UK Politics

Plan to cut £1bn tax-credit fraud not achievable - NAO

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A US company brought in to crack down on tax-credit fraud will fail to meet its £1bn target, the National Audit Office has said.

Synnex-Concentrix only generated savings of £500,000 in 2013-14 compared with the original estimate of £285m.

It is expected to deliver savings of £423m over three years, less than half the original target.

HM Revenue and Customs said tax-credit fraud was at a record low and the firm was paid by results.

The National Audit Office gave a generally positive assessment of HMRC's performance over the past year and said it had cut tax-credit fraud and error from 8.1% in 2010-11 to 4.4% in 2014-15.

'Not achievable'

"This decline suggests that HMRC's initiatives to tackle specific fraud and error risks have had an impact," said the National Audit Office in a statement.

"For example, it has worked with credit reference agencies to increase the number of checks and used new data to address the undeclared partner risk."

But the spending watchdog said Belfast-based Synnex-Concentrix UK Ltd, a division of a US outsourcing giant, employed in 2014-15 to tackle fraud and error, had not performed as well as expected and its savings target was now "not achievable".

The company was at the centre of controversy earlier this year, when the Independent newspaper reported claims it was sending tax credit claimants letters wrongly accusing them of cheating and was engaged in a vast "fishing expedition".

HMRC sources denied the firm was engaged in a "fishing expedition" and rejected claims it had sent "threatening letters" to claimants, saying they were "simply fact-finding".

In a statement, an HMRC spokesman said: "We have reduced tax-credit fraud and error to a record low of 4.4% of total payments last year.

"The contract with Concentrix uses a payment-by-results model, which means Concentrix is only paid based on the money they save for the taxpayer.

"These savings come from correcting claims where, for example, someone's circumstances have changed which would alter the value of their payments but they have failed to tell us."

NAO head Amyas Morse said HMRC had "met its strategic objectives to increase tax revenue while cutting its administrative costs".

But it had made less progress in improving customer services and faced "significant challenges" such as the transition to a new computer system, the introduction of universal credit and tackling fraud and error.

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