NAO report highlights lessons for HMRC’s future digitalisation plans

AN INCREASE in customer waiting times, plugging staff shortages by moving employees elsewhere and misjudging the impact of its “complex transition” are just a few of the problems that have engulfed HMRC in recent years, according to a cutting report by the National Audit Office.

The NAO report into HMRC’s quality of service found that its service “collapsed” between 2014 and 2015 due to staff shortages as the government department looked to cut costs.

HMRC reduced the cost of its personal tax operations by £257m between 2010 to 2011 and 2014 to 2015, exceeding the projected savings of £193m it agreed to make in its 2010 spending review settlement, the NAO said.

HMRC also reduced the number of staff in its personal tax team, from 26,000 to 15,000, as the government department eliminates 137 offices in favour of 13 regional centres.

The cuts in staff have had a profound effect on the quality of service to taxpayers, with the cost of calling HMRC’s taxes helpline increasing by 54%, rising from £63m in 2012 to 2013, to £97m in 2015 to 2016. The NAO also estimated that the increased cost to customers was £4 for every £1 saved by HMRC over the same period.

The report found that HMRC had to move remaining staff from essential work to maintain PAYE records to help improve service levels in 2014 to 2015.

“As a result, maintenance work was deferred and the stock of outstanding discrepancies in tax records requiring investigation rose from 2.4 million at March 2014 to 4.6 million at March 2015. Of these items, 3.2 million were high priority cases, carrying a risk that employees will have paid the wrong amount of tax,” stated the report.

John Cullinane, tax policy director of the CIoT, said: “This report sets out starkly what happens when government makes over-ambitious assumptions about the speed with which savings from digitalisation can be realised and cuts staff prematurely. There is a lesson here for HMRC’s future digitalisation plans.”

No sufficient contingency plan

HMRC has been accused of misjudging “the cumulative impact of its complex transition”, finding that it released too many customer service staff before completing changes to its service.

The report claimed HMRC relies too heavily upon automated telephone systems and paperless self-assessment, but did not put “sufficient contingency into its plans” when cutting staff and the number of offices.

Whether HMRC can sustain its cost reduction depends entirely on the success of its Making Tax Digital initiative, the NAO argues, highlighting that the department is “learning from its past experience that it needs to allow sufficient capacity for implementing operational and service change”.

Frank Haskew, head of ICAEW’s tax faculty, said that taxpayers have been “short changed by poor service standards” at HMRC’s call centres.

“The ability to get through to the right person quickly to resolve queries has been a major concern for some years now.

“It is worrying to hear that in order to improve call centre performance HMRC has had to move staff from maintaining PAYE records, leaving taxpayers vulnerable to paying the wrong amount of tax. More needs to be done to improve call and post handling efficiency and to ensure that HMRC gets it right first time,” continued Haskew.

In response to the report, Ruth Owen, HMRC director general for customer services, said that the average customer waiting time to speak to an advisor is currently six minutes, adding that its investment in IT and flexible working is continuing to improve more traditional customer services.

“We recognise that early in 2015 we didn’t provide the standard of service that people are entitled to expect and we apologised at the time,” said Owen. “We have since fully recovered and are now offering our best service levels in years.”

“Over the past six months we’ve consistently answered calls in an average of six minutes, and have launched new online tax accounts and webchat for everyone, enabling customers to manage their tax affairs wherever and whenever they want.

“There’s never been a better or more convenient service for our customers.”

On 13 June, HMRC leaders Edward Troup and Jon Thompson are to appear before the PAC to take further evidence on these issues, as well as HMRC’s crackdown on tax fraud.

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