Examination of Witnesses (Questions 160-179)
SIR NICHOLAS
MONTAGU KCB, MR
BARRY GLASSBERG
AND MR
TERRY HAWES
MONDAY 18 MARCH 2002
160. I understand.
(Sir Nicholas Montagu)—by internet not about
filing. Essentially what this is saying, I think—I do not
know if Sir John wants to amplify it—is that payment by
internet is a very cheap way of us receiving payment and that
essentially it has cost just over £700 to bring in that figure.
(Mr Gibby) If I may add, we added the two figures
together—you mentioned this—that is the total cost
of making payments by internet whether it is from employers or
from self assessment taxpayers.
161. Sure.
(Mr Gibby) The cost comes from Bill Pay which is a
contracted out organisation.
162. When I did accounts and economics, which
I did at a very primitive level and decades ago so no doubt the
world has changed, when the context was fixed costs and marginal
costs, I presume the transactional cost was the additional cost
which was involved in bringing in the three and a half million
pounds, is that right?
(Mr Gibby) There is a cost charge per transaction
by Bill Pay.
163. It seems to me that really is like the
tip of the iceberg, the visible part but the total cost of the
system is the kind of submerged part to which we do not refer.
I am not quite sure exactly what all this information is giving
us in terms of the cost. One might say the Government has set
itself a target of creating accessibility for filing and paying
to the whole population and we have achieved that but I do not
find it plausible at all, either the answers which have been given
or the report, in arguing that there are savings being made on
an ongoing basis and on a straight line basis. I do not think
this report justifies that. I wonder if anybody wants to comment
on that before I shut up? I am just not convinced at all.
(Sir Nicholas Montagu) I am not sure, Mr Trickett,
what either Sir John or I can do to convince you. So far as payment
is concerned, what I think the report shows is that by paying
Bill Pay, as our agent, to get in payments in this way electronically
it is extraordinarily cost effective compared with the traditional
way of processing cheques.
164. My riposte to that is if you exclude all
the development costs and establishment costs of setting the scheme
up in the first place. Let me move on to the incentivisation thing
and then I really will draw my questions to a close. In the first
year there was a £10 and £50 incentive offered. How
many £10 and how many £50 did we pay out then?
(Sir Nicholas Montagu) Of the 38,981 taxpayers—very
precise figure—who sent their tax return over the internet
31,000 qualified for the £10 discount. Of the 2,700 employers
1,400 qualified for the £50 discount.
165. One final question—this is really
my last one—how many people who filed in the first year
then filed in the second year? What kind of capture have you got?
I do not mean the numbers, I mean the proportion, was it 50 per
cent, 90 per cent, can you give me an approximation?
(Sir Nicholas Montagu) I do not know if we have those
figures.
(Mr Hawes) No.
(Sir Nicholas Montagu) We do not know.
(Sir John Bourn) Perhaps I could, Chairman, if I may,
pick up a point that Mr Trickett made. I think the contrast that
Mr Trickett drew between the road construction projection that
he talked about and what is being talked about here is the difference
between what you might call a cost benefit analysis where you
do set out to show the costs and benefits and see whether on a
discounted basis the result is positive or negative and this which
is seen as more of a cost effectiveness analysis where you say
"This is what we want to do" and work out the cheapest
way of doing it and then you decide as a matter of policy, if
Ministers decide as a matter of policy, to do it. Then of course
what this report is about, the extent having done it, what take
up rates you get, what some of the aspects of costs of various
incidental transactions are. It would not be right to say that
the report ever pretended or set out to attempt to say whether
this system on a cost benefit analysis was positive or negative.
166. You have said it much more eloquently than
I could have done. I think that the whole report really, if you
do not mind me saying this, is an attempt to provide a justification
really for a political decision. I think on that basis it does
not provide an economic or financial argument in favour and I
think Sir John is indicating that is a correct position.
(Sir Nicholas Montagu) If I could just comment on
that, Mr Trickett. I do come back to the point that I made before
that we are talking about putting in large scale long term investment.
Certainly I can testify to the rigour and challenge of the National
Audit Office in conducting this investigation.
167. I have already said finally five times
but I just want to ask what is the prognostication in terms of
the length of life? If you build a new motorway, the motorway
is there forever but if you put in new technology, as we know,
in 18 months it is already way out of date and has to be replaced.
What is the obsolescence prediction in relation to the technology?
(Sir Nicholas Montagu) Again, sorry to be imprecise,
Mr Trickett, there is no simple answer. Some bits of the system
will need modification or replacement in a matter of two to three
years others will still be going after ten years. There is not
a straight answer to that.
Chairman
168. So to sum up this discussion, what you
seem to be saying, Sir Nicholas, is that if you take into account
the set up cost, it has probably cost you more than you have got
back so far but it is a price worth paying.
(Sir Nicholas Montagu) I think that is right, Chairman.
It is a long term investment. Certainly it has not broken even
so far, but it is a long term investment to put in place the infrastructure
to deliver the Government pledges and a better service to taxpayers
and tax credit claimants which offers the potential as take-up
increases—and take-up, the experience of public and private
sector shows will increase—does offer the scope for considerable
long term savings.
