Everything Is Wunderbar!

My compliments to Phil Pavitt (Chief Information Officer of HMRC), who is now rather ubiquitous in the media and is currently outshining Lin Homer in the "column inches" devoted to his achievements.

Recently I noted that Pavitt was proudly claiming that he/HMRC had halved HMRC's spending on IT from £1.4BN to £700M in two years. I was "shocked and appalled" by the reactions from some of the cynics within my loyal readership, who suggested that Pavitt may be telling porkies:

"Those of us who have followed the, erm, spotty career of Phil "Employment Agency " Pavitt will understand that his relationship with the truth has always been somewhat difficult..........."


"One suspects most of the 'gains' have come from consolidating software onto fewer physical boxes and using more 'virtualisation' as this is the flavour of the month in IT at the moment. However, the fact you are running a virtualised Windows server on a machine that is also running a virtualised Unix Server etc does not mean you have any less operating systems or software to support just less hardware.

So Pavitt's claim to have only one platform is almost certainly being extremely economical with the truth Since much of the cost is taken up by the former not the latter I doubt that these 'savings' are going to be around for long as overtime software license increases will eat into the savings.

Virtualisation can create its one issues as shared resources such as disk, memory and cpu capacity may have to upgraded over time if one of the systems using the resource has been poorly specified and is subsequently found to need much more grunt. For example, general upgrade of CPUs on shared machine can feed directly into the bottom line as licensing costs of software are often based on CPU Mips. Thus if you enhance the CPUs on a box because one system or application needs more processing speed then all the other systems software licenses may also be hiked regardless of whether they need the extra power or not. 

This is the ticking time bombs Pavitt is leaving for his successors."

Such cynicism has not deflected Pavitt from telling the world about another saving (I assume that this is on top of the £700M IT saving that he was talking about the other day?) that HMRC has made. Apparently, HMRC will save more than £200M by 2017 after renegotiating its Aspire outsourcing contract with Capgemini.

Aspire covers IT services including desktops, laptops and a number of tax and credit systems such as online VAT filing. The contract, which is led by Capgemini and includes some 360 other suppliers, was renegotiated in January.

It most certainly needed some renegotiation, for as I wrote in February 2012:

""The Aspire contract between HMRC and Capgemini covers a 13 year period and was originally valued at £2.8 billion.[49] This contract is a case study of what is wrong with the present procurement culture. Such a large contract is too complex to manage. The assessment of costs and benefits is opaque and it commits too much power and money to a single supplier."

Anyhoo, as well as lowering the cost per unit of IT services, the renegotiations will give HMRC greater control over the volume of work going through Aspire, according to the Cabinet Office. HMRC will also be able to control the Aspire subcontractors directly, which was previously the responsibility of Capgemini.

Pavitt is quoted by the Guardian:

"No longer do we have a unique SI relationship with Aspire and Capgemini.

We have introduced competition at all levels. There's no longer exclusivity between us and our partners."

HMRC is currently introducing 25,000 new PCs to its offices, and Pavitt claims that its IT service levels were at 99.93% "our best ever".

Pavitt said:

"We have cut our IT costs, transformed IT and made it sustainable, stabilised our services and reorganised our business processes. We have some way to go still, but we are delivering sustainable change."

So there you have it, everything is wunderbar!

There is no stopping this man!

However, I am always interested to hear from those of you who have to use the systems and have insight into the reality behind the claims made by Pavitt. Let us trust that he does not seek to emulate Icarus and fly to close to the sun.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



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

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

War Is Declared II - Hodge Speaks Out

As I noted on Tuesday, today is the day when Margaret Hodge (Chairman of the Public Accounts Committee) is going to make a speech at Policy Exchange (a think tank) in which she fans the flames of the war between the mandarins in Whitehall and PAC.

I understand that she will call for the Freedom of Information Act to be extended to companies and other organisations that deliver government services.

