Examination of Witnesses (Questions 40
- 59)
THURSDAY 8 FEBRUARY 2001
DAWN PRIMAROLO,
MR MIKE
HANSON, MR
TERRY BYRNE,
MS SUE
PITHER AND
MR DAVE
HARTNETT
40. The significance of the case that I was
referring to was that it did sponsor the Butler report and the
Butler report, from its findings, did result in this question
of whether the prosecuting powers should be retained by Customs
and Excise, so there were some significant things arising from
that. What factors, when you consider the report, will you be
taking into account in deciding whether the prosecuting powers
should be retained by Customs and Excise or not?
(Dawn Primarolo) The Attorney General will decide
that and that is what the report is about.
41. The Attorney General will decide?
(Dawn Primarolo) Absolutely, yes. Customs in terms
of both of those reports were exonerated but obviously the issue
of whether it was correct to have the prosecuting authority within
the same department was a particular focus. That was then taken
out to a review that then looked at both of the inquiries. That
review was appointed by and reports to the Attorney General. Obviously
they would have sought information from Customs in the progress
of that. The Attorney General will take a final decision on what
is best, whether it remains or goes somewhere else.
42. Will that take into account the relative
conviction rate of the present team compared with other prosecuting
authorities?
(Dawn Primarolo) I presume so. I presume it will take
everything into account, yes. This is a review being done on us,
so other people will decide these things.
Judy Mallaber
43. Can we move on to the Inland Revenue and
particularly its changing role as a result of legislation over
the last few years. How well do you think the Inland Revenue has
coped with the changes to its remit introduced since 1997? I am
particularly thinking of things like the introduction of tax credits
and enforcement of the minimum wage.
(Dawn Primarolo) I think that the Inland Revenue,
which has had a huge change, both with the development of tax
credits, with the Contribution Agency moving in, has coped extremely
well and it has met all of its performance targets set by the
Public Service Agreement. At the same time, the cost of collecting,
price per pound, has gone down. It has dropped to 1.1p per pound
collected. Across the board, whether it be telephone calls or
letters, the mobile advice centres or the customer service performance,
the complaints, what has been done on tax credits, minimum wage
enforcement, it has done a fantastic job and I think that is generally
recognised, how well the department has coped. That is obviously
not to conceal the fact that there have been particular issues
around IT.
44. What do you think have been the particular
challenges as a result of the legislation?
(Dawn Primarolo) They are all significant challenges.
Perhaps you should ask my officials which they thought were the
worst. I should imagine that the movement of the Contribution
Agency into the Inland Revenue, the moving of the staff, the management
of that, the bringing of the Contribution Agency into the systems
of the Inland Revenue, was a huge issue, and clearly the movement
of tax credits as we took the tax credits in and developed them
on. I think the biggest challenge for Inland Revenue is one of
culture, that they have to move, and are moving, to be a department
that has, if I can put it this way, social responsibilities. They
are the lead department for the payment of the tax credits, the
monitoring of the national minimum wage, as well as their functions
as a tax collecting department that also has compliance responsibilities.
Customs and Excise have to do the same but Inland Revenue have
to do it much more, which is to balance now a sort of enabling,
facilitating role with, if you like, an enforcement role, a collection
role. Although there have been management changes to bring in
more staff, actually changing those attitudes and how the department
operates is a huge challenge.
45. What work has been done, for example, to
enable the staff to deal with handling a rather different client
base from its traditional areas of work? What particular things
have you put in place to assist staff to deal with that and to
make that culture change?
(Dawn Primarolo) Clearly with the Contribution Agency
the staff moved. With the tax credits some staff moved and we
recruited further staff. What we have done through the department
is to ensure that we have training and support in the department
to move people to those functions. I have to say as well that
the staff in the Inland Revenue are used to dealing with people
and it is nice for them. They have a more diverse role and they
are very excited about that and very keen to feed into the department's
strategies for training and support of staff to take on those
different roles that they now fulfil.
46. Are you getting a universally positive approach
to that? I have just moved over from the Employment Committee
to this Committee and we have been pleasantly surprised by the
way the Employment Service has adapted its role to deal with a
similar change in what they are meant to be doing. Are you saying
to us that this is a success and that the Inland Revenue staff
are fully on board?
