Examination of Witnesses (Questions 160-166)
MR DAVID
VARNEY, MR
PAUL GRAY
AND MISS
SARAH WALKER
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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