PAC raises fresh and historical concerns about HMRC performance
In its review of HMRC’s performance in 2015/16, the Public Accounts Committee (PAC) have not only identified new concerns but also some familiar ones too.
HMRC are becoming more reliant on new digital services to transform the department and reduce demand on its call centres. It is vital that they make a success of this to safeguard tax revenues and ensure that it provides an acceptable level of service to all taxpayers. It is therefore essential that HMRC avoids repeating the same mistakes from two years ago when it reduced the number of staff in its personal tax service prematurely, which resulted in a disastrous decline in service to the public.
The PAC remain concerned that HMRC does not pay close attention to whether tax reliefs are being misused or provide Parliament with sufficient information on the costs of tax reliefs and their effectiveness.
HMRC’s contract with Concentrix to investigate cases of potential fraud and error has been described as a complete failure by the PAC. Concentrix’s actions have resulted in many tax credit claimants being wrongly accused of fraudulent claims and thereby losing their payments, resulting in unnecessary distress and hardship. The PAC have told HMRC that they must ensure lessons are learned from how this contract was designed and managed to ensure that such a calamity never happens again.
Selected conclusions and recommendations
Measuring the tax gap still unclear
During the last 10 years there has been a downward trend in the difference between the amount of tax that should, in theory, have been collected by HMRC and what is actually collected, ie the tax gap. Although HMRC’s estimates fluctuate from year to year the figure has fallen from 8.3% in 2005/06 to 6.5% (£36 billion) in 2014/15. Nevertheless, the PAC think that the Revenue are “painting too rosy a picture” of its success in closing the tax gap.
HMRC should report on the effect its work to generate compliance tax yield is having on its efforts to reduce the tax gap.
Lack of contingency planning
In the face of having to deliver spending cuts, HMRC face a huge challenge to maintain services, restructure the department, replace its IT provider following the parting of the ways with Aspire, and at the same time relocate virtually all its staff and deal with the implications of Brexit. HMRC have already lost its Chief Digital and Information Officer as a result of market pressures and were it to lose further key staff then this would damage the department’s capability to deliver transformation. HMRC are committed to reducing staff in its personal tax service by a third in the next three years. When HMRC made 5,600 staff reductions in 2014/15 that same service collapsed forcing the Revenue to recruit an additional 2,400 staff members the following year to stabilise services.
Whilst HMRC have given assurances that it will seek additional resources if digital services do not reduce demand for personal tax services as it expects, nevertheless the PAC are concerned that it has not agreed any contingency plan with the Treasury for such an eventuality. The PAC therefore want this addressing by March 2017.
Too many complaints
The PAC’s recent report on quality of service to personal taxpayers highlighted that individuals collectively spent more than four million hours waiting for HMRC to answer calls in 2015/16. Whilst this has since improved, complaints have increased. In that same year HMRC received 80,400 complaints, which was up 6,000 on the previous year. Of the 1,808 complaints referred to the tax adjudicator in 2014/15, 85% were upheld in part or full. HMRC accepts that there is something wrong with the way it currently handles complaints and is reviewing its procedures.
Unnecessary hardship and suffering caused by the Concentrix debacle
In 2014, HMRC signed a contract with Concentrix to provide additional capacity to tackle fraud and error in the tax credit system on a payments by results basis. Despite HMRC giving assurances in July of this year that things were improving, following PAC concerns about the contract and the treatment of claimants, a month later service levels collapsed. Concentrix had failed to cope with an increase in call numbers following a letter it had sent to a large number of claimants. In particular, in the third week of August the basic levels of customer service provided by Concentrix deteriorated to the point that less than 10% of phone calls were being answered within five minutes. As a result, HMRC terminated the contract and cleared all of the 181,000 incomplete cases it inherited from Concentrix. During this time, around 250 Concentrix staff were transferred to HMRC.
This is not the end of the matter as the PAC will look at this subject in the New Year when the results of a National Audit Office investigation are published.
In future, HMRC must ensure that it has clear customer service standards regardless of whether it or one of its contractors delivers the service.
The challenges that lie ahead for HMRC in the short term future should not be underestimated but, following this latest report, one is left wondering whether the department is guilty of that themselves. Boy scouts they are not but HMRC would do well to adopt their motto, ‘Be Prepared’, otherwise further chaos will only follow.
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