Debt collection
Asked by Gavin Newlands on 4 February 2016
To ask the Secretary of State for Work and Pensions, what his Department's policy is on using debt collection agencies for collection of outstanding payments.
Answered by Justin Tomlinson on 12 February 2016
The Department’s policy is to recover outstanding debt whenever possible. Where a person is not in receipt of benefit and all the Department’s attempts at recovery have been unsuccessful, the overpayment will be referred to a debt collection agency. The debtor is always given an opportunity to make an agreement to pay the Department before the debt is sent to a debt collection agency to recover.
p, the Department does not hold extant, direct contracts with any debt collection agencies although the nature of some of the expired contracts means that a number of collections are still being made. DWP now makes use of one main contract with Indesser. The Framework Contract is managed by Cabinet Office. Indesser manage relationships with a number of Debt Collection Agencies on behalf of all Government Customers.
Under the terms of the Framework Agreement, Indesser and its sub-contractors must comply with relevant industry and public sector standards for service delivery including those of the Credit Services Association, the Code of Practice and the Financial Conduct Authority guidelines. The standards are listed in the DMI Framework Agreement. Indesser reviews subcontractor compliance with these standards through audit and assurance activity, including responsibility for ensuring that they comply with relevant industry standards, managing their performance, and monitoring any complaints. Customer departments (i.e. DWP) in turn receive Letters of Assurance which they review to ensure standards are being achieved and the audits are effective.
The breakdown of figures you have requested is derived from operational processes and systems designed solely for the purpose of helping the Department to manage its business. As it was not originally intended for publication, it has not been subjected to the rigorous quality assurance checks applied to our published official statistics.
The debt collection agency costs of the Child Maintenance Group and DWP are given separately. Please note that the figures are rounded to the nearest £10,000.
The cost to the DWP of the debt collection agencies, and the related recovery made by them, is as follows:
Financial Year Spend Recoveries
2009/2010 £1.59m £8.50m
2010/2011 £1.33m £9.77m
2011/2012 £2.11m £13.94m
2012/2013 £1.95m £14.15m
2013/2014 £2.12m £15.00m
2014/2015 £2.52m £17.30m
2015/2016 to date £1.64m £11.05m
The cost to Child Maintenance Group of the debt collection agencies, and the related recovery made by them, is as follows:
Financial Year Spend Recoveries
2009/2010 £1.25m £10.20m
2010/2011 £0.56m £4.68m
2011/2012 £0.35m £1.35m
2012/2013 £0.21m £1.71m
2013/2014 £0.05m £1.21m
2014/2015 £0.10m £0.86m
2015/2016 to date £0.07m £0.53m
My analysis
Financial Year Spend Recoveries DWP spend per £1 recovered
2009/2010 £1.59m £8.50m 19p
2010/2011 £1.33m £9.77m 14p
2011/2012 £2.11m £13.94m 15p
2012/2013 £1.95m £14.15m 14p
2013/2014 £2.12m £15.00m 14p
2014/2015 £2.52m £17.30m 15p
2015/2016 to date £1.64m £11.05m 15p
DWP spent 15p average per £1 recovered.
The cost to Child Maintenance Group of the debt collection agencies, and the related recovery made by them, is as follows:
Financial Year Spend Recoveries CMG spend per £1 recovered
2009/2010 £1.25m £10.20m 12p
2010/2011 £0.56m £4.68m 12p
2011/2012 £0.35m £1.35m 26p
2012/2013 £0.21m £1.71m 12p
2013/2014 £0.05m £1.21m 4p
2014/2015 £0.10m £0.86m 12p
2015/2016 to date £0.07m £0.53m 13p
CMG spent 13p average per £1 recovered. This is 2p per £1 cheaper than DWP debt and 13% better value than DWP debt. But CMG debt recovery has been slashed because the debt is owed to women.
And it shows that the claim that child maintenance debt was too expensive to pursue was a lie. See my Freedom of Information request on 22 March 2017: Page 29 of Preparing for the future, tackling the past - Child Maintenance - Arrears and Compliance Strategy 2012-2017, states: “The performance of DCAs in relation to arrears of child maintenance is not consistent with their performance in relation to other government debts.”
Page 23 of the arrears strategy shows that at that point £490 million was owed on cases where there was a current child owed maintenance but no maintenance was being paid.
On 30 October 2018 Baroness Buscombe told the House of Lords: “Moving all the debt to the CMS IT systems would incur a one-off cost of at least £250 million, without the resources to action it. We have taken various actions to collect this debt, including using debt collection agencies to chase what is owed. More than 63,000 cases were passed to debt collection agencies for them to arrange collection, but after three years we took back 55,000 cases because the DCAs had not been able to make any debt collection arrangements.”