Now this would be very useful for those of us with an interest in HMRC, given that a large number of crucial functions (eg IT, printing etc) have been outsourced to the private sector. It would be very interesting for example to learn if contracts with these companies have penalty clauses for when projects are delayed, fall apart or when services fail (eg printing errors etc).

Anyhoo, by way of a taster for today's speech the BBC have provided some extracts:

"Lately, it seems that the Public Accounts Committee has been rattling the cage too much for some.

There are those who say that shows we're doing our job properly, but there is a real challenge from the civil service on how we are approaching our work on behalf of Parliament and the taxpayer.

Some have upped the ante, even asserting that the PAC's activism affronts some constitutional principle - of which the civil servants consider themselves custodians. Anonymous briefings suggest that some would even like to dismantle the committee itself...

But it's our job to blow the whistle and shout loudly when the evidence before us is that the executive is not doing a good enough job. That is going to be uncomfortable for both ministers and the civil service."

Regarding GOD, now Lord O'Donnell, she will say that in a letter he wrote to her shortly before retiring he:

"..berated me for the way in which the Public Accounts Committee was seeking to hold the executive to account.

He was particularly exercised about the hearings we had held during the autumn involving HM Revenue & Customs investigating how it had tackled tax disputes with large corporations and specifically the settlement it had made with Goldman Sachs.

It was as if he had taken on the role of shop steward for aggrieved permanent secretaries.

 ...old doctrine of accountability isn't fit for the 21st Century.

It's our job to blow the whistle and shout loudly when the evidence before us is that the executive is not doing a good enough job. That is going to be uncomfortable for both ministers and the civil service.

Rather than responding defensively, the civil service should embrace the opportunity. It is in all our interests for this to happen. It will help all of us to deliver better public services with better value."

Regarding the exchange of letters between Ms Hodge and GOD, Exaro have a copy of Hodge's response:

"Dear Gus,
 
Thank you for your letter of December 20, which I now understand has been widely circulated across the civil service.

I was rather surprised by your criticisms about the way the public accounts committee conducted our inquiry into HMRC’s handling of tax disputes with large corporations. As you are aware, £25 billion is outstanding in unresolved tax bills and the role of HMRC governance is critical in explaining why this substantial sum remains unresolved.

As a direct result of the committee’s inquiry, major systematic failures in the governance of HMRC and the way it handles tax disputes with large companies were uncovered. In several of the largest settlements examined by the National Audit Office, the department did not comply with its own procedures, and the same senior officials were involved both in negotiating and in approving deals, which is simply inappropriate. 

In the case we looked at, Goldman Sachs, there were extremely serious questions about the role played by the permanent secretary for tax [Dave Hartnett], whether appropriate legal advice was sought and acted upon, and the veracity of the evidence he gave to the Treasury select committee.

The committee was very disappointed by the failure of senior officials to assist us actively and answer our questions in a spirit of openness and transparency. Some of the evidence given to, and seen by, the committee was, at best, inconsistent and, at worst, misleading.

• First, there was a clear discrepancy between Dave Hartnett’s statement to the Treasury select committee on September 12, 2011 that “I know nothing of Goldman’s tax affairs… I do not deal with Goldman’s tax affairs,” and the internal minute of the meeting that took place in Anthony Inglese’s office on December 8, 2010, which referred to “a deal on which DH had ‘shaken hands’ with GS” to settle an outstanding tax dispute.
• Second, at our hearing on October 17, 2011 Mr Hartnett told us that he had informed Mr Inglese, as HMRC’s most senior lawyer, that there had been a mistake with the Goldman’s settlement on Monday November 22, 2010 – the day the mistake was identified – or “very soon after”. At our subsequent hearing on November 7, 2011, Mr Inglese told us that Mr Hartnett had not informed him of the mistake until December 7, 2010, more than two weeks after the deal had been done on November 19, 2010.
• Third, at our hearing on October 12, 2011, Mr Hartnett said that no disciplinary action had been taken against anybody as a result of the mistake. However, at our hearing of November 7, 2011, he said that “the error was taken into account in someone’s annual appraisal… It affected their non-consolidated pay, because there was no pay rise that year.”

