HM Revenue and Customs

George Mudie Excerpts

Wednesday 2nd March 2011 Commons Chamber

[Mr George Mudie (Leeds East) (Lab)]

I thank the hon. Member for Chichester (Mr Tyrie) for his kind remarks. When Lord McFall left the Treasury Committee, no one thought its work could be kept at the same level, but I think that it has improved—that is, if one can improve on Lord McFall’s performance. As Chairman, the hon. Gentleman has already gained the respect—even the fear, I think—of witnesses appearing before the Committee, which is a good sign. He also serves a useful purpose for me, because when I go on one of my northern, regional rants, he will translate it for the southern gentlemen before us, and I sometimes get an answer.

As expected, the hon. Gentleman has dealt with this issue on a policy level that I could not match. I take a more pragmatic view towards the department, because although there is an argument for having a look at policy—tax definitely needs simplifying—we should not necessarily do things at that level to suit a vehicle that is dysfunctional; rather, we should ensure that the vehicle is functional. At the moment, I fear that the department is in a disappointing state. To give some background, we on the Treasury Committee, and on the Treasury Sub- Committee under the hon. Member for Sevenoaks (Michael Fallon), see HMRC every year, and we have had one or two inquiries over the years. In 2006, the Committee published a report on the efficiency programme. We identified concerns that reductions in the headcount were leading to falling service standards, and we made certain recommendations. We have returned to that issue in our current inquiry—we are halfway through it—into the same subject as this debate, and we have sadly discovered that nothing has been done along those lines. Indeed, in our 2009 review of administration and expenditure in the Chancellor’s Department, we noted

“a 7% increase in total recorded customer complaints”.

We asked HMRC to square that with its submission that strong progress had been made.

[Mr Liddell-Grainger]

The latest figure from HMRC is that complaints have gone up by 33% in the last two years, so the hon. Gentleman’s figures are a bit light.

[Mr Mudie]

They probably are, but the report that I am quoting is a couple of years old.

The other thing that we highlighted—the hon. Member for Chichester referred to this—were the dire results for HMRC of a cross-government staff survey. We expressed deep concern about employee engagement at HMRC and its effect on performance, along with the severely low morale, which has been referred to. What that amounts to is this. The problem could be a passing phenomenon, but it is not. It has been consistent for a number of years and it has to be faced up to. What are the reasons for it? We cannot move away from that dismal performance without accepting that severe staff cuts in the department are a major—if not the major—contributory factor. The work force has gone down by 30% since 2005. There might be some excuse in that the merging of two departments—Customs and Excise and the Inland Revenue—provides scope for rationalisation, but not for losing 30% of the staff. There is worry that with the spending review, another £2 billion might be taken out—or £3 billion, with £900 million going back. In addition to seeing those 30,000 jobs, another £2 billion is to be taken out of its resources, and we cannot anticipate a better performance in the years ahead.

[Tony Cunningham (Workington) (Lab)]

I am hearing rumours that some people threatened with redundancy are earning £20,000 to £25,000 a year, yet the work they do saves the Treasury hundreds of thousands of pounds a year. Surely that does not make any sense either?

[Mr Mudie]

That is a well-accepted fact. To be fair, the £900 million is an acceptance of what my hon. Friend says. Theoretically or on paper, this money is going back to bring in £7 billion-worth of tax that has not been collected for one reason or another. I would like the Minister to deal with the phasing of that £7 billion. As usual with the Treasury, this can be read any way. I know that we culminate with this £7 billion, but what are the targets for the years ahead?

The computer has also contributed to demoralisation in the Department. It is not just the computer, but the man in Whitehall who thinks that the computer is the answer, because pressing a button produces something and it does not argue back. As we have discovered elsewhere in government, that simply does not work under any circumstances. The Revenue saw the computer as an answer to its problems with the budget cuts and thought that the staff could be taken out. They were removed before the computer was up and running, before it became operational and proved to be defective. That is why we had the debacle at Christmas 18 months ago of millions of taxpayers receiving an unexpected and largely unwelcome envelope. I grant that some might have been welcome, but they were mostly unwelcome.

