Memorandum submitted by The Public and
Commercial Services Union
INTRODUCTION AND
SUMMARY
1. The Public and Commercial Services Union
(PCS) is the largest trade union within the Civil Service and
Her Majesty's Revenue and Customs department (HMRC). PCS has 325,000
members with 83,000 of these employed by HMRC.
2. PCS welcomes the select committee's inquiry,
and is happy to supplement this written submission with oral evidence
or further written evidence.
3. PCS strongly believes in the social objectives
of Tax Credits (TC), as one of the means of reducing poverty and
encouraging people to remain in regular employment.
4. PCS wants to see improvements in the
TC system. We believe it should be easier for claimants (and those
voluntary agencies who seek to assist claimants such as Citizens
Advice Bureau) to understand, and HMRC staff to administer with
greater accuracy.
5. We broadly welcome the recent recommendations
from the Parliamentary and Health Ombudsman. However, these have
implications in terms of resources and staffing. Within the former
Inland Revenue (IR), decisions on how to deal with overpayments
have historically been undertaken by an experienced member of
staff. We are concerned that this no longer happens across HMRC,
and are concerned that in the haste to clear enquiries or disputes,
standards have been allowed to drop.
6. Additionally, PCS has serious concerns
over the capacity of HMRC to implement much needed administrative
improvements in the face of 12,500 proposed job cuts. The workforce
within the Tax Credits Office (TCO) relies heavily on temporary
staff and is continuing to employ fixed term staff for long periods.
There has been a continual extension of contracts that limits
the job security and prospects for these staff.
7. Moreover, there is a huge reliance by
TCO management on overtime working. Whilst PCS understands the
political imperative for HMRC to take action to deal with complaints
and overpayments, we believe that overtime is out of control,
and is hiding what we believe could be up to 200 full-time jobs
per year. PCS believes that public money is better spent on the
provision of quality full-time jobs that reduce bureaucracy within
the system.
8. The experience of our members with the
IT system suggests that the concept of replacing people with technology
has been a failure. The system still underperforms and fails to
provide "joined up" access between HMRC departments.
9. PCS also has major concerns over the
effects that office closures will have on local communities. Taxpayers
need access to locally based offices and new enquiry points where
HMRC currently has no presence. These should be staffed by well
trained people who can provide high quality "face to face"
advice and assistance.
10. This submission offers constructive
commentary on:
— The progress of the six measures
for improvement of TCs, submitted by the Paymaster General (PMG)
to the select committee in May 2005.
— The difficulties caused by the recovery
of overpayments of TCs and future solutions.
— The need for a redesign of the TC
system.
— Measures that PCS believes will improve
TC administration and the service to the public.
PMG SUBMISSION TO
THE TREASURY
SELECT COMMITTEE,
MAY 2005
Measure 1
11. PCS notes that in April 2006, the responsibility
of employer payments of TCs will fall to HMRC. This should bring
more clarity to the system.
12. We acknowledge the difficulties in improving
the clarity of the award notices and also the system itself. This
is exacerbated by continuing "legacy" problems with
the IT system. Nevertheless, PCS believes that senior HMRC management
must take responsibility for failing to deploy sufficient resources
to this problem in the form of permanent, well trained front line
staff with the skills to reduce repeat contact and assist confused
claimants. Far too much reliance has been placed on the ability
of temporary staff and large amounts of overtime.
13. PCS understands that HMRC management
has initiated a number of projects in partnership with voluntary
and support groups to improve the clarity of tax award notices.
Their complexity has been borne out by a recent BBC television
documentary that demonstrated how difficult these can be.
14. Our members in front line TC work indicate
that despite management initiatives their experience has not been
sufficiently taken on board in this process. It is also notable
that since the creation of HMRC, there has been a negative change
of attitude at senior HMRC level to the role of PCS as "stakeholders"
in this important project.
15. PCS believes that its members opinions—as
"stakeholders" with an obvious interest in the efficient
operation of Tic's, must be fully taken into account, and we seek
support from the select committee to ensure that our members'
concerns are addressed.
