Concentrix House of Commons Work and Pensions Committee - Fourth Report of Session 2016-17 - Parliament (publications)
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House of Commons
Work and Pensions Committee
Concentrix
Fourth Report of Session 2016–17
HC 720House of Commons
Work and Pensions Committee
Concentrix
Fourth Report of Session 2016–17
Report, together with formal minutes relating
to the report
Ordered by the House of Commons to be printed
28 November 2016
HC 720
Published on 1 December 2016
by authority of the House of CommonsWork and Pensions Committee The Work and Pensions Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Office of the Department for Work and Pensions and its associated public bodies. Current membership Rt Hon Frank Field MP (Labour, Birkenhead) (Chair) Heidi Allen MP (Conservative, South Cambridgeshire) Mhairi Black MP (Scottish National Party, Paisley and Renfrewshire South) Ms Karen Buck MP (Labour, Westminster North) James Cartlidge MP (Conservative, South Suffolk) Neil Coyle MP (Labour, Bermondsey and Old Southwark) John Glen MP (Conservative, Salisbury) Richard Graham MP (Conservative, Gloucester) Luke Hall MP (Conservative, Thornbury and Yate) Steve McCabe MP (Labour, Birmingham, Selly Oak) Craig Mackinlay MP (Conservative, South Thanet) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publication Committee reports are published on the publications page of the Committee’s website and in print by Order of the House. Evidence relating to this report is published on the inquiry page of the Committee’s website. Committee staff The current staff of the Committee are Adam Mellows-Facer (Clerk), Margaret McKinnon (Second Clerk), Ian Hart (Committee Specialist), Libby McEnhill (Committee Specialist), Rod McInnes (Committee Specialist), Alison Pickard (Senior Committee Assistant), and Jessica Bridges-Palmer (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Work and Pensions Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 8976; the Committee’s email address is workpencom@parliament.uk.
Concentrix 1
Contents
Summary3
1 HMRC’s contract with Concentrix 7
Background7
The claimant experience 9
2 Customer service failures 11
The HRR16 Campaign 11
Letters11
Receipt by claimants of initial letters from Concentrix 11
Receipt by Concentrix of responses from claimants 12
Fear of scamming 13
Information provided to claimants 14
Phone lines 16
Spiral of poor service 16
HMRC action 18
Modelling failure 20
Other contributory factors 23
Service levels and training 25
3 Decision making failures 27
Evidence of fraud or error 27
Selection of targets 27
Burden of proof 28
Proving a negative 29
Leeway to exercise judgement 30
HMRC pressure to increase number of targets 31
Mandatory reconsiderations 33
MRs and HRR16 33
Right first time and the hardship payment safety net 34
Concentrix decisions not subject to MR 35
4 Consequential effects of poor decisions 38
5 HMRC’s intention to renew the contract 39
Expectation of renewal 39
The announcement not to renew 416 Learning the lessons 42
Oversight of Concentrix 42
Monitoring underperformance 42
Transparency43
Ongoing decision making 44
Use of private contractors for benefit decision making 44
Decision making by HMRC 46
Conclusions and recommendations 49
Appendix 1: Sample letters 53
Undeclared partner 53
Work and hours 57
Appendix 2: Extracts from Concentrix documentation 62
Praise for Concentrix and interest in Parliament 62
Pressure to increase savings 68
Selection of cases 71
Extracts from papers to joint HMRC/Concentrix boards 72
Contract renewal 75
Formal Minutes 82
Witnesses83
Published written evidence 84
List of Reports from the Committee during the current Parliament 85Concentrix 3
Summary
Concentrix were contracted by HM Revenue and Customs (HMRC) in May 2014 to
provide additional capacity and expertise to check for possible fraud and error in
tax credit claims and, if appropriate, reduce or suspend those benefits. This was the
first time a private company had been delegated such a degree of decision making
responsibility for UK benefit claims. In September 2016 HMRC announced they
would not be renewing the contract, took much of the work in house and extended
their MPs’ hotline. HMRC have since processed the majority of appeals against
Concentrix decisions. In November 2016 they announced the existing contract had
been terminated. We commend that decision.
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.
Customer service failures
HMRC gave Concentrix 1.5 million tax credit claims in an April-August 2016 review
cycle known as High Risk Renewal (HRR16). Under the terms of that work, Concentrix
could write to claimants asking for information to demonstrate that they were entitled
to tax credits. They wrote to 324,000 people. Those claimants had 30 days to provide
information to prove their entitlement or lose their tax credits. We heard evidence of
gross failings of customer service:
• some letters were not received by claimants and the first some claimants
knew they had lost their benefits was when they checked their bank accounts;
• the systems used to process evidence provided by claimants were at best slow
and at worst unreliable; and
• Concentrix phone banks completely collapsed in August 2016 to the point
that some claimants called tens of times and waited hours to speak to advisers.
These were failings of Concentrix; but they were also failings of HMRC. HMRC
approved Concentrix’s plans; took three weeks to escalate the problems to senior staff;
and added to their contractor’s workload by sending out 45,000 additional termination
letters.
Decision making failures
Tax credit claimants seeking to ensure continued eligibility for tax credits were faced
with a decision making system stacked against them:
• the merest “hint” that a claim may contain more than “zero risk” of fraud or
error was enough to trigger a compliance check; and
• claimants who did not or could not reply were treated as guilty until proven
innocent but, in many cases involving single person claims, were not told the
basis of suspicions against them and were tasked with proving the negative
that they were not in a relationship with another person.4 Concentrix
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 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 have been upheld. These are extraordinary figures for any appeals process,
let alone one that left 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.
Consequential effects
The loss of tax credits could leave claimants in financial difficulty. We see no justification
for tax credit refunds being given in instalments and recommend that all be made in
a lump sum. We are deeply concerned that claimants may have further lost out by tax
credit refunds taking them above income thresholds for other means tested benefits.
We call on the Government to ensure that no households have received less in total
benefits than they were entitled to as a result of a decision by Concentrix.
