HMRC: Building our Future Plan

Rob Marris Excerpts

Thursday 28th April 2016 Commons Chamber

[Rob Marris (Wolverhampton South West) (Lab)]

Well, Minister, it’s all a bit of mess, isn’t it? I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate. He touched on staff morale, the workforce figures and the fact that there has been no ministerial statement. Along with several other hon. Members, he also mentioned the shameful Mapeley contract, signed—I am sad to say—by a Labour Government who did not realise at the time that it was an overseas company.

My hon. Friend the Member for Walsall South (Valerie Vaz) touched on a point dear to my heart when she mentioned HMRC’s curious governance arrangements. She also referred to the strange fact that people in her constituency, which is close to my constituency, will have to travel to an HMRC centre in Birmingham, where rents are much higher than in Walsall or Wolverhampton, where, I am disappointed to say, the Government propose to close Crown House. The hon. Member for Dundee West (Chris Law) quite rightly mentioned the imbalance of resources devoted to benefit fraud versus tax evasion. To sum up what my hon. Friend the Member for Bootle (Peter Dowd) said movingly about his constituency: the Government are indeed uninterested.

The hon. Member for Fermanagh and South Tyrone (Tom Elliott) mentioned geography and spoke about foster carers as an example of people trying to help their community who need face-to-face access. The hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) mentioned the difficulty that Welsh speakers are likely to have with the relocation to Cardiff. Finally, the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) quite properly pointed out the lack of an impact assessment.

The context of this is that HMRC is embarked on something called “Making tax digital”. The Chartered Institute of Taxation says that that promises significant potential benefits but that HMRC’s resources should not be cut further

“before the full cost-savings that digitisation promises are being delivered.”

There is the rub. We see that under “Making tax digital” businesses will be required to update HMRC quarterly, via digital tax accounts. As the right hon. Member for Chichester (Mr Tyrie), the Chair of the Treasury Committee, said in a letter to the Financial Secretary this week:

“I understand that HMRC has recently clarified, for the first time, that businesses would be required not just to submit information to HMRC online once a quarter, but that they would also be required to do all their record keeping in a prescribed digital format.”

The Institute of Chartered Accountants in England and Wales—I suspect a similar situations pertains in Scotland and in Northern Ireland—found in its survey that 75% of all businesses and 82% of sole traders would need to change their record-keeping systems to comply with the Government’s new proposals for making tax digital.

As far as I can tell, HMRC is a mixed blessing on this—there is a mixed picture on digitisation. In a written answer to me on 1 February, the Financial Secretary to the Treasury said:

“HMRC’s Business Plan for 2016-17 is currently being finalised and will be published by the end of March 2016 on GOV.UK.”

That is an online publication, but unfortunately neither I, nor my excellent researcher, nor indeed the House of Commons Library, can find that document online. So if it is there, it is buried—not very good on digitisation there.

The office closures have been spoken about movingly today. They are happening all over the country and will make access for individuals much worse. We know that access by telephone has been appalling, although, to be fair to the Minister, with extra resources and extra staff, because of pressure from Opposition Members, that has improved somewhat. Again, the context of this is that we are trying to tackle tax avoidance, which we see in the Panama papers. HMRC staff are rushed off their feet now, so how are they going to deal with the fallout from the Panama papers? They are just not going to be able to do that. I would like the Minister to refer to that when he replies, because a similar situation applies in respect of the general anti-abuse rule that we hope we are going to have and to implement. I laud the Government on that, but staff will be required to enforce it; we do not have the enforcement if we do not have the staff.

The Office for Budget Responsibility made the following comments about the tax yield loss from Guernsey, Jersey and the Isle of Man:

“HMRC is also now less optimistic about how much of the lost yield can be recouped through additional compliance activity, on the basis that they are unlikely to be able to work the higher number of additional cases on top of existing workloads.”

The OBR estimates that HMRC will now recoup £530 million, which is down from a previous estimate of £1.05 billion. Talk about cutting off your nose to spite your face: cutting the number of staff and not being able to work the extra cases to get in the revenue. The staff would pay for themselves, and there are many, many studies to that effect.

All this comes coupled with a Government who have increased the size of the tax code by 50%. I understand that, as all Oppositions talk about simplifying taxation—it is the holy grail—but I am not aware of it happening in the 15 years since I first entered this Parliament. “Tolley’s Tax Guide” now runs to 1,500 odd pages, whereas it had 1,000 in 2010, so it is 50% longer. I am not saying to the Minister that we therefore need 50% more staff, but I think that most people would say, “If we are having more complexity rather than more simplification in tax, we probably need at least the same number of staff, with their expertise.” As it is, the number of staff in HMRC has plummeted in the past six years—some of this is a result of efficiency and some is because of digitisation.

Like all hon. Members, I suspect, I received a very helpful briefing from the Public and Commercial Services Union—PCS. I declare an interest, in that I am a member of the Unite trade union, and I am proud to be one. PCS represents more than 35,000 workers in HMRC, which is well over half the workforce, so I think PCS has some idea of what it is talking about. One thing it highlights is the lack of an equality impact assessment, which should have been done. There is anecdotal evidence—I stress that it is anecdotal—from London and the south-east of England that 40% of those being targeted who will not be able to transfer under this centralisation have disabilities. That may or may not be the case, but without that equality impact assessment we just do not know. Many staff with disabilities or with childcare or care for the elderly responsibilities will be disproportionately affected because the additional travel occasioned by centralisation—even if it is geographically possible which it is not in some parts of the country—will not be possible for them.

According to the PCS briefing, HMRC is not prepared to discuss the planned office closures with a recognised trade union, but it will discuss how those closures will be implemented. If that is the case, it is unacceptable. If that is really the Government’s view, they should put their money where their mouth is—I do not advise them to do this because it will be a lot more expensive in the long run—and de-recognise the trade union that represents more than half their staff, or they should comply with the spirit of the law and engage properly with a recognised trade union. They should have the one-to-one discussions, which were initially promised, but which are now being withdrawn in terms of having a union representative present. That is part of what union recognition is about—a person can have their union rep there when they have difficulties at work. The Government should be telling HMRC to do that.

HMRC is broadly going in the wrong direction. It is putting the cart before the horse. It is cutting staff—or proposing to cut staff—before there is any demonstration that digitisation is working smoothly. It should get it to work smoothly before it cuts staff.

Furthermore, making tax digital will increase costs for businesses, as they will have to put in information four times a year on new software and that will have a disproportionate effect on small businesses. With fewer staff, there is a reduced likelihood of success on tax avoidance and tax evasion, which, to be fair, the Government have done a lot about in the past six years, but they do need to do a lot more. These cuts will further restrict access to HMRC services for individuals and they will be further demoralising for a highly skilled workforce.

I say to the Government that there is a contradiction in what they are trying to do. Quite rightly, they are trying to make HMRC and its operations more efficient by using computers more. At the same time, they are saying that they need to centralise their offices. If computerisation works smoothly, they do not need to centralise geographically; they can do it in a dispersed manner, as is the case with the offices that we currently have, which the Government are proposing to close. I urge the Minister to think again.