By Vivienne Russell | 3 February 2012
Uncollected debt costs the government between £7bn and £8bn every year, the Cabinet Office revealed today.
The interim report of the taskforce on fraud, error and debt found that some £6.5bn worth of debts were written off last year, often because businesses had become insolvent.
A smaller amount had to be written off because of official error.
Total outstanding debt was £25.3bn at March 2011, of which the vast majority (95%) fell into three main categories: tax debt, unpaid fines and repayments for overpaid benefits and tax credits.
Cabinet Office minister Francis Maude said it was ‘mind-boggling’ that work on the state of government debt had not been done before.
‘This report is an early, interim report, but it shows clearly that we need a quicker, more empathetic and accurate system to prevent so much debt accruing in the first place. While there is lots of good practice, we have been struck by how little joining-up exists – we need more data sharing across departments,’ he said.
The government will produce firm plans for how to tackle debt in the summer. Maude said there would be support for people and businesses in genuine hardship and thus unable to pay. But he warned that those who deliberately avoided payments ‘should be prepared for a tough approach’.
The taskforce is recommending a cross-government approach focusing on two areas: improved collection of debt through greater upfront compliance and ensuring the amount of debt progressing through to the final stage of enforcement action is reduced.
Over the next few months, the taskforce will negotiate a single commercial framework contract for debt collection agencies. It will also ensure a consistent approach to legal sanctions and hardship support for debtors across government departments.
Establishing the Fraud, Error and Debt Taskforce in 2010 was a no-brainer for ministers – we were only months into the job but we knew that every pound mattered and we were concerned about the level of losses due to uncollected debt owed to government.The taskforce started by looking at fraud prevention, and in this area it has already saved £5m for taxpayers since 2010. Now it is turning a sharp gaze on to debt and has published interim recommendations for tackling the problem, focused on prevention and fairness.
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