Mr Gardiner
169. Finally, Sir Nicholas.
(Sir Nicholas Montagu) There is still Mr Williams
to come.
170. I was starting as I meant to go on after
Mr Trickett. Sir Nicholas, you said you do not use e-lodgement
yourself.
(Sir Nicholas Montagu) Yes.
171. Can I ask your two colleagues do they use
e-lodgement?
(Mr Glassberg) Yes.
172. You do, Mr Glassberg. Mr Hawes?
(Mr Hawes) Yes.
173. When the report tells us that one of the
vital good practices for the roll out of e-services is clear active
and visible leadership from the top, we can put in the word "almost"
top?
(Sir Nicholas Montagu) I think, Mr Gardiner, you can
put into the definition of "leadership" that my personal
financial affairs do not come into it.
174. Indeed. Can I ask you, Sir Nicholas, which
of the constraints in paragraph 2.9 that are identified as the
constraints that might deter taxpayers from using the Inland Revenue's
e-services do you think are most deterrent?
(Sir Nicholas Montagu) I think probably the lack of
value added. Certainly I would agree strongly with Sir John that
we need to make the electronic way of doing business the preferred
method, and that is why we are working so hard with customers
in the way that I have described and why, for example, the self
assessment return for the year 2002-03 will be a lot easier to
use.
175. Earlier on in the questioning you said
that a 50 per cent take up by 2005 would—I think you said—be
unlikely, you do not think it will?
(Sir Nicholas Montagu) Yes, so far as self assessment
is concerned.
176. What do you think is likely?
(Sir Nicholas Montagu) I do not know, and that is
why we are working with Treasury colleagues to try and come up
with figures for each different segment which might be more realistic
and that, I may say, should be turned into targets. Because if
we have done finer analysis and have come up with something that
is more precise and more evidence based than that initial blanket
50 per cent challenge then I think that it is right that we should
accept those as actual targets. Also, of course, by then there
will be other facilities for self-assessment, like the facility
I mentioned repeatedly for people to access their data. At the
moment, if somebody files on-line they cannot actually view their
own record. By 2005 they will be able to do so and indeed to communicate
with us by e-mail.
177. Maybe I should be addressing this to Mr
Glassberg. In paragraph 3.12—this is in the context of talking
about need to be part of wider business change and having a customer
focus—it says, "The Inland Revenue has made progress
in re-fashioning its business structures and processes, for example,
by introducing Business Streams and a Customer Service champion,
but has decided that a strong regional structure is appropriate
to business delivery and in relation to local points of presence
which now take many forms." It seems to me that that paragraph
implies at the very least a tension between these two aspects.
Why, first of all, do you believe it is appropriate to maintain
the strong regional structure?
(Sir Nicholas Montagu) I think actually, if I may,
it is for me rather than Barry, as this is a wider issue of Revenue
organisation. What we are trying to do is provide, as the Report
notes, genuinely customised services but also with a strong local
presence. I think all of the evidence is that people like to be
able to do business with their local Revenue office. What we have
done, and we did this last year, is we have restructured from
600 offices, each of which had a Manager, to 60-plus areas, each
of which has two Area Directors, one dealing with compliance and
one dealing with services; and there will also be an Area Manager
for corporate services, which would cover such things as the IT.
We did this to give a sharper local focus but at the same time,
where it makes sense, to develop the particular stream of activity
as a business stream. Contact centres are one example. It does
not make sense to have a contact centre in Peterlee managed quite
out of sync with one in Peterborough, in the sense that one can
see a case for organising the two local offices separately. But
we have also, after a study involving a lot of other tax administrations
and the private sector, put all our debt and recovery activities
into a single business stream, receivables management, and that
works alongside our area structure and it is working well. Although
they are managed nationally, they will work in locally with their
colleagues in the particular area.
178. I take it from all you have said, Sir Nicholas,
that you do not accept there is a tension between the customer
focus and the regional structure. The thing I stick up against,
I suppose, is the word "but" used in this paragraph;
". . . but has decided that a strong regional structure is
appropriate." That implies to me there is a tension here
and that it is one that both you and the C&AG have acknowledged
in agreeing this Report.
(Sir Nicholas Montagu) I do not think there is a tension.
179. Could I ask the C&AG if that was the
understanding from their side of this paragraph?
(Sir Nicholas Montagu) If I may say, Mr Gardiner,
I do not see any conflict between Sir John and me in this. What
it is saying is this: in some areas we are introducing business
streams. We have a Customer Service Champion. I may say that she
is actually my deputy on the operational side who sits over the
regional structure. What we are saying is that we have decided
it is appropriate for some things but not for local service delivery.
It is drawing a contrast between those two things, not between
customer service and that. Indeed, a part of the reasoning behind
the restructuring has been to give a sharper customer focus. I
have made it very clear to my Area Directors, for example, that
I expect them to get stuck in with their local representative
bodies.
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