Contract renewal
Despite protestations to the contrary, HMRC were negotiating a new contract with
Concentrix until just four days before they announced their decision not to renew. At
this stage they were well aware of their contractor’s failings. They only pulled the plug
under public, parliamentary and media pressure.
Lessons learned
We have grave concerns about the delegation of benefit decision making to private
companies. This is especially true when payment structures incentivise the removal
of benefits. We welcome HMRC’s commitment not to use private contractors to
make benefit decisions in future. DWP should consider carefully the experience of
Concentrix before they contemplate letting any similar contract.
HMRC monitored Concentrix decision making on narrow technical grounds. On
those terms they were satisfied their contractor was doing a good job. It is right and
proper that they sought to ensure benefits were paid only to those who were entitled, but
while HMRC had a responsibility to ensure their contractor acted fairly and properly,
their overriding priority was the maximisation of expenditure savings. HMRC and
Concentrix described cuts to a single parent’s benefits as a “strike”. We struggle to
marry that with a public service ethos.
HMRC continue to use the same flawed decision making processes that were used by
Concentrix. Further delays to the rollout of Universal Credit means HMRC will be
administering tax credits for at least six more years. We recommend the Government
commission an independent root and branch review of tax credit compliance processesConcentrix 5 to report before any further HRR cycles are undertaken. This should incorporate decision making and appeals, appropriate evidential burdens and timescales, and the effects on claimants. This was a sorry episode for the welfare state. It is imperative that it is not allowed to happen again.
Concentrix 7
1 HMRC’s contract with Concentrix
Background
1. In May 2014 HM Revenue and Customs (HMRC) awarded Synnex-Concentrix Ltd
(Concentrix) a three year contract to review possible fraud and error in claims for tax
credits by UK households. Specifically, Concentrix were tasked with assessing the validity
of three elements of declarations which could affect the support to which claimants were
entitled:
a) cohabiting partners;
b) work status and hours worked; and
c) childcare costs.
The contract was expected to save the Exchequer £1 billion over its course, for which
Concentrix would receive between £55 million and £75 million.1
2. HMRC had a poor track record of reducing fraud and error in tax credits.2 In July
2008, they announced a target of reducing losses due to fraud and error to no more than
5 per cent of the value of finalised entitlement by March 2011. In an attempt to meet that
target, they rapidly increased the number of compliance checks: they made 1,973,000 such
interventions in 2010–11, compared with 123,000 in 2008–09.3 Though the initial target
was missed, with losses estimated at 8.1 per cent of entitlement in 2010–11, the rate then fell
to below 5 per cent by 2013–14 (see Figure 1). The contract with Concentrix was intended
to give HMRC “additional capacity and capability” and “different analytical skills” to
reduce tax credit fraud and error.4 The contract with Concentrix stated that HMRC alone
was unlikely to make further progress on reducing fraud and error with existing resources
and to “drive down levels [ … ] further requires private sector collaboration.”5
1 NAO, HM Revenue & Customs 2014–15 Accounts, July 2015, para 5.16 and Contract between Concentrix and
HMRC, 6 May 2014
2 NAO, Understanding fraud and error in benefits and tax credits: a primer, July 2015 sets out the Government’s
definitions of fraud and error and how it is measured differently by DWP and HMRC.
3 NAO, Tackling tax credits error and fraud, HC 891 2012–13, 14 February 2013
4 Contract between Concentrix and HMRC, 6 May 2014 and Oral evidence taken before the Treasury Committee
on 27 October 2016, HC (2016–17) 795, Q6.
5 Contract between Concentrix and HMRC, 6 May 2014, para A2.58 Concentrix
Figure 1: Rates of fraud and error within the tax credits system 2003–04 to 2014–15
HMRC: estimated fraud and error in tax credits
Overpayments only; % of estimated entitlement
12%
10%
8%
6%
4%
2%
0%
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
3. Concentrix queried nearly 1 million tax credit claims over their contract, including
324,000 as part of the April-August 2016 review cycle. In total, Concentrix identified over
100,000 cases of tax credit fraud and error, saving the Exchequer around £193 million. For
this the company will be paid approximately £32.5 million.6
4. In September 2016 instances of poor quality Concentrix decision making and
customer service were widely reported.7 These reports were matched by a rapid increase in
the numbers of constituents contacting their MPs with concerns. We decided to conduct
a short inquiry. We are grateful to everyone who participated, especially the four people
who gave oral evidence to us after having their tax credits stopped.
5. On 13 September HMRC announced that they would not renew their contract with
Concentrix, that they would not send any new cases to the company (though Concentrix
would continue to work on their existing caseload) and that outstanding requests for initial
appeals, known as Mandatory Reconsiderations (MRs), of Concentrix decisions would
be handled in-house.8 Over the course of September HMRC announced that 450 staff
would be redeployed to work on HMRC phone lines and MRs of Concentrix cases.9 They
also added staff to, and extended the hours of, the tax credits hotline for MPs.10 HMRC
subsequently made strong progress in reducing the backlog of MRs in October and early
6 Letter from Jon Thompson to Frank Field, 11 November 2016. This compares with Mr Thompson’s earlier
estimate that Concentrix would be paid £27.5 million for £270 million of savings. See Qq99-101.
7 For a selection of press articles and Parliamentary Questions see House of Commons Library Debate Pack CDP
2016–0178, Performance of Concentrix in dealing with tax credit claimants, Steven Kennedy and Alex Adcock, 14
October 2016.
8 The MR is an initial process that precedes a formal appeal via an independent tribunal. It has been described as
a “second opinion” by a benefit decision-maker. See, for example, Citizens Advice, The cost of a second opinion,
July 2014.
9 Letter from Jon Thompson to Frank Field, 24 October 2016. Concentrix told us that the MR caseload
was transferred to HMRC on 19 September and HMRC started work on it on 5 October. See Concentrix
documentation, p335.
10 HC Deb 18 October 2016 Col 262WHConcentrix 9
November.11 On 27 October HMRC announced that they would not in future use third
party contractors to carry out tax credits work.12 On 11 November they announced the
termination of the Concentrix contract. 250 Concentrix staff who worked on tax credits
will become civil servants and transfer to HMRC.13 Figure 2 shows a timeline of HMRC
action.
