HM Revenue and Customs

Debate between Ian Swales and Ian Liddell-Grainger

Wednesday 2nd March 2011 Commons Chamber

[Ian Swales]

I can express a personal opinion, which relates to what I was just saying: we should not judge efficiency savings at HMRC without reference to the tax that is collected. We cannot judge it simply according to headcount reductions and those sorts of changes.

[Mr Liddell-Grainger]

Is my hon. Friend aware that 194 million national insurance accounts are not rectifiable even though they are scanned twice a year? HMRC does not even know how much money is in those accounts. Does he think that that is equally a problem, in that the morale has gone because people do not understand what is going on within the system?

[Ian Swales]

Judging by the evidence that the PAC received, there seems to be a lack of control over the trail of cases. All the changes have resulted in less focus on individual companies and taxpayers. I certainly recognise that sort of story.

There should be a constant watch in HMRC on the business case for investment in it. I welcomed the announcement of £900 million in extra funds to address avoidance, but I remind the House that it is targeted at collecting £7 billion, although the tax gap is £42 billion even according to HMRC’s estimates. How have we arrived at the figure of £900 million, and how do we know it is the right amount? As a taxpayer, I would be happy to invest any extra money that could be proved to produce a positive return.

The department has recognised that it has lacked detailed information on the costs and returns of different types of enforcement activity. At present it does not know the costs of, or returns on, civil investigations, or the point at which further investment in a particular type of activity would produce diminishing returns. It is therefore very difficult for it to decide how best to deploy its resources. Its management and senior officials need to show strong leadership and pay close attention to the morale of staff if those problems are to be overcome. The headcount at HMRC should not be reduced further until efficient new systems and ways of working are properly established. The department urgently needs to manage its resources effectively to optimise the tax take. The current system is obviously not working effectively for people either inside or outside HMRC. At a time such as this, when everyone across the country is having to tighten their belt, it is unacceptable that HMRC is failing to collect such a large amount of money through inefficiency and mismanagement. I urge the department and the Government to put this right.