On 23 July 2007, the Treasury Committee published a report which focused on progress of the efficiency programme launched as part of the 2004 Spending Review.  The aim of the 2004 Review was to identify ways of improving efficiencies in public services to release resources which could be better used in education, healthcare etc.  It set ambitious targets for:

• Monetary savings
• Reduced numbers of Civil Servants
• Relocation of Civil Servants from London and the South East

But, in doing so, to maintain the level of service provision.

What were HMRC’s targets?

• Reduce staff numbers by 16,000 (full-time equivalent posts) by 1 April 2008, comprising a reduction of 12,500 posts and redistribution of 3,500 to ‘front-line’ activities.
• Secure monetary savings with an annual value of £507million by 2007/08.
• Relocate a total of 4,250 staff out of London and the South East by 2010.

What did the report find? 

The merger of the former Inland Revenue and HM Customs & Excise into HMRC was expected to achieve cost savings, coupled with an increasing focus on electronic services such as online filing of tax returns, which are ‘more convenient for [the taxpayer] and more cost-effective for government’.  The initial spending review therefore set stretching targets for the new body’s combined efficiency. 

Efficiency’ is defined as achieving cost savings without reduced service quality otherwise any changes are just a cost-cutting measure. 

The report questions who currently judges whether cost-savings are achieving efficiencies or simply cut-backs and stresses the need for external validation of results.  At present (and somewhat worryingly) HMRC is left to give its own assessment that cost-savings have not resulted in deteriorating service levels.  As HMRC failed to convince on this score, the report reiterates calls for the government to accept the need for independent monitoring – a plea which has hitherto been rejected.

The LITRG experience

In our experience:

• Quality of service has deteriorated, for example through increased reliance on call-centres and the resulting inability to speak to an adequately-trained member of HMRC staff. 
• There is a need to focus on the individual, in particular those who rely totally upon HMRC for their information. These tend to be those who have difficulty travelling, have little access to online services and find HMRC communications challenging without the aid of face-to-face contact, access to which has diminished. 
• Administrative burden has been shifted onto individuals and their agents.  Problems previously resolved through one point of contact can now take three or four attempts. 
• Greater reliance on online technology and the telephone has increased the burden on individuals, albeit this may have been unintentional. 

HMRC’s own performance statistics (measured against Public Service Agreement targets) indicate that service standards have not deteriorated, but the report acknowledges that performance against these targets ‘may not translate into improved service delivery’.  For example, it highlights an anomaly in the tax credit statistics which shows that although 97% of tax credit awards are processed accurately, only 40% of payments are in fact correct.  A clear case of measuring the wrong figures (a subject which LITRG has raised frequently in the past…..see our article Why do HMRC bother with service standards? ). 

The Chairman of HMRC agreed they are ‘committed to working increasingly closely with…agents, representatives of organisations that speak for the unrepresented’.  This is very welcome, if the close working is done in partnership mode and in advance, rather than consulting after “we have already decided what we want to do”.

The report concludes that HMRC’s measures of service are inadequate and recommends:

• HMRC devote high priority to preparing measures of service quality
• These are to be devised in consultation with relevant groups
• These measures should be used in making wider HMRC policy on services
• Performance is measured against these new standards;
• External monitoring is put in place.

We can only agree.