Much has happened at HM Revenue & Customs since the two CDs containing the personal details of 25 million people were reported missing last November.

Dave Hartnett has taken over as acting chairman, the capability review findings have been published and Kieran Poynter has issued an interim statement on the data loss. While these moves are welcome, in my view, the question still remains: was the loss linked to the job and cost cuts demanded by the change programme HMRC is currently implementing?

HMRC and ministers have argued that there was no link, but it is hard to believe that any organisation ­ public or private sector - could survive cuts of 25,000 staff from a workforce of 94,000 without problems. If HMRC is to deliver the service standards it aspires to, it must be properly resourced. The capability review, perhaps predictably, steered clear of suggesting that more resource was required but made several recommendations regarding management and control.

Hartnett responded immediately by making senior level management changes designed to increase departmental effectiveness. He also, as Kieran Poynter confirmed in his interim report, ensured that HMRC took extensive action in the days following the discovery of the loss of the CDs to bolster data security.

The task facing Hartnett is huge, the CD loss coming at the end of a year that saw unprecedented levels of dissatisfaction among the ICAEW members with HMRC.

Will 2008 be any better? I am hopeful that it will. Processing times for VAT registrations have been improving steadily over the last few months ­ something that Paul Aplin and Frank Haskew, chairman and head of our Tax Faculty, lobbied hard on last year ­ while HMRC looks set to start 2008 by hitting its target of 70% of routine applications being processed within 14 days.

I do not expect to see all of the service issues resolved in 2008 but I am cautiously optimistic that we will see tangible results from the extensive lobbying of 2007 and that our policy of constructive engagement with HMRC will be vindicated.

I am encouraged by the management changes that Hartnett has made, but I remain concerned that Hartnett’s zeal will be blunted by pressures on resources. HMRC is starting to head in the right direction but the next few months will be critical.
Michael Izza is chief executive of the ICAEW