Figure 2: HMRC actions regarding Concentrix since August 2016
Date Action
13 August Concentrix phone line performance dramatically reduced.
24 August Daily performance calls between HMRC and Concentrix instigated
owing to HMRC concerns about call-handling.
7 September Minister informed of performance concerns. 50 additional HMRC staff
deployed to work on MRs.
12 September Further 100 HMRC staff deployed to clear Concentrix MRs.
13 September HMRC announced they would not renew their contract with
Concentrix, that they would not send any new cases to the company
and that outstanding requests for appeals MRs of Concentrix decisions
would be handled in-house.
15 September First MP drop-in session held with HMRC officials.
21 September HMRC redeployed an additional 200 HMRC staff to HMRC phone lines.
30 September Further 100 HMRC staff allocated to MRs of Concentrix cases.
27 October HMRC announced that they will not again use a third-party contractor
to make tax credit decisions.
11 November HMRC announced the termination of their contract with Concentrix.
Source: Letters from Jon Thompson to Frank Field, 24 October 2016 and 11 November 2016
The claimant experience
6. The failures of Concentrix have been marked by some extraordinary stories. One
claimant was accused of cohabiting with RS McColl, a chain of newsagents; another
was told she was living with Joseph Rowntree, a philanthropist who died in 1925. These
farcical examples should not, however, mask the terrible consequences of the unwarranted
removal of benefits from families who relied on them. Marie Crowley, a single mother,
told us about her experience of coping without tax credits for six weeks:
It has been horrendous. I work, only part-time because of health, and so
my wages pay for my rent and my utilities and I rely on my tax credits each
week to feed my children and get them to school. My daughter was just
about to go to university. I didn’t have any money to fill her food cupboard
[ … ].14
11 By 10 November HMRC had processed approximately 28,000 of approximately 32,000 requests for MRs of
Concentrix decisions. Letter from Jon Thompson to Frank Field, 11 November 2016.
12 Oral evidence taken before the Treasury Committee on 27 October 2016, HC (2016–17) 795, Q48
13 Letter from Jon Thompson to Frank Field, 11 November 2016
14 Q1410 Concentrix She continued to explain the “humiliation” of “having to ask for money from family and friends, having to rely on food banks”.15 7. 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. This was the background against which we conducted our inquiry. 15 Q28
Concentrix 11
2 Customer service failures
8. Jon Thompson, Chief Executive and Permanent Secretary of HMRC, told us that the
failures of Concentrix were “a collapse of basic customer services”.16 He said he had “tried
to put customers at the heart of the HMRC business”.17 Those customers, he felt, had been
let down by his contractor.
The HRR16 Campaign
9. Concentrix were contracted to check tax credit claims in two different types of annual
cycle: a High Risk Change of Circumstance (HRCC) cycle and a High Risk Renewals (HRR)
cycle. For each cycle HMRC determined the subset of claims Concentrix considered. An
HRCC campaign is carried out annually between September and March. It was developed
to tackle failures to report, or incorrect reporting of, changes of circumstance during the
year such as a new cohabiting partner, adjustments to pay or working hours, or changes to
childcare responsibilities. The cycle that resulted in the collapse of the Concentrix contract
was an HRR cycle. HRR cycles are conducted annually between April to August, a period
in which tax credit renewals are due. The process aims to both check and, where necessary,
adjust a claimant’s award for the previous year and estimate the current year’s award in
line with their entitlement. The cycle that ran from April-August 2016 was known as the
HRR16 campaign.
10. In an HRR campaign, claimants identified as a risk of fraud or error are first contacted
by letter to ask them to verify information held on them and to provide the necessary
information to validate their claim. This could involve gathering information from third
parties. If they do not satisfactorily respond within 30 days their tax credits are halted.18
Caseworkers are available on the telephone to advise claimants on their circumstances.
We heard evidence of failures in both the letter and telephone components of service.
Letters
Receipt by claimants of initial letters from Concentrix
11. The Low Incomes Tax Reform Group (LITRG), a charity which lobbies for simpler
tax rules for people on low incomes, told us that claimants reporting that they had not
received an initial letter from Concentrix was a “common” theme of enquiries received on
their website.19 Peter Morris, a single father of four children, told us that he first found his
benefits had been stopped when he checked his bank account.20 Marie Crowley said that
the stopping of her payments came “completely out of the blue”.21
16 Q104, reiterated in a letter to Frank Field, 24 October 2016
17 Q125
18 Regulation 32 of the Tax Credits (Claims and Notifications) Regulations 2002 (SI 2002/2014 as amended) states
that the period of notice given for the person to submit the information or evidence “shall not be less than 30
days after the date of the notice.”
19 LITRG (CTC0008)
20 Q2
21 Q312 Concentrix
12. Though their own staff had raised concerns about particular batches of letters,22
Concentrix said that they believed the “anecdotal feedback of letters not being received to
be unfounded”.23 They had used “a highly credible and proven third party”, RR Donnelley,
and had “validated that all the letters that we expected to be sent out had been sent out”.24
13. The validation considered response rates to batches of letters. Over 188 batches sent
out under HRR16, responses to 52 per cent of letters were received. For individual batches,
between 10 and 100 percent of letters received responses. In instances where staff had
raised concerns, response rates of 40 per cent reassured Concentrix that there was no
problem.25 Furthermore, RR Donnelly had not “cited any issues in the outbound mail
process” and had confirmed sending all letters.26 Concentrix acknowledged, however, that
they could not be sure claimants received letters for two reasons:
a) failures in the postal system;27 and
b) instances when addresses supplied to them by HMRC were incorrect.28
14. People faced having their benefits stopped if they did not respond to a letter from
Concentrix. It is clear that many letters, which were sent by a sub-contractor, were not
received by claimants. The first some affected people knew that their benefits had been
stopped was when they checked their bank accounts.
