Speech

Tackling debt owed to Government – speech by Francis Maude

Minister for the Cabinet Office Francis Maude made a keynote speech at a Dods conference on debt on 15 October 2012.

This government inherited a situation where we were spending £4 for every £3 we took in taxes. And we all know about the legacy of a huge deficit built on debt which the previous government left us.

But we also inherited a different sort of debt - a vast amount of uncollected debt which was owed to the government .

Quite simply this has never been on the agenda.

Earlier this year we revealed, for the first time, just how much debt is owed to the government -

Over £20billion - with government shockingly simply writing off around £7 to £8 billion every year in uncollected debt. The government writes off the equivalent of more than £400 per working household every single year.

This is unacceptable.

Debt is of course always an emotive, sensitive topic. But avoiding the subject altogether has left us with disjointed, inefficient, ineffective approaches to managing and collecting debt. It’s also simply unfair to those taxpayers who are working hard and trying to do the right thing.

Looking at the scale of debt owed today - I think there are some things we would all agree on:

  • Public money should be directed to where it’s needed most;
  • So much uncollected debt shouldn’t be accumulated in the first place;
  • And government should be taking fair, proportional responses to debtors; differentiating between the people who can’t pay and the people who won’t pay.

How can we achieve these aims? Not by working in isolation. But by working together, across government - sharing our resources, our data, our growing expertise.

Yes - it sounds so obvious, but it simply didn’t happen in the past.

This conference will spell out the importance of this agenda today and outline how we can team up to tackle debt - and I’m very pleased to have the opportunity to address you now on some of the key priorities.

Tackling financial loss in the public sector is important at any time - but I don’t need to remind you just how crucial it is in today’s financial climate.

This government is taking the tough decisions needed to ensure that Britain can prosper again in the future. 

As everyone here knows there is less money - and because there is less money it’s more important than ever that the resources we have are targeted where they’re needed most.

And this has meant really getting a grip on Whitehall’s finances. In the past the general approach to public money was far too uncoordinated, too casual, even chaotic. This applied to the money going out, the money coming in - and the money that should have been coming in but wasn’t.

This government has taken significant steps to get a handle on the nature and scale of financial loss in the public sector. We set up a Taskforce on Fraud, Error and Debt which I chair and I am well supported by colleagues from other Departments including Lord Freud at DWP and David Gauke at the Treasury.

And earlier this year we published an important report that set out a series of recommendations on how we might tackle debt - which we are now turning into concrete actions.

A key priority was to take far more joined up approach to tackling debt.

One of the most ingrained problems with the way Whitehall operates, is that too often we are 17 disparate departments all going their own way in their separate silos. We don’t share our resources, our expertise, our best practice. And then we duplicate, we’re inefficient and we’re wasteful.

But this is changing - particularly with the establishment of the Cabinet Office’s Efficiency and Reform Group - which brings together key areas of spend including procurement, marketing, property and ICT. By ruthlessly pursuing efficiency and value for money we saved the taxpayer over £5.5 billion in the last year and £3.75billion in our first ten months in office.

To achieve these savings we worked as one government - not 17 separate departments. And tackling debt requires the same approach. 

One of the obvious reasons for this is that debtors themselves often owe money to more than one arm of government .
Not that we have been able to say that definitively in the past because the data on how many common debtors owe money to more than one department simply wasn’t there. No one bothered to collect it properly.

But today for the first time I can reveal that almost 10 per cent of debt owed to government - £1.7billion - is owed by an individual or household with more than one debt to HMRC, DWP or HMCTS.

Some of this overlap was predictable - it’s no surprise to see that £200million of debt owed by individuals in overpaid benefits and tax credits but there are other more surprising areas of overlap. For example, there is £220m of debt owed by common debtors for self-assessment tax and court fines.

This overlap is a big problem. It means the same debtors are being chased by multiple arms of government which is not good for them and highly inefficient for us. 

We are now starting, what I hope will be a series of pilots, that will trial joining-up of collection activity between HMRC and DWP and in the future other departments as well. We want to see whether debtors themselves respond to a single approach positively.

One of the reasons we are able to do this, is because HMRC have developed sophisticated technology that allows them to gain a single customer view for the first time. Whereas in the past they could have chased one person for Self-Assessment, VAT and Corporation Tax debts separately. 

This technology also selects the most effective and efficient strategy to collect a specific debt based on things like past debtor behaviour and the size and type of debt.

This is an important example of how we are starting to overcome one of the key barriers to joined up working on debt in the past - the difficulties that surround data sharing. And we still have much further to go on this.

There are both perceived and actual legal barriers that for too long have stopped us from linking and matching data on debtors between departments.

