Tax: Are we asking too much of HMRC?
By Donald Drysdale for ICAS
21 February 2019
At a time when many crucial aspects of delivering Brexit will fall on HMRC’s shoulders, Donald Drysdale questions whether the tax authority has been given the resources and flexibility it needs. The views expressed are his own and not necessarily those of ICAS.
Ambitious plans
Two years ago I wrote about the massive transformation programme on which HMRC were then embarking – largely in response to political pressures to cut their operating costs.
The changing face of HMRC looked at possible impacts of replacing 137 local HMRC offices with 13 new regional centres. HMRC's plans for Scotland highlighted some potential adverse implications for HMRC staff and customer service standards.
From the start, it was unclear whether HMRC would be able to relocate and retain so many personnel. If not, how would the tax authority maintain its current services, deliver pre-existing plans such as Making Tax Digital (MTD), and cope with the unknowns of Brexit?
Update from HMRC
In a report published in January, HMRC speak of significant progress made in their 10-year transformation to become ‘a tax authority fit for the future’.
They provide a list of their 13 new regional centres, of which one has been opened so far – and with building work underway at 10 others.
There are to be 5 specialist sites and 8 transitional sites, in addition to their head office in Westminster. HMRC remain committed to this ‘locations strategy’, whilst acknowledging flexibility in their workforce plans.
Troubles in the civil service
Sources close to the civil service suggest that the picture is not so rosy. Reportedly, the Public and Commercial Services Union (PCS) has claimed that HMRC lost an estimated 17,000 person/years of experience last year alone through redundancies and other departures ahead of forced relocations.
In its publication Moving On, the Institute for Government think tank reported in January on excessive staff turnover in the civil service. It found that, across Whitehall, managers stay in post less than two years.
Brexit is driving higher turnover across government departments, with some staff taking on new roles to gain promotion before moving on quickly. This is both bad for Brexit work and disruptive for the areas which these staff leave behind, because rapid change leaves civil servants ill-equipped to advise ministers on crucial decisions.
Staff moves are largely unplanned, driven not by the government’s needs but by individuals’ efforts to advance their career prospects. Generalist civil servants who move quickly tend to be valued above those who demonstrate loyalty and develop expertise – a point particularly relevant in a specialist sphere such as tax.
HMRC staff morale
In January HMRC published the report from an independent Respect at Work Review which they had commissioned. While this praised the pride, dedication and commitment of many in HMRC, it also identified key concerns.
The reviewer, former John Lewis personnel director Laura Whyte, found no-one in HMRC who had confidence in the organisation’s grievance process. Other policy areas she flagged for reform included recruitment and attendance, discipline, conduct, whistleblowing, and how dismissals, suspensions and investigations are handled.
She found that HMRC staff tolerate poor behaviour that would be unacceptable elsewhere. Swearing, breaching confidentiality and mocking colleagues are unremarkable. Both abusive and abrasive behaviours are often not dealt with.
The Civil Service People Survey, published in November 2018, provides further insight about perceptions of work. HMRC staff satisfaction levels were below the median (benchmark level) for all 18 Whitehall government departments.
When the civil service is going through such a bad time, it seems scarcely surprising that pressures on HMRC to deliver on their transformation project are resulting in visible cracks in their staff morale.
Pressures from Parliament
Reporting in October 2018 on HMRC’s performance in 2017-18, the House of Commons Public Accounts Committee (PAC) was concerned about delays to HMRC’s new Customs Declaration Service (CDS) and the need for further development so that systems would be able to handle postponed accounting for import VAT on a no deal Brexit.
When the PAC had last reported on HMRC’s performance in January 2018, it had concluded that the transformation was not deliverable as planned due to unrealistic assumptions and Brexit-related work. HMRC have since undertaken a structured prioritisation of their transformation programme to release staff for priority work, reduce risks to service delivery and cut the costs of transformation.
This time around, in spite of rising pressures from Brexit, the PAC didn’t let HMRC off the hook regarding ‘business as usual’. It recommended action to reduce tax credit error and fraud, to tackle compliance risks from properties owned by overseas companies, and to take more responsibility for ensuring that tax reliefs provide value for money.
HMRC were also charged with improving the quality of PAYE administration by employers and pension providers, and developing a scorecard of performance measures to provide a broader overview of HMRC’s service standards as experienced by both businesses and individuals.
The true scale of Brexit
For a better understanding of the impact of Brexit on the civil service, an invaluable source of information is the Whitehall Monitor 2019, also published by the Institute for Government in January.
This paints a devastating picture of the current turmoil at the centre of British politics, where there are deep divisions within both the minority Conservative government and the Labour opposition. It highlights the unprecedented number of ministerial resignations that have taken place recently, mostly caused by Brexit.
It explains the enormous strains placed on the civil service, whose headcount grew by 20,000 in only two years to over 404,000. Vast numbers of personnel – including, for example, one-third of HM Treasury’s total headcount – have been diverted from other duties to work full-time on Brexit-related issues.
HMRC’s transformation programme was based originally on an assumption that HMRC would have the equivalent of 48,000 full-time equivalent posts by the end of 2021. By September 2018 this estimate had risen to 58,400 – an increase of 10,400.
Of this extra headcount, 5,000 is the current requirement for additional HMRC staff dealing with Brexit – partly to expand the national customs hub, and partly in compliance work because Brexit presents a different set of risks in the tax system.
As the Brexit clock runs out of time, it’s a reasonable guess that last-minute demands on the civil service – particularly from a no-deal Brexit – will fall disproportionately on the tax authority, and in ways it can’t even plan for yet. Are we asking too much of HMRC?
Article supplied by Taxing Words Ltd