Receipt by Concentrix of responses from claimants
15. LITRG told us that they received numerous reports of claimants seeing their tax
credit payments stopped for failure to provide information despite sending in evidence
before the deadline. At the same time, they “had consistent reports of people being told
by HMRC and Concentrix staff that there were backlogs of post and of papers getting
scanned onto the system”.29
16. Paul Eite, a single father of two sons whose benefits were stopped without warning
on 25 August, told us:
I sent all of the documents off in May. The person on the phone just said,
“Well, they must have got lost in transit, because we have not received the
documentation”. When I got the initial letter in May I sent it off that day.
It was tenancy agreements, bills, everything else that they asked for—I
sent all of that off. I even rang them four weeks later to say, “Have you got
my paperwork?” This was Concentrix, not HMRC. They then said, “No.
We do have quite a substantial backlog at the moment, but if there are any
problems we will contact you”. I never had any contact [ … ].30
17. Sarah Broome, a single mother of two, described her problems in getting documents
to Concentrix to prove her entitlement to tax credits:
22 Q39
23 Concentrix documentation, p342
24 Concentrix documentation, p342 and 353
25 Q39
26 Concentrix documentation, p342
27 Concentrix documentation, p342
28 Q39
29 LITRG (CTC0008)
30 Q6Concentrix 13
I sent [them] through the post office, first-class post, and that was not
received. They were original tenancy documents also, so I had to gather
that information again, send it again by recorded delivery, and that wasn’t
received. I then had to get all of that information again, and I sent it by
special delivery. It was signed for on, I think, 19 September and HMRC
didn’t get it until Monday this week.31
Similarly, Marie Crowley told us that she had to repeatedly send the same personal
information to Concentrix and HMRC.32
18. When this problem was put to him in evidence Philip Cassidy, Senior Vice President
of Concentrix, said that his company used a third party provider to scan post into their
electronic systems.33 Mr Cassidy told us that Concentrix were “investigating” concerns
about the quality of service provided by the third party.34
19. Concentrix had a key performance indicator, agreed with HMRC, of the proportion
of post “opened, scanned and any documents returned to the customer or disposed of as
appropriate with 40 working days of receipt”.35 This was 10 days longer than claimants
were given, in which time they may have been required to provide information which
could only be held by third parties.36
20. We are concerned that the systems used to process evidence provided by claimants
were at best slow and at worst unreliable. It appears that Concentrix were unable to
operate to the same levels of speed and accuracy that were demanded of claimants.
Fear of scamming
21. Letters sent to claimants as part of HRR16 were jointly branded with HMRC and
Concentrix logos. These letters asked for personal financial information such as bank
statements. Examples are shown in Appendix 1. We heard evidence that claimants
suspected the letters were scams. Sarah Broome told us that she had been confused because
she “didn’t know who Concentrix was”.37 Mike Wood MP said:
Frankly, I would not have assumed that that letter came on behalf of the
Government. It was of very poor quality; the letterhead looked as if it had
been scanned in or computer-generated; and to all extents and purposes
it looked like a scam, and I would have been very reluctant to responded
officially to it.38
22. Jon Thompson acknowledged this could be a problem:
I can totally understand that some people might think, ‘This is from a
private sector company and it might be phishing’.39
31 Q12
32 Q13
33 Q49
34 Q50
35 Concentrix documentation, p186
36 See, for example, transcripts from Concentrix documentation, p361
37 Q5
38 HC Deb, 18 October 2016, Col 249WH
39 Oral evidence taken before the Treasury Committee on 27 October 2016, HC (2016–17) 795, Q83. “Phishing” is
defined as “the fraudulent practice of sending emails purporting to be from reputable companies in order to
induce individuals to reveal personal information, such as passwords and credit card numbers” (OED).14 Concentrix
The Economic Secretary to the Treasury, Simon Kirby MP, acknowledged that
“unconvincing and misleading” letters was “an area in which there are lessons to be
learned”.40
23. Branding proved to be the final sticking point in negotiations between June and
September 2016 about a possible contract extension for Concentrix.41 HMRC resisted
requests from their contractor to remove the Concentrix logo. On 1 September Chris
Caldwell, President of Concentrix, told Philip Cassidy “I don’t think we can live with
their conditions around branding. I see no need to have our name or logo on anything”.42
Concentrix referred as a precedent to instances of HMRC using agency staff but not
requiring them to state which organisation employed them. Philip Cassidy noted this
point was “understood but not accepted”.43 On 8 September HMRC officials attempted
to arrange a phone call to discuss branding and “see if there is any middle ground”.44
In his notes of his 8 September meeting with HMRC, Philip Cassidy noted that HMRC
“absolutely insist on joint branding” even though Concentrix considered it a potential
“deal breaker”.45 HMRC’s resistance was curious given their insistence in evidence that
the Concentrix contract “was never an outsourcing in the first place. It was additional
capacity”.46
24. Many people who received letters from Concentrix requesting personal
information such as bank statements were concerned that they were being scammed.
This was understandable, especially given that the letters had Concentrix branding and
it was a little-known private company. These letters should not have carried Concentrix
branding in the first place. We are particularly concerned that HMRC resisted requests
from Concentrix for their branding to be removed from future letters. This suggests
that HMRC were seeking to distance themselves from the work being carried out on
their behalf.
Information provided to claimants
25. Claimants subject to a compliance check were sent letters requesting a wide range of
records and documentation, some of which may have been difficult or time-consuming to
compile. For example, undeclared partner letters from Concentrix included the following
section:
40 HC Deb, 26 October 2016, Col 334
41 Concentrix documentation, pp11-103 and summary on p324. We consider the proposed extension on
Concentrix’s contract in Chapter 5.
42 Concentrix documentation, pp70-71
43 Concentrix documentation, p16
44 Concentrix documentation, p14
45 Concentrix documentation, p16
46 Oral evidence taken before the Treasury Committee on 27 October 2016, HC (2016–17) 795, Q47 [Jon Thompson]Concentrix 15
26. LITRG noted that these letters did not appear to be tailored to individual circumstances:
So single people who are married but separated permanently from their
spouse receive the same letter and same evidence list as a single person who
is suspected of living together with someone else, even though the legal
tests are different and the evidence needed to be sought to prove couple
status is likely to be different.47
Concentrix, using letters based on HMRC templates, erred on the side of demanding
more information.
