New ‘savings’ targets of £80 million may sink a department that is already fighting to keep its head above water.
Since HMRC was born as a merger between Customs and Excise and the Inland Revenue in 2005, it has weathered many a storm. But the latest government demands could prove fatal. As part of its austerity plan, the government have just informed HMRC that they will have to make £80million of ‘savings’. But no concessions have been made concerning the impact of these financial cuts, as they are simultaneously expected to continue with extensive modernisation plans.
It’s not all bad news!
In February The National Audit Office said, “We consider HMRC to be among the strongest government departments as regards its managerial competence and its robustness in managing risks.”
They have also been praised for meeting targets for successfully recouping money from tax avoidance and evasion and for cutting costs.
Unfortunately, we are far more aware of HMRC’s problems than their achievements.
HMRC Staffing
The most recent annual survey results revealed that, in comparison with other government departments, HMRC’s staff morale is much lower than average. Only a quarter of their staff thinks it is managed “well”. Considering the seemingly unstoppable stream of very public administration disasters, this is not a huge surprise.
In the last 10 years, HMRC has seen staff losses up to 40%. This is a combination of high staff turnover and personnel cuts of 20% imposed by the government from 2010. A shrinking HMRC is now only the third largest government department after Work and Pensions and the Ministry of Justice.
The National Audit Office identified another problem whose effects may be felt in the near future; “…with an ageing workforce, HMRC risks losing experienced staff through retirement”. This leads not only to less staff, but less staff with expert knowledge.
The consequences of HMRC’s staffing issues have been keenly felt by many taxpayers recently. The current massive mail backlog and unanswered calls scandals began with the decision to transfer staff internally last July. They were redeployed to help meet the target for tax credit renewals and, obviously, were then not doing their usual work dealing with ongoing post and phone queries. This staff shuffling was then repeated to assist at the height of the self-assessment tax return filing period in January.
The entire situation has snowballed horribly, with call rates increasing as taxpayers try to find out why HMRC have not replied to written mail within usual processing times. Phone queue waiting times sky rocketed to a ridiculous 2 hours and, during some months, only two thirds of all calls were actually answered. Meanwhile, many taxpayers are going without essential information and the money that belongs to them.
HMRC’s solutions were to simply cancel the £100 late fines issued to those who filed their self-assessment forms after the deadline. This meant that staff could be used to work on the post issue instead of phoning to chase the forms and fine payments. They have also hired 3,000 more staff to, hopefully, get back on track.
Government Priorities
Other than cutting costs and modernising the system, some MPs have been very vocal about HMRC’s tackling of tax avoidance and evasion. The shocking revelations about HSBC’s Swiss subsidiary bank, that hit the headlines in February, have brought the question of fair tax collection to the forefront of public consciousness. Confidence in our system has been shaken and the government responded with £11 billion investment in 8,000 staff. These new HMRC employees are specifically working on tax evasion and avoidance, development and illegal attacks. The government funded this with money from cuts elsewhere.
HMRC Modernisation
Those in charge at both HMRC and the Treasury consider new technology to be the primary solution to HMRC’s problems – the new online service launched in 2014. HMRC continue to be “completely committed to delivering new digital accounts that are at the heart of modernisation of tax collection plans”.
Whilst this may remain an aim for HMRC, it is a lot to ask given the immediate administration issues and the new ‘savings’ targets. Lin Homer, Chief Executive of HMRC, said in an internal memo to her staff;
“It is disappointing to be required to make cuts at a time when we are delivering a transformation programme to modernise HMRC, improve services to customers and increase out compliance yield…There will inevitably be impacts on what we will be able to achieve and there is little prospect that we can absorb these cuts without some business impacts.”
The old ‘do more with less’ conundrum that all public sector departments are wrestling with.=
Leaders from Trade Unions, the accountancy world, CBI employees’ group and justice campaigners are together expressing their concern about the consequences of these huge cuts. It is revealing that such otherwise disparate groups are unified in their alarm at the potential results of the government’s actions, which reach well beyond the walls of HMRC into the lives of all British citizens.