(Dawn Primarolo) Yes, I would say that it is a success
and I would say that the staff are on board. I would not want
to say that the staff, in representing their views on what they
feel is best for them, would not have other objectives. If you
wanted it to be arranged we could certainly give you access to
the sorts of things that have been going on, you could speak to
our staff. We could arrange a visit for you so you can see in
detail what we have done both with our tax credits and with the
Contribution Agency, as an example, and with the national minimum
wage enforcement unit, which I think has done a brilliant job
and has worked very well indeed.
47. What have been the difficulties? What has
not gone right? You obviously mentioned the IT.
(Dawn Primarolo) The Inland Revenue has a huge IT
system, I think it is in the top one per cent of IT users in Europe,
and we need that IT to be user friendly for our staff as well
as to be able to give the information. Obviously there have been
pressures on staff in terms of deadlines to accommodate this change
and the changes that have gone on and that has been very intense
at different times. All of the staff in the Revenue have responded
incredibly positively because they are committed to making sure
that they give the very best service. Even on measuring, for instance,
the level of complaints coming into the department and the percentage
of complaints that go into the formal procedure and then to the
adjudicator, we see a declining rate. Touch wood, we have moved
away from the horrendous headlines in the late 1990s, 1997-98,
that we were getting about staff, whether they were unfriendly
or abusive or unhelpful, because they have improved so much on
the customer service.
48. How can you continue to ensure that the
Inland Revenue's traditional work, such as getting in the money
from income tax, which they need to be able to do as well as everything
else, is not overlooked in the rush to embrace tax credits and
the culture change and everything else?
(Dawn Primarolo) It will not be overlooked. It is
£195.6 billion to overlook. Although our staff are very keen,
particularly those who are specifically engaged in the tax credits,
the Contribution Agency, in making the important contribution,
all of the staff in the Inland Revenue, I think it would be fair
to say, view their role as to collect the right amount of tax,
and only the right amount of tax, in an efficient and fair way
so that Parliament can take the decisions on how it wishes to
spend that money on its public services. It is very difficult
to convey strongly enough how the staff in both the tax departments
see their crucial role in that wider picture of securing fairly
the resources that are then allocated by Parliament to our public
services.
49. How do you expect the Inland Revenue to
evolve over the next few years? Where do you see it in another
four years' time?
(Dawn Primarolo) I think they probably wish "more
slowly". I think we need to go into a period of consolidation.
For instance, the Contributions Agency's IT system will be within
I2K by August of this year, the tax credits by the following year.
We could not do it any faster than that because of resources and
priorities elsewhere. So we will have the integration there. The
partnerships and the closer working with Customs clearly over
the next year will develop and bed down, and I certainly think
that all of us see now that the Inland Revenue needs to consolidate
the changes it has already made and bed them in well, and that
will be our priority. How could I describe what I would like?
What I would like is that somebody rings up a local tax office
and at the end of the conversation we have got to a position where
we can say to that individual, "Would you like me to check
whether you have paid too much tax and we need to give some back
to you?" I would like that conversation for two reasons:
one, that we were able to do it; and, two, so that the taxpayer
would not feel reluctant, as sometimes they are, to engage in
that but confident that the Revenue is only seeking the tax level
that is necessary and if there is too much which has been inadvertently
given, we would give it back.
50. My local tax office has won plaudits for
its outreach work, so there are lots of good stories.
(Dawn Primarolo) Absolutely, and they have done very
well on Charter Marks. When we had the Tax Back Campaign, just
as an example, we gave the challenge to our offices that they
were responsible for getting the local publicity and I was stunned,
amazed, at the imagination and diversity of what they did. There
were tax inspectors busking in shopping centres—I hasten
to say not because we do not pay them enough but because they
wanted to get their message across in a different way—there
was a huge range of things they were doing in their local communities,
and I think that is something we want to build on. We have quite
a way to go before we get to the user-friendly, softly, cuddly
Inland Revenue.
51. I know you said you wanted to have stability
but do you think there is a need to look fundamentally at the
boundary between tax and the benefits system?
(Dawn Primarolo) The Government is actively looking
at that. The development of the next generation of tax credits
and reforms we have undertaken to date are exactly about addressing
the boundaries and taking away the cliff edges or the problems
which were building up in the system, and that will not stop.
Mr Cousins
52. I will certainly treat buskers with more
respect if I think they are tax inspectors in disguise.
(Dawn Primarolo) You will give them some money, will
you!
