Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 160-166)


12 OCTOBER 2005

  Q160  Mr Todd: But if you are going to renew those contracts, you need a strategy to do that.

  Mr Varney: Yes. We have quite a good arrangement under the Cap Gemini contract. The Cap Gemini contract benefited from the experience with EDS. We have a contract with them and then we have a so-called eco-system, which is underneath them, where we can pull in IT companies which have specialised skills which we need. I think that is the right strategic arrangement. Just take HM Revenue and Customs, 276 million customer contacts last year, collecting £388 billion. On the scale of that, you are going to be affected by technology change and therefore you need a contract which gives you a degree of flexibility. At the moment, we hardly use mobile phones, yet that is a piece of technology which almost every member of the public has.

  Q161  Mr Todd: When are you going to present your business case?

  Mr Varney: At the end of the year.

  Q162  Susan Kramer: I do not pretend anything like Mark Todd's knowledge on IT systems for the tax credit system. On the tax credit system, EDS, unsatisfactory though it was, had one virtue, in that it was a fixed cost contract. Cap Gemini does not have that kind of cost control mechanism. What are you doing to ensure that there is cost control as you shift from one provider to another?

  Mr Varney: We are looking for value for money in what we do. That is what we are doing and built in. We have this eco-system where we can flex the contract by bringing in their parties and not putting it Cap Gemini's way if we think that is better value for us. Their commercial interests are to do as much work for us as they can. Our ability to redirect that is in the eco-system.

  Q163  Chairman: This Sub-Committee produced a report a year and a half ago recommending that the Revenue look at how the compliance cost of business is measured. We set a target for it of 25% as they have done in the Netherlands. Have you done any serious work on measuring the cost of tax compliance?

  Mr Varney: We have started work on the measurement. There are two activities going on in Government. One is under the Cabinet Office, which is basically all the spending departments, and we kicked off looking at the impact of what we do, using KPMG. They also have the Danish company that was involved in the Danes' look at their cost of compliance. That has begun work and will report back in March '06. I have also been across to the Netherlands to look at what their experience has been. My take is that duplication of information requests makes some contribution, but a pretty small contribution, to an aggressive target like 25%. An awful lot of the rest has to be gained by changing basically the parameters of the information we gather, and that raises other issues about what the cost and benefit are of that particular move is.

  Q164  Chairman: Whom are you reporting back to on this?

  Mr Varney: I am reporting back to the Paymaster-General.

  Q165  Chairman: The National Audit Office carried out an audit of your Regulatory Impact Assessments. Is that going to be published at any stage?

  Mr Varney: I do not know whether it is going to be published. They have given a review back. They have said to us, I think, that ours was an encouraging performance. They have given us some guidance in terms of the quality of the economics and costing in the documents, and my understanding is that they are going to do another review at the end of this year.

  Mr Gray: My understanding was that, drawing together the lessons from what they have looked at in relation to different departments, they would be publishing a report.

  Q166  Chairman: Good. Thank you very much. You have promised us a whole series of notes as a result of today and we look forward to receiving those. I would like to thank you and your team for appearing today. I ought to put you on notice that on the issue of tax credits we may well be returning to the operation and the progress you are making, because a very substantial number of people seem to have been adversely affected, far more than originally predicted, and the scale of the overpayments, as you have said this afternoon, is much greater than originally anticipated. I hope it is clear to you the degree of concern in this building and around this Sub-Committee of the scale of the problem. I hope you will take that lesson away. We look forward to seeing you again.

  Mr Varney: Thank you.

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