HM Revenue and Customs

John McDonnell Excerpts

Wednesday 2nd March 2011 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I congratulate the hon. Member for Witham (Priti Patel) on her creativity in using an estimates debate to get so many constituency cases addressed. Following her critique of HMRC, I say to her that the buck stops here in Parliament.

I am not a member of the honourable fellowship of the Public Accounts Committee or the Treasury Committee. I was a member of a Select Committee back in 1997, I believe, when the Labour Whips, in a fleeting moment of jocularity, put me on the Deregulation Committee. I sought to change it to the Reregulation Committee, and we parted company soon after. I believe that my hon. Friend the Member for Leeds East (Mr Mudie) was in the Whips Office at that time, but I do not bear grudges.

I attended the debate on the legislation that founded HMRC. The House was relatively empty, and I believe that I was one of the few Members who tabled amendments on Report. At that time, a number of us were concerned about whether the merger was appropriate. We were also concerned about a trend that started immediately when the merger happened, when 3,000 job cuts were announced. Soon after that, 12,000 more were announced. I do not know of any organisation—public or private—that could have survived the treatment that HMRC received in recent years, including recent months.

When the merger happened, there were 104,000 staff. Since then, there have been 30,000 job cuts. We are now down to 75,000 staff. The £2 billion cuts as part of the comprehensive spending review amount to another 11,500 job cuts. I appreciate that the Government have put back £917 million to tackle tax evasion and avoidance, but cutting £2 billion and putting £900 million back seems like a ricochet policy rather than a planned approach to reform, as many Members have suggested.

I want to follow on from the points that the hon. Member for Chichester (Mr Tyrie) made. I chair the parliamentary PCS trade union group, an informal group of Members of all political parties. It enables us to meet the trade unionists who represent HMRC staff—the tax inspectors. Reference has been made to the briefings that have been given in recent months. That has educated us about the role that the staff play and what they have had to endure. It is not just the job cuts; 200 local tax offices have also been cut. We have now been told that there is a radical reduction in the opening hours of the walk-in tax inquiry centres. The point was made that, in some parts of the country, there are no local tax offices and vast gaps. The worst example is Wick in Scotland, where there is nothing in the vicinity and nowhere to transfer the redundant staff to ensure that they are retained in the service.

My hon. Friend the Member for Luton North (Kelvin Hopkins) made the point that for every tax official appointed, £685,000 is gained in tax income that is generated.

[Ian Swales]

Does the hon. Gentleman agree that a walk-in centre that is open only a couple of days a week and staffed by somebody who knows nothing about tax, and whose main role is to note details or direct people to telephones, is not a good walk-in centre?

[John McDonnell]

Yes. In recent years and from the time of the initial legislation, there has been almost a Dutch auction between Front Benchers competing to see who could cut more jobs from HMRC. We tried to point that out. My hon. Friend the Member for Leeds East gave a good example of how not to do a tax return. Some people need a face-to-face discussion about their tax affairs and that cannot be done through a call-centre mentality.

Some Members have pointed out that the evidence on call centres is fairly appalling. The pressure on call centres has mounted. Let me give some statistics for the record. Calls were up 20% from 2009-10 to 2010-11. Call attempts were up 100% from 2009-2010 to 2010-11. Engaged and busy tones played were up from seven to 35 minutes. One can see why that tune—“Greensleeves” or whatever it is—pushes some people right over the edge if they have to listen to it for 35 minutes. The current contact directorate performance prediction for 2010-11 is that only 40% to 50% of call attempts will be answered.

[Kelvin Hopkins]

I agree strongly with my hon. Friend. Together with the cuts in staffing, which have put extra pressure on staff, and de-professionalisation, will my hon. Friend mention the relatively low pay with which many tax office staff have to cope?

[John McDonnell]

We once prided ourselves on an effective and efficient tax delivery service through tax collection, and the job of tax inspector was one to which people aspired. We have undermined that through the de-professionalisation of the service, the way in which staff are treated and pay.

My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) has direct experience, having met large numbers of his constituents who work in that tax office. The problem is not just the numbers of staff or how some of the services have been downgraded; it is the fact that the redundancy payments of people who are being laid off as a result of the recent cuts are being cut by up to two thirds. In addition, their pensions are now threatened by the change from the retail prices index to the consumer prices index.

Of course, that spells disaster for many people in planning their careers and their futures, so it is no wonder that the statistics on morale are so appalling—and morale is getting worse, not better. Staff were asked whether the changes were usually for the better, but fewer than one in 10 answered yes, meaning that they hold out no hope for the future.

Staff have been treated appallingly by management over a period too. Some Members were in the House when we debated the introduction of the lean system to HMRC, which was lifted straight from the Toyota car factories. That system produced the first strike in the history of HMRC in Scotland, because of how staff felt they were being treated. Hon. Members have learned that members of staff describe the imposition of the new attendance management system as draconian. One said that HMRC management seems to be

“more interested in finding ways to justify dismissing staff to get the numbers down as this is cheaper than redundancy rather than staff welfare and delivery of good customer service.”

The fact that professional staff have those sorts of opinions is an indication that something is wrong.

Staff are also concerned about elements of privatisation, such as the increasing role of private debt collection agencies in pursuing tax debts of under £10,000, and the conduct of private companies that do not have the expertise that HMRC has developed over the years in door-to-door collection. There are real concerns about not only office closures but the disbanding of whole HMRC business streams, which is reducing expertise and damaging service delivery.

[Kelvin Hopkins]

One feature of privatisation and the call centre culture is that it destroys the public service ethos. As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said earlier, the public service ethos is vital in an important job such as tax collection.

[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.