53. There was a review of the Inland Revenue's
policy work which was carried out last autumn and published just
before Christmas, and one of its conclusions was that it was difficult
to identify anyone in the structure of the Inland Revenue who
has the background and capacity to think about the tax system
as a whole. That is a fairly heavy criticism. How are you going
to respond to that review and improve the revenue departments
work on tax policy?
(Dawn Primarolo) Firstly, clearly when looking at
the Treasury Departments and the issue of policy we would not
see the Inland Revenue as free-standing in future planning because
clearly the Treasury itself has a role in that. What Revenue has
done, and the report sees, is made a real improvement in strengthening
its policy function and in particular to have dedicated quality
staff who have the depth of knowledge on particular subjects and
therefore can assist in the effective implementation of policy
as well. The review team did give the Inland Revenue credit for
its expertise, for its professionalism, for its integrity and
for the development of things like the tax credits which shows
its capacity to do that. What we have done in addition is that
Mr Hartnett has the role of ensuring the co-ordination of work
that is being developed in Revenue and that it has that focus,
because I think the peer review was questioning not only that
it was not going on but that the depth and the focus needed to
be directed, and that is what is being undertaken now. In particular,
the review referred to the need for developing staff and recruiting
staff who would assist much more in evidence-based information
and research, the modelling that is necessary, and again that
is being addressed. I do not know whether I could commit Mr Hartnett
to do a short note for you on the changes which are being developed
to address these issues?
54. Yes, that would be useful.
(Mr Hartnett) Yes.
55. The review did discover there was no business
taxation model. Is that being done?
(Dawn Primarolo) Yes.
56. Is it fair to say that some of the difficulties
that the Government got itself involved in, like how you deal
with taxing insurance companies' reserves or stock options in
small e-economy companies, might have been avoided if there had
been better and more coherent tax policy advice within the Revenue?
(Dawn Primarolo) On your first question, yes, it is
being addressed. On your second question, I doubt it. Ensuring
that everybody is always at one with the Inland Revenue is difficult.
We are in a changing world and it is changing very rapidly and
we collect information, but I have had some salutary lessons as
a minister on questions of consultation. When I tried to address
it on the basis, "We have a problem here and it is a big
problem, how do you think we might deal with this?", I was
criticised for doing an inadequate consultation process and people
wanted specifics. Then, of course, when we do specifics, people
complain it is all cut and dried. I think the relationship not
only of Inland Revenue internally in having that policy capacity
but, most important, the dialogues with the representative bodies
outside representing taxpayers, is something we have strengthened
and continue to strengthen, so we have both our own views and
information about how we see the tax system moving—if you
like as tax collectors what we see the issues are—and also
the experience of those businesses in terms of what would or would
not work for them. That is never a perfect exercise but we have
to strive to constantly improve it.
57. Yes, but the lack of a business taxation
model points to difficulties between the Inland Revenue and the
Treasury. I take your point about consultation outside, but there
is a distinct feeling if you read that peer review report that
all is not well about the exchange of proper advice between the
Inland Revenue and the Treasury. There are mistakes which have
been made which could have been avoided.
(Dawn Primarolo) To be honest, I did not read the
remarks quite as critically as that. Yes, the business model needs
to be developed.
58. Needs to be developed?
(Dawn Primarolo) Absolutely, and is being addressed.
Yes, of course, there always needs to be the exchange of proper
and relevant information between government departments, not just
within the Treasury departments, when issues are being developed,
but I thought the peer review was saying, "These are the
things you need to specifically address", which we have.
It also said, "There are things you have done very well and
things that you have not done so well, concentrate on what you
have not done so well, learn the lessons and put it right."
The idea of peer reviews is not to be antagonistic, and the Revenue
accepted entirely what was said and are acting on it.
59. Judy Mallaber mentioned the ever present
problem of computing. Just to briefly come to that, can you bring
the Committee up to date with how many cases will be closed from
1998-99?
(Dawn Primarolo) As the clock was ticking by, I could
not believe I might get through an entire hearing without referring
to that. The original figures were reported to you by Nick Montagu.
The figure now is 1.7 million where we have incomplete information
and which we are working on. As Nick Montagu agreed with this
Committee on working through them on an individual basis, we are
hopeful and expect that the 1998-99 figures will be considerably
reduced and will report to you at the end of the year where we
are.
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