The 30,000 jobs are gone, but I have yet to mention the merger. It was particularly important for staff morale, because at the same time this brilliant Department—I suppose it was the Treasury—brought in McKinsey to do its thinking, and it ended up adopting a French model of “départements”. There were 36 such departments inside the organisation, which meant no joining together of the two departments with their great traditions and ethos, and no welding together of the best bits from both. Instead, the departments were broken up—everybody was broken up—and there were no lines of accountability or anything like that. It was a complete shambles. Steps have been taken to put that right, but some of the damage persists, which is another contributory factor. That is what has happened. It is not possible to take out 30,000 people, have a merger or reorganisation, load in additional work and duties and expect it all to work. It is not working; something has to be done about it.

The hon. Member for Chichester touched on the issue of taxpayers. When the new computer came in, as usual somebody in Whitehall said, “It is wonderful to have this computer in London, so we can shut some offices”—and they gaily did so. On paper that meant saving staff, costs and so forth. The trouble is that tax is a very complicated issue. The best of us—I say this because I am among them—simply cannot handle tax and the details relating to it. Two or three years ago I decided that my accountant was too expensive, and took over the job of filling in the forms myself. In the first year, I received £300 back; in the second year I was charged £1,500. Now I am back with my accountant.

The difficulties involved in dealing with tax are a fact of life. The closure of tax offices has been a disaster, along with the cuts in working hours and days. We have reached a stage in public life, at both local authority and national levels, when call centres may seem to be the answer but are really—I suspect—a way of placing a brick wall between the decision-makers and the public. They can be helpful when dealing with ordinary questions, but are often unhelpful when it comes to detailed matters such as tax. That is especially true when they are talking to the elderly and those for whom English is a second language. I am reminded of confused.com: call centres are unhelpful to anyone who is confused.

[Guto Bebb (Aberconwy) (Con)]

The closure of tax offices is an important issue in north Wales. I hate to be parochial, but I represent an area in which about 20% of the working population are self-employed. The need for self-employment is paramount in north Wales, because the economy is so fragile that unless we create our own job opportunities, we cannot work at all. Unfortunately, over the past few years we have seen the downgrading of the Porthmadog, Bangor and Colwyn Bay tax offices. The 20% of the working population who are self-employed must now travel to Wrexham and even over the border to be served, which is a big problem. As the hon. Gentleman has pointed out, when a small business is forced to use an accountant because it is unable to talk to—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We must have short interventions.

[Mr Mudie]

I am sorry that you stopped the hon. Gentleman, Mr Deputy Speaker, because his was a better speech than mine. I do not think that he needed to use the word “parochial”, or even to apologise if he thought that he was being parochial. In fact, he was being regional. Here in London, it is assumed that any region above Watford can be written off. The hon. Gentleman has made an extremely valid point.

I know that my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont), who is sitting behind me, is a strong supporter of tax office staff. However, I agree with the Chairman of the Select Committee about the number of telephone calls that are not answered. At one stage, the figure was 43%. One of the professional witnesses who gave evidence to the Committee said that an HMRC tax manager had been in his office and observed that it took 12 minutes for a call to be answered and seven minutes simply to change a tax code. That simple transaction took 20 minutes. That is a witness’s statement, and a very good one. I am sure that the Minister has read all the evidence given to the Committee, and has noted that that particular witness described his experiences brilliantly.

[Mr Liddell-Grainger]

The hon. Gentleman is well aware that the two companies charged with this task by the Government, Capgemini and Accenture, have been at it for a decade. The system that they were asked to use a decade ago is not the system that they use now and is not capable of doing the job, although it is starting to throw up problems that we saw a couple of years ago. Does the hon. Gentleman agree that both companies’ contracts should be upgraded to a level that is appropriate to the 21st century?

[Mr Mudie]

That is an interesting point.

I am using up time rapidly, but let me mention in passing another feature of call centres. Telephoning 0845 numbers can be very expensive for pensioners—indeed, for everyone. The fact that people have to hold on for so long does not help, but in any case it is not the right way to decide complex matters. It is best for people to deal with those face to face. The best people in the whole business are the agents, as they are the professionals. They take the frustration and get angry about it—and they have given good evidence. The ordinary individuals are in the worst position, however. The professionals get used to things and can get on with other tasks, yet, as the professionals said, those who are not represented get the worst deal, and with office closures, cutting hours, and relying increasingly on telephone calls, e-mails and letters, the whole system knocks out a fair number of the population. That is what is happening. Plenty of Members want to speak, and they will spell out their constituents’ experiences.

