The Revenue took on 7,000 new staff in the year to April, putting much of the rise down to preparation for new tax credits.
E&Y branded the new system wasteful, as new figures also revealed the government was likely to overshoot its public sector borrowing forecasts by about £10bn.
Anne Redston, tax partner at E&Y, said it would be far simpler if people on the minimum wage were not required to pay relatively large amounts of national insurance in the first place.
‘We have one army of bureaucrats taking tax and national insurance off them and another army of bureaucrats who have to give it back and that’s very expensive,’ said Redston.
‘What we have now is a very complex system, so of course you need more people. These numbers are a consequence of the broader means tested approach to the tax and benefits management. It comes with a very high cost.’
For September, the public sector net cash requirement was more than £2bn above forecasts at £8.6bn. It was the largest-ever gap between tax revenue and spending, raising the possibility that the chancellor may need to raise taxes ahead of the next election.
Overall, the government revealed that the number of civil servants had risen by more than 22,000 to 512,400.
‘I think it’s likely that this tax credits system is going to cost far more thanthey expected,’ Redston added.
The figures showed government spending had increased by 10%, while tax revenues are rising at a rate of just 6%. It came as the government announced a new drive to improve efficiency, which could lead to thousands of public sector workers redeployed.
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