27. In contrast, we heard that claimants were not provided with the alleged evidence
against them which could have led to their tax credits being stopped. This was a particular
problem in relation to undeclared partners. Though they “normally” were aware of
the name of a suspected undeclared cohabiting partner generated by automated data
processing, Concentrix told us they had “a policy of not putting that named partner in
there”.48
28. LITRG told us that claimants “have a right to know what they are being accused of”.
They added that knowing the identity of a suspected partner allowed claimants to send
appropriate evidence or inform HMRC of the status of that person:
For example, they could be their landlord who lives elsewhere, a previous
tenant of the property or their family member. The claimant not knowing
who they are suspected of living with deprives them of the opportunity
to settle an investigation very quickly by giving a simple explanation, and
causes unnecessary cost, stress and wasted time for all concerned.49
29. Philip Cassidy told us that the policy of not providing details of a possible undeclared
partner in letters was inherited from HMRC. The letters used by Concentrix were “based
on the letters that were originally used by HMRC”, with some “improvements in tone”
47 LITRG (CTC0008)
48 Q40
49 LITRG (CTC0008)16 Concentrix
approved by HMRC.50 LITRG told us, however, that HMRC policy is now to name a
suspected undeclared partner.51 If claimants called Concentrix to inquire, and managed
to get through to a member of staff, they were told the information.52
30. Letters from Concentrix to claimants did not inform them of the nature of
suspicions against them. Concentrix usually had this information, but chose not to
share it. This made disproving those suspicions unnecessarily difficult. This approach
was not only unfair on claimants: it increased the pressure on phone lines and led
to more costly appeals. Concentrix should have shared with claimants the supposed
evidence against them. HMRC should have insisted that they did. We recommend
letters to claimants challenging entitlement to benefits detail the reasons fraud or error
is suspected.
Phone lines
31. Concentrix’s work on tax credits was supported by a call centre in Belfast. At peak
times in the cycle Concentrix had more than 500 advisers either on telephones or providing
back office casework support.53 The company had a key performance indicator agreed
with HMRC to answer customer calls within five minutes of the call being made. Their
target was to respond to 90 per cent of calls attempted within that timeframe.54
Spiral of poor service
32. Jon Thompson told us that the performance of Concentrix phone banks “dramatically
reduced” in August 2016:
By the middle of August the situation with Concentrix was that less than
10% of phone calls were being answered [within five minutes] and the
amount of time taken to get through rose above 30 minutes, with the result
that people then had to ring multiple times.55
He continued to describe the rapid decline in standards:
if you take 1 August, on that day Concentrix answered 93.2% of the calls at
an average speed of 48 seconds. That seems to be a reasonable standard of
customer services, and it broadly matches that which is provided by HMRC,
but if you go forward, picking one at random, say 16 August, at that point
it is taking an average of 31 minutes to get through and 90% of the calls are
not getting through.56
Mr Thompson explained that the waits to speak to an advisor entered a “spiral” where
claimants repeatedly tried and failed to get through: “you cannot resolve your case if you
cannot speak to someone to resolve it”.57
50 Q41
51 LITRG (CTC0008)
52 Q40
53 Concentrix documentation, p106
54 Concentrix documentation, p186
55 Q104
56 Q105
57 Oral evidence taken before the Treasury Committee on 27 October 2016, HC (2016–17) 795, Q14Concentrix 17
33. Figure 3 below charts the rapid decline in phone answering standards:58
Figure 3: Rapid decline in Concentrix phone line performance
Concentrix calls: % answered within 5 minutes
August 2016 (excludes Sundays)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
01/08
02/08
03/08
04/08
05/08
06/08
08/08
09/08
10/08
11/08
12/08
13/08
15/08
16/08
17/08
18/08
19/08
20/08
22/08
23/08
24/08
25/08
26/08
27/08
Figure 4 charts the corresponding increase in average call time:59
Figure 4: Average call waiting times exceeded half an hour
Concentrix calls: average waiting time (mins)
August 2016 (excludes Sundays)
40:00
30:00
20:00
10:00
00:00
01/08
02/08
03/08
04/08
05/08
06/08
08/08
09/08
10/08
11/08
12/08
13/08
15/08
16/08
17/08
18/08
19/08
20/08
22/08
23/08
24/08
25/08
26/08
27/08
34. As waiting times rose, fewer callers managed to get through to a caseworker. In the
last week of August just 54 per cent of queued calls were answered after an average of 29
minutes’ wait.60 Those statistics exclude callers who simply heard an engaged tone and
58 Concentrix (CNC0009)
59 Concentrix (CNC0009)
60 Concentrix (CNC0009)18 Concentrix
were not put on hold.61 Sarah Broome said she redialled Concentrix 70 times in one day,
receiving an engaged tone each time. Over a six week period she calculated she had been
on her own phone trying to resolve her tax credit problems for 19 hours and 57 minutes.
She had also used her parents’ and friends’ phones over the period. It had, she told us,
“consumed my life and my family’s life”.62
35. Marie Crowley told us about her experience of trying to get through to a Concentrix
advisor:
It is being on hold for days on end and giving up after 90 minutes because
when you only have your mobile phone [ … ] that is a lot of money. My
phone bill in September was double what it should be. When you do not
have any money coming in from tax credits each week, having to then think
about having to pay double is just like another kick in the face, really.63
The telephone number offered was a 0345 number, meaning claimants were charged the
same amount as if they had called a standard landline number with a geographic code.
