Whatever else you could say about Dave Hartnett, former policy chief of HM Revenue & Customs, he doesn’t lack a sense of humour. As one of Whitehall’s more colourful characters, he will need all the cheer that he can muster to find his way through the department’s biggest crisis in years.

What's happened?

Not since the Mapeley affair, when HMRC sold properties to a company based offshore, has the department suffered such ignominious press coverage. Perhaps not even then.

Every serious national newspaper in the country led last week with the news that
the department had lost computer discs containing all the bank details of every child benefit claimant in the country, relating to 25 million people.

The data loss is one of the largest ever, by any organisation across the globe.
It caused Paul Gray, the chairman of HMRC, to quit after only eight months in the job, and Hartnett has stepped in to take his place on an acting basis.

What's going to happen?

Hartnett has long been well known in the tax profession as someone whose mastery of detail has made him the most important person to know on tax issues. A former tax inspector, the question will now be: is he chairman material?

The problem he faces is that his department is desperately demoralised. Staff do not know how long they will be in their jobs, budgets are being slashed by 5% in real terms year on year, and they are subjected to patronising edicts about where they should leave their packed lunch. A lecture on how capital gains tax works isn’t going to cut it. He must, in the first instance, accept some dull but worthy advice about IT security, a subject that is uninteresting until things go terribly wrong.

Hartnett will have to manage the investigation of how the discs went missing without demonising staff further, but also without appearing to go soft in public.

He may also, if he gets the permanent post (and there can be few better candidates), need to restructure the department. The whispering about Sir David Varney’s McKinsey structure and confused accountabilities must be laid to rest.

Above all, Hartnett has to step up a level. The world of tax is, despite its impact, small and clubby. The new acting chairman of HMRC now has parliament to satisfy, and 25 million members of the British public who want to know what on earth has gone wrong.