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

Aims and outcomes UNCLASSIFIED UNCLASSIFIED Prevention Effectiveness Efficiency Fairness UNCLASSIFIED 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 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 In 2010/11 we sent 101,000 debtors with 197,000 debts worth £99m out to suppliers. In 2010 we joined with HMRC and ran a procurement exercise for DCA’s this is a framework contract and can be used by any department as a call off contract. We intend to use the HMRC contract from 2013 running a mini tender exercise within the framework. We have used our data sets and ran these against HMRC and some CRA data and the results were interesting, we have a 19% overlap of debtors, either the debtor has a relationship with one department and a debt with another or a debt with both. HMRC took a significant number of means tested pensioners to court but did not know this before they took their action. All of which told us we needed to open the information flow between our two departments and this is what we are in the process of doing. We have looked at Debt sale and talked to the market, there are opportunities but they are more limited for DWP as our debt still has a value downstream, if a debtor returns to benefit then we can still recover. We are exploring new methods of recovery and plan to use a more streamlined DEA process where we have failed with traditional methods. We collected £25m when Debt recovery within DWP first centralised in 2000 and £320m last year our current debt stock is 1.4bn which is growing but we do have problems writing off debt for the reasons I have highlighted above. We have a ongoing efficiency programme and have delivered against targets but can do so much more on recovery and reducing operating costs.

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 We have learned a lot whilst working with our suppliers. They use the same methods as ourselves but have three main advantages, the HR policies are much more flexible both on recruitment and incentives, they invest much more on IT (which is you can understand as this is not DWP core business) and they are in a competitive field and this drives improved performance. We have conducted a Contestability review and piloted using suppliers earlier in our process. We will be using all of this information in a review of our current recovery model, introducing a new model in March next year. As I mentioned in my last slide the more we know about our debtors the better we can service our debt. We are working with our IRIS colleagues and cross government to improve our intelligence which will the inform of recovery models, in particular the review I just mentioned. We have too many manual processes within the end to end debt process and need to automate these, and streamline where and how we refer debts. There are significant improvement opportunities internally we need to exploit. I have mentioned our DEA approach combining these with powers across Government could increase recoveries without additional resources. Our current end to end model that starts with our business and ends in debt recovery has too many hand off’s and is to layered, we can streamline this by move boundaries and more automation. Reducing time to contact customers and improving their experience. We could prevent some our debt by understand why it occurs some of this is not possible because of late notification but some we could by changing our internal processes to ensure we capture information in time and accurately.

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). Given the first two slides these more or less speak for themselves! We are currently reviewing our collection process and plan to use DCA’s more extensively and include them during our review. We are working with colleagues in this room and our own intelligence to improve our understanding of debt stock and recovery methods. We have a extensive programme (I am the project manager) looking to transform how we improve our overall debt process reducing costs by as much as 43% and increasing our recoveries everything on this last slide is part of this Transformation Programme. We will look to use data and our new Debt Controller role to improve our collection strategies, learning form suppliers. We are introducing a new set of IT processes that streamline and automate our process, but still have room for improvement. Our current ownership model is fragmented and by placing this function in one place and focusing on this last slide we will drive up recoveries ensure compliance and reduce costs. We know the world is changing in DWP and we need to ensure that our approaches merges with Universal Credit, Fraud and error improvements

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

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)

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

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