Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 1-19)




  1. Welcome to the Committee of Public Accounts. Welcome, Sir Nicholas Montagu, it is nice to have you back with us this afternoon—

  (Sir Nicholas Montagu) It is always a great pleasure to be here.

  2.—to talk on the subject of e-Revenue, which may seem quite esoteric. We have a very interesting Report in front of us, with a lot of potential for the future. Could you start by introducing your colleagues?
  (Sir Nicholas Montagu) On my right is Barry Glassberg, who is our Director of e-business, and on my left is Terry Hawes, who is Head of Business Management and Service Development.

  3. They are very welcome too. Perhaps you can start with the take-up, the paragraph is paragraph 2.6 on page 13. We know that there are about 9 million people who have self assessment, we know that at least 60 per cent of them, and going up all of the time, are on the internet, why is it that two years after the scheme was launched, namely you can do your self assessment on your computer, out of 9 million potential customers you only have 75,000?
  (Sir Nicholas Montagu) We are a bit above that; it is about the 80,000 mark. It is not high, but it is a 94 per cent increase from the first year. I think the reason is that experience in other administrations and in much of the private sector as well is that initial take-up is slow, as Sir John's Report acknowledges. We hope that it will be steady. I would be pleased with a further 94 per cent increase next year. Again, as the Report recognises, there were some teething troubles with the first year: some people, like Mac users, were unable to file electronically. Again, the Report gives a number of examples where take-up has been similarly slow to get off the ground.

  4. You say there has been a very high increase, let us go straightaway to the relevant paragraph 2.14 on page 16 and 3.15 on page 22. Let us go straightaway to the teething problems you talked about, shall we? Was it about 120,000 who attempted this? Only 39,000 succeeded. Four out of five attempts failed. Is this the right way to launch a high profile project if four out of the five attempts by people who are, after all, higher rate income taxpayers, people who are pretty bright as it is, cannot succeed?
  (Sir Nicholas Montagu) Not all of them will necessarily be higher rate taxpayers; you are talking about one particular group.

  5. Let us not quibble about that.
  (Sir Nicholas Montagu) It is relevant, Chairman. The question is, how at ease with e-filing are these people? I want to make two points. First of all, as you rightly said, we are talking about four out of five attempts failing. We have completely reversed that now: four out of five attempts succeed. As far as the figures are concerned, about 119,000 people registered; in the event about 38,000 actually filled in year one. I think there were a number of reasons—again Sir John's Report touches on these—a lot of them, I suspect, being from the fact that the C&AG constantly recognises the Inland Revenue was ground-breaking in offering this sort of e-service.

  6. Did you have to go live too early because there was a Ministerial commitment in the Budget of 1999 which said that within a year you would go live on the scheme?
  (Sir Nicholas Montagu) I do not think we had to go live too early. Our business is to deliver Ministerial commitments. What is certainly true is that we introduced it to a very tight deadline, not only because of the Ministerial commitment but because our discussions with software houses indicated that they were ready to go, and I think it would have let them down if we had not gone live then. What is certainly true, as I indicated, is in the first year a number of things were not as good as they should have been. Equally, again as Sir John's Report notes, we have learned from those mistakes and we have substantially improved matters and are continuing to do so.

  7. Were you consulted before the Ministerial decision was given?
  (Sir Nicholas Montagu) Chairman, I do not talk about discussions with Ministers, as you know.

  8. I have to ask the question, why did you decide—and you have admitted the launch was a disaster—
  (Sir Nicholas Montagu) No, I have not admitted that at any stage.

  9. I think it is a disaster if four out of five attempts fail. Why did you launch the scheme before you were ready to get it right?
  (Sir Nicholas Montagu) We were ready. We were ready with a scheme which was less than perfect and which we were confident of improving after introduction. Sir John's Report rather vindicates that. The modern approach is what is called `build and learn', particularly appropriate to use of the internet, which is a process of constant and iterative improvement. Chairman, I must emphasise it again, you may view it as a complete disaster, but I certainly did not say that.

  10. Let me ask you about this very important point, I refer you to paragraph 3.25 on page 25, and I will deal with that now. If you are going to have a build and learn system you presumably want to learn from what you are building, I think that is the point of it, why is it that 13 of the products delivered since June 2001 have still not be properly evaluated?
  (Sir Nicholas Montagu) Again, you have to distinguish between formal evaluation at the close of a project, which is when an evaluation review would be expected to take place, and continuing evaluation. The essence of build and learn is you learn and you enhance as you go along. That is exactly what we have done with filing for self assessment, and Sir John's Report acknowledges that.

  11. I have been a bit critical so far, if you were in the private sector you would be launching many projects, and I understand that the private sector typically in this sort of field might expect two out of five projects to fail. What I am slightly concerned with is, why was there not more piloting? Why did you try to launch a national scheme before it was entirely ready? Would piloting having helped you?
  (Sir Nicholas Montagu) Chairman, you keep on saying, "before it was entirely ready". It was ready. It was not perfect, but it was ready. It would, I think, have been wrong to hold it up. There was the Ministerial commitment, there were the software houses ready to go. I am interested that you mentioned private sector experience. About three weeks ago I was talking to the chief executive of a very big energy retailer with about 7 million to 8 million customers—broadly comparable with self assessment—they had all products available on-line with only 10,000 taking it up. Against that kind of background and against some of the international experience, which Sir John quotes, I do not think we did too badly. I do not think we are doing too badly by increasing by 94 per cent in year two.

