HMRC cost-cutting and service improvement a "huge challenge"

THE TAXMAN faces a mighty challenge in making a £1.6bn reduction in running costs while improving customer services and tax take, warns the National Audit Office.

The cost-cutting schedule has a 2015 target. HM Revenue & Customs has cut £1.4bn since 2005. A further 10,000 staff will also be cut during the period.

While the Taxman has defined clear opportunities for cost-cutting, it has "not yet sufficiently defined" its performance and customer service levels for the next four years.

HMRC has only limited information on the cost of its end-to-end processes and on the cost of servicing different customers groups. It also has a limited understanding of the link between the cost and value of its activities, the NAO found.

There is no allowance for slippage or under-delivery, the NAO noted, with no reserve of proposals on which to draw.

Planned reductions and estimated savings require better testing, for example in its plans to reduce sickness absence.

Amyas Morse, head of the NAO, said: "Reducing running costs by £1.6bn over four years is a big challenge for HMRC.

"It is making progress but there is no contingency in its plans. To achieve value for money, it needs to better define the service it is aiming for, improve its understanding of costs and develop its implementation plan."