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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HMRC's Emissions

Congratulations to HMRC for winning the Best Large Public Sector Fleet title for the second year running, and the Business Mileage Management award for the first time. It was also runner up in the Leadership – Public Sector category!

The Awards are organised by the Energy Saving Trust, and supported by the Guardian and the CBI.

Pete Gleeson, Category Lead Travel and Transport at HMRC, told Public Sector Travel:

"I am delighted to receive these awards on behalf of HMRC, which recognise the work of our fleet team and pays tribute to the efforts made across HMRC.

We will now be turning our attention to what more can be done to reduce fleet/emissions further in 2011."

As noted, HMRC also won this last year and what I said then probably still applies:

"I assume that this hasn't been achieved by managers ditching cars and flying instead?

It would be interesting to see if flying miles during the last year have increased/reduced or remained static."

I refer to two comments made by readers at the time:

"Talk of saving CO2 is a nonsense.

Now that officers have to travel into the office first to pick up the pool car for their visits, it means that actual journey times and mileages and CO2 are greatly increased - but then again, the first leg of the journey doesn't count in the stats and HMRC and Gordon Brown's crazy world of Off Balance Sheet Financing."

"I wouldn't believe a word they said.

Since a mangers team could include staff in Belfast, Edinburgh or somewhere in England these people are never out of airports and jumping in taxis.

HMRC are a fucking laugh spouting off all this positive info. When you asked for some clarification on the departments restructuring or simply the future, it was like talking to a pack of dummies.

Plus should the overall costs not be down anyway considering that thousands of disillusioned staff have fucked off out of the place over the last few years?

A den of iniquity."

Comments on the reality of these energy/emissions savings welcome!

Tax does have to be taxing.

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OBR Predicts Failure

The Office For Budget Responsibility (OBR) seems to be unimpressed with government/HMRC attempts to close the "tax gap", and government/HMRC bluster about tackling avoidance (perfectly legal) and evasion (illegal).

In short they have dismissed the bluster, and have ignored it.

Page 99 of the OBR November 2010 report states the following:

"Forecasts for tax receipts do not generally include any explicit assumptions about changes in the level of tax compliance. For most taxes, an implicit level of compliance will be reflected in the current level of receipts. In most of the tax models, the current level of receipts will be projected forward using the most appropriate set of economic determinants. Effectively we are assuming that the level of compliance remains constant as a proportion of overall tax revenues. The one
exception is the VAT forecast, where the forecast explicitly projects a VAT gap, the difference between the theoretical tax liability and actual receipts.

HMRC published a document in September on Measuring Tax Gaps 2010 which indicates that the tax gap for HMRC taxes (the difference between tax collected and tax that should be collected) has been close to £40 billion in recent years.a Specific factors such as Missing Trader Intra-Community (MTIC) fraud and a rise in VAT debts during the economic downturn have affected compliance in particular years, but in general the tax gap has been broadly stable. This was achieved against a 2007 HMRC Spending Review settlement of a 4.9 per cent real reduction per year.

The Spending Review 2010 settlement for HMRC included overall resource savings of 15 per cent. This assumed 25 per cent efficiency savings and a £900 million investment to address the tax gap and tackle tax avoidance and evasion. This included measures to increase criminal prosecutions, tackle offshore evasion, extend HMRC’s coverage of high risk areas and the greater use of debt collection agencies.

Inevitably there are always large uncertainties about the effects of both the efficiency savings and additional investment. As a result, we have not included the impact from either factor in the November forecast. If improvements in tax compliance do occur, receipts outturns would come in above what was implied by the economic determinants. At this point they would then be incorporated into the tax forecast. The same would apply in reverse if HMRC savings led to a loss of compliance yield for any tax."

Tax does have to be taxing.

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Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

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"Efficiency" Savings

There was a rather interesting take on the effectiveness and value of the "efficiency" savings being implemented by government organs, such as HMRC, in yesterday's Guardian.

In effect the Guardian reasons that costs are not being saved, but are being swept under the carpet and being passed on to others attempt to clean up the less left by a newly "efficient" and "cost effective" government organ:

"Look at the "cost savings" made at the Department for Work and Pensions and HM Revenue & Customs. Both these flagships of public-sector reform have been subject to top-down makeovers along approved factory lines. Dumbed-down "front offices" sort and feed incoming cases to specialised processing sections in the "back office" in the belief that these mass-production techniques will cut the unit cost of transactions and harvest economies of scale.

Even in manufacturing, economies of scale lost their grail-like allure when the Japanese discovered how to make small quantities of different, high-quality goods cheaply. In services the case is at best unproven (banks, anyone?), and so far the successes in shared services are few and far between. But even if they do make transactions cheaper, that's irrelevant if from the citizen's point of view the service is worse, requiring more transactions to put right. And it takes no account of the disbenefits of the efficiency measures elsewhere in the system.

Thus the HMRC and DWP cost savings recorded in official figures reappear, with interest, in the workloads of harassed local councils, housing associations, police, courts and advice agencies. They have to pick up the pieces left by the failure of HMRC and DWP's demoralised staff and fragmented processes to provide an acceptable (rather than cheap) tax and benefit service.

Much of the work of the UK's voluntary advice organisations now consists of dealing with mistakes affecting the most vulnerable in society perpetrated by New Labour's efficiency flagships."

Tax does have to be taxing.

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