HM Revenue and Customs

Charlie Elphicke Excerpts

Wednesday 2nd March 2011 Commons Chamber

[Priti Patel]

I do not, actually. Many other measures came out of the comprehensive spending review and last year’s Budget that will help small businesses to further their interests and, we hope, grow their businesses as well.

I come from a small business background—my parents have a small business—and I am stunned by the attitude and the bureaucracy associated with HMRC. Its lack of accountability is also deeply disturbing for all our constituents. I have had constituents in my surgery who have been reduced to tears when describing their own personal experiences and the distress that HMRC has caused them. In one case, a couple who had separated were having endless complications with their tax credit awards, and the wife was receiving demands from HMRC for the repayment of overpaid credits. In another, problems were caused by HMRC’s delay in processing the correct levels of tax credit for a constituent because—surprise, surprise!—HMRC had made mistakes with the information that it held on her, and my constituent subsequently had to supply it with a great deal of additional paperwork and ID. That involved a lengthy and inconvenient process.

I should like to draw the House’s attention to another tax credit case. It concerns a couple who received overpayments as a result of HMRC’s mistakes. HMRC even gave my constituents a reward of £35 in recognition of that. However, the errors mean that that family are now being pursued for a range of repayments and are undergoing another lengthy and bureaucratic process, even though they have done nothing wrong. Make no mistake, HMRC is effectively still persecuting them and treating them like criminals.

In all those cases, and many others, my constituents have endeavoured to do the right thing, and there has been no evidence of any attempt to avoid paying taxes or to mislead HMRC. However, due to an overly complicated tax system and what seems to be endemic incompetence at HMRC, my constituents, and, as we have heard today, many others, have suffered. My constituents feel that HMRC, with the full force of the state behind it, is effectively bullying them and persecuting the disadvantaged, the weak and the powerless, and that it fails to realise the worry, stress, anxiety and misery that its errors cause the businesses and individuals who are threatened. Those unreasonable actions defy common sense and undermine how HMRC operates and the tax system.

[Charlie Elphicke (Dover) (Con)]

When my hon. Friend takes up cases with HMRC, does she find that they are suddenly sorted out extraordinarily quickly?

[Priti Patel]

I wish that the answer was yes, but unfortunately it is no. As with all large organisations, I am staggered by how long it takes to get a response. I am the one chasing up cases on behalf of constituents months after a complaint has been made.

That brings me on to accountability. Despite the fact that I have taken up every single constituency case directly with HMRC’s chief executive, she has yet to respond personally on any case I have written to her about. It seems that there is a lack of transparency in HMRC. I should also point out that it has an organogram that reaches about 45 pages, which tells me that it is a substantial bureaucracy, but there seems to be no manager for common sense in the organisation. I urge it to start seeing common sense.

In my view, that bureaucracy adds weight to my constituents’ impression that HMRC is an unwieldy, unaccountable organisation that seems effectively to be a law unto itself and never to take responsibility for its errors. I have concluded that that is its practice because it does not feel it has to do so. All too often, officials seem to hide behind complex rules and leave businesses and families having to pursue lengthy appeal processes, whether through the adjudicator, the tribunal, the ombudsman or the courts. Clearly, that puts those who feel that they have suffered an injustice at a significant disadvantage. In many cases, people do not want to go through a lengthy and perhaps costly process to seek a resolution. When they do pursue a matter, those who are unable to seek legal help are left to pitch up with their own amateur efforts against the professional force that is HMRC’s bureaucracy.

I make those criticisms and comments not to attack or damage HMRC but because I want it to make drastic improvements in the service it provides to the British taxpayer. I draw my remarks to a conclusion by congratulating the Treasury Committee on its ongoing and important investigations into HMRC. I praise the Exchequer Secretary for the attention he has given my constituents’ cases, and I wish him luck and all the best in the challenge ahead of him.

--- Later in debate ---

[John McDonnell]

I fully agree, and we have painted a picture this afternoon of the impact of a combination of job reductions, cuts in redundancy pay and the threats of cuts to pensions, which my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East described as a perfect storm. The message from those on the front line of tax collection is that HMRC is in a perilous situation. I hope from here on in that those voices will be heard and that we will consider a more systematic approach to HMRC reform.

Hon. Members have been told that access to face-to-face inquiry services has been significantly reduced, which is extremely worrying. Let me put on record what a number of tax inspectors have said about that. They say:

“Those offices that remain open”

after the 200 closures

“are having their enquiry centre opening hours significantly reduced. In some case these offices are due to be opened for only two or three days”—

maximum—

“rather than the five days a week they currently open for.”

