Jon Thompson, HMRC’s newly appointed chief executive, has identified low staff morale and the move to in-house IT provision as among the key challenges the department faces, and has told the Treasury select committee that some of the past criticisms of poor performance have been justified
In his first appearance in front of MPs since he took up his new role ten weeks ago, Thompson said that lapses in customer service targets which saw average phone call waiting time escalate to 47 minutes at peak times last year were signs that ‘HMRC had lost its way in 2014/15’.
Thompson said the May figures indicated 90% of calls are being answered first time, with an average wait of five minutes.
He singled out the views of HMRC staff of their own organisation as ‘a worry’ and said scores of 45% on the annual Civil Service survey, though an improvement, remained below average. Thompson said he and Edward Troup, who has moved to the role of executive chair and permanent secretary, had committed to meeting as many staff as possible and had already carried out 20 visits to meet over 3,000 employees.
‘What we’ve discovered is that staff are very positive about their jobs and their immediate team leader, but have very little trust in the senior leadership. We are keen to listen to what they have to say, and my first blog post generated 78,000 responses,’ Thompson said.
Thompson identified ongoing concerns around HMRC’s performance management system, which he described as ‘totemic’ and highly unpopular, and the technology offer which he said need to be addressed.
When questioned about staffing resources at HMRC, which has around 66,000 staff, he said that he had attended a meeting on 8 June to discuss staff redeployment with discussion around moving staff to critical areas of the business.
Challenged about the move away from HMRC’s previous Aspire IT infrastructure contract with a single source supplier, Thompson said IT costs were not going to increase significantly but warned that the new technology implementation remained a key risk, along with the pace of the move to digital services.
Troup was asked to elaborate on HMRC’s work to close the tax gap, currently put at 6.4% of receipts expected. He said that while efforts were focused on reducing evasion and non compliance, there would always be examples of taxpayer error and reduced receipts during periods of economic downturn.
However, Troup said HMRC stood by its estimate that the new Diverted Profits Tax would yield £1.5bn over four years, partly through the charge paid by multinationals found to have shifted profits but also by encouraging behavioural change. Troup said assessing corporation tax payments made in the UK from companies which would otherwise have moved profits overseas would form a large part of the total.
On this point, several MPs raised the issue of offshore avoidance schemes based in overseas territories or Crown dependencies, and asked for HMRC to provide support for greater capacity planning within the regulatory bodies based in these jurisdictions.
There were questions about the tax take from disclosure schemes relating to the Crown dependencies, Lichtenstein and some Swiss bank accounts. Troup said that the total had been revised down from the original £9.3bn to £5.4bn and that all the schemes had now closed. He accepted that the Crown dependencies scheme had raised considerably less than forecast and that some individuals had moved money to Lichtenstein to take advantage of a scheme with lower penalties, although there are signs that more money is still to come in.
Troup said HMRC has issued 46,000 Accelerated Payments Notices bringing in £2.5bn in tax, but was forced to admit that as a consequence a large number of people were seeking to settle and the counter-avoidance directorate had a backlog. One MP claimed to have heard of individuals wanting to settle an Employee Benefit Trust case, bringing a cheque book to three separate meetings but being told HMRC did not have the capacity to handle the paperwork at that point.
Towards the end of the session, Thompson was asked to clarify an earlier response to a question posed by the select committee to his predecessor, Lin Homer. She was asked to provide data on the number of EU migrants who had interacton with HMRC over income tax, receipt of child benefit, tax credits or payment of National Insurance contributions, and originally replied this was ‘too time consuming and difficult to produce.’
The eventual answer, supplied five months after the request, was superseded by data from the Office for National Statistics (ONS).
‘In a footnote of page seven of the ONS release it says in the four years up to and including 2013/14 there were one million EU migrants. They paid £3.1bn in income tax and NI and claimed £570m in tax credits and child benefit, leaving a net £2.54bn for the Exchequer,’ Thompson explained.
Thompson, Troup and Mark Dearnley, HMRC’s chief digital and information officer, are due in front of the Public Accounts select committee on Monday 13 June to provide an update on progress with managing and replacing the Aspire project.