The Exchequer Secretary to the Treasury (Mr David Gauke)
I congratulate the hon. Member for South Down (Ms Ritchie) on securing this debate this evening. I welcome this opportunity to clarify what Her Majesty’s Revenue and Customs is doing in respect of the office in Newry and to give the House as much information as possible.
The answer to the written parliamentary question that the hon. Lady tabled last week highlighted the fact that HMRC has not announced the closure of the office in Newry. However, on 20 November, HMRC invited around 1,500 people in 21 locations to apply for a voluntary exit. That included more than 130 people in Custom House in Newry. The invitation gives people the option to leave HMRC if that fits with their life choices, but HMRC is not making redundancies at this stage.
Before I go into detail on the voluntary exits and what it means for staff in Newry and other offices, it is important to explain the context. HMRC is reshaping itself to become a more modern, flexible and cost-effective organisation that can deliver better, more personalised services for customers at the same time as increasing tax revenues from compliance. Like other Departments, it has to deliver that within ever-tighter fiscal constraints.
HMRC has been steadily reducing in size since it was formed in 2005. Over the past eight years, it has cut its staff from around 97,000 full-time equivalent people to just under 63,000 FTEs at the end of October 2013. It has reduced its estate by more than 200 offices, and is now more concentrated in urban centres. It has done that while improving service and increasing yield. Since HMRC was created, it has more than doubled its compliance yield and delivered major projects, including Real Time Information. During 2012-13, it brought pay-as-you-earn up to date for the first time, answered 75.2% of the calls made to its contact centres—hitting 90% during the last six months of the year—and, for the first time since HMRC was formed, cleared more than 80% of customer post within 15 days.
HMRC has committed to reducing its work force from 63,000 FTEs today to 54,000 by the end of 2014-15 and then to 52,000 by the end of 2015-16. Although retirements, resignations and people reducing their working hours will deliver some of those work force reductions, they will not be sufficient if HMRC is to achieve its work force target. HMRC has always made it clear to its staff that it was likely that voluntary exits would be needed and that is what it announced last month. Targeted groups of staff will be asked to consider whether a voluntary exit is right for them. People in those groups might be in roles that are needed less and less because of new ways of working, including increased automation and the fact that some administrative work has dried up. Others are in locations where, according to all the indications, one, some or all lines of business in HMRC are unlikely to be based in the medium to long term.
Although the specifics of the announcement will, I appreciate, come as a shock or surprise to many people, the reality is that HMRC will continue to contract its work force. That has long been known by staff and many have been waiting to find out where that contraction will take place. Indeed, the hon. Member for South Down acknowledged that there has been uncertainty in Newry for some time.
The background to the news is that in June 2011 HMRC announced that it would be located in 16 key centres until at least 2020. Those centres include Belfast. Newry was one of most of the other offices in which HMRC said that it would be located until at least 2015. As HMRC reduces in size, it will need to continue to bring together its people in larger sites where they can work more flexibly and to reduce its footprint to be more cost-effective. Smaller offices will not be viable as overall numbers reduce and the skills pool in smaller local communities will not necessarily provide all the skills that HMRC needs when it needs them. HMRC has therefore started to identify locations that do not fit business needs in the medium to long term. In seven of the 21 locations where people have been invited to apply for voluntary exit, one or more lines of business intend to withdraw from the office in time. In the other 14 offices, all of the lines of business wish to withdraw. Newry is one of those offices.
There is not at present a proposal to close those offices, since HMRC is honouring the commitment it made to staff in 2011 that they would stay open until at least 2015. However, HMRC’s executive committee took the view that staff should know that there might not be a long-term future for those offices well in advance of any decision on office closures, so that they can think about their options and start planning their futures.
The voluntary exit scheme—I stress that it is entirely voluntary—gives those staff who want to leave HMRC the opportunity to do so on favourable financial terms. Some people will welcome the opportunity to leave the Department given that change and uncertainty in the air. The compensation provided by accepting a voluntary exit will enable people to pursue other life choices if that is what they want to do.
Ms Ritchie
If the staff choose to stay and do not take voluntary exit, what is the long-term future for them, for Newry and for the other 13 centres?
Mr Gauke
Let me say a bit more and I shall answer the hon. Lady’s question directly. Those who wish to take up the exit package will need to apply by 18 December and decide on a formal offer by 31 January. Their last day of service will be 30 April. As she says, other people will not want to leave and there is no compulsion on them to apply for a voluntary exit if they wish to stay, but they have been given notice of the likely longer-term picture for their offices and will ultimately need to consider their future after 2015. HMRC will not be closing Newry or any of the offices where it invited people to consider applying for a voluntary exit before April 2015, in line with the picture it gave in 2012 about how long it would be based in current locations.
