Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 160 - 179)



  160. The first sub-paragraph of 4.10 says "initial local office compliance plans and targets were based on the resources and abilities of their compliance staff." In other words, where you had a well staffed office with a low vacancy factor and high skills they took on more cases. The rest of the paragraph appears to read that actually what you are saying is not happening, that you are moving cases from one local office but rather the initial plans were based on the capacity of the office to deal with a particular workload.
  (Mr Banyard) Yes, they were, but when you look across to—

  161. In that respect then the random nature of targeting of particular taxpayers is undermined to some extent since some offices were capable of doing more than one in a thousand and some were capable of doing less than a thousand.
  (Mr Banyard) Can I take both points. First of all, the first bullet of paragraph 4.10 is to do with each local office that will have set its targets but then we have to look across them all and say are some of them getting more out of their people than other offices and challenge the ones who are underachieving to do better. In terms of the random audit cases, they were mandatory, they were all worked.

  162. These paragraphs do not say that, do they?
  (Mr Banyard) I think it is implicit that the random audit was carried out.

  163. I think it is quite explicit what these paragraphs are saying. The first bullet point finishes up with this final clause in this last sentence "local plans were adjusted to match the overall target". We then see in the next bullet point that there were skills and resource shortages, in London for example. It then says "Where this has put the overall target at risk, the remaining regions have increased their take up targets to compensate". That is not saying that cases were transferred from London elsewhere, what it is saying is they were given larger take up targets because they have more skills and more staffing resources. The rest of the paragraph goes on to reiterate that. Maybe I am misreading it, but I do not think I am.
  (Mr Banyard) It is true that our local offices increased their take up in some areas but there was also transfer of cases too. What we are concerned with is targeting risk and having a certain coverage overall.

  164. The next paragraph or two go on to targeting and I want to ask you about targeting in a minute. I am still trying to establish, and have you accept, what this document is clearly saying, which is that in some areas you are doing more than one in a thousand and in some areas you are doing less than one in a thousand.
  (Sir Nicholas Montagu) I do think it is very important that what figure 13 is talking about is the enquiries that we take up. In other words, the cases that we select, not the one in a thousand cases selected centrally for random enquiry, all of which will be taken up.

  165. I understand that now, perhaps I misunderstood it, but I do not think it is quite clear that is the case in the report. Nevertheless, the point I am making is not undermined in any way. There are some areas where there were more resources available to tackle cases generated within that office and in other offices that was not the case. That raises questions about the character of management and also management information systems which were in place and maybe still are in place.
  (Sir Nicholas Montagu) Perhaps I could bring Dave in to help clarify this.
  (Mr Hartnett) I think there is an important misunderstanding here, and it is this: Nick talked earlier on about the factors which influence where our resource is and, for example, mentioned we have difficulty with resource in London. I think implicit in what you are saying is that we may therefore neglect in some way our enquiries into, for example, London taxpayers but huge numbers of London taxpayers are actually dealt with in Manchester, in Newcastle and in Edinburgh. So that implicit risk simply is not there. What these paragraphs are saying, quite simply, is that we have national targets which we apply by reference to the resource we use. I do not think there is any risk here of there being shortfalls in geographic areas.

  166. I read this document quite differently. I think anybody who goes away and reads it quietly will accept that there is a lot of ambiguity here. It is clearly saying that the workloads were adjusted to take account of the skills and resources, not that the workload was distributed through some national distribution. I want to move on because I think I have made my point and you have made yours. Can you tell me what proportion of the staff and what the cost is in relation to this particular work between the two years? Has it increased or decreased and so on? Earlier you were taking pleasure in the 1.1 penny per pound collected and no doubt quite pleased with the proposal. With the marginal cost argument you had to go back to the Treasury and ask for more staff since it is so cost effective. I am just wondering if you know what this work costs?
  (Sir Nicholas Montagu) I do not think I ever said I was going to go back to the Treasury and ask for more staff, Mr Trickett, I know my limitations.

  167. I just was interested in the exchange between yourself and Mr Davies, who is not in the room, that was an argument being made at the time. Do you know what the costs were of this particular work?
  (Mr Banyard) I can find it in a minute. I cannot immediately lay my hands on it.

