(13 years, 8 months ago)
Commons ChamberI wish to raise the issue of the funding settlement for Her Majesty’s Revenue and Customs, for two reasons. First, it is important to my constituents, many of whom work in the Cumbernauld branch of HMRC, one of the largest tax offices in the country. Secondly, it is important to the nation for our tax to be collected efficiently and effectively.
I have several questions for the Minister about the settlement that HMRC received in the comprehensive spending review. It mandates overall resource savings of 15% and efficiency savings of 25%. I should be grateful if the Minister clarified the precise meaning of those two figures. To what budget does the 25% refer? What proportion of the 15% overall resource saving will be met from efficiencies, and what proportion will be met through a reduction in the scope of HMRC’s activities? How does the Minister define an efficiency saving? And—this is the most important question for my constituents in Cumbernauld—what is the Minister’s most recent estimate of the number of redundancies that he expects at HMRC across the country during the spending review period, and what proportion of them will be compulsory?
Will the Minister confirm that neither the £900 million for combating tax avoidance nor the £100 million for reducing error, both of which were announced in the comprehensive spending review, will be additional money for HMRC? Will he also explain whether the figures refer to annual allocations, or to money redirected to these purposes over the entire spending review period? How does the Minister expect HMRC to achieve such a redirection of resources, in the context of significant cuts to its overall resource budget?
I would like to place HMRC’s funding settlement in a broader context and draw attention to some specific problems faced by my constituents working in the Cumbernauld office.
My hon. Friend raises an important point, which speaks to the overall context in which HMRC will be operating.
We know that there is no direct correlation between reduced funding and increased output. The productivity of individual public servants can increase, but overall output can still decline. There comes a point when any organisation can no longer do more with less. If resources are reduced too far and too hastily, it will end up doing less with less, even if productivity increases. Does the Minister accept that it will be extremely difficult to deliver the additional revenue and improved customer service that we need from HMRC in the context of large reductions in overall expenditure?
Many of the savings that the Government talk about will be made through redundancies and restructuring. Staff motivation and industrial relations at HMRC are already poor. These problems have been recognised by HMRC, which was the subject of heavy criticism in the capability review published by the Cabinet Office in 2009. The review found that only 25% of HMRC staff, compared with 61% of senior civil servants, were proud to work for the Department. In the 2009 staff survey, only 11% of all staff and 17% of senior civil servants felt that change is well managed in HMRC.
We know that working in HMRC is often a difficult job. Dealing with people who are recalcitrant in paying their tax is, I suggest—without direct experience of it—often not much fun, yet staff morale is extremely important. I worry that a combination of low staff morale and further funding cuts is likely to lead to further problems for HMRC. Staff in Cumbernauld, for example, are deeply concerned about the restructuring that is taking place among staff in the benefits and credits section, a reform that is taking place two years ahead of the planned move to universal credit.
These staff have been threatened with compulsory relocation to other tax offices in East Kilbride and Livingston, a source of particular concern for staff with child care and caring responsibilities. I hear that there are fewer jobs available in these new offices than there are posts in Cumbernauld. Staff who are not redeployed might be labelled as surplus, with an uncertain future. Staff in payroll and human resources for the whole of HMRC are also based in Cumbernauld. They are extremely concerned about potential redundancies following the introduction of next generation human resources.
Does the Minister expect that these changes will result in redundancies in Cumbernauld, or will the Cumbernauld office perhaps expand its functions and its staffing? More broadly, can he give us an assurance that HMRC will improve the manner in which it manages change in its organisation?
Finally, I would like to ask a broader question about HMRC’s strategic vision. Does the Minister accept that there is a tension between announcing Britain’s business- friendly credentials to the world and cracking down on tax evasion, particularly by companies and wealthy individuals? In particular, what view does he take of the remarks that David Hartnett, Permanent Secretary, made in the Financial Times last August, when he suggested that
“HMRC is packed full of very intelligent people but we are sometimes too black and white about the law”?
Does the Minister believe that it is possible for tax officials to be “too black and white” about the antisocial behaviour of tax evaders? I can assure him that my constituents, and no doubt those of every hon. Member, do not take that view.
A well resourced and properly motivated HMRC is crucial to the important work of Government. I ask the Minister to provide more detail on the implications of HMRC’s funding settlement, and to consider the assumptions underpinning it.
I echo those wishes of good will and merriment to the House.
Before I start talking about choice and competition in the banking sector, I would like to put on record my thanks to the Building Societies Association and the pressure group Compass for giving me assistance in preparing for this debate, and to the fantastic staff of the Treasury Committee, who have provided excellent briefings to me and other Members throughout our ongoing inquiry into choice and competition in the sector.
The financial crisis had a major impact on the shape of the banking sector. There has been widespread consolidation, and concerns have been raised that competition in the sector is not working—with, for example, investigations by the Office of Fair Trading into overdraft charges—and that there is now an ever greater lack of choice and diversity in financial services. That is borne out by the latest OFT figures on market concentration. In the personal current account market, the five largest providers in the country have a 73% market share. In the mortgage market, they make up over 75% of gross lending. They have cornered over 90% of the credit card market as well. By way of comparison, in Spain, the US and Germany, the five largest providers have less than 50% of the personal current account market. In all but a couple of cases, the largest providers are banks. There has been just one new start-up retail bank, Metro Bank, since 2008. These figures demonstrate that there is a lack of choice and diversity in the sector, which, of course, also reduces competition.
I believe we can increase choice and competition by growing and expanding the mutual sector. I hope the Government agree with me on that, particularly as a commitment was given in the coalition agreement to
“bring forward detailed proposals to foster diversity in financial services…and create a more competitive banking industry”,
in part by promoting mutuals.
But why mutuals, and what can they offer that standard banks cannot? First, mutuals are democratic. Banks are accountable to shareholders who demand a rising share price and a big dividend, whereas mutuals, collectively owned by their customers, have a collective of people who vote on the direction they wish the institution to take.
I have been listening closely to my hon. Friend’s comments. Given the Government’s commitment to what they call the big society, does my hon. Friend agree that mutuals seem to be a perfect example of collective self-organisation of the type the Government talk about?
I agree with my hon. Friend and I shall expand on that matter a little later. An example of the participation of members of mutuals is displayed when one attends a building society annual general meeting. The participation rates in such AGMs have increased sharply over the years, and some have member panels, which play an enhanced role in the management of the organisation. I am in favour of markets, but properly regulated ones. That means that we need to redemocratise the market so that it serves people, rather than having things the other way round, which is an avenue we have gone down too much over the past couple of decades. Giving life to mutuals is a good way of redemocratising the financial services sector.
Secondly, mutuals add biodiversity to the financial services sector; a thriving mutuals sector adds to the diversity of the financial system. The more diversified the financial system in terms of size, ownership and structure of businesses, the better able it is to withstand the strains produced by normal business cycles and we can also avoid the herd instinct commonly displayed in the market over recent times.
Thirdly, mutuals have a lesser appetite for indulging in risky financial activities and so, on the whole, they weathered the storm well during the global financial crisis. For example, building society mortgage arrears are less than two thirds of those of the market as a whole. Building societies are also, thankfully, legally barred from taking positions in derivatives, foreign currency and commodity markets, which is where other financial organisations have found themselves in deep trouble. Where mutuals have run into difficulty, as the Dunfermline building society did in March 2009, it has been because they have moved away from the traditional mutual business model. So a growth in mutuals will not only reduce exposure to risky financial activities, but bring systemic advantages. It will foster a culture that moves away from the risky, reckless behaviours that we have seen precipitate the crisis, and so we can reduce the chances of that reoccurring.