HMRC's plans to cut the cost of its personal tax services by a further 34% in the next five years raises the risk of another collapse in service levels, according to a report by the Public Accounts Committee (PAC), which wants the department to balance its potential savings with the costs to taxpayers left waiting on the telephone
The 2015 Spending Review settlement committed HMRC to further cost reductions by 2019–20, which it plans to deliver through digitising its services.
Meg Hillier, PAC chair, said: ‘The prospect of HMRC making further cuts to spending on customer service will chill the blood of many taxpayers. HMRC's recent performance in this area has been appalling for long periods and left members of the public counting the cost in time and money.’
The committee heard evidence confirming customer service levels collapsed in 2014–15 and early 2015–16 as a result of HMRC underestimating the demand for telephone contact and reducing customer service capacity by releasing 5,600 staff.
Average call waiting times tripled compared with previous levels and only recovered towards the end of 2015 after the recruitment of 2,400 new staff. In one week in October 2015, the average time taken for HMRC to answer the telephone reached almost 35 minutes and, in 2015–16, 28% of calls remained unanswered as customers simply gave up.
Assessments suggest taxpayers spent some four million hours waiting for HMRC to answer the phone in 2015–16 and also incurred direct call charges while on hold, with every £1 saved by HMRC on telephone services over this period resulting in an estimated £4 in extra costs to customers.
In its recommendations to government, the committee states: ‘HMRC should estimate the cost to those using its services, including factors such as charges incurred using the 0300 helpline and time spent waiting on the telephone.
‘It should use this information when considering resource needs to ensure the optimal balance is struck between its own costs and those borne by customers.’
PAC also wants HMRC to test whether its forecasts of demand are realistic and be prepared to flex its resources as necessary. It highlights concerns that HMRC’s plans to improve service levels require taxpayers to switch to digital challenges, and says HMRC should pilot how taxpayers will respond to new digital services before they are widely implemented.
The committee says HMRC has not done enough to understand the impact which the quality of its service has on tax revenue. It points out HMRC recognises that its existing analysis, which suggests that a one percentage point improvement in customer satisfaction might lead to increased annual income tax revenue of £43m, is ‘highly speculative’ and based on poor data. PAC has asked HMRC for a report on progress towards a more detailed approach by the end of the year.
In addition, PAC flags up concerns about HMRC’s progress in in replacing its long-term Aspire contract with a new model of IT provision, which the committee describes as ‘a substantial undertaking which will require firm and consistent leadership’.
The committee supports the decision to move to a phased approach to replacing Aspire services between 2015 and 2020, extending some services by three years, bringing some in-house and using smaller, shorter contracts for others, which it says should help HMRC manage the risks involved to customer services and tax collection.
However, the committee’s report states: ‘HMRC now plans to take crucial decisions in 2018 on the long term IT model it will operate from 2020. We remain concerned that HMRC may struggle to integrate different services from different providers. As we have seen from elsewhere in government, one of the main factors that determines the success of complex programmes such as this is the quality and stability of their leadership.’
PAC wants HMRC to ensure continuity in the leadership of the Aspire programme in order to maximise its ability to design and introduce a new IT model successfully, and says it wants an update on each key point in the project.
The committee has published a list of its future subjects for the autumn, which will include sessions on HMRC performance and tax transparency.
PAC’s report on HMRC customer service and tax collection contract replacement is here.