Business

UK debt collection plan has 'failed' say MPs

Margaret Hodge Image copyright Getty Images
Image caption Margaret Hodge MP said the government needs to re-think its use of debt collection agencies

The Treasury and Cabinet Office need to come up with a plan to help manage £22bn owed to the government, say a group of influential MPs.

The majority, £15bn is owed to HM Revenue and Customs (HMRC).

The Department for Work and Pensions and the Ministry of Justice account for most of the remainder.

The committee has warned that failure to minimise the volume of outstanding debt was having a direct impact in the form of higher government borrowing.

The money owed ranges from unpaid fines and taxes to overpaid tax credits.

The government said it had already done much to tackle the problem.

"As part of our long-term economic plan, this government's relentless focus on tackling fraud, error and debt has already saved £6.5bn," a coalition spokesperson said.

"Before 2010, Whitehall did not know how much overdue debt was owed to government and departments weren't working together to address it. We are turning debt management around but hardworking people expect us to do more and we will."

'Intelligent customers'

While funds owed to HMRC dropped by £5.5bn in the last four years, £3.5bn of this was due to written-off tax credits and other debt it has given up, the MPs report said.

"While the Treasury and the Cabinet Office say they are belatedly developing a cross-government strategy for debt, we are concerned that the centre [of government] has taken so long to drive improvements in debt collection, given that this should be a basic business activity, and given the huge volume of bad debts that are written off each year," said the report.

Authorities should also consider the effectiveness of hiring debt collectors, it said.

"We are particularly concerned about the risks of vulnerable debtors being pursued inappropriately," said Margaret Hodge MP, who chairs the Committee of Public Accounts.

The departments owed money should start acting like "intelligent customers of debt collection agencies," said the committee. They should also collect better data to make more effective use of resources.

The committee recommended that the Cabinet Office give targets to government ministries for improved management of debts.

The Treasury ought to test the departments against those targets, it said.

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