HMRC: Building our Future Plan

David Gauke Excerpts

Thursday 28th April 2016 Commons Chamber

[The Financial Secretary to the Treasury (Mr David Gauke)]

Back in November, HMRC announced important changes to how it would operate. Its aim was simple: to create a modern, efficient organisation that would continue to protect this country’s tax revenues, while, at the same time, providing better value to the taxpayer. HMRC is determined to make sure that it is better able to focus on its core priority—to bring in more revenue by tackling tax evasion and avoidance.

Since 2010, it has made real progress. For example, it has driven down the tax gap—the difference between what HMRC should theoretically bring in, and what it actually collects—from 7.3% in 2009-10 to 6.4% in 2013-14. That is one of the lowest rates in the world. To make the importance of that quite clear, let me put it this way: if the Government and HMRC had not taken action to achieve that, we would have collected £14.5 billion less in tax.

We are determined to transform HMRC into a more efficient, more highly skilled organisation, which offers the digital services people expect in the 21st century. That is why, in the spending review of 2015, we made the commitment to invest £1.3 billion in transforming the digital capabilities of HMRC. In this year’s Budget we allocated a further £71 million to help HMRC improve its customer services. By the end of this Parliament that will bring the change we need to make it quicker and easier for taxpayers to report and pay their taxes online. It will deliver a seven-day-a-week service, improved telephone services and reduced call waiting times, as well as dedicated phone lines for new businesses. This investment will pay off. By 2020, we expect HMRC to be saving £700 million a year, as well as delivering an additional £1 billion in revenue in 2020-21.

The next stage of the plan to bolster HMRC and help it deliver more for less is to transform the estate through which it works. In 2010 we challenged HMRC to make savings. We asked it to reduce costs by a quarter and reinvest £917 million of those savings in making sure that more businesses and people paid the tax that they should, bringing in an additional £7 billion a year in 2014-15. HMRC delivered, making savings of £991 million, including reducing the cost of the estate. At the same time, it kept up progress in cutting the tax gap and improving customer service. So far from endangering our plans to clamp down on tax avoidance and improve customer service, as some have suggested today, these plans are crucial to those aims.

Let me remind the House that HMRC’s plans will generate estate savings of £100 million a year by 2025.

[Patrick Grady]

Will the Financial Secretary give way?

[Mr Gauke]

I have many points to get through, but if I have time I will give way.

When HMRC was formed in 2005, it had around 570 offices spread out all over the country—an inefficient way of doing business in the 21st century. Reorganising this network of offices was a priority even then, which is why, following a number of reorganisations, that number was reduced to around 390 in 2010. It now stands at around 170 offices, ranging in size from 5,700 people to fewer than 10. That is a start, but it is not efficient enough. The changes that we announced in November represent the next stage of HMRC’s estate transformation programme.

Over the next 10 years, the department will bring its employees together in large, modern offices in 13 locations equipped with the digital infrastructure and training facilities they need to work effectively. These new high-quality regional centres will serve each and every region and nation in the United Kingdom, creating high-quality, skilled jobs and promotion opportunities in Birmingham, Belfast, Bristol, Cardiff, Croydon, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Stratford.

There are significant advantages to such a system: the new offices will have the capacity to encourage people working in different roles, at different levels, to work more closely together, as well as providing more opportunities for them to develop their careers. The offices will be in locations with strong transport links and with colleges and universities nearby, to ensure a ready talent pool close by. In short, they represent the way business is done in the 21st century. HMRC expects the first centre to open by 2017, with the others opening over the following four years.

On the point about consulting HMRC staff, HMRC fully recognises that its most valuable asset is its people. HMRC can only do what it does thanks to its dedicated members of staff who bring in the money that funds our essential public services, as well as helping hard-working families with the benefits they need. That is why HMRC has kept its workforce fully abreast of all its plans to change how it operates, which were first announced internally two years ago. Since then, HMRC has held around 2,000 events across the United Kingdom, talking to colleagues about these changes. Everyone working for HMRC will have the opportunity to discuss their personal circumstances with their manager ahead of any office closures or moves.

I should remind the House that this is about changing the locations, not cutting staff. Indeed, the department’s policy is to keep any redundancies to an absolute minimum. HMRC’s analysis indicates most employees are within reasonable daily travel of a new centre, although that is subject to the one-to-one discussions which every member of staff will have about a year before any planned closure.

Let me pick up the point about trade union representation. One-to-one meetings are an opportunity for managers and staff to discuss how the proposals will affect staff, and HMRC will consult every one of its staff. Once decisions are taken, staff will of course have the opportunity to have representation. This is not a change of approach; these are fact-finding discussions with all members of staff to understand their personal circumstances. Trade union reps have never been in such meetings, but they will be involved, as they would normally, at a later stage.

[Chris Stephens]

My understanding is that, once there is an outcome at the one-to-one meetings, there is an appeal mechanism, but the trade union will not have access to that either. Will the Minister clarify that?

[Mr Gauke]

The purpose of the one-to-one meetings is to ascertain the particular circumstances of each individual likely to be affected by the proposals. From that, further proposals will come forward, and the usual trade union representation will be available to members of staff.

Since announcing its decision on the locations of its new offices in November, HMRC has been busy negotiating with suppliers, designing the look and feel of buildings, and planning how it will move its existing workforce. That has included one-to-one meetings with almost 2,500 members of staff who are most immediately affected, to look at their individual needs.

I stress that those are operational changes, decided at an operational, rather than a political level. Making changes to how HMRC offices are organised is an integral part of the Government hubs programme. It is essential to make the organisation fit to deliver better customer service, as well as to make it harder for the dishonest minority to cheat the system—and all at a lower cost to the taxpayer. That has the Government’s full support.

On staff engagement, HMRC staff are currently spread across about 170 offices across the country, many of which are a legacy of the 1960s and 1970s, lack modern facilities and technology support, and do not reflect new ways of working. The current state of the estate is undoubtedly a factor in the levels of engagement from staff, many of whom look forward to working in new, modern, fit-for-purpose offices—the type of workplaces that will also help HMRC to attract and retain the skilled workforce it will require in the future.

There has been much comment about the Mapeley contract entered into by the previous Government, and I for one am certainly not going to defend it. It is not a good contract for the taxpayer, which is precisely why HMRC wants to get out of it. If we do not get out of it now, HMRC will be fixed in it for years to come.

On customer service standards, call handling last week was at 90%, and the average wait was six minutes, but we invested more money at the Budget to improve that.

On Welsh-speaking services, HMRC is committed to maintaining services in Welsh for its Welsh-speaking customers. The quality of those services must continue to be high, and HMRC is actively exploring the ways it can best achieve that.

If we want HMRC to do its job effectively, we must ensure that it is fit for the challenges it faces. We have to be willing to modernise, find efficiencies, target resources, and make long-term strategic decisions. That is precisely what HMRC is doing: transforming itself into a smaller, more highly skilled organisation with modern, digital services and a data-driven compliance operation that will deliver more for the taxpayer at lower cost. That is the policy it has embarked on, and I hope it will have the support of the House.