NAO Report On HMRC's Cost Savings

"In 2011-12 HMRC maintained its performance while reducing staff and spending but it is too early to tell what the long-term impact of cost reduction will be."

That is the overriding conclusion of the National Audit Office (NAO) report published yesterday entitled "HM Revenue and Customs: Progress on reducing costs".

Amyas Morse, head of the National Audit Office, 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."

HMRC made £296 million of savings in 2011-12, exceeding its target by 19%:

• It reduced staff numbers by 2,400 full-time equivalents and improved staff productivity, saving £140M.

• The government froze pay increases for which HMRC had budgeted in 2011-12, saving £29M.

• HMRC reduced the price it paid for IT equipment, such as laptops, and services, such as IT support helplines, by £74M.

• HMRC vacated 118 buildings fully and 28 partially, reducing the size of its estate by 138,000 square metres and resulting in savings of £26.8M.

• It reduced the cost of other contracts, such as those for postage and printing, by, for example, reducing the amount of unnecessary information HMRC sends to customers, saving around £26M.

HMRC needs to make new savings of £585M a year by 2014-15 as well as maintain those savings already made. At September 2012, HMRC was on track to exceed its 2012-13 cost reduction target by £29M. However, the reduction in planned savings being delivered by change projects means that HMRC needs to find £66M more savings than it originally planned through other initiatives. As at July 2012, HMRC had not fully worked out where these additional savings in 2013-14 and beyond would come from.

A spokesman for HMRC told the BBC:

"We are now taking a more strategic approach to managing our resources resulting in us answering phone calls faster and turning post around more quickly than ever before."

All fine and dandy, maybe.

However, I have a question on the subject of cost reduction for both HMRC and the NAO, why does HMRC pay £8 per lever arch file?

Tax does have to be taxing.

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