I do not underestimate the fact that for many people this news was a shock and was unwelcome, but I believe that HMRC was right to provide its staff with an honest assessment about the future of their offices or, in some cases, their roles, and to offer them the opportunity to consider applying for a voluntary exit.
HMRC needs to do further work to be able to say if and when it sees itself moving away from Newry and the 13 other locations where all lines of business will be reducing. A future decision to close the office will need to be accompanied by a proper consultation process and equality impacts, involving the employees themselves, their trade unions, right hon. and hon. Members and other local interests.
Let me pick up on a couple of the questions asked by the hon. Lady. She asked why there has not been consultation at this point and I stress that HMRC has not yet taken a decision to close Newry or any other office. Newry does not feature in HMRC’s long-term plans, but as long as there are people in the office, HMRC will not break its previous commitment that no occupied office will close before April 2015. HMRC follows a tried and tested process in these circumstances. If and when there is a proposal to close the office, consultation will be undertaken with interested parties, both within and outside the Department, and feedback will be invited from staff, unions, hon. Members, other elected local representatives, and the local community. Any representations will be considered fully before a final decision is made.
Dr William McCrea (South Antrim) (DUP)
Is the Minister not playing with words? I am listening to what he is saying but, in reality, has a decision not already been made?
Mr Gauke
I reiterate that HMRC will honour the commitment made earlier in this Parliament that Newry will be open at least until 2015. A final decision will be made only after consultation, as I have outlined. I do not wish in any way to hide from the point—indeed, HMRC has been very clear about this—that HMRC does not see Newry having a future in the long term. The final decision as to when any closure would take place will be made, as I have said, after consultation. The choice for HMRC in the circumstances is to try to conceal that and leave things to the last minute or to try to be as open as possible, engage with staff and provide opportunities at an early stage for those who might want to leave voluntarily with a severance package.
Mark Durkan
In the decisions that HMRC is making about its future pattern of business, has any account been taken of the possible changes in the distribution of taxation? The Government have recently indicated that there are shifts in relation to Wales, and who knows what is going to happen in Scotland? If other choices are being made on some taxation moving to a more devolution-weighted basis, surely having a revenue-collecting infrastructure available in a devolved area is hugely important?
Mr Gauke
The hon. Gentleman makes an interesting point. HMRC is going in the direction of concentration on larger urban offices that have the flexibility to operate. Included in those larger urban offices is Belfast. He tempts me to speculate on future policy matters in the devolution of tax, but I want to make it clear that this is not a proposal to withdraw from Northern Ireland. This is a proposal that applies across the United Kingdom, with a move to larger urban centres. That applies in Northern Ireland, as well as elsewhere.
May I deal quickly with the issue of the equality impact assessment, which is an important matter raised by the hon. Member for South Down? The equality position has been considered, and it has been concluded that there is unlikely to be a disproportionate impact on any of the protected equality groups as a result of the voluntary exit schemes. Consequently, completion of an equality impact assessment is unnecessary. A people impact assessment has been completed, however, and audiences likely to be affected have been identified and appropriate mitigating action will be taken to eliminate those impacts.
If HMRC does decide to close any offices in future it will identify all redeployment options for affected staff. However, because its estate and work force will become smaller, there will clearly be less chance of redeployment in HMRC, particularly in areas that are outside a reasonable daily commute.
Ms Ritchie
I thank the Minister for his generosity; I hope that that will be extended to HMRC in Newry. May I also ask him to provide us with some information about the pilot study in the north-east of England and its outcomes?
Mr Gauke
I will answer the hon. Lady’s question, although I suspect that I will be unable to conclude my remarks as I had wanted to. This issue is very much focused on the inquiry centre, which is only a small part of what is currently undertaken in Newry. With regard to the inquiry centre pilot in the north-east of England, HMRC will decide in January 2014 whether to roll out that service and move away from inquiry centres and face-to-face services and towards a telephone service with additional enhanced support for vulnerable people. HMRC remains committed to providing face-to-face support for those who need it in future, including in Newry and across Northern Ireland. If we decide to roll out the new service next year, HMRC believes that it will provide that face-to-face support in a way that is more flexible and accessible to customers.
Time is constrained, so I will conclude by saying—