There is also concern about the disbanding of the complex personal return team in March 2009. Many thousands of the top UK taxpayers no longer have the services of a dedicated case owner and customer relationship manager. Thirty-five thousand taxpayers whose tax affairs were handled by that dedicated team—a highly trained, professional team—are now dealt with in the wider HMRC network. There is a view that the skills are therefore not available or not dedicated in the most effective way to increase tax revenues.

In conclusion, I have heard figures bandied about for how much tax is avoided or evaded, and therefore should be collected. They range from the internal estimate of £46 billion up to £120 billion. A number of us have worked with Richard Murphy and John Christensen of the Tax Justice Network over the past five to eight years to try to highlight the issue. Until recently it was not taken up or reported particularly effectively by the media, so I pay tribute to UK Uncut—a group of individuals who have come together spontaneously, taken information from the tax justice campaign and mobilised direct action, which, whatever Members think of it, has been incredibly effective in raising the issue up the political agenda. As a result of campaigning by the Tax Justice Network, UK Uncut and others, and as people are experiencing the cuts and moving from abstraction to reality in their communities, as my hon. Friend the Member for Leeds East said, they are now asking the question: why are we not collecting this tax? It is due not just to a lack of political will—although there is a tax reform issue that needs to be addressed—but to the way in which we have treated HMRC over the years, undermining its ability to collect those taxes.

[Charlie Elphicke]

I agree with the hon. Gentleman that everyone should pay their fair share of tax, but I strongly disagree with—indeed, I would condemn—any endorsement in this place of direct action that has the effect of shutting down businesses for a day, at a time when jobs and money are hard enough to come by for people in this country because of the Labour party’s recession.

[John McDonnell]

Jobs would be more protected if companies and rich people paid their taxes. If there is £120 billion out there that should be paid, then it should be paid, and if it takes direct action to force action on that, I support that direct action. Indeed, I have participated in it and will do so in future.

Now that the issue has become so pertinent to our constituents, to the country’s financial affairs and to trying to tackle the deficit, my view is that if we continue to hamstring HMRC in the way that it has been since 2005, we will undermine its ability to operate effectively. If we continue with the job cuts experienced in recent years, and with those as a result of the comprehensive spending review, we will destroy that public service ethos, as my hon. Friend the Member for Luton North said, undermining the organisation that we have been so proud of over the past two centuries for its effectiveness in ensuring a fair and just taxation system. I urge the Minister to put in place a consultative process, consulting the unions and the staff on a reform programme for HMRC, so that it can once again do its job effectively.

[Charlie Elphicke (Dover) (Con)]

This is an important debate, because the evidence shows that businesses and people do better when taxes are simple and certain. Anyone who knows anything about business will know that people in business have to plan. They have to know where they stand and what the tax regime will be. That regime has to be as simple as possible, so that people can understand it and get their heads round it. That is fundamental to the consistency of the rule of law and the framework that enables business to thrive.

It is the same for individuals. I could tell hon. Members about the number of people who come to my surgery who have been stressed out of their minds by demands for £2,000 in tax that they simply do not have. That kind of demand weighs on them, giving them the gravest possible concern and taking over their lives, as they wonder how they will manage to make ends meet. I tend to intervene in those cases, because I can write to Dame Lesley, although I have to say that my experience has not been entirely the same as that of my hon. Friend the Member for Witham (Priti Patel). I have found the Revenue quite helpful in giving people time to pay and helping them to understand that they can do so through their coding notice. Nevertheless, things should not be like that. We have heard time and again that the Revenue did not used to be like that. It is only in recent years that it has gone that way.

It is important that everyone in this country should pay their fair share of taxes, and that includes business. However, we also need to be careful not to make up phoney figures for the tax gap and make wild claims that it is £150 billion a year, when the Revenue itself has said clearly that it is no more than £40 billion.

I take issue with the hon. Member for Hayes and Harlington (John McDonnell), who is still in his place, when he says that it is somehow acceptable to have direct action campaigns against business for the amount of money that it might or might not owe. It is unacceptable to close down a business for a day and deny the people who work on the shop floor—people who are often not well paid—the chance to earn their living and go about their business in their ordinary way in their ordinary lives. It is wrong to do that, and in some cases taking part in such direct action campaigns amounts to a criminal offence, so I urge all Members not to take action that unlawfully impedes business, particularly if it is of a criminal nature.

