Tax credit claimants will never again have to deal with a private company after Concentrix debacle, HMRC pledges

Work is being taken back in house for good

Chief executive of HMRC Jon Thompson said only back office functions would be contracted out

Tax credit claimants will never again be made to deal with a private company following the Concentrix debacle, the Government has pledged.

Concentrix was dropped as a contractor and its contract shortened by six months after reports of thousands of people on low incomes having their tax credits stopped for spurious reasons.

HMRC’s top civil servant on Thursday told the Treasury Select Committee that his department had “to accept responsibility for what’s happened”.

He went on to confirm that the work would be taken back in-house, as some MPs have demanded, and that HMRC would not seek to use private contractors to do similar jobs in the future.

“We will not be going back to the market for this kind of work. We will not be going back to the market to seek a third party to help us in any way with the tax credits system,” HMRC’s permanent secretary Jon Thompson told MPs on the committee.

Though Mr Thompson said some back office functions would continue to be contracted out, he said “front of house” would now be run by HMRC.

“There already is a vast array of work where we work with third parties, but not in what you might call front of house to my knowledge – in terms of directly interacting with customers. I think this is the only area,” he said.

Concentrix was charged with rooting out fraud and error in the tax credit system and sending letters to people who its systems showed could be wrongly being paid more than they were entitled to.

Thousands of claimants were however accused by the company of being in a relationship with their parents or living with a previous tenant in their home. They were asked to provide comprehensive proof to disprove the claims within a set deadline or have their tax credits stopped. The number of letters sent out numbered in the millions.

A telephone hotline set up for MPs and their staff to call HMRC to get help for distressed and affected constituents is said by HMRC to be dealing with hundreds of enquiries a day.

Concentrix says it was simply followings the conditions of its contract with HMRC and that HMRC provided it with faulty data and wildly optimistic targets.

Case studies raised by MPs in a debate last week include constituents forced to pawn their late parents’ jewellery to make ends meet, see food in their freezer spoiled after their electricity was cut off, or be forced spend their last £5 on submitting evidence to the company using expensive recorded delivery.

The tax credit system is being phased out to ultimately be replaced with Universal Credit, which integrates most benefits into a single centrally-administered payment.

Since that new benefits system will be run by the Department from Work and Pensions rather than HMRC, Mr Thompson could not commit to a similar policy applying to the new system.

Labour's Louise Haigh was among MPs who first championed the Concentrix failures in Parliament

Labour MP Louise Haigh, who long campaigned for HMRC to take action on Concentrix and for the system to be taken back in-house, told The Independent that the private sector had “no place” in the welfare system.

“It’s excellent news that HMRC have heeded our advice that there should be no further private sector involvement in the handling of tax credits. The private sector has no place in the delivery of our welfare system and I hope the rest of Government follows HMRC’s lead,” she said.

“It is grotesque that companies should be incentivised by profit to decide who should and shouldn’t be receiving welfare in their time of need.”