Such calls cost up to 12p per minute from landlines and from 3p to 45p per minute from
mobiles.64
HMRC action
36. HMRC staff became concerned about call handling at Concentrix on Monday 15
August in the light of monitoring data showing that just 10 per cent of calls had been
answered within the agreed five minutes.65 On Wednesday 17 August, HMRC agreed
to reduce Concentrix’s call answering target from 90 per cent to 80 per cent.66 It is not
clear to what benefit.67 By 20 August, however, it was clear that change “was not making
any difference”.68 The contractor’s continued poor performance was highlighted in daily
performance calls with HMRC staff from 24 August. Jon Thompson and Nick Lodge
were not, however, informed until 5 September, more than three weeks after the severe
problems began.69 On 7 September HMRC announced their first redeployment of staff to
assist.70
61 Concentrix confirmed that busy signals “would not be included in either answered or unanswered calls”.
62 Q7
63 Q7
64 https://www.gov.uk/call-charges
65 Q109; clarified as referring to calls answered within five minutes in oral evidence taken before the Treasury
Committee on 27 October 2016, HC (2016–17) 795, Q14.
66 Q109
67 Concentrix requested a relaxation of their target to reflect the effect of HMRC issuing 45,000 auto-termination
letters within a week. This problem is considered later in this chapter.
68 Oral evidence taken before the Public Accounts Committee on 26 October 2016, HC (2016–17) 712, Q8
69 Q109
70 Letter from Jon Thompson to Frank Field, 24 October 2016Concentrix 19
37. That timeframe contrasted greatly with internal HMRC monitoring of customer
service levels. HMRC themselves were criticised by the National Audit Office (NAO)
for service standards on their own telephone lines in the 2015–16 financial year.71 Jon
Thompson described how he now had a detailed knowledge of in-house HMRC customer
service:
I could now tell you performance on every single major telephone line in
half-hour slots, and we can take action in half an hour in order to respond
to the demand from customers.72
Mr Thompson said that the “speed of escalation” of Concentrix service concerns to senior
HMRC staff was “probably not” fast enough and that this was a “fundamental lesson” of
the episode.73
38. This was not the first time that HMRC knew of failures in Concentrix telephony
standards. As we explain in the next section, there was a similar collapse in performance
in June-September 2015. On 13 June 2016 the Public Accounts Committee (PAC)
described to Jon Thompson a “raft” of HRR16 cases where claimants had been unable to
speak to Concentrix.74 Mr Thompson wrote to the Chair of the PAC Committee on 26
July acknowledging that Concentrix’s “performance in answering telephone calls [had]
not been acceptable”.75
39. In his letter to the PAC Mr Thompson explained the importance of telephone
caseworkers in ensuring the correct tax credit decisions were made:
The aim of our letters is to get claimants to contact us and explain their
circumstances. When they do get in touch with us or with Concentrix, we
are able to talk these cases through and reach the right decision.
40. The Concentrix phone banks completely collapsed in August 2016, resulting
in great expense in both time and money to claimants who could invariably afford
neither. This was unacceptably poor customer service.
41. HMRC’s monitoring systems failed as they took more than three weeks to escalate
severe problems to senior staff. This is a particular concern as HMRC were well aware
of the risks.
42. Speaking to a caseworker over the telephone was a standard part of the tax credit
verification process used by both Concentrix and HMRC. In many cases claimants
needed to take advice on the nature of the suspicions against them and the steps
they needed to take to retain their tax credits. They were unfairly disadvantaged by
the failure of the telephone system. We recommend that any future deadline for the
submission of supporting information by claimants is extended by the length of time for
which key telephony performance indicators were not met.
71 NAO, The quality of service for personal taxpayers, HC 17 2016–17, 25 May 2016
72 Q125
73 Q125 and oral evidence taken before the Treasury Committee on 27 October 2016, HC (2016–17) 795, Q100
74 Oral evidence taken before the Public Accounts Committee on 13 June 2016, HC (2016–17) 78, Q116
75 Letter from Jon Thompson to Meg Hillier MP, 26 July 201620 Concentrix
Modelling failure
43. Jon Thompson argued that the collapse of Concentrix phone lines was a failure of
their modelling:
You can very clearly model, if you send out a certain number of letters, how
many responses you are going to get to those letters—how many phone
calls you are going to get. We use that modelling for our own service.76
Mr Thompson hypothesised that not as many Concentrix staff as planned had been at
work: “if a contractor says that they are going to put 114 people on the telephone and they
do not, people are not going to get through”.77
44. When Concentrix initially submitted a plan for the HRR16 campaign in April 2016,
HMRC raised concerns about the company’s ability to “deal with phone calls from people
who receive these letters”.78 This warning was very justified: data provided by Concentrix
shown in Figures 5 and 6 chart low call answering rates and high average waiting times
respectively during the summer of 2015, albeit with lower numbers of calls involved:
Figure 5: Call answering rates slumped during the HRR15 cycle
Concentrix calls: % answered
Monthly, as proportion of calls offered
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jul-15
Jul-16
Jun-15
Jun-16
Nov-14
Nov-15
Apr-15
May-15
Apr-16
May-16
Dec-14
Aug-15
Jan-15
Feb-15
Mar-15
Sep-15
Dec-15
Aug-16
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Oct-16
76 Oral evidence taken before the Public Accounts Committee on 26 October 2016, HC (2016–17) 712, Q6
77 Q124 and oral evidence taken before the Public Accounts Committee on 26 October 2016, HC (2016–17) 712, Q20
78 Concentrix documentation, p267Concentrix 21
Figure 6: Call waiting times peaked sharply during summer 2015
Concentrix calls: average waiting time (mins)
Monthly data
50:00
40:00
30:00
20:00
10:00
00:00
Jul-15
Jul-16
Nov-14
Jun-15
Nov-15
Jun-16
Apr-15
May-15
Apr-16
May-16
Dec-14
Aug-15
Aug-16
Jan-15
Feb-15
Mar-15
Sep-15
Dec-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Oct-16
45. In April 2016 the Department rejected the initial Concentrix plan and asked
for “assurance/demonstration” that Concentrix had sufficient staff allocated for all
components of the planned HRR cycle.79 Concentrix provided this information and the
numbers were agreed, unchallenged, by HMRC on 9 May.80 HMRC explained that their
Senior Responsible Officer for the contract accepted the plan and said they would “closely
monitor delivery against the plan and to escalate to her quickly if it starts to slip”.81
46. Concentrix told us that they exceeded those agreed staffing requirements:
As per HRR 2016 plan we ramped up staffing levels (using temporary
staff) through April and May in order to deal with forecasted demand on
telephony and back office case work during the peak months of June, July
and August.82
Concentrix further explained that they “built contingency into our planning by initially
taking on more staff than planned to allow for spikes in demand during peak periods”.