I am a member not of the Treasury Committee or the Public Accounts Committee, but of the lowly Public Administration Committee, in which we look at paper clips and try to reflect on how administration can be improved. Looking at the careful and thoughtful work done by the Treasury Committee before the election, it is quite clear that the number of customer complaints has risen dramatically. It now stands at 87,179, so I ask where those complaints and problems are. That is how to deal with the issues arising. Call centre issues are important—the fact that we cannot eyeball someone or get our phone calls answered quickly. Complaints about office processing have risen by 38%, while complaints about online services have risen by an astonishing 181%. It is logical to focus on where the complaints arise and where the problems need to be dealt with.

Let me deal with the call centre issues. We know that 43% of phone calls were simply not answered in 2008-09—[Interruption.] That is a huge number of calls, as my hon. Friend the Member for Witham interjects from a sedentary position. We also know that 35% were not answered last year. That does not tell us how long it took to answer the calls that were answered. Oral evidence to the Treasury Committee suggested that it could be as long as 12 minutes—an extraordinary situation. One person providing evidence said that if he took 12 minutes to answer his phone calls, he would not be in business for long. There is clearly an issue about the efficiency and quality of call centres that needs to be looked at.

I do not condemn HMRC, as many of its officers and officials have worked very hard, but I do condemn the previous Government for using the expertise of these wretched consultants time and again to answer all their problems, instead of using the expertise that existed within two institutions with long, proud and successful histories.

I hope that the Exchequer Secretary who comes on deck at this moment will realise on the one hand that he is fortunate, as he cannot do any worse than his predecessors, but on the other hand that he faces a challenge and should take care not to sit on deck while the orchestra is playing and the water is flooding in through holes down below. I hope that he will be assiduous in looking at the issues and trying to sort out the administrative, policy and leadership issues in HMRC today—including the matter of political leadership.

I say that because the staff survey suggests that staff feel pretty wretched. We have heard that time and again, and no one seems to think that the HMRC is well managed. No one has much confidence in anyone and no one feels energised to go the extra mile. Most people do not have that much confidence in their line managers, but they have an awful lot more confidence in them than they do in the top leadership of the entire institution. It is pretty clear, then, that we need to focus on providing the political leadership and the organisational and managerial leadership to make HMRC a better place and, above all, to make it feel better about itself.

We also need to sort out the information technology. It is clear from the Treasury Committee report that, under the previous Government, IT was an unmitigated disaster. I have to describe the response from this Government, who had only just come to office, as Panglossian. It was one of the poorest responses that I have ever seen. I do not blame the Minister, because this was back in June when the Government had only just been formed, but I urge him to take much greater control. I hope that he will take the policy side of his Department by the scruff of the neck.

Commenting on the disaster of the call centres, the Government’s response was that

“six of the seven indicators have improved from baseline and therefore exceeds HMT’s definition of ‘strong progress’.”

The Government seemed to suggest that everything was just marvellous. They went on about how wonderful the call centre answering record was, and I do not think that that is acceptable. The Government do not seem to have been in touch with the reality of the situation.

When asked about the disaster of morale, the Government went into management-speak worthy of the former director-general of the BBC. They talked of creating

“a working environment which motivates and develops our people to give of their best and take pride”.

Whenever we hear mission statements of that kind, we have a sinking feeling that the consultants have crept in through the back door and started to charge a lot of money and ruin an organisation. I hope that the emphasis will change, and that the Government will instead say, “We are going to inspire people, and give them back their sense of pride and responsibility at ground-floor level.” That will enable those people to make real advances and exercise responsibility at every level, rather than returning to the dreadful tick-box culture that has grown up over the past 10 years.

As for IT, we know that it is a disaster. The Exchequer Secretary had to come to the House in the autumn and say that it was a disaster. I must say that he was very forthright and honest with the House, and dealt with the situation superbly. The earlier Panglossian response had been:

“The robustness of HMRC’s IT systems continues to improve, however the scale of the operation, and the amount of legacy systems, is such that this is a journey of continuous improvement and not overnight change.”

[Nick de Bois (Enfield North) (Con)]

From “ghastly” to “poor”.

[Charlie Elphicke]

Indeed.

I believe that the Exchequer Secretary is a very fine Minister who will, in time, become one of the ablest Ministers to have graced this or any Government. Let me end my speech by urging him to grab this issue by the scruff of the neck. I urge him not to knock the officers of HMRC who work so hard but to inspire them, make them feel better about themselves, and allow them to take charge and do really well—to provide a great call centre service, a great online service, and the great service in general that HMRC used to provide before it was ruined, particularly in the last decade.