HM Revenue and Customs

Kelvin Hopkins Excerpts

Wednesday 2nd March 2011 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

We are discussing the administration of Her Majesty’s Revenue and Customs, and I should declare a constituency interest because Cumbernauld HMRC is one of the largest tax offices in the country. It is a strategic site, and the largest employer in my constituency. As this debate shows, HMRC is equally important for the Government, who must collect tax more effectively if they are to be successful in their economic and financial objectives.

I should like to address a few issues regarding HMRC’s effectiveness, many of which were touched on in the thoughtful contributions of the hon. Member for Chichester (Mr Tyrie), my hon. Friend the hon. Member for Leeds East (Mr Mudie) and, most recently, the hon. Member for Redcar (Ian Swales). In my view, two things are necessary if HMRC is to be as effective as possible. First, it must be properly resourced, and I endorse the final words of the hon. Member for Redcar about the wisdom of getting HMRC sorted out before moving to a programme of further cost cutting.

Secondly—this relates to observations that have already been made—HMRC must have well-organised and highly motivated staff. I am concerned that that will not be the case in the future, not only because of the cuts that the Government are making in HMRC’s budget, but because of how they are being implemented. Together, the cuts and their implementation are having serious effects on the morale of HMRC staff in Cumbernauld and elsewhere. Simply put, HMRC staff know that cuts are being made, but do not know yet where they will fall.

HMRC received a tough settlement in the comprehensive spending review. The settlement mandates overall resource savings of 15% and efficiency savings of 25%. Those cuts were announced in October, as Members in all parts of the House are well aware, but we have yet to receive any confirmation from the Government of how HMRC is to be restructured.

[Kelvin Hopkins (Luton North) (Lab)]

Is it not the case that every additional tax officer collects many times their own salary, and that if we want to collect more revenue and make HMRC a more profitable organisation, we need more staff, not fewer?

[Gregg McClymont]

My hon. Friend makes a good point. There is a problem of short-term savings at the cost of long-term benefits—what we might call a false economy. I shall come to that.

We have not had any confirmation from the Government of how HMRC is to be restructured. We do not know which services to the public will go, or which services will be changed. We do not know yet which jobs will go. Before Christmas I asked the Treasury Whip about the future of HMRC jobs in Cumbernauld in a Back-Bench debate. The Treasury Whip suggested to me that the Cumbernauld jobs were safe. I understand that as it is a strategic site, its situation is different from that of some of the smaller call centres and the like. I urged the Treasury Whip to share the information that proved this to be the case: it has not yet been forthcoming, for good reason.

Subsequent questions for written answer revealed that the Government cannot give any such undertaking until HMRC publishes its business plan. It is better for HMRC to take its time and get its business plan right than to get it wrong in a rush, but that has consequences. It seems that the business plan will not appear before April. The delay and the mixed messages do not make tax officers’ jobs any easier. Clearly, the increased anxiety can damage morale.

We have heard about the situation from the hon. Member for Chichester and others. It is not surprising in those circumstances, and also given the nature of the job, that in a recent survey only 11% of HMRC employees felt that change in the organisation was well managed. HMRC employees in Cumbernauld are now just as uncertain about their future as they were when the programme of cuts was first announced in October. Such uncertainty has an impact on staff morale, and thus on productivity and performance. More fundamentally—this goes to the point raised in an intervention by my hon. Friend the Member for Luton North (Kelvin Hopkins)—I suspect that the cuts to HMRC’s budget may well prove to be a false economy. Short-term savings at HMRC could reduce the Government’s ability to maximize tax revenue in the long run.

--- Later in debate ---

[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.

--- Later in debate ---

[Kelvin Hopkins (Luton North) (Lab)]

I shall speak very briefly.

I agree with much of what was said by the hon. Member for Dover (Charlie Elphicke). I especially agree with what he said about the need not to demoralise the staff of HMRC any further, but to put the blame where it truly lies—with the Treasury. My experience has led me to believe that the Treasury is the most stupid of all our Departments, and I say that advisedly.

I had my earliest experience of the Treasury and HMRC when I first entered Parliament and visited a local VAT office. There were splendid people there who were doing a good job, but they said, “We have not enough staff to collect all the tax.” They said, very modestly, “Every tax inspector collects at least five times his or her salary. What we really need is a few more inspectors.” I wrote to the Treasury, as one does, suggesting that because they were collecting more than their own salaries, employing more of them would bring in more revenue. I thought that that was a wonderful idea. The letter that I received from the Treasury, however, was one of the most vacuous, stupid letters that I have ever received from a Government Department. It said, “We are trying to reduce costs by minimising staff.” An eight-year-old child would have seen the illogicality of that. Obviously, cutting staff would cut revenue by far more than the salaries that would have been paid to those staff.

I have not changed my mind about the Treasury since then. I would add that managing the economy has not been one of its great successes either. I hope that one day I shall be challenged by the Treasury—by Ministers, or even by senior civil servants—to justify my accusation. That letter read like a thin press release rather than a proper, intelligent letter from a Department.

I subsequently raised the matter with union members. Along with my hon. Friend the Member for Hayes and Harlington (John McDonnell), I am a member of the union support group. They said that inspectors dealing with income tax and corporation tax raise sums that are many times greater than their salaries—five times is just a modest amount for VAT inspectors, and it is much more for other forms of taxation: the Vodafone scandal involved billions of pounds, for example. HMRC cannot collect enough tax simply because it does not have the resources to do so. It has been demoralised and de-professionalised. I have had many private conversations with senior tax officers, so I know what the problems are.

My next point might not be popular with my party colleagues. Against my better judgment, the previous Government arranged for HMRC to hand out benefits as well as collecting taxes. They gave it the job of handing out credits, but in my view benefits should be handed out by a Department specialising in that, namely the Department for Work and Pensions. No other country in Europe has three major Government Departments handing out means-tested benefits— I have checked that. Housing benefit is paid by the Department for Communities and Local Government, tax credits are paid by the Treasury and other benefits are paid through the DWP. Why not have one Department responsible for handling benefits, especially as each is means-tested, they all overlap and the people who receive them and therefore have to deal with these complex, means-tested benefits are often the elderly and people who might not be the most able? These benefits should be handled by sympathetic, professional staff who can deal with all of them in one place. Part of the problem is that the people who currently do this job have been landed with it.

These two tasks are completely incompatible. Taxation is collected on an annual basis; most taxes are paid yearly, and some of us fill in tax returns while for most PAYE, or pay-as-you-earn, is collected automatically. Benefits change throughout the year, however. Those who claim benefits are often people whose circumstances change almost by the week. They might be in and out of work and their pay rates change so they are either entitled to a credit or not. The situation is immensely complex, therefore. It was stupid to hand that responsibility to HMRC, and I opposed the move. I have stated before in the Chamber that we should have one Department responsible for handing out benefits and another responsible for collecting taxation. The two roles are completely incompatible. I stand by that position, and I hope that one day a Government will be more sensible and will start to unify the handing out of benefits in one Department.

I have met many tax staff, both senior tax officers and the basic back-room staff. All of them complain that they are demoralised and overworked, and that there are too few staff. The less senior staff are very poorly paid, too. If we are going to have a good HMRC for the long term, we must re-professionalise it, and provide enough staff and make sure they are properly paid, and we must take away the nonsense of them handing out benefits as well as collecting taxes.

My message is simple, and I hope it goes home and is thought about, even if it is not acted on immediately.