Does the system need to be improved and will it be improved? I do not think it will, first because it goes against the grain—I will explain that. Sadly, every time witnesses from HMRC have appeared before us, they have been in a state of denial. If someone has a problem, there is no chance of their dealing with it unless they own up to it and accept it. I sympathise with them in a way, however. The hon. Member for Chichester said we are to blame and that is true; we are to blame, in particular the Ministers. It is hard for a civil servant to go before a Select Committee and say, “Yeah, I admit it; we can’t do this because we don’t have the people.”

We look for loyalty and a straight bat from civil servants, but the way we are doing things is not generally the best way to get a real dialogue. Therefore, when we have them before us in a couple of weeks, I am not sure that Dame Lesley will do anything other than give us the Geoff Boycott treatment, or even do a Pietersen and knock us out of the ground a couple of times. Because she and the management are in this state of denial, I cannot see things happening unless the Minister takes some steps. I really do think this comes down to staff and resources. Unless they are in place, we cannot load new jobs on.

Finally, let me describe a few points that should push the Minister to want to have a fresh look at resources. One of them is to do with what the Chairman of the Select Committee said about the integrity and reputation of the system, and real tax compliance in this country. If we frustrate and ignore people, and make it difficult for them to get explanations, one way or another, non-compliance will grow. There will be increasing disrespect for the system and the people in it, and a growing feeling that they are not here to help. The tax inspectors and staff are adamant that they are here to help however, and that has always been my experience at that level—when we can get to speak to someone, they are helpful.

If something is not done and we treat people in this way, they will respond in a manner that I think is natural, which is to say, “Get on with it”—I almost said “Sod it”—and “I am not complying.”

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We cannot say “Sod it.” I am sure the hon. Gentleman will withdraw that.

[Mr Mudie]

Well, I did withdraw it; I said I will not use the phrase “Sod it.”

I have made points about management being in denial and non-compliance. The next point is more current. We live in a time of austerity. It is a hard time and people’s wages and homes are being affected, yet the public are reading about Barclays paying £190 million on billions of pounds of profit, and about Vodafone being willing to pay £3 billion or £4 billion and having that available to pay to the Inland Revenue, but the Inland Revenue accepting £1.3 billion. This big multinational company is getting away with paying that amount of tax at a time when we are closing vital public services. We see Mr Green paying his wife through Monaco. In last Sunday’s papers, we read about a man with reputed wealth of £47 million being forced by someone he sacked to confess that he pays no tax at all because of the trust his father set up. Such stories are starting to resonate among ordinary people.

The Governor of the Bank of England came before the Treasury Committee yesterday, and at one stage in the evidence session he accepted that the anger we have witnessed in the past couple of years is nothing compared to what might happen when we see the real cuts, which are starting now. Last year, we talked a lot about cuts, but they amounted to only £6 billion. However, in Leeds recently, people invaded the council chamber when the budget was being fixed. There were people outside in wheelchairs whose benefits were being cut. Cuts were made to housing benefit. Students and trade unionists were also there. Some 1,000 jobs there are to go.

I genuinely say to the Government that a dangerous situation is brewing. A very affluent lady in America said, “Tax? That’s just for the little people.” That belief is starting to take hold in this country, as a lot of evidence shows. We need to get the tax people working properly. The tax gap is reckoned to be between £40 billion and £120 billion. We would not have these cuts if everybody paid their tax in a responsible fashion. That issue needs to be tackled, yet right now thousands of tax staff are being given their cards, when they could be dealing with it.

I want to finish by being helpful to the Minister. Another computer program is wending its way through the Department that has a crucial bearing on the Minister’s future. It deals with real-time initiatives and has very strict deadlines. It is for not only the Treasury but the Department for Work and Pensions, and it is a crucial factor in delivering the universal credit. I know that Treasury Ministers are very anxious to get universal credit in. To judge by past performance with computer systems, I wish the Minister luck. However, let me mark his card in this debate: all the signs from the Department are that, unless he gets a real grip and has a serious word with the Chancellor, that deadline will not be met. We are talking about not just one Whitehall Department negotiating a contract, but two, and when you put two Departments together, that leads, I fear, to trouble.

As an old friend of the Minister—we have worked together on the Treasury Committee and on other matters—I would not like that contract to be lost on his watch, and that is the third, and perhaps most compelling reason why he should do something about this problem.