In a report released today, the committee blasted HMRC and Concentrix, a private contractor, after the project delivered only £193m savings out of the £1bn originally mooted.
According to the PAC, HMRC said that the investment of £32.5m a saving of £193m represented a reasonable rate of return.
Concentrix was brought in on a three-year contract in 2014 to investigate potentially incorrect personal tax credit awards for HMRC on a payment-by-results basis.
However it routinely failed to meet quality and customer service targets. During the contract HMRC suspended and later reinstated payments to 29,500 people who were wrongly denied their entitlements.
In August 2016 Concentrix answered just 35% of customer service calls in five minutes against a target of 90%.
PAC chair Meg Hillier said: “The dreadful human consequences of this contract are well-documented but the story does not end with its termination.
“Having taken the work contracted to Concentrix in-house, it is critical that HMRC now delivers for tax credit claimants.”
Hillier slammed HMRC for a “disastrous decline” in customer service and urged the government to put right the damage done by the failures by reinstating of all the awards claimants wrongly lost and compensating people for any impact on other benefits.
She added: “Clearly it placed too little importance on customer service. But it was also driven by an inappropriate payment-by-results model, was renegotiated on terms less favourable to the taxpayer, and ultimately achieved less than a fifth of the savings expected.”
The committee’s report states HMRC lacked the commercial capability to design the contract effectively, agreeing to nearly triple the commission paid to Concentrix, from 3.9% to 11%, even though the service was so poor.
HMRC now accepts that the payment-by-results mechanism used in this contract was “wholly wrong” for this type of service.
Despite the “debacle”, the committee found that neither HMRC nor Concentrix is prepared to take full responsibility for mismanaging the process. MPs concluded “that between them they provided a totally inadequate service to claimants”.
An HMRC spokesperson said: “HMRC is absolutely committed to paying tax credits claimants all the money to which they are entitled, efficiently and on time and we have apologised for the failings that occurred during the contract.
“HMRC terminated the contract with Concentrix when it became clear that it was not delivering the quality of service we expect for our customers. Those who had their payments stopped incorrectly are now back in payment.
“It is important to make checks on tax credits claims to ensure the right people are receiving the money to which they are entitled under the law, and this work will now be done by HMRC. HMRC will not be entering into external contracts for this work in future.”
