Tackling Debt Owed To HM Government

Sarah Storey, Cabinet Office

Graham Cassidy, DWP

Sue Batty, HMCTS

Gordon Smith, HMRC UNCLASSIFIED

Background • The Cabinet Office have convened a Taskforce to drive down the

levels of Fraud, Error and Debt in the public sector.

• Focus on ‘overdue’ debt owed to Central Government (e.g. Departments and their partner bodies) by individuals and businesses

Phase 1 Phase 2 Phase 3

Gathering data and initial analysis

(Complete)

Identifying areas for action and piloting new

approaches(November 2011 – June

2012)

Implementation of new approaches

(June 2012 onwards)

UNCLASSIFIED

Key Facts • Around £26bn of overdue debt across central government

• This overdue debt is split between:

• Tax

• Benefits

• Fines

• Loans

• Sale of goods and services

• Suppliers

• Lots of existing contracts with debt collection agencies, credit reference agencies, consultancy and data services providers.

UNCLASSIFIED

Aims and outcomes

UNCLASSIFIED

How you can help us • Open Public Services White Paper committed us to look at “new

commissioning approaches” on debt management and collection.

• But we are in a tightly constrained budgetary environment

• So we are looking for innovative solutions, which tackles the “low hanging fruit” and longer term solutions

• So ideas and suggestions via our e-mail address: fed@cabinet-office.gsi.gov.uk

• Face-to-face sessions available with the project team January-March 2012

UNCLASSIFIED

Department for Work and Pensions

DWP and Debt what we have done • Used debt collection Agencies (DCA’s) since 2004

• Undertook a Joint procurement exercise with HMRC for DCA’s in 2010

• Worked with HMRC using shared data and Credit Reference Agency (CRA) data for analysis of joint Debt Stock

• Looked at Debt sale and how we could use this

• Introduced new legal powers to improve our debt collection

• Improved debt collection year on year collecting £320m in 2010/11

• Reduced operating costs by 10% year upon year

What we have learned • DCA’s don’t have a “silver bullet” but have more options and better

processes that aid debt recovery

• CRA data along with Segmentation and scoring are essential to recovery

• We can make efficiency savings by using our IT more productively

• We can recover much more with new powers and working across government boundaries

• We can make efficiency gains by re-examining our current processes

• We need to be better at route cause analysis and prevent the debt from occurring

Where next? • More use of DCA’s and different points in the our process

• More integration and data sharing with other government departments (OGD’s)

• “lean” the current process from the point where debt occurs through to recovery

• Use all of our information (CRA, OGD’s DCA’s) to drive our strategies

• Introduce or improve our technology to automate processes

• Introduce a Debt Controller function that oversees the whole DWP debt recovery strategy

• We need to develop our new approaches in line with new DWP strategies (Universal Credit etc).

Her Majesty’s Courts and Tribunals Service

Context: HMCTS and Debt

• Financial impositions (fines) account for 70% of all criminal court disposals

• In 2009 there were 913,194 fines imposed by magistrates’ courts and the average fine was £175

• Current total fines imposed ~£330m, collections ~£280m per annum• Typical fine defaulter characteristics:

• Lead chaotic lives• Transient• Take active steps to avoid detection

• In 2010/11 HMCTS expenditure on enforcement was ~£70m, with ~1800 administrative staff operating from 180 sites

• As at 31st March 2011 the total amount of fines outstanding was ~£609m

Programme of activity (1)

HMCTS Fines & Compliance Services Project

• Seeking to revolutionise fine collection through a potential innovative partnership with the private sector

• Required outcomes:• Reduce overall costs• Increase collections• Improve infrastructure• Increase levels of voluntary and supported compliance whilst

decreasing reliance on enforced compliance• Increased use of automation and innovation • Increased availability of data and management information

Programme of activity (2)

HMCTS - Aged Debt Pilot

• A pilot testing three private sector suppliers’ expertise and innovation against the collection of outstanding HMCTS aged debt

• HMCTS will use the outcomes of the pilot to influence future strategy

• Currently hold ~1.2m accounts over 12mths old totalling ~£420m

• Testing sample of 21,000 (£3.3m) accounts ranging in: age - (1 to 5 yrs)

value (£10- £800) and geographical location

Where next?

• HMCTS is currently finalising its future delivery model for compliance and enforcement activities - due early 2012

• Final outcomes of the Aged Debt Pilot will be evaluated February 2012 and will be used to inform future strategy

Her Majesty’s Revenue and Customs

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Context: HMRC and Debt • Deal with all UK taxes direct and indirect

• £468 billion receipts in 2010/2011

• Campaigns based debt strategy

• Targeted segmented letters to customers

• Expanded telephone capability to handle enquiries

• Further action; visit customer, court action or DCA

• Debt balance March 2011 £18.4bn (reduction of >£3bn)

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Programme of activity• Jan 2011 tender process for DCAs

• June 2011 engaged 10 DCAs on a framework agreement

• Late 2011 Introduction of new computer capability to analyse and segment customers

• Campaigns Strategy continues to develop using analytics

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Where next? • Make it easier for those who want to pay on time

• Support those who contact us early

• Deter late payment

• Make greater use of a variety of ways of debt pursuit

What next?

Engaging with HM Government

• Any questions?

• Contact us at: fed@cabinet-office.gsi.gov.uk