Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 140-159)


12 OCTOBER 2005

  Q140  Jim Cousins: Could you let us know what projections you have of the staff consequences of introducing manual suspension of overpayments?

  Mr Gray: We will—although this tends to be, I am afraid, an art rather than a science because of the number of assumptions that need to be made.[9]

  Q141 Jim Cousins: It has already been pointed out that a lot of people do report to tax offices their difficulties about tax credits. How many tax offices are you proposing to close?

  Mr Varney: We have a process now where we are looking at rationalising our organisation. We have towns where we have more than one office. We are looking at that. We are going through quite a detailed process to see the implications in terms of service delivery. There are some bits which do not touch the public and that process is underway but has not yet by any means reached a conclusion in terms of job cuts. We have already made some decisions which are being communicated to staff about particular locations where we will close offices with no consequence for the total level of staffing.

  Q142  Jim Cousins: You cannot tell us how many tax offices you are proposing to close.

  Mr Varney: No.

  Q143  Jim Cousins: When will you be able to tell us that?

  Mr Varney: When I have gone through the process we are going through at the moment. An organisation which has barely been in existence for six months is now looking at the sort of structures it needs to achieve the tasks it has to achieve, and that is what we are going through. Obviously we have to consult with the unions as well—we said we would do that—and we have a process for doing that.

  Q144  Jim Cousins: When can we expect the outcome for Parliament to see the pattern of tax office closures? When can we expect a statement on it?

  Mr Varney: As we come to the decisions, then we will be in a position to make a statement of what we are going to do.

  Q145  Jim Cousins: When will that be?

  Mr Varney: We are working through at the moment. I am as keen as you are to get this result, because I have a set of targets that I have to deliver. But I have to do this in the best way possible. We have to look at what we can do, given the design of the business we have to deliver the outcomes that we are required to deliver.

  Q146  Jim Cousins: I have a question on a related topic. The whole House obviously has the issue of our security very much in mind—and this is a matter I have raised with you before, about Programme Cyclamen, which is the testing of radiological substances. It is now working. It is in place.

  Mr Varney: It is in place in some—

  Q147  Jim Cousins: How many sites at any one time can you cover?

  Mr Varney: Full time on five sites. I think some of the kit is mobile and therefore can be used at other sites.

  Q148  Jim Cousins: Could you let the Committee know how many units there are and whether they are mobile. You are part of the container security programme in the United States. What proportion of containers entering the country do you check?

  Mr Varney: I am happy to write to you on that. I do not have the statistics at first hand.

  The Committee suspended from 4.00 pm to 4.10 pm for a division in the House.

  Q149 Chairman: Jim Cousins, I think, asked a question before the break.

  Mr Varney: You asked a question about the percentage of containers. We are trying to find out, but we do not know the answer.

  Q150  Chairman: Would you let us have a note.

  Mr Varney: Yes.[10]

  Q151 Jim Cousins: In the Auditor-General's report, R29, there is a reference to financial services sector of the economy and the difficulties with improving payments of tax, particularly corporation tax. You will see in paragraph 3.34 there is a reference to the difference of tax yields relative to costs between the financial services sector and other sectors of the economy. Could you give us more explanation as to that, as to what costs are involved and what difficulties are experienced—possibly in written form. Generally, the staff in the large business service which is going to replace the large business offices of both Customs and Revenue, are those staffing levels to be increased or decreased? What is the scale of the increase? There is clearly a big problem of non-payment by some of the wealthier sectors of the economy.

  Mr Varney: We brought the two organisations together. I will give you the note which you requested. We will look at what the staffing levels are appropriately. There is an issue here which is about compliance and the investigations. We are looking at doing a series of things. One is to encourage companies to put tax on the boardroom agenda and encouraging more work by them where they discuss in their boards what their tax structure is. We are also looking at the impact of investigations and visits we have in terms of what it uncovers. We want to take a risk management approach to the deployment of the resources we have. We want to look at where they are deployed, that they are deployed in areas where they can make a substantial contribution to our tax gathering efforts, and not that we just repeat year after year the same audit and we get very little result for it. We will be looking at the organisation as part of 2008. That is what we are doing at the moment.[11]

  Q152 Mr Todd: Is there a new IT strategy for the merger?

  Mr Varney: Yes, I think it is coming about. We are very lucky to have recruited Steve Lamey from the private sector. We have two sets of issues, one of which I think is probably pretty generic, which is that IT has, in a sense, been a free resource. I do not want to be misunderstood, it has had to be paid for, but what has happened is that businesses get IT and they therefore make bids for what they want done on their systems. We have just taken the whole 46 leadership away to talk about how we might create a system in which we can have much better prioritisation and much better risk management. We are going to experiment with soft charging, to see what implication that has for ensuring that we deploy the resources we have in the most efficient and effective way for public value. We always have more things to do than we have capacity.

  Q153  Mr Todd: Indeed. That is why a strategy is a useful document to have. I take your answer to be: "Not yet."

  Mr Varney: I think you may have some sympathy with this: I want the strategy to be led by the businesses, which in the end are led by the customers. We want to do what is going to serve the needs of our customers, whether they are new tax credits, large businesses or small- and medium-sized enterprises, then we have to decide what the priorities are, and we have to get to a situation where we have less going on but when it goes on it is done effectively and efficiently.

  Q154  Mr Todd: I think that methodology sounds fine from my own personal experience. But when do you think you are going to arrive at a position where you have some certainty as to how you are going to direct an absolutely critical resource in your team. Jim has been questioning you on the issue of job losses. If that is to be delivered, you are certainly going to need more effective deployment of information technology than you currently have.

  Mr Varney: I would like to think that at the end of the next 12 months we have a clear statement of direction of travel. Could I explain why it is going to take time, which is relevant—and I would like it yesterday too. A key group of people we have had to recruit whom we did not have are the people who know about the business of HM Revenue and Customs and know enough about the technology to be able to interface with our technical people.

  Q155  Mr Todd: Business analysts.

  Mr Varney: Yes. Those, as you know, are pretty scarce and are pretty hard to find. That outfit has to be built up. We are encouraging a much more—

  Q156  Mr Todd: You have alarmed me that these people did not exist in the organisation before, but . . .

  Mr Varney: Before, there was the business talking to the technology people—which is a similar situation I have seen in other private sector companies, particularly the big ones—where the technology people would be advancing what the technology could do and the business people would be grabbing at it because they thought it would solve a problem. The end result is that you have a more sophisticated problem.

  Q157  Mr Todd: I do not know if the Committee would, but I would find it useful if you did a note on how you are going to establish an information technology strategy for your organisations and the methodology you are going to use to set it out. You have then the difficulty of two suppliers of technology in your organisation because there are two different contracts. You were admirably calm, and one might even say blasé, about this in your interview with the Financial Times, suggesting that this was something that would sort itself out by having the two sides chat to each other.[12]

  Mr Varney: I was not exactly . . .

  Q158  Mr Todd: You asked them to exercise "commercial imagination"—presumably together, I do not know.

  Mr Varney: Yes. I did not want them to see me as the financier of whatever plot they came up with. They are talking to each other. I have a commitment to go back to the Paymaster-General with a business case for whatever the results of that conversation are. I will listen to it and then I will think what is in it.

  Q159  Mr Todd: Do you see the problem in not having a strategy in place before you have to make those sorts of decisions?

  Mr Varney: Both Cap Gemini and Fujitsu will be part of that strategy, at least for the early years.

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