Measure 2
16. PCS notes that a simpler award notice
is due in April 2006. However, this has taken nearly two years
to reach fruition, and has followed extensive discussion with
consultative bodies; sadly PCS were not asked for our views.
17. We also note the increase in advertising
activity to remind TC claimants of their responsibility to inform
the department of a change of circumstances.
Measure 3
18. Not all claimants can visit an HMRC
office and the development of a network of Contact Centres has
put the department at the forefront of dealing with the public
by telephone. These centres now service around 70% of HMRC's customers
and this will increase to 90%. At present these centres offer
a varied level of service and opening hours.
19. By standardising these aspects, HMRC
can ensure consistency and provide a customer focused service
for TC claimants who currently find it difficult to contact HMRC.
We believe there is also an opportunity to extend the services
currently offered, by allowing more executive action on TC enquiries
as a result of phone calls. It should be possible to transact
more substantive business over the telephone.
20. In this respect, PCS expresses its disappointment
that the Contact Management Application (CMA) has still to be
fully utilised within HMRC. We believe it makes sense to try and
be pro-active in resolving problems, or ascertain key aspects
of information that can be fed into the TC system at an early
stage.
21. The computer system is not user friendly
and continues to be often unavailable at key times. Our members
are concerned that the focus is on quickly "clearing"
incoming telephone calls at contact centres, and then forwarding
tens of thousands of difficult enquiries to specialists at the
TCO, often staffed by fixed term appointees.
Measure 4
22. PCS notes that agreement has finally
been reached between HMRC and the former IT contractor Electronic
Data Systems, over the early failures of the TC system. However,
our members report continuing problems with the interface between
the TC computer system and treatment of data that HMRC operatives
are forwarding for inclusion (such as a claimants' change of circumstances).
23. PCS acknowledges that identification
of IT system problems has improved. However, the resolution of
processing errors has not. Other operational demands and a lack
of resources can mean that these errors are delayed or stockpiled
for the attention of already overloaded TCO staff at Preston and
Liverpool.
24. PCS welcomes the planned review next
year by the Chief Information Officer of IT use across Government.
In view of the historical difficulties around TC computerisation
we would welcome an opportunity to submit evidence to this review.
Measure 5
25. PCS believes that HMRC have failed to
meet what is a key measure to alleviate the difficulties faced
by claimants and voluntary agencies that try to assist them.
26. In our submission to the 2003 Comprehensive
Spending Review, PCS set our agenda for improvements to the interface
between the then IR and its customers.
27. HMRC enquiry centres provide the bulk
of the department's face-to-face contact, but are sited in a relatively
small number of towns and cities around the UK. There is no enquiry
centre in Blackburn, a "high density tax credit area"
or anywhere on the East Coast between Edinburgh and Alnwick. Even
where there are enquiry centres, they are often in areas of towns
and cities, which are not suitable for claimants to reach easily.
This vital work can only be effective if HMRC retains office locations
in communities rather than planning to close them.
28. In some cases a full-blown enquiry centre
would not be appropriate, but by working with other civil service
departments and/or local councils "Enquiry Points" could
be located in towns/cities where HMRC does not have a presence.
Furthermore, the number of people travelling across the UK continues
to rise, and there is an argument for locating HMRC enquiry points
at major airports and railway termini.
29. We believe HMRC should be much more
outward facing by developing new channels of contact, so staff
will be in a position to ensure that everyone gets their TC entitlement,
but can also access support from other government departments.
Similarly, the provision of "joined up" support for
business on tax and VAT issues must be thoroughly investigated.
30. We firmly believe that links need to
be built with a wide variety of organisations, including:
Measure 6
31. PCS welcomes the statement by the PMG
at the select committee regarding the HMRC Spring Report that
announced the implementation of this measure.
32. We are however concerned about the length
of time it has taken HMRC management to act, given that there
are over 1.6 million recorded overpayments of TC's that HMRC say
will take 18 months to clear.
33. PCS believe that HMRC have failed to
meet their responsibilities under their own operational charter,
and have failed to appreciate the stress, anxiety and financial
hardship that has been caused by the delay in implementing this
measure.
