Figures show the government is owed over £20bn, with more than £7bn of unpaid debt written off each year. A new bill is expected to improve data sharing between departments and lead to greater efficiency in debt collection.
Ministers said it was “unfair” that not enough was done to recover the debt, with the amount written off equal to £400 for every household in the UK.
Minister Francis Maude said this was “unacceptable”, particularly at a time when the public finances were under strain. “There is less money – and because there is less money it’s more important than ever that the resources we have are targeted where they’re needed most,” he said.
“In the past the general approach to public money was far too uncoordinated, too casual, even chaotic.
“This applied to the money going out, the money coming in – and the money that should have been coming in but wasn’t.”
Of the £20bn the government is owed on things like court fines, benefit overpayments and tax fines, £1.7bn is owed by individuals or households with multiple debts across a number of departments.
In a speech to a conference on debt, Mr Maude said: “This overlap is a big problem. It means the same debtors are being chased by multiple arms of government which is not good for them and highly inefficient for us.”
Although data sharing already is allowed between government departments, there are a number of complicated legal barriers to overcome. This has meant debt collection has often been “handicapped by our outdated, cautious approaches to data sharing,” Mr Maude said.
Following consultation, the government expects to bring in a new law to make it easier for government departments to share “appropriate and proportionate” information and pursue multiple debts in a single action.
“Government holds the data to trace debtors and assess their ability to pay but too often we can’t use it.
“That’s why we will act to enable data sharing to catch the cheats, while also understanding who is in real hardship and needs more time or support to pay,” Mr Maude said.
In order to improve transparency, information about how much is owed to each department will now be included in quarterly departmental publications.
New guidance has also been issued to those departments with high levels of uncollected debt, such as HMRC and the Department for Work and Pensions, to help ensure a “fairer approach to those who have fallen into debt but cannot afford to pay it back”.