Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 80-99)



  80. I know that. I am giving you a real example. A person running this small company may have done all this analysis off screen, and you have got to get them to plug in on-screen and plug it down line rather than stamp it and send it off. What are you going to do?
  (Mr Broadbent) I will try and develop the point. If one could do what I was just talking about—changing the nature of the process—instead of that small business person being faced with the choice between a paper return and an electronic return, he has to do nothing, his VAT return will be e-mailed to him and filled out saying this is how it has been fitted with your pattern last month or the last two or three months, are you happy, and it will be virtually a zero touch event. At the same time he might have some flexibility in changing payment dates. He may also be able to access his own account details. He may also be able to pay excise at the same time if he is an excise taxpayer as well as a VAT payer. At that point the interaction with the organisation becomes a quite different experience and potentially an added value one.

  81. Your basic take on that is that you take them through, you put in the last period's sales in each box, and then say now fill in this one, and it does a calculation on the screen. That is basically where we are. That is what you currently do on paper.
  (Mr Broadbent) I go beyond that. I think you are right—I do not believe simply having the existing VAT paper form on a screen base is going to lead to a huge amount of change unless we induce people and, in a sense, what is the point in paying people to use a service that is not adding value? I do believe—and this is the work we are doing to develop our strategy—that if we approach it slightly differently and create a different opportunity to inter-act with us so what actually happens, as I say—and this is a hypothetical example—is in a small company, a busy managing director gets an e-mail once a month saying it has been done for you, are you happy, just tick the box, press the button, at the same time he has some flexibilities about access to other information, guidance and flexibility about payment dates. He may have some opportunity to change his return if he wants to. He does not have to. If he pays other taxes for which we are responsible, he can do that as well.

  82. Probably the sales will not be the same and obviously they are going to change them and they would have done that anyway. I can understand it will make a slightly easier, but I do not see that as compelling reason for take-up and therefore I do not imagine at the moment from what you said your targets are at all achievable.
  (Mr Broadbent) Our targets relate to all our services. I was making clear in relation to VAT, although we might achieve it across the board—

  83. You are not going to get 50% on VAT returns. What is the objective for 2005 for VAT returns?
  (Mr Broadbent) The work we are doing at the moment says that if we are able to approach the issue slightly differently—and this is the discussion that requires spending the money differently and possibly spending a different amount of money—then I think we can create an environment in which 50% will be at the lower end of the range not the upper end of the range.

  84. Right, so you will achieve more than 50% VAT returns by 2005? Is that what you are saying?
  (Mr Broadbent) I believe that if we e-enable the organisation in the way I am talking about we will see the sorts of levels of take-up we have seen, for example, in imports and exports, but I agree with you that we will not achieve that level of take-up by simply inviting people to fill out a form on line when they can fill out on paper if they wish.

  85. Perhaps I can ask Mavis McDonald this, has there been any thought—and this might sound a scandalous thing to say—to providing the opportunity for people going into government sites to buy things that might not be government services to give them another reason to go in?
  (Mavis McDonald) I will ask Andrew to answer that. The kind of thing we have been thinking about is where third parties might have an interest in where they can get an added intermediary into public services.

  86. You could sell double glazing or whatever it is.
  (Mavis McDonald) I do not think we have gone into product sales as an extra. There is a genuine point about who else might be helped to do their business differently with their customers, which also helps us and helps the client. If people working in different aspects of financial services, consultancy or accountancy are consulted on this they may be able to interact differently with their clients if we are giving then a front end into which they can go.

  87. There might be some added value. Obviously double glazing is a joke but one would want to go into these sites and you might get benefits other than being able to fill in the form on the screen.
  (Mr Broadbent) We have had a number of approaches and some discussions with a fair range of companies who would like to use our services and our site for exactly that purpose. We are approaching those discussions with extreme caution.

  88. I thought I would ask that.
  (Mr Pinder) If I can add to that answer. Clearly we want to try to protect the government brand and therefore there is an implied approval that if something is on our site then we take responsibility for it. There is a natural caution there which I absolutely agree with and I propose. But another way of doing this is to do it the other way round and to allow the delivery of government services through other people's sites. We have been building up a number of partnerships to try to do that. Going back to the tax return, although the Inland Revenue's tax return is currently off the air for the reasons we have talked about, there are other tax returns (which the Inland Revenue have approved) available on other people's sites, so people have no excuse for not filing their tax return, they just have to do it through a third party. That is, as it were, taking your point but doing it the other way round and saying—

  89. If it is cheaper for accountants to help you do your VAT or tax returns via the e-mail perhaps they should be offering products to clients and saying we can help you access through and you should be facilitating that in the market operations.
  (Mr Pinder) That is the sort of approach that people like the Inland Revenue are making at the moment.

