Revenue's axe wielding trims spending
In the year ended 31st March 2012, HMRC made £296 million of savings, exceeding its target by 19%, according to a recent National Audit Office report. This represents around a third of the total savings the department is required to make over the four years of the spending review period.
HMRC achieved its savings in five key areas:
(1) Staff
Around 2,400 full time equivalent members of staff were forsaken, saving £140 million.
(2) Pay increases
Budgeted pay increases were frozen achieving a saving of £29 million.
(3) IT equipment
By reducing the price paid for IT equipment and services, such as IT helplines, HMRC achieved a saving of £74 million.
(4) Buildings
HMRC vacated 118 buildings completely and 28 partially, reducing the size of its estate and saving £26.8 million.
(5) Other costs
The cost of other contracts, such as postage and printing, were shed producing a saving of around £26 million.
Improved productivity by reducing management layers, efficient working methods and curtailing sick leave, made HMRC meaner and leaner as it exceeded its overall target for collecting additional tax revenues, maintained tax collection and reduced the level of tax debt.
HMRC has to make new savings of £585 million a year by 2014-15 as well as maintaining savings it has already made. By that time the department anticipates a total staff loss of 10,000 full time equivalents and further reductions in its estate.
As at September 2012 the Revenue was on track to exceed its cost reduction target for 2012-13 by £29 million.
Amyas Morse, head of the NAO said:
"In one year, HMRC has managed to deliver a third of the savings it is required to deliver over the four years of the spending period, at the same time as maintaining performance in key areas such as maintaining tax collection and reducing tax debt.
HMRC is moving from making tactical efficiency savings and quick wins towards a more strategic approach to managing its resources. We recognise the importance of this change and note that
HMRC is addressing PAC and NAO recommendations in the process. The big challenge ahead will be to make more and deeper spending reductions without impairing its performance."
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