They also maintained staffing levels in August and September, when they had planned
to reduce them, to address higher than expected demand. They told us they employed
567 caseworkers in June compared to an agreed requirement of 502, 527 in July against a
requirement of 489 and 501 in August against a requirement of 222.83
79 Concentrix documentation, p266
80 Concentrix documentation, p277
81 Concentrix documentation, p277
82 Concentrix documentation, p105
83 Concentrix documentation, p105 and p277. Concentrix confirmed that these were total caseworker numbers and
not all were on shift at any given time.22 Concentrix
47. As shown in Figure 7, caseworker numbers in the key month of August were very
similar to subsequent revised plans to retain more staff.84 Rates of staff absence and
attrition were not exceptional during the month.85
Figure 7: Concentrix caseworker numbers in August closely tracked plans
Planned/actual Concentrix caseworkers: Aug 2016
Full time equivalents
500
450
400
350
300
250
200
150
100
50
0
Planned Actual
Source: Concentrix documentation, p 107.
48. The agreed forecasts of demand turned out to be highly inaccurate: Concentrix
received 158,000 calls in August 2016 compared with the 33,000 expected in the plan
they agreed with HMRC in May 2016.86 Concentrix acknowledged that they would have
needed to “deploy hundreds of extra caseworkers” to cope with the surge in calls. They
were unable to do so at short notice because staff needed to be security checked and
trained before they could start work. A security check typically took at least 15 days and
new recruits were trained for three weeks before being allowed to work on HRR cases.87
49. Concentrix expressed frustration that the HMRC “patterns and precedents” they
relied upon to model call volumes and therefore staff numbers were “not fit for purpose”.88
LITRG concurred that “given that this was a somewhat predictable event we would have
expected HMRC to have ensured Concentrix were able to meet the increased demand”.89
Though Concentrix said they had worked “in conjunction” with HMRC on forecasts,
84 Concentrix (CNC0009). Concentrix told us that the higher number of planned caseworkers in August than had
been originally agreed in May reflected adjustments, principally the retention of temporary staff, agreed
to cope with high volumes of calls. In some cases caseworkers worked additional hours, meaning those
contingency plans were sometimes exceeded.
85 Concentrix documentation, p106
86 Concentrix (CNC0009)
87 Concentrix documentation, p120
88 Concentrix documentation, p355
89 LITRG (CTC0008)Concentrix 23
HMRC did not offer additional resourcing or staff to assist them when those forecasts
failed. Owing to the security and training requirements, “only HMRC staff would have
been capable of helping with the unexpected volumes at short notice”.90
50. Despite being grossly understaffed and though the proportion of calls answered fell
sharply, Concentrix answered more than three times the number of calls in August 2016 as
they had forecast with HMRC.91 This was partly attributable to changes in shift patterns,
extensions of temporary staff contracts, increases in overtime and other adjustments
instigated by Concentrix.92 On 7 September they were praised by their HMRC Project
Lead:
I know you have worked long hours and long weeks with barely a break over
the summer to keep your teams on track despite what has felt like a constant
flow of issues to deal with that could not have been foreseen or mitigated.93
Concentrix told us that HMRC had initially viewed high telephone volumes as a welcome
indication of a high number of cases of potential fraud or error being identified: Concentrix
were “victims of our own success”.94
51. Concentrix did not have nearly enough staff on the phones to cope with the
volume of calls they received in August 2016. This was their failing. It was, however,
also HMRC’s failing. HMRC agreed projections of demand and consequent proposals
for staffing levels by Concentrix. These proved to wildly inaccurate. As the situation
spiralled out of control only HMRC were in a position to assist. They should have
intervened sooner.
Other contributory factors
52. Concentrix cited a range of other factors that contributed to unexpectedly high call
volumes.95 Chief among these was HMRC’s timetable for stopping tax credit payments
to claimants who had not submitted an annual declaration of eligibility by the 31 July
2016 deadline. These were known as “auto-terminations”. 45,508 auto-terminations were
assigned to Concentrix.96 This was a “separate overlapping process” to HRR16, unrelated
to compliance check letters.97 These cases generated a substantial numbers of calls to
Concentrix at a time when many claimants subject to compliance checks were also trying
to get through.98 Figure 8 below demonstrates correlation between the issuing of auto-
terminations and divergence between the numbers of calls made (“offered”) and numbers
answered (“handled”) by Concentrix:
90 Concentrix documentation, p355
91 Volumes of calls answered was 332 per cent of forecast. See Concentrix documentation, p215.
92 Concentrix documentation, p355
93 Concentrix documentation, p3
94 Concentrix documentation, p277
95 Concentrix also cited concerns with HMRC’s archiving and technology systems which were escalated to the
HMRC Senior Responsible Officer in August and September 2016. See Concentrix documentation, pp200-210.
96 Concentrix documentation, p168
97 Concentrix documentation, p354
98 Concentrix documentation, p118 and p33424 Concentrix
Figure 8: Call centre failure coincided with HMRC release of auto-termination letters
Concentrix: calls received and answered: Aug 2016
Data shown for weekdays only
14,000
12,000
10,000
8,000
Received
6,000
4,000
Answered
Shaded: period in which
2,000 HMRC posted out auto-
termination letters.
