HM Revenue and Customs

Debate between Lord Soames of Fletching and David Gauke

Wednesday 2nd March 2011 Commons Chamber

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

We have had a valuable debate, and I congratulate my hon. Friend the Member for Chichester (Mr Tyrie), the Chair of the Treasury Committee. We have had the benefit of his expertise and that of other Committee members, including my old friend, the hon. Member for Leeds East (Mr Mudie) and my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman). We also heard from a member of the Public Accounts Committee, my hon. Friend the Member for Redcar (Ian Swales).

We have heard about the experiences of the constituents of my hon. Friend the Member for Witham (Priti Patel) and had the benefit of the considerable tax expertise of my hon. Friend the Member for Dover (Charlie Elphicke). We have heard about some of the difficulties of a border area from the hon. Member for Foyle (Mark Durkan) and also heard from the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont), whose constituency has the largest tax office in the UK. We have also heard from the hon. Members for Luton North (Kelvin Hopkins) and for Hayes and Harlington (John McDonnell), who both have a long-standing interest in the matter.

There is clearly a consensus across the House that HMRC is a hugely important organisation that has a valuable role to play through the service it provides to taxpayers and tax credit claimants and its contribution in dealing with the difficulties in the public finances. We have heard articulated a widespread concern about a number of aspects of its performance. As the hon. Member for Leeds East pointed out, that has been a consistent concern for a number of years. We have heard a little about some of the causes of the problems. The hon. Member for Hayes and Harlington, among others, talked about the difficulties of the merger, and my hon. Friends the Members for Chichester and for Dover talked about tax complexity. The hon. Member for Luton North talked about the challenges created by the introduction of tax credits and HMRC’s responsibility in that area. Those issues have contributed to a number of the problems.

In the time available, I will touch on the various issues that have been raised. A number of Members mentioned staff morale. The survey numbers are pretty shocking, as HMRC does very poorly on that. My hon. Friend the Member for Chichester referred to HMRC staff as the salt of the earth, and talked about their dedication. I visit a lot of HMRC offices and find that the staff are very dedicated and committed to their jobs. The problem is that they do not feel a strong connection with HMCR or the sense of loyalty and affection to the organisation that they might, but there is a desire to do their jobs very well.

There is sometimes a feeling that HMRC staff are kicked around a bit and that some of the criticism is unfair—happily, I can exclude all Members who have participated in the debate from that charge. To be balanced and fair to HMRC, we should acknowledge some of its successes. Just over a month ago, for example, they successfully dealt with a record number of self-assessments by the self-assessment deadline.

[Nicholas Soames (Mid Sussex) (Con)]

I wholly support what the Minister is saying. It strikes me that what HMRC staff need most is to feel valued, because they do an extraordinarily important job for this country.

[Mr Gauke]

My hon. Friend is absolutely right, and it is right for us to put that point on the record.

On PAYE reform, there is no doubt that there were real problems with the introduction of the national insurance and PAYE service—NPS—computer system. The system does improve how PAYE works, but last year we saw significant problems with tax codes. So far this year we are more than halfway through the tax code process, and it seems to be going well, but these are still relatively early days. There has been a concern about the introduction of NPS, and a considerable concern about the end-of-year reconciliation process. PAYE has always involved an end-of-year reconciliation, but the numbers revealed in September were shocking. We have enormous sympathy with those who face an unexpected tax bill, and we want to do everything we can to ensure that they are treated fairly and sympathetically.

The fundamental problem is that the PAYE system has failed to keep up with changes in working patterns: people tend to move jobs more often, and they often have more than one source of income. We are taking steps to address that by introducing real-time information to the tax system, and we believe that that can address the real causes of the problem. I am aware of the concerns that the hon. Member for Leeds East raised about the timetable, and we are looking closely to ensure that we can deliver to it.

My hon. Friend the Member for Dover was entirely right to mention contact centres and their slow responses. The current service is not good enough, and in the long term we will solve that by getting things right first time and ensuring that the tax system is simpler so that people do not need to phone up. As a temporary measure, however, HMRC will employ between April and September—a particularly busy time for HMRC—1,000 additional contact centre advisers to ensure that we see an improvement in performance.

Several Members raised the issue of the tax gap. The £42 billion figure that HMRC produced—the other figures that have been thrown around lack credibility—is a big number, and although it compares well internationally we are determined to do what we can to bring it down. The figure is made up of several factors, including the hidden economy, written-off debt and so on, and there will always be a tax gap, but we are determined to reduce it.

That brings me to the spending review. Let me be very clear: during the usual communications that take place between Opposition spokesmen and senior civil servants in the run-up to a general election, we said to HMRC, “If you have proposals for areas where additional expenditure could result in substantially increased yield, we want to look at them,” because all too often the previous Government did not listen or even attempt to address that matter.

We were very pleased when HMRC came up with proposals for spending £900 million over the course of the spending review period, and it believes that that could really deliver. I cannot supply the full profile, but by the end of that period HMRC should be raising an additional £7 billion as a consequence of strengthening its compliance capacity, increasing the number of people working in compliance and enforcement, and tackling tax evasion. That is an important step to take.

We have had a useful and valuable discussion within a wide-ranging and interesting debate about an incredibly important issue. Across the House, we recognise that HMRC is a very important organisation. It is right to focus its efforts, as the right hon. Member for Delyn (Mr Hanson) said, on collecting taxes and getting the yield in, and that is what we are doing.

We recognise that savings have to be delivered, that services have to be maintained, that performance must be improved and that revenues must be increased to help tackle our nation’s record deficit. We are determined that HMRC will deliver, and that by the end of the Parliament it will be a far better department, and one that is more efficient, cost-effective and better tailored to the needs of modern Britain.

Question deferred (Standing Order No. 54(4)).