RECOVERY OF
OVERPAYMENTS AND
FUTURE SOLUTIONS
34. PCS agrees there is a pressing need
to move forward positively, and stands ready to assist in the
process of finding solutions to TC overpayments that have been
reported as accounting for £2.2 billion of the £13.8
billion paid out annually.
35. Our members report that granting additional
TC payments is a "quick fix" often perpetuating claimant's
problems, and leading to greater levels of hardship. We note the
new "disregard" threshold of £25,000 in the Pre
Budget Report, but believe this measure in itself will lead to
unfairness in terms of relative need between claimants with vastly
different incomes.
36. PCS believes that most overpayments
result from the original design of the TC system, which was predicated
on the basis of saving vast amounts of money by using IT equipment
to replace people. It was initially intended that the "rapid
data capture" process (the conversion of written information
from application forms into electronic data) would handle around
90% of claims without further need for human intervention. Our
estimate is that only 10% of the information is captured by this
method.
37. The knock on effect of this was the
"pay out first and check later" policy. A practice that
has enabled a substantial number of fraudulent claims and "hijacked"
National Insurance numbers. This diverts money from those who
are in greatest need.
38. The NTC process was designed to mirror
Working Families Tax Credit. This included former IR staff being
deployed on "disputes" teams, to try and prevent matters
being escalated as a complaint. This process ceased when NTC were
introduced, in lieu of IT.
39. This led to a situation where at any
one time multiple staff may be amending details of applications
without sight of each other.
40. The only solution to these problems
is to introduce a new process with staff being the responsibilities,
training and skills to work through entire applications or related
processes, or manage work on a geographical basis.
41. Whilst the HMRC Chairman recently informed
Parliament that HMRC intends to "up-skill" its employees,
the impression from the TCO is that jobs are being de-skilled.
42. Following a pilot scheme, there appears
to be a move towards downgrading some of the compliance work around
certain cases, by removing the need to interview the claimants.
43. We would ask the select committee to
raise serious questions about why there are plans to shed almost
300 jobs from TC compliance and anti-fraud activity in this financial
year when, as we demonstrate above, this work is vital.
REDESIGN OF
THE TAX
CREDIT SYSTEM
44. Our concerns demonstrate the need to
make changes to the system to minimise the scope for continuing
overpayment and targeted fraud.
45. As this submission is being prepared
we received news that over 100 PCS members working in the Department
for Work and Pensions have had their National Insurance numbers
"hijacked" by tax credit fraudsters.
46. Whilst this incident will be investigated,
it is an established fact that organised criminals see the design
of the TC system as the provider of "low hanging fruit"
for their activities.
47. PCS believes that a fundamental review
of the TC computer system's current capabilities and future capacity
should be commissioned by Parliament.
RECOMMENDED ACTIONS
TO IMPROVE
TC ADMINISTRATION AND
SERVICE TO
THE PUBLIC
— HMRC should create enquiry centres/contact
points that allow better access for claimants at shopping centres
and Citizens Advice Bureau's.
— A network of HMRC enquiry points
should be established, possibly in partnership with other government
departments or local authorities;
— HMRC enquiry points should be established,
on a trial basis, at two major airports in the UK;
— The opening hours of HMRC contact
centres should be standardised and widely advertised to claimants;
— Claimants should at least be able
to receive a substantive answer to their telephone enquiries and
have their changes of circumstances recorded in one call;
— HMRC should accept e-mails and SMS
text contact from TC claimants and should commit to answering
these within 24 hours;
— Each HMRC enquiry centre should appoint
a TC specialist, who will be charged, initially, with making contact
with community groups and claimants' representatives to offer
a range of support and advice services;
— Additional resources need to be put
into TC compliance and anti-fraud activity instead of the reductions
we have seen;
— TC administrators need to be trained
interactively. Proper consolidation periods must be available
to TC staff after each training package.
CONCLUSION
HMRC has an excellent record in debt management,
detecting evasion and ensuring that individuals and companies
pay the correct amount of tax. The public expect a fair and consistent
policy of tax compliance, but also expect that public money is
spent wisely on the administration of TC's. PCS and our members
look forward to working with HMRC to improve the administration
of TC.
December 2005
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