRR16 [the review process called High Risk Renewals] have been upheld. These are extraordinary figures for any appeals process, let alone one that leaves people in hardship as their benefits were stopped in the meantime. Yet those rates were accepted by both Concentrix and HMRC as a routine feature of the system. Many claimants may have not, for a range of reasons, submitted an appeal. We recommend that all Concentrix decisions in HRR16 to stop tax credits that have not been appealed are reviewed by HMRC.’

The Government announced today that it has accepted the following recommendations of the Select Committee:

• HMRC has agreed to undertake a review of cases where Concentrix amended or terminated a benefit award but an appeal was not requested by the claimant. Of the 59,000 claimants whose benefits were stopped or cut by Concentrix, 36,000 requested an appeal called a ‘Mandatory Reconsideration’. 87% of those were upheld in favour of the claimant. The Committee was concerned that the complex and demanding Mandatory Reconsideration procedure, which HMRC and Concentrix accepted as “a routine feature of the process” was daunting for claimants and there was “no doubt” that some people who wrongly had their tax credit stopped had not appealed. HMRC plans to complete this new commitment by March 2017.

• The Government has agreed to publicise better the availability of hardship payments. It acknowledged that there has been “an absence” of such guidance on gov.uk and will publish new content in February 2017.

• HMRC has committed to detailing the reasons it suspects fraud and error in letters to claimants.  One of the Committee’s main concerns was that  Concentrix did not inform tax credit claimants of the nature of suspicions against them, with claimants left not knowing what they had to prove or disprove, or how. For example, claimants tasked with proving they were single were not told the identity of the person with whom they were suspected of cohabiting. In some cases the person was a former landlord or a dead relative  – potentially easily resolved.

• HMRC has agreed to extend any future deadline for the submission of supporting information by claimants to be extended if telephone handling performance again falls below acceptable levels. It has also begun work on enabling claimants to supply information electronically. The Committee found that claimants were “unfairly disadvantaged by the failure of the telephone system”. One single mother told the Committee she had spent 19 hours and 57 minutes on the phone trying to resolve her tax credit problems.

• HMRC is taking independent advice on the next annual tax credit renewal process and will write the Committee in March 2017 with its proposals for improvements before proceeding. It intended to “shift the focus of compliance activity to a greater emphasis on education and preventing error and fraud at the point of entry to the system”. A longstanding criticism of HMRC’s approach to fraud and error is its focus on detection rather than prevention, with the consequent costs and hardship to claimants this causes.

In its report, the Committee expressed ‘grave’ concerns about ‘the delegation of benefit decision making to private companies. This is especially true when payment structures incentivise the removal of benefits’. HMRC has said it will not be entering into external contracts for this work in future.

Even before the Committee reported on its inquiry, alarms were being raised about the work of Concentrix and, more generally, the process of departmental Mandatory Reconsideration and the privatisation of administrative justice. For example, the report of the Social Security Advisory Committee (SSAC) from July 2016 here highlights the difficulties that tax credit claimants face when challenging a decision. It points out that the Concentrix contract was based on a ‘payments by results’ model, and also notes a lack of transparency in that no published data was available on the processing times of Mandatory Reconsideration at HMRC, nor had HMRC published any data on the proportion of Concentrix reconsiderations that upheld the original decision or how this compares to HMRC’s own decisions. The SSAC also notes with concern that oversight bodies that would have had responsibility for scrutinising the appeals system, such as the AJTC and its successor body the Administrative Justice Forum, have been abolished.

Here at UKAJI, Robert Thomas’s and Joe Tomlinson’s post in September 2016 here highlighted the dangers of privatised administrative decision-making:

‘The profit motive and a payment-by-results approach may well undermine the principle of impartial and disinterested administration. In turn, this can undermine the acceptability of decisions. Privatised schemes of administrative justice are not necessarily illegitimate. Such schemes could operate to high standards of both justice and efficiency. But that has clearly not happened here.’

Thomas also obtained data, via an FOI request, on Mandatory Reconsideration and analysed these data on a post for UKAJI, here, following the Work and Pensions Committee report. He found that there did not appear to be evidence of a profit-motive bias in Concentrix decision-making, noting that although the incentive existed, ‘if this incentive had exerted any influence, then we would have expected to see more initial decisions upheld than overturned’. He also noted that only a small proportion of claimants sought a Mandatory Reconsideration of the initial decision.  What of those who didn’t? For this reason the decision to look into the 23,000 cases where claimants did not seek a review is very welcome.

The Hon Frank Field MP, Chair of the Work and Pensions Select Committee, said the Committee ‘welcomes the review of cases where claimants had their tax credits stopped but did not submit a formal appeal. For many claimants, particularly those who were unwell, lacked self-confidence or had caring responsibilities, the document-heavy process of challenging a wrong decision by Concentrix was surely prohibitively daunting. The real answer is of course to root out fraud and error at entry to the system rather than stopping benefits in payment as first resort.’