In its recently published paper, 'Reducing Costs in HM Revenue & Customs', the National Audit Office (NAO) has criticised the Revenue's cost-cutting measures for posing substantial risks and lacking certainty. It said HMRC had a “limited understanding” of the link between cost and value of its activities which had “restricted its ability to assess fully the impact of cost reductions on business performance”.
HMRC has been set the task of reducing its operational costs by £1.6 billion by 2015 whilst at the same time increasing revenues, improving taxpayer service and achieving reductions in welfare payments. Since 2005, HMRC has reported savings of approximately £1.4 billion and given that the landscape of the department will substantially alter as it reduces staff numbers by 10,000, sheds a number of its offices and cuts spending in the provision of IT, HMRC is facing a significant challenge according to the NAO.
Whilst the NAO acknowledges that HMRC has a clear vision for their spending review and has begun implementing its cost saving plans, the department has not yet established a defined operating model for business performance and achieving service targets. Some of the Revenue's measures such as reduction of sickness absence and PaceSetter (the programme designed to streamline business operations and criticised by the NAO for not providing value for money) have yet to be tested and the NAO say it must build greater confidence in its cost saving plans. The NAO further rebuked HMRC for making no provisions for under-delivery or slippage and for having no contingency plans.
HMRC responded to the NAO report by stating that it was very clear on its key objectives by 2015. Early term school report remains, 'Must pay more attention and could do much better'!
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