These are serious concerns that should be addressed by the cabinet secretary. However, in this case, you told us your powers were limited because HMRC is a non-ministerial department. I would be grateful if you would set out how, in these circumstances, senior officials are held to account in carrying out their duties with “honesty and integrity”.

Your letter also makes various points about constitutional matters. Over recent times, Parliament’s role in holding the executive to account has strengthened. The public’s expectations in relation to transparency and accountability are greater, and this is reflected in the way select committees approach their work. 

As a result, there have been useful developments in conventional practice that have improved accountability and public understanding. For example, on a number of occasions in recent years (such as with Sir John Gieve on the disclaimer of the Home Office accounts, Catherine Bell on government support for MG Rover and, very recently, Dame Helen Ghosh on the Rural Payments Agency) the committee’s inquiries have been materially assisted by the attendance as a witness of the department’s former accounting officer who had held responsibility and knowledge at the time of the matters under discussion. While such occasions are infrequent, I have no doubt that they have enriched the committee’s understanding and helped us to serve the public better.

If we accepted all conventional past practices we could not respond to expectations of the present. The civil service will merely be seen as having things to hide if it follows the outdated and defensive path of action you propose. Furthermore, past conventions would not help us in holding properly to account departments that do not have ministerial oversight. I hope you would agree that the lack of ministerial oversight makes parliamentary oversight even more important.

I have worked in many government departments and have the highest regard for the civil service. I have seen at first hand the commitment of civil servants, and, if you read all the PAC reports, you will see that we warmly acknowledge success and good practice. However, I believe it is the duty of the committee to pursue fearlessly the public and taxpayers’ interest whenever and wherever we deem it necessary.

You also raise concerns about our questioning of Mr Inglese. In taking evidence from Mr Inglese, our aim was simply to get to the bottom of a settlement that he himself is on record as suggesting may be “unconscionable”. His advice was at the heart of understanding the truth to a particularly tangled and unacceptable story. Requiring a witness to swear an oath should indeed be a rare step, taken only in exceptional circumstances. I am surprised that you are not more concerned about the circumstances that made it necessary on this occasion.

Finally, in your successful time as cabinet secretary and head of the civil service you have dedicated a considerable part of your tenure in trying to deepen its capacity – an enterprise in which the PAC has been an ally. Now you have moved on and I wish you well. I look forward to my committee working constructively with all those who succeed you and all those called to give evidence in the future.

Yours sincerely
Rt Hon Margaret Hodge MP
Chair of the Committee"

A well written and scathing response to GOD (BTW, Goldman Sachs rather hit the headlines yesterday courtesy of Greg Smith).

The key to the problem of oversight and accountability, is that HMRC is non ministerial department. However, the risk of placing it in the hands of a minister is that it becomes more politicised than it is already; when in fact it should be (at its "simplest") a non partisan bureaucracy that collects taxes in the most cost effective and efficient manner possible.



Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



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

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Death and Taxes - HMRC To Improve Service To Bereaved

The Guardian recently published an article about a mix up emanating from HMRC, which caused HMRC to fine the deceased mother of one of its journalists for the deceased failing to send in her self assessment on time.

Seemingly HMRC knew full well that she had died because it did not send its penalty demand to her house, but to her son at his home address.
Quote:

 "As power of attorney for Mrs B Levene, Deceased".

Power of attorney ceases on the death of the person who grants the power, the bank accounts are frozen to protect the beneficiaries of her estate and the executors of the estate take over. They cannot act, however, until probate is completed.

HMRC, when contacted by the journalist, said:
"We are extremely sorry for the errors in this case and the distress these have caused. 

