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HMRC cuts must stop, say unions

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The Treasury Committee report that drew a public apology from HMRC chairman Mike Clasper at the weekend warned that sustained cuts to resources, and a management culture of ‘command and control’, have contributed to a decline in service delivery standards.

The cross-party committee of MPs recognised that HMRC operate under significant pressures. The department ‘has to implement increasingly complex tax legislation, sometimes developed without full account of the practical consequences, whilst undergoing restructuring, delivering substantial resource reductions and job cuts’, it said.

The spending review settlement involves further reductions, offset by ‘reinvestment’ in compliance and PAYE.

‘Damaging impact’

The committee said: ‘Whilst genuine efficiencies have been, and will continue to be, made, we are concerned that HMRC's performance will continue to deteriorate if further reductions in resources are badly managed. There was near unanimity among our witnesses that the reductions made so far have had a damaging impact.

‘Serious dissatisfaction’ with HMRC may undermine voluntary tax compliance, MPs warn 

‘We are particularly worried as there is no evidence that the methods that management will deploy to find “efficiencies” and “cost savings” have changed in any substantial way.

‘We also believe there is a tension between the drive for “more automation” and “centralisation” and the desire to empower and boost the morale of staff who must deliver the cost savings.’

It added: ‘HMRC collects revenue for the government of more than a hundred times the amount it costs to run.

‘Given the fiscal position, it would make little sense for the department to be cut back further if resource reductions in addition to those plans already agreed would have the effect of reducing receipts, displacing disproportionate costs onto the wider economy or further eroding public confidence in the tax system.

‘Great care will be needed before any further savings are planned or implemented.’

‘Command and control’

‘We received disturbing evidence of job cuts being made before the efficiencies that were intended to enable them had been delivered, and of a culture of command and control that disengages staff and prevents potential problems from being dealt with effectively,’ the committee said.

'There is a perception that the department is run on the principles of close control and management scrutiny, with little opportunity for individuals to develop autonomy and exercise their skills' 

Treasury Committee

HMRC continue to face ‘major difficulties’ with staff engagement, it found. ‘Whilst staff remain dedicated to their work despite the pressures HMRC is under, they have little confidence in the leadership of the department or that change will be for the better. This has been a long running problem for the department.’

Senior management are ‘very aware of the problem’ and have made efforts to improve engagement, but there has been ‘little evidence’ of any positive impact to date.

The committee concluded: ‘The evidence we have received about the management culture within HMRC, supported by staff survey results, is very disturbing. There is a perception that the department is run on the principles of close control and management scrutiny, with little opportunity for individuals to develop autonomy and exercise their skills.’

‘Grave concerns’

Graham Black, President of the Association of Revenue and Customs, which represents senior HMRC staff, said his union shared the committee’s recognition ‘that the cuts in HMRC are having a serious impact on delivery’.

ARC said it has ‘grave concerns’ about the way HMRC is managed.

‘On the plus side, the report recognises the good work of HMRC professionals, for example in dealing with large businesses, in the face of severe cuts.’ Black said.

‘We also welcome HMRC management’s commitment to improve service standards, though further cuts may undermine this.

‘However, all this reinforces the message ARC has consistently put across: the cuts have gone too deep, and that more resources for HMRC would help defeat the deficit. Indeed, extra resources for HMRC would bring in more than the government hopes to save by raiding the pensions of nurses, teachers and civil servants.’

ARC claimed in June that ‘while some extra resources are being used, rightly, to target fraud, the number of senior staff capable of dealing with complex avoidance and evasion will tumble yet further, by over 400’.

‘HMRC is reducing by a further 15% to around half the size it was a few years ago,’ it said.


Black added: ‘While the committee pointed to low morale and suggested HMRC leaders needed to change their approach, ARC is now in dispute with HMRC because of attempts by the department’s board members to worry and bully staff. This hardly suggests that HMRC is taking the committee seriously, which is a serious error of judgement.’

An HMRC spokesman told Tax Journal: ‘The suggestion that HMRC senior managers are guilty of bullying is both offensive and wrong. HMRC has strong anti-bullying policies in place and any manager disregarding them would be dealt with firmly.

‘We very much value ARC’s members’ hard work and commitment in delivering services to our customers.’

‘Staff cuts damage services’

The Public and Commercial Services Union called on the government to ‘immediately halt the axing of thousands of jobs’ in HMRC.

‘HMRC has axed 30,000 jobs since 2005 and another 10,000 posts are earmarked to go,’ the PCS said.

‘The department has been employing thousands of people on short term contracts and paying staff to work overtime in an attempt to mask the impact of job cuts. In call centres, where HMRC has invested in 1,000 additional staff, the numbers of calls answered has increased from 44% to 71%.’

But staff morale has been ‘damaged over a number of years by poor management and a pervading culture of “command and control”, it claimed.

Mark Serwotka, PCS General Secretary, said: ‘Once again we see the evidence laid bare before us that staff cuts damage services. The unanimity of evidence in the report confirms that the cuts programme is destroying HMRC's effectiveness to deliver even the basic services required to support taxpayers and revenues.’

‘Compelling but disturbing evidence’

The Treasury Committee said:

‘A second contributory factor identified by our witnesses was a 'command and control' approach to management within HMRC. Martin Lewis, a former HMRC employee, sent us compelling, but disturbing, evidence about his experience of the culture within HMRC:

‘Middle managers are discouraged from reporting back to the top "bad news" or news that projects and initiatives are becoming unmanageable or are going awry. Such reports are regarded as "negativity" and will damn career progress.

‘Thus at the top senior managers are largely unaware of the difficulties, problems, and obstacles that the bulk of the organisation faces. They know little of the scale of unanswered phone calls, and the unopened letters, the data quality of tax payers' records and perhaps most importantly the nature and quality of the service provided on a daily basis to the taxpaying public.

‘The role of middle managers is to struggle vainly and to provide the appearance that their targets have been met. They are not expected to provide reasons why targets are not met, they are just expected to get on and meet them.’

The unions supported Mr Lewis’s views, the committee added.

Source: Treasury Committee, Administration and effectiveness of HM Revenue and Customs, 30 July 2011