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TaxationWeb’s General Editor takes a less than objective look at how HMRC’s falling staff numbers are affecting its service to taxpayers.

Introduction

There were a few things which have caught my eye over the last few days, which have prompted me to’ pen’ this article. By way of introduction, I am a tax adviser in practice by day and therefore deal with HMRC by telephone, e-mail (yes, e-mail!) and letter every day.

As evidence that I am not just a jaded cynic whose only reason for not continually sniping at HMRC derives from laziness, I should add that I am a ‘fully paid-up’ member of Working Together, and I am also involved with the Closer Working with Tax Agents Initiative. I wouldn’t invest such precious time if I didn’t think that HMRC / taxpayers and agents would benefit from co-operative consultation.

So, what’s rattled my cage?

I have concerns that the continued reduction in HMRC staff levels is having a deleterious effect on its ability to deliver an appropriate level of service to taxpayers or their agents. I doubt I am unique in that.

Exhibit A – HMRC’s Business Plan 2012-15 entitled, I kid you not, “Delivering Our Vision” Cue a significant number of heart-warming photographs* of people smiling / working studiously throughout. (*Or, as I like to call them, pointless wastes of taxpayers’ money).

From page 33 thereof:

“We will have 10,000 fewer full-time equivalent posts than in April 2011by the year 2015 and we will redeploy people whose current roles are coming to an end in other essential departmental work. This will principally focus on moving staff to new compliance roles.”

Exhibit B – the Chancellor’s Letter to Lin Homer (Chief Executive of HMRC) re: Remit for HMRC 2012-13 under the heading “Delivering Cost Reductions”

“Recognising the importance of reducing public spending to reduce the deficit, HMRC have committed to efficiency savings of 25% in real terms by 2014-15.

It requires a comprehensive cross-departmental workforce strategy to support the necessary headcount reduction targets in processing and customer contact and the movement of over 3,000 staff to compliance work...” (emphasis added) . So if I have read correctly, that will be 3,000 less staff dealing with processing forms or answering telephone calls over the next 12 months or less.

Exhibit C – Graham Black’s Guardian Article End the Cuts to Staff Dealing With Tax Avoiders (with a nod to Richard Murphy for highlighting it). Mr. Graham Black represents the more senior members of HMRC, being president of the Association of Revenue and Customs.

“What of all those extra resources for HMRC? When it was formed by merging the Inland Revenue and Customs & Excise in 2005, it had nearly 100,000 staff. Now it has 65,000, and this will continue to fall over the next two years to 56,000. This is an almost 50% cut that has far outstripped the genuine savings from merger and IT improvements. [Q: Hold on a mo, isn’t the title 20%? A: It’s 20% on more current figures. Trust me]

Any organisation facing 10 years of successive cuts would struggle with the consequences, and the problems HMRC has faced in recent years stem from this. In the spending review, the Treasury intended to cut the HMRC budget by a further £3bn over three years, but only cut it by just under £2bn – and this is what [Mr. George] Osborne calls an investment of £900m. I know of nowhere else where a £2bn cut is described in such a way.”

Now just to be clear, I do not subscribe to the position that avoidance is inherently wrong and I will happily argue with Messrs. Black and Murphy about the legitimacy of tax avoidance and respect them no less for their alternate position(s). But I would hope that we might find common ground insofar as HMRC is (theoretically at least) an agent of government policy and to the extent that the government of the day finds some areas of avoidance unpalatable it is right that HMRC fulfil its mandate to the best of its ability – and with adequate resource to do so.

But that is an issue for another day and in the interim, I trust they don’t mind my borrowing some of the points in Mr. Black’s article. In a nutshell, HMRC has undergone continuous and far-reaching surgery over the last 10 years and is half the size it used to be.

What is the Consequence of Continued Staff Reduction?

Exhibit D – LITRG’s article HMRC Keep Telephone Callers Waiting 30 Minutes

“Back in 1997/98 the Inland Revenue aimed to answer a telephone call within 30 seconds 91% of the time. But now, in 2012/13, you can spend four times as much time pushing buttons before you even get in a queue. The subsequent wait can be excessively costly for the caller on a low income...