These should not have happened and resulted from human error. 

There is no question of a penalty being payable and we are writing with a full explanation and apology."

HMRC added that it was in the process of reviewing how to improve its service to the bereaved.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



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

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

War is Declared!

Now here's an interesting thing, last year's public drubbing of "Jack" Hartnett and HMRC's General Council Anthony Inglese (who was forced to take an oath) by the Public Accounts Committee (PAC) over HMRC's handling of the Vampire Squid and Vodafone has not gone down well with the civil service.

As I noted in December last year:

"When it comes to self loathing, no one and nothing does it better than politicians and the State; especially when they viciously turn on one of their own departments.

Therefore it should come as no surprise whatever to read the "public damnation" of HMRC by the Public Accounts Committee ."

Anyhoo, senior mandarins are less than gemused and have, according to Exaro, "declared war" on MPs over the constitutional implications of civil servants being treated in this manner.

Such is the anger felt by the mandarins that GOD himself (the recently retired Gus O'Donnell) wrote to Margaret Hodge (Chairman of PAC), at the end of last year before he was elevated to the Lords, to tell her that civil servants should not be accountable to Parliament and are only accountable to ministers.

In the letter to Hodge GOD accused PAC of using the hearings as a “theatrical exercise in public humiliation”, adding “praise certainly can be a more effective tool for change than blame.”

Hodge is making a speech this Thursday in which she is expected to reveal the contents of a dossier of anonymous, highly critical comments from civil servants and government lawyers who object to PAC's conduct.

At the very centre of the storm is the treatment of HMRC's Hartnett and Inglese.

Hodge is quoted:

"I would agree that Whitehall seems to have declared war on Parliament.”

Aside from Thursday's speech by Hodge, which will stir things up, PAC is adding further fuel to the fire with its ongoing examination of contracts that allow senior civil servants to avoid tax.

This "war" between mandarins and Parliament will of course do nothing to help HMRC improve its service or internal moral; as its failings/improvements will be used as a political football by both sides.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



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

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Communications Confusion

Child tax credits continue to cause confusion, not just for the recipients but also for HMRC.

The Telegraph reports that HMRC sent out letters last month to recipients of child tax credits, stating that the maximum income for a family to be eligible for the benefit will be £26K as from April 6. The letters warned that child tax credit would end for families with income above £26K, unless they got in touch with the HMRC:

"For Child Tax Credit the income limit is £26,000 for both single and joint households."

Whilst this is correct for a household with one child, it is not correct for households with more than one child; families with two children will be entitled to credits, if their annual income is less than around £32,200.

HMRC have admitted that the letters were not that clear, and are quoted:

"We accept that a recent letter sent out to some tax credits claimants was not as clear as it could have been. 

We apologise if any confusion has been caused."


What was it  Mark Holden (the RTI Programme Director) said recently (granted he was referring to RTI, not something as "mundane" as tax credits)?

"...so the real thing for us is making sure the communications are clear, making sure the guidance we are publishing is in plain English..."

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



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

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

MP's To Examine HMRC's Legal Status

The Treasury subcommittee is worried about HMRC's accountability and transparency. As such it wants to conduct a detailed examination into HMRC's legal status.

The FT reports that MPs are concerned about the "tension" between HMRC's need for political independence and the public’s right for it to be accountable.

The subcommittee notes that because HMRC is not led by a government minister it means that “ministers are unable to bring about changes in HMRC even where they are clearly needed.”

Let us "hope" that ministers do not use this as an excuse to politicise HMRC.

The subcommittee was also less than impressed with HMRC’s approach to the “tax gap” – the difference between the amount of tax it thinks is owed and the amount it actually receives. The subcommittee was not convinced the process of calculating, publishing and publicising the tax gap was a sensible use of HMRC’s limited resources.

All very well, but the mess that HMRC finds itself in is as a direct result of the actions by politicians of various political hues over many years.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



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

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"