  Chairman: Tell us later.[9]

Jon Trickett

  168. Just send us a note. There is one final point which I want to ask about which is targeting. Presumably the random selection of cases, this famous one in a thousand I have misunderstood, has led you to the conclusion that certain categories of activity or individual or perhaps geographical locations or demographic factors are more prone to moonlighting or ghosting. Can you give us some indication as to what your conclusions are in relation to?
  (Sir Nicholas Montagu) Smaller businesses more than large businesses, small businesses where a substantial number of transactions are in cash.

  169. Is there any geographic or other categorisation within that? I have to say in terms of the kind of sophisticated management information which I would envisage you have, I would expect you would be able to say in some more detail precisely which categories other than just small business sector.
  (Sir Nicholas Montagu) Only I think in very broad terms, Mr Trickett, like, for example, larger cases tend to be in the South rather than in the North but I am not sure that we can disaggregate below that group.

  170. Do you think it would be fair to underline the point that you made earlier that the management information system is quite weak?
  (Sir Nicholas Montagu) No. I think it would certainly be fair to say that we need to improve our management information system and our risk analysis. Risk, intelligence and analysis teams working on the results of random enquiries will enable us to achieve that sort of refinement.

Mr Rendel

  171. Sir Nick, may I start off with a couple of responses you made to Mr Steinberg earlier. Correct me if I am wrong but when he challenged you that it might be better to chase some of the backlog rather than chasing big debtors, I think you said that late filers tend to have smaller debts.
  (Sir Nicholas Montagu) On the whole we tend to find that, Mr Rendel, but I should say I was not saying that we should clear the backlog rather than chase the bigger debtors.

  172. You were saying you ought to chase the bigger debtors.
  (Sir Nicholas Montagu) No, I was saying that we are doing both. Yes, of course we pursue the bigger debtors but, as Stephen indicated, we are actively, and in a targeted way, pursuing the backlog. Having cleared the backlog we will then hope, through the work that I have described, to keep it down.

  173. The point I was interested in was this question whether the late filers tended to be the smaller debtors. According to paragraph 3.13 there are four particular groups that tend to file late and one is taxpayers with substantial liabilities in the previous year which seems to be the exact opposite of what you are saying.
  (Sir Nicholas Montagu) They are one group. As a generalisation it is true to say that the late filers' debts are smaller. Obviously I accept what Sir John has found there. I should say, perhaps, that taxpayers with substantial liabilities in the previous year who do not file would again be a prime sort of case for determinations which are based on previous years' liabilities and the daily penalties. Quite often new filers will actually have no liability. There is a correlation there.

  174. I understand the rest of it, I just wanted to clear up that point because it does seem that big debtors tend also to be late filers. Can I go on to another point you were making there in your discussion with Mr Steinberg and that is the question of the £100 penalty and the fact that it is refunded if the debt turns out to be less than £100. Is that true of just the first £100 or is it also true of the second £100?
  (Sir Nicholas Montagu) It is true of both.[10]

  175. True of both?
  (Sir Nicholas Montagu) Yes.

  176. When do you have to pay that £100?
  (Sir Nicholas Montagu) The first is if you do not file by the 31st January.

  177. When do you actually have to pay? That is when you are charged for it. What happens if you just do not pay it?
  (Sir Nicholas Montagu) We would then pursue it as part of the self assessment debt.

  178. How long would you go on pursuing it before you start taking people to court for it or whatever?
  (Mr Banyard) It depends on the overall size of the debt because we have got to be cost effective.

  179. These are people who have not yet sent in their form.
  (Mr Banyard) We are pursuing the forms overall by trying to target the number of forms that we get in but in terms of using our resources we target the overall debt and what we target to do is to get in 72.9 per cent of the debt for this year.

9   Note by witness: In 1999-2000 this work involved 3192 staff (full time equivalents) and cost £216.1 million (including all overheads). Back

10   Note by witness: The penalty is reduced to the amount of the tax debt, but is payable in addition to the tax debt. Ref footnote to Q129 and also Ev, Appendix 1, p32. Back

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