HMRC launches change process to rebuild confidence

Senior management at HM Revenue & Customs has failed to inject pace,
confidence and dynamism into the department, an influential report has found.

The Capability Review, which has already seen senior management changes
implemented, found a department that is set to meet its efficiency savings but
is short on seven of its ten service-level targets.

Sir Gus O’Donnell, head of the civil service, said HMRC was on track to cut
12,500 full-time posts and has met its Gershon efficiency target of reducing
annual running costs by at least £507m, both by March 2008, and relocating posts
out of London and the southeast by April.

But HMRC is behind on cutting VAT losses and recovering direct tax and
national insurance underpayments. The taxman is also falling behind on online
tax filing figures, despite the success of the self assessment system.

Middle managers, meanwhile, are unclear about senior management’s vision for
the department’s future. Only 17% of middle managers think senior management is
effective at leadership according to the review.

Only 41% of staff are confident in the department’s management. ‘The
department needs to address a disconnect… about the ability of HMRC to set
direction,’ says the report. A restructuring of management lines and
responsibilities is required, it adds. The role of former CIO Steve Lamey, now
COO, must be clarified and the board should have separate roles for a chief
executive and non-exec chairman.

A complicated ‘matrix-management’ structure at the department ­ introduced by
former chairman Sir David Varney ­ and extensive use of sub-committees has
‘diffused accountability’, leading to an increase in risk of errors being made
further down the organisation. The matrix structure has been criticised by tax
insiders since its introduction.

In response to the report, the taxman claims it is already on the case of
turning itself around.

‘We will now create a simpler structure so that everyone understands who is
responsible for what,’ says acting HMRC chairman Dave Hartnett. ‘This will start
with an immediate review of the responsibilities of the top team and quickly
move to the rest of the department.’

The executive committee has begun clarifying its role and hopes to simplify
HMRC’s committee structure by February. Senior executives have already taken on
new core respondsibilities.

The department has ‘significant analytical capability’ and needs to use it to
better effect to measure its performance more effectively, Hartnett added. This
process should be completed by November.