On Tuesday 10 April 2012, we made three calls to HMRC helplines using the routes taken by an ordinary PAYE caller, a pensioner and a tax credit claimant. On average the wait was 29 minutes. On a PAYG mobile that could have cost £11.60 per call, which could equate to half a day’s income for a pensioner...

It really is just not good enough.”

Quite so.

Exhibit E – a letter which I received through Working Together channels but which the CIOT has helpfully reproduced on its website:  HMRC Call Centres - Are You Hanging On?

Our [HMRC’s] Contact Centre Performance Last Week

“...We have longstanding arrangements in place to redeploy staff to cope with peaks in demand. And we do this in “real time” to try and ensure that we can offer the best possible service levels we can.

In the light of the exceptional demand we have seen over the past few days, we have deployed all available trained staff within our Contact Centre network to handle additional PAYE and SA demand, as well as an additional 350 staff from processing offices around the country to help us to manage the additional calls we are receiving.

We are deploying front line managers to answer calls, and have cancelled all training time on our busiest days to ensure we are in a position to improve service levels as soon as possible...”

So I make that about 350 staff who, the week before last, were processing paperwork and are now answering telephone calls from taxpayers and agents. Have they been adequately trained? I infer not, given that according to the letter they are ‘in addition’ to ‘all available trained staff’.  One might also wonder what the front line managers were doing before they were tasked with answering calls.

But to me, the most telling lines are,

“It will help us to improve further if customers with non urgent enquiries can defer their call until next week when we are confident these measures will have improved things even more. “

Hold on, I thought we were talking about HMRC helplines, not about calling to report dodgy street lighting or out-of-control hedges? When does someone call HMRC about something that isn’t urgent?  Let’s not forget that just a couple of weeks ago, we were exhorting people to call HMRC promptly about their Tax Credits because entitlements can now only be backdated for a month. ( Tax Credits - Important Changes from 6 April ) So who’s manning the Tax Credits telephones (or how many)  if staff have been re-allocated to deal with Self Assessment and PAYE enquiries? It would be laughable, if only it weren’t so serious.

Prognosis

Not good. Current performance is clearly not ideal and I expect that HMRC will only be able to rob Peter to pay Paul for so long and that eventually, a continued reduction in manpower or a lack of appropriate training (or a combination of both factors) will result in a profound and inexcusable failure of service. As a tax adviser, I should look forward to it: it should result in a higher demand for my services and those of my colleagues. But I don’t.

I accept that this is the future we – or some of us at least – have wrought, and HMRC is not alone in having to deal with plummeting budgets. After all, we are all in this together. And I do see that there is an underlying strategy, which is to move away from processing (employers and agents will be doing that – that’s what we’re here for after all: to make HMRC’s life easier!) and towards compliance and enforcement. But I am not convinced that HMRC has, or will have, the basics down pat in order that it can go off and chase down all the bad guys.

Real Time Information (RTI)

In theory, RTI should automate the PAYE regime to an extent that eventually, HMRC will be able significantly to reduce its resource allocation in that area. But does HMRC really have the short-term capability to implement the game-changing RTI regime next year? Because if it doesn’t, it won’t be the large corporations who will suffer: it will be the really ‘small’ employers (and their employees), who get dragged into RTI in October 2013. They don’t have IT departments or HR offices but they do outnumber the’ large’ employers who are piloting the scheme by something like 1,000 : 1. I do not like those odds. Nor do I relish the prospect of saying “I told you so” in about 18 months’ time. There won’t be anybody at HMRC to answer my call anyway: they’ll be too busy taking urgent phone calls (as if there were any other kind) from employers who are trying to run a business, pay their employees and work out how, simultaneously, to tell HMRC all about it.  Will they be prepared to wait on hold for 30 minutes for an answer? Or am I being optimistic in thinking it’ll be just 30 minutes?