0
01/08
02/08
03/08
04/08
05/08
06/08
07/08
08/08
09/08
10/08
11/08
12/08
13/08
14/08
15/08
16/08
17/08
18/08
19/08
20/08
21/08
22/08
23/08
24/08
25/08
26/08
53. In 2015 Concentrix had control of the auto-termination timetable for their cases
and spread them over a six week period. In 2016 HMRC enacted all auto-terminations
between 7 and 15 August. Concentrix told us that had HMRC staged them they would
have experienced lower call volumes.99 Concentrix data for August, based on the options
claimants selected for calling, show that more than 30,000 calls relating to annual
declarations were made to Concentrix and more than 20,000 answered.100
54. Concentrix said that a further important factor in call centre demand was “increasing
numbers of claimants not following process”. In August and September 2016 more
than 62,000 claimants from the 324,000 compliance check cases open failed to comply.
Concentrix told us this “indicated higher than planned volumes of fraud and error” in
the caseload.101 This neglected the possibility that claimants had not been able to provide
adequate information supporting their claims because of one or more of the service
failures at each stage of the process.
55. It is clear that the failure of the Concentrix contract was more complex than simply
not enough staff. It is equally clear that many of the problems that contributed to its
rapidly snowballing collapse were foreseeable. In the initial stages it appears HMRC
made the situation worse.
99 Concentrix documentation, p277
100 Concentrix (CNC0009)
101 Q118Concentrix 25
Service levels and training
56. We were told that the levels of service provided, and the advice given, by both
Concentrix and HMRC varied depending on the members of staff who answered the
phone.102 In particular, we heard that some Concentrix staff lacked basic knowledge.
Sarah Broome said:
I spoke to one person who said to me, “I am really sorry, I am new here and
I don’t know the process of the mandatory reconsideration”. I said, “Is there
a complaints procedure?” “I don’t know.” I said, “Do I send it into the same
address that is on the letter?” I was told, “I don’t know, I suppose you just
send it in to that one”.
57. We also heard that some Concentrix staff were rude to claimants and tried to prevent
them from making a formal complaint. Joanne Dykins, a single mother with three
children, told us:
after informing Concentrix I was going to lose my home I was told to go
and take my children to social services who could look after my children. I
came off the phone in tears.103
Sarah Broome was repeatedly told by a Concentrix caseworker that there was no complaints
system and that speaking to a manager would not change anything.104
58. On 26 September, the BBC reported a Concentrix employee saying that staff were
“dealing with people claiming they were going to commit suicide” without the requisite
training. He further claimed that Concentrix staff received no “aftercare by our human
resources team, or any sort of counselling, after a call”. Instead, he said, they “were just
told, ‘Go out. Have a smoke. Come back. You’ll be fine. Deal with another 40 or 50 calls’”.105
59. Concentrix told us that the recruitment of caseworkers followed “a rigorous process
in line with HMRC requirements”.106 This included an assessment at the end of initial
training and a continuous learning process which included weekly “calibration sessions”
and compulsory quizzes.107 They also sent us the step-by-step HMRC algorithm provided
for use on HRR16.108 Concentrix said that their staff were “subject to exactly the same
quality checks and reviews as internal HMRC staff members” and that feedback from
HMRC on the performance of staff had been good.109
102 Q27 [Marie Crowley, Sarah Broome]
103 Joanne Dykins (CTC0010)
104 Concentrix had an in-house complaints team to deal with customer service complaints. Complaints regarding
the compliance process would go to HMRC; Claimant call transcript (CTC0006).
105 BBC Online, Concentrix: ‘Suicidal calls’ made to tax credits firm, by Peter Whittlesea, 26 September 2016
106 Concentrix documentation, p120
107 Concentrix documentation, p125
108 Concentrix documentation, pp126-162
109 Concentrix documentation, p35626 Concentrix
60. Jon Thompson told us that on termination of the contract around 250 Concentrix
staff transferred to HMRC. He said HMRC had
put in place a substantive programme of induction and training to help
us strike the right balance in ensuring good customer service and bearing
down on error and fraud in the tax credits system.110
61. We understand HMRC’s decision to take Concentrix staff in-house. It is imperative
that they ensure those staff are adequately trained and monitored to ensure they
provide an informed, compassionate and efficient service.
110 Letter from Jon Thompson to Frank Field, 11 November 2016Concentrix 27
3 Decision making failures
62. HMRC cited poor customer service as the reason for ending the Concentrix contract.
LITRG argued that this simple explanation overlooked “concerns about the quality of
decision making and other process related issues”.111
Evidence of fraud or error
Selection of targets
63. HMRC provided Concentrix with 1.5 million tax credit claims for the HRR16
campaign. While these claims were termed “high risk”, selection was partly on the basis
of cases sharing some similarities with fraud or error cases. Nick Lodge, Director General
for Benefits and Credits at HMRC, told us:
What we are doing with those 1.5 million cases is effectively saying, “These
are cases that share the characteristics of cases that we know often are
incorrect.” We are not saying that they are all incorrect by any means,
because clearly they are not all incorrect.112
64. Concentrix filtered the 1.5 million cases. They removed more than 500,000 cases they
had already considered. Evidence of stable single status over the preceding 12 months
resulted in the removal of a further 275,000 cases alone.113 Further processes, some of
which were automated, used data provided by third-parties such as analytics and credit-
referencing specialists to remove cases where little or no risk of fraud or error were found.114
65. Philip Cassidy explained that Concentrix were contractually obliged to investigate
every case where they had no reason to suggest there was zero risk of fraud or error:
The judgement made in looking at these cases was such that we had no
reason based on data provided by both HMRC and our partners to suggest
there was zero risk in these cases. Furthermore, we exercised empirical
judgement through the removal of cases that had already been worked,
cases that were evident to be parent and child/sibling relationships and
those who had deceased in order to reduce the scope for individuals to
be unfairly selected for an enquiry in accordance with the legislation and
process prescribed by HMRC.
66. Mark Oatridge Commercial Manager of Concentrix, said that for a claimant to be
excluded from undeclared partner investigation there would need to be no “hint” of
another adult living at the property:
The third party would provide evidence that indicates the individual at
that household has no other financial associations. So there would be no
111 LITRG (CTC0008)
112 Oral evidence taken before the Treasury Committee on 27 October 2016, HC (2016–17) 795, Q30 Q30: Treasury
Committee, HC 795
113 Concentrix documentation, p109
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