Taxpayers must not bear brunt of new HMRC spending cuts

27 July 2016

The Public Accounts Committee report warns that further cuts to Government spending on personal tax services could trigger another collapse in customer service.

Report conclusions and recommendations

In their report, the Committee raises concerns about plans by HM Revenue & Customs (HMRC) to cut the cost of these services by around a third in the next five years.

Customer service levels collapsed in 2014–15 and early 2015–16 as a result of HMRC underestimating the demand for telephone contact and reducing customer service capacity by releasing 5,600 staff.

Average call waiting times tripled compared with previous levels and only recovered towards the end of 2015 after the recruitment of 2,400 new staff.

HMRC did not consider the costs to customers of providing a sub-standard service

The 2015 Spending Review settlement committed HMRC to further cost reductions by 2019–20, which it plans to deliver through digitising its services.

The Committee says before HMRC makes more cuts to staffing it must have "a clear understanding of customer behaviour to estimate how demand will change" and be confident it can maintain service standards.

The Committee concludes that during spending cuts between 2010–11 and 2014–15, HMRC did not consider the costs to customers of providing a sub-standard service.

Taxpayers spent "four million hours waiting for HMRC to answer the phone"

Taxpayers spent some four million hours waiting for HMRC to answer the phone in 2015–16 and also incurred direct call charges while on hold, with every £1 saved by HMRC on telephone services over this period resulting in an estimated £4 in extra costs to customers.

In its recommendations to Government, the Committee states:

"HMRC should estimate the cost to those using its services, including factors such as charges incurred using the 0300 helpline and time spent waiting on the telephone.
"It should use this information when considering resource needs to ensure the optimal balance is struck between its own costs and those borne by customers."

As a matter of urgency HMRC should also make “significant progress” in understanding and measuring the relationship between the quality of service it provides and tax collected.

This recommendation builds on concerns raised in the Committee's Report on HMRC's performance in 2014-15, published in November, that customer service was so bad it could be having “an adverse impact on the collection of tax revenues”.

Chair's comments

Meg Hillier MP, Chair of the PAC, said:

"The prospect of HMRC making further cuts to spending on customer service will chill the blood of many taxpayers.
HMRC's recent performance in this area has been appalling for long periods and left members of the public counting the cost in time and money.
It is bad enough that people trying to pay their fair share of tax should have been kept waiting for so long.
But holding for HMRC's helpline has hit them in the pocket too – a serious concern for those on low incomes and a dismal message to send to small businesses, the self-employed and anyone else simply seeking advice.
HMRC has serious work to do before this Committee is confident it can provide a consistent, efficient service that properly meets the needs of taxpayers and optimises tax revenue.
Efforts to meet Government spending targets must not come through ill-conceived measures that effectively penalise the people departments are intended to serve.
HMRC says it now expects average waiting times to fall below five minutes and aims to reduce this still further. We will be holding senior officials to account on this target in the months ahead."

Aspire contract replaced by Capgemini

The Report also examines HMRC's plans to replace its Aspire contract with Capgemini, which provides its major tax collection systems.

It has been the government's largest IT contract and accounted for about 84% of HMRC's total spend on technology between April 2006 and March 2014.

The Committee concludes that while HMRC is now better placed to replace this contract than it was in January 2015, it "still has important decisions to take, and work to do" and the next two years will be crucial.

Among its recommendations, the Committee urges HMRC to ensure continuity in leadership of the Aspire programme "to maximise its ability to design and introduce a new IT model successfully".

Report summary

Average call waiting times tripled compared with previous levels, transferring an unreasonable cost to taxpayers.

Waiting times only recovered towards the end of 2015 after the recruitment of 2,400 new staff but HMRC's plans to cut the cost of its personal tax services by another 34% in the next five years raise the risk of another collapse in service levels.

Customer behaviour must be understood to estimate changes in demand

HMRC needs a clear understanding of customer behaviour to estimate how demand will change and must be confident that it can maintain service levels at an acceptable level before it releases further staff.

In January 2015, the previous Committee concluded that HMRC demonstrated little appreciation of the scale of the challenge it faced in replacing its Aspire IT contract, which provides its major tax collection systems.

The Committee was concerned that the move to a new model of IT could bring substantial risks to tax collection and customer service.

Next two years "crucial" for move to new IT model

HMRC is now better placed to replace the Aspire contract and is doing so in phases which allows it to better manage the operational and technical risks. However, HMRC still has important decisions to take, and work to do.

The next two years are crucial to HMRC's ability to move to a new IT model from 2020 which lowers cost, supports improvements in customer service and protects tax revenue.

Continuity in programme leadership will significantly improve HMRC's chances of success. We will continue to track this programme.

Further information

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