So while you might think it would already be possible for departments and other government bodies to share data to verify debtor details that would help us to track and trace debtors in the first place - and aggregate debts so we can pursue and collect once and once only - in fact we are often handicapped by our outdated, cautious approaches to data sharing. 

The ability to check and verify information and build a picture of the customer is standard practice in banks and other financial institutions - but not in the public sector.

In fact one of the major reasons why information on the overlap between debts and debtors was not immediately available was because of fears around data sharing.

We’ve found that between the 8 major debt departments and local authorities there exists 86 different legal gateways that allow different departments to exchange, provide or receive data on debtors. These have accumulated over the years and are on top of the common law powers, which is all some departments rely on to exchange data.

This array of different gateways don’t allow departments to really work together to build up a single customer view.

Using the latest technology in the future we will share data only on a momentary basis, allowing us to check for matches, while never creating a single file. It’s my mission to get us sharing data far more effectively.

So today I am pleased to announce that we will be pursuing legislation that will aim to create one gateway that will give a legal basis for data sharing between departments where there is a sufficiently strong case.

For example to assess the means of a debtor when considering their plea of hardship, or to know when a debtor also owes money to another department.

This will give departments the means to help separate the can’t pays and the won’t pays. For the won’t pays this will help us take consistently tough action and not waste time on, for example, the early collections activity of writing letters, and move straight to enforcement.

We will be consulting shortly on the scope and requirements of this legislation and we are very clear departments will only be able to use these powers sensibly and proportionately.

Ultimately we anticipate that this will help us be far more effective in collecting that £1.7billion of overlap that exists just between HMRC, DWP and HMCTS.

It’s important to stress that the measures we’re taking aren’t just about collecting money which is owed. It’s also about being fair to the people who have fallen into debt.

There are people who genuinely cannot pay us and need our support - and what they don’t need is the many different arms of government chasing them only to all individually establish there is no money to repay any of the debts. We know of one case where a single mother ended up with 22 different parts of government chasing her.

A more collaborative approach would clearly work better for everyone.

To help us consistently provide the right support to those who are in genuine hardship I am pleased to announce that for the first time we’ve put in place a consistent set of high-level guidelines that the major debt departments have committed to adopt.

We will seek to apply them where appropriate to smaller departments.

At the other end of the spectrum, there are of course people who simply think the rules don’t apply to them - people who are happy for others to pay more because they choose not to pay at all. There is a disjointed, inconsistent approach to dealing with these people too.

We’ve identified over a hundred different sanctions and penalties used by different departments on those who deliberately avoid payment.

Some are highly effective - some aren’t.  In the future we want to ensure we are being consistently tough and proportional towards the won’t pays and that we are all using the approaches that get the best results.

It comes back to making sure we’re all, across government, doing what works. And innovative work is taking place all over government to find the best ways to tackle debt.

Over the last year the Behavioural Insights Team from the Cabinet Office has been working with a number of government departments, agencies and local authorities to test how interventions based on behavioural science can encourage greater compliance.

For example a text message trial between the Behaviour Insights Team and the Courts Service found that sending a personalised text message reminder to people who failed to pay their court fines improved the average value of fine repayments went up by over a third.

We need to roll out these kind of successful insights across government.

It’s also a priority to ensure that every civil servant who has any contact with debtors, be it face to face, or by telephone is trained and supported to apply the emerging best practice and techniques.

Across central government, there is now an externally accredited qualification in debt management.

It’s also worth stressing that how well we do on uncollected debt will be scrutinised like never before.

In the past Whitehall lacked comparable management Information.

Today I am announcing today that as part of a wider review of our new Quarterly Data Summaries, we will be asking departments to report against four key measures that will help us to build a consistent view of department’s uncollected debt. This will allow us to build a much better, consolidated view of the debt owed to government.

Previous governments might have been able to shrug off and ignore unpaid debt in the past - but in the future this will be out in the open - everyone will be able to see the figures. And I am a great believer in transparency driving improvement.

It is extraordinary that there has not been a cross-government approach to debt - and indeed fraud and error - in the past, when so many billions are lost annually. This does affect every government department and does affect our ability to deliver better public services.

But we are going to get better. By sharing our techniques, our data, and our resources - we will drive improvements right across government, we will get a handle on debt.

That’s not to say the answers on this will emerge all at once - we’ve got to work out which interventions are suitable for the type of debt and debtor. But we will continue to build momentum - as I hope I’ve outlined today.

And all of you working in this area do keep trying new things - in collaboration with each other - don’t be afraid to test things out, learn from them and then adapt. Debt is on the agenda now - and you can lead the way in tackling it.

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