  90. Microsoft have been given the responsibility for the construction of the gateway technology, have they not?
  (Mr Pinder) Microsoft have been one of a number of partners we have used to build that site although we own the intellectual property rights to that. They are a contractor along with Dell and a number of other contractors.

  91. If they sell it abroad to other governments we get a margin; is that correct?
  (Mr Pinder) Microsoft have asked us if they can use our intellectual property rights for building products for other governments.

  92. Exactly how much are we going to get for that?
  (Mr Pinder) We take a commission on their gross sales of that product through a contractual arrangement. 24% of their gross sales of the government gateway intellectual property will come to us. They have made two sales so far and have a number of other sales in prospect, so we have got a contract with Microsoft US to get that commissioned. We felt it was right, rather than just hold on to the technology ourselves because there was an opportunity to recoup some of the cost of building that technology through a licensing agreement.

  93. That 22% of the intellectual property must be bringing in money.
  (Mr Pinder) We rather hope that it will give us quite a lot of money, yes. In this particular respect we wish Microsoft every good wish in their sales efforts.

  94. Coming back to Mr Broadbent again, somewhere in the report you mention that the cost of managing a VAT return with a cheque is £1.16 per return. Industry research suggests that if one did this over the Internet it would be something like 10p. Obviously there is an issue about economies of scale and the cost of setting up all these systems if nobody is using them and we have got a limited number of people who have got access to the Internet and of those a sub-set of people who can be bothered to use it and of that a sub-set that can be bothered to do their VAT returns on it. You have got a small number, 2,500 people, so presumably the average unit cost is not 10p but is working out at much more than the £1.16 before we start. Have you any idea how much it costs. Dividing the total costs by 2,500, surely, the cost of interaction is enormous?
  (Mr Fraser) The way that the system works at the moment is that the electronic VAT return goes through the same manual channel as material that we receive via the postal service, so there is no full end-to-end electronic process in place. The thing that drives the cost is the number of channels that we keep open and we do not have a full electronic channel until we have some economies of scale, some levels of take-up.

  95. I do not mean to have a go at you, Mr Broadbent, but just so I have some idea, what we have got is these very ambitious targets and what I would like to do is take a picture of a possible prospective client filling in his VAT return. It seems to me from the Report that customer segmentation and analysis of the amount of web use by clients, particularly small businesses which are very numerous as you know, had not been done, but given that has now been done, do you feel that had that market research been done beforehand that we would have been starting with a somewhat less ambitious target in terms of people doing their VAT returns?
  (Mr Broadbent) I do not want to labour the point but the target relates to all our services.

  96. You said you were hoping that it would be over 50% with your new adjustments by making it more colourful or whatever you are going to do.
  (Mr Broadbent) What I believe is this: we have as part of the agreed strategy put the VAT return on-line. I believe you are right in concluding from the experience we have that we will not get material levels of take-up on that because there is not enough added value to the user. We therefore have to increase the value added to the user to get take-up.

  97. I have got all this. Can I ask something else. Maybe I can ask Mavis McDonald or possibly Mr Pender. If you look at profiles for the rates of translation of sales from conventional to Internet-based for various organisations retailers, travel agents and all the rest of it, you will find that the rate of growth is far less than the projections that we have been talking about with Mr Broadbent. Do not you feel that the exponential rate of these targets is ambitious to say the least and should be adjusted?
  (Mr Pinder) In the particular case of Mr Broadbent he is here to answer your questions. He is bigger than I am, so I would not want to second guess on him on his targets! Customs & Excise are one of the departments we think are doing a really good job in government in looking fundamentally at their business.

  98. I am talking about whether the targets are ambitious.
  (Mr Pinder) The target we have is for getting all government services on-line and I think that has been a very useful target to have and it is a target which we will achieve or very closely achieve. Certainly the plans that departments have and the plans that local government have indicate that they are making very rapid process towards all services on-line.

  99. The issue is not whether they are on-line, it is whether anyone bothers to use the service they have got on-line given we have spent all this money putting them on-line. You could argue in terms of value for money that we would have been better being slower getting these services up and running in order to enable the public to be more conversant with use and there to be greater penetration and usage of the web.
  (Mr Pinder) We wanted to try to get services to inject a lot of momentum into both central and local government, and certainly the targets have seized on doing that. I think it is right that we now, in addition to keeping the pressure on to hit the targets, switch the emphasis to saying we want services to be used and departments in their work should prioritise their work towards doing just that. It is much better that we focus on the big services and make them attractive to the public whilst in parallel improving access to people who can use the Internet in order to deliver what you suggest, which is value for money. Clearly there is no point in having these services available if no one is using them.

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