The government's 'Spend to Save' programme, introduced three years ago as part of plans to improve tax collection, has yielded little more than half its original £2bn target.
The three-year initiative – unveiled by former Chancellor Kenneth Clarke in the 1996 budget and introduced in April 1997 – was designed to raise tax revenues and clamp down on fraud and evasion.
But Accountancy Age has learned that Revenue estimates put expected savings well below their original targets.
The Inland Revenue was expected to spend £187m in a bid to establish savings of £1.95bn over the three years. However official figures suggest the department has spent £150m and will save only £1.4bn by the time the scheme winds up in April.
Privately the Revenue admits the amount likely to be brought in will be even lower than that due to collection problems. One of the biggest problems has been the number of companies going into liquidation before paying their tax liability. As a result it is believed the final figure may be as low as £1.1bn – barely half of the original target.
The initiative will now be dropped in March. The Revenue said the 2000 staff recruited as part of the initiative would retain their jobs, while the increased efficiency in compliance and investigation work would continue without the Spend to Save banner.
Despite the shortfall in projected savings, Peter Dennis, the Revenue’s Spend to Save programme manager said the initiative had been an overwhelming success.
‘The initiative has given us extra compliance and investigation support across all bands from small local businesses to highly technical international businesses. It has clearly been a success as these savings are money that wouldn’t otherwise have been raised,’ he said.
Chantrey Vellacott tax partner Maurice Fitzpatrick, said: ‘Although in common with all tax professionals we as a firm have taken Spend to Save seriously we always thought the yield envisaged in the 1996 budget was over estimated – and so it has proved.’
Meanwhile Customs and Excise – along with the social security department, the other major participant in the initiative – was projected to spend £88m in a bid to bring in additional savings of £2.25bn.
An official said this week it expected to do so. ‘We have met or over-achieved all our targets,’ he said.