The Treasury is under pressure to recover some of the £22bn owed to the Government by taxpayers, including over £15bn due to HM Revenue and Customs in tax, overpaid tax credits and fines.
The £15.1bn owed to HMRC accounts for 68 per cent of the £22bn owed to Government as a whole by individuals and businesses. Almost all of the remainder is owed to the Department for Work and Pensions and the Ministry of Justice.
The public accounts committee says £22bn is equivalent to one fifth of the public money spent on health care and is calling on the Treasury to set out a comprehensive and effective strategy for managing debt as quickly as possible.
Committee chair Margaret Hodge says: “The Government is owed this massive amount of money but it has failed to take a strategic, cross-Government approach to managing that debt and getting more money paid to the Exchequer.
“In the current climate of tight public finances, that’s just not good enough, and urgent action is required. Government must get better at preventing, managing and recovering debt. The Treasury and key Government departments have a job to do to get on top of this and get money owed flowing into the coffers.”
The report says information held on debtors by Government which is needed to target debt collection and resources appropriately is “generally poor”, citing the National Audit Office’s finding that records of 97 per cent of HM Courts and Tribunal Service debtors were missing one or more key pieces of data.
It says: “Departments should implement systems that collect the data they need to manage and target their debt recovery resources effectively and reflect debtors’ circumstances and ability to repay. The centre should ensure that departments share information and coordinate their debt management activities with a view to developing a single view of what each debtor owes to government as a whole.”
The £15bn owed to HMRC is not the tax gap which results from avoided or evaded tax, but “money owed that is in arrears and legally collectable”. Last year, HMRC estimated the tax gap to be £35bn.
The report says debt has been increasing over the past six years in all departments except for HMRC.
Some of the reduction in debts to HMRC came from improvements in the amount of debt recovered but a “significant proportion” of the reduction was secured by writing off debts or deciding not to pursue £3.5bn of tax credits debts and other debts it considers “uncollectable”.
Hodge says: “[Government’s] treatment of debt has been characterised by neglect and periodic large write-offs. Large volumes of old debts have been allowed to build up in departments, with 61 per cent of HMRC’s debt and 88% of DWP’s debt over 180 days old at 31 March 2013. The older the debt the more difficult it becomes to collect.“