Tackling Debt Owed To HM Government

1. Tackling Debt Owed To HM Government Sarah Storey, Cabinet Office Graham Cassidy, DWP Sue Batty, HMCTS Gordon Smith, HMRC UNCLASSIFIED

2. 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

3. 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

4. Aims and outcomes UNCLASSIFIED

5. 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

6. Department for Work and Pensions

7. 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

8. 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

9. 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).

10. Her Majesty’s Courts and Tribunals Service

11. Context: HMCTS and Debt • Financial impositions (fines) account for 70% of all criminal courtdisposals • 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

12. 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

13. 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

14. 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

15. Her Majesty’s Revenue and Customs

16. 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)

17. 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

18. 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

19. What next?

20. Engaging with HM Government • Any questions? • Contact us at: fed@cabinet-office.gsi.gov.uk