  12. Let us look to the future then, if we look at page 14, paragraph 2.9, the first bullet point, you will see there the key potential barrier to take-up is user access to the internet. You have done work with the Citizens Advice Bureau, can you tell us a bit about that and how you can help people gain access in the future?
  (Sir Nicholas Montagu) Absolutely. I need to start by the development of a customised portal for corporation tax. It is the first customised portal, I believe, for any public service anywhere in the world, certainly for tax administration. The importance of this is that we have developed it extremely quickly and we are extending it to self assessment and we will also extend it to new tax credits. The essence of this approach is that, instead of having what is essentially a paper form transferred to the screen however much you pre-populate and improve, it actually brings up data about you from a variety of systems; it masks the complexity, and it has the potential to make it the easiest and quickest way of doing business with the Inland Revenue, the preferred method. I think that has great potential for bridging the digital divide. Even people who do not at present have access to the internet can go into or will be able to go into relevant government offices, local authority offices, Citizens Advice Bureaux, public libraries; and in due course it is extremely possible the majority of them may have digital televisions from which they can access the net, plus, of course, the new generation of phones.

  13. Okay. Still looking to the future, if you turn to page 11 and look at paragraph 1.8, these are the commitments we have, by 2005 to achieve significant business transformation. Can you give us a bit more of a feel about how confident you are that you can deliver these changes, these commitments can be met and the kind of improvements customers will see in service by 2005?
  (Sir Nicholas Montagu) I am entirely confident of our ability to deliver 100 per cent e-availability in line with the Government's undertaking by 2005. What that means is that by then all of our customers will be able to file their returns, access their data, make payments and communicate with us electronically. Where I am not confident, again as we discussed with the National Audit Office, and Sir John recognised, is I do not believe that we will reach the original target of 50 per cent take up across the piece.

  14. Lastly, I am quite excited about this, I think it is a very significant and useful development. Certainly one has to take risks to get something like this on board. Give me a feel from the general customer of how it is working now and how it is going to work? I understand one of the problems when you started was that you literally downloaded the whole of the form, which was impossible. Give us a feel for how it is developing now? Is it going to be quite easy? Are we looking at a system where you can switch on your computer, your basic salary will be flashed up fairly quickly, it will ask very simple questions about how many shares you have, what are your interests, is it a deposit account, so it would be something you could do within 15 minutes?
  (Sir Nicholas Montagu) I certainly hope so. I will try and give you a feel. You go in through the Government Gateway using your secure ID. 98 per cent of entries through the Government Gateway are already to the Inland Revenue. You put in your data and up on the screen comes "Hello, Mr Leigh", or if we were in Australia it would say, "Hello, Edward", (we are a little more formal in this country), then essentially I visualise you will get a menu. These are the things we know you are interested in, is that still it? Yes. Which of them would you like to talk about? Self assessment. Then I think you will get screens pre-populated with your data, your relevant number, your address, possibly even earnings data from last year, etcetera, so you will only need to change it if it has changed. Already we are moving towards this approach this year. There will be much more pre-population, there will be page by page error checking and there will be an on-line calculator to help you do it. What we are really aiming at is something very customised to you and very easy to use. As I say, not just to you but critically for our new groups of customers, like the tax credit claimants, who are almost by definition likely to be on the wrong side of the digital divide for as long as it exists.

  15. It will be so easy I can sack my accountant!
  (Sir Nicholas Montagu) Chairman, I would not like to say that in public. If I went public on that I think I would have the six Institutes at my door tomorrow. I think it is certainly easy enough for you to do it yourself.

  Chairman: Thank you very much, that is a good positive note to end on.

Geraint Davies

  16. It is clear from the Report and from what you said that you have, in fact, put in place a tremendously impressive e-infrastructure for delivery service to customers but at the same time you are really now being beaten by your own targets. Do you now agree in hindsight that the targets that have been set for people to engage in the system were much too ambitious?
  (Sir Nicholas Montagu) I think I would put it slightly differently. As I said to the Chairman, we will meet our targets for e-availability. We are already up to 40 per cent, we will be at our target of 50 per cent by the end of this year and 100 per cent by 2005. What I think we need to refine is the overall 50 per cent take-up target. When we accepted that it was something that we knew was, in a sense, crude, it was challenging, which was what we wanted. We were venturing into an untried market. What I am talking about with Ministers—

  17. The answer is "yes".
  (Sir Nicholas Montagu) No, the answer is not "yes". The answer is that it is too crude and undefined. A key part of our activity at the moment is segmentation. I think it is likely that by the target date we will not have hit 50 per cent with some unrepresented, self-employed people, but I think it is very possible that we will have exceeded that target with others. I think Sir John mentions large business as a possibility.

  18. I will not dwell on all of the figures. We know for instance in 2000-01 only 39,000 people submitted their tax return for 1999-2000 electronically compared to the projection of 315,000.
  (Sir Nicholas Montagu) Can I be clear about what that projection was?

  19. That is self assessment taxpayers.
  (Sir Nicholas Montagu) This projection and the figure that refers to it does two things. First of all, we deliberately had a high projection—and it was not a prediction. We wanted to come to a figure that we thought was the absolute maximum of who might want to file electronically. What we did not want was to hit 31 January, with loads of people trying to file electronically and then have the system crashing. So that was not a projection.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 29 August 2002