NAO to government: Improve debt collection

The government’s approach to collecting debt such as tax and benefit overpayments is inconsistent and often ineffective, according to a report by the National Audit Office (NAO), which said at least £22bn was owed to the government in March 2013.

Although the amount of money owed to the government has fallen slightly since 2008-09 when it was £30bn, the NAO report suggests that there is plenty of room for improvement.

In 2012-13, £6bn of debt was written off as irrecoverable, or ‘remitted’ on the basis that it was not a good use of scarce resources to pursue it.

“Government is owed a large amount of money but has yet to get to grips with how to manage that debt. It has not set out overall objectives and has no clear understanding of the financial risk that debt poses,” Amyas Morse, head of the National Audit Office said. “Poor quality data on debtors and a lack of analytical capability are serious barriers to progress.

Government accounts show losses of more than £32bn over the last five years. Government cannot easily control all losses, the NAO said. Of these around 70% result from write-offs in insolvency cases, the NAO said.

The NAO acknowledged that HMRC and the DWP are trying reduce old debt by improving their understanding of debtors. But the ability across government to manage debt is “undermined by poor quality data, barriers to data sharing and inconsistent definitions.”

HM Courts & Tribunals Service, for example, found in a pilot that more than 96% of aged debtor records were missing one or more basic pieces of information, such as a telephone number.