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29 Nov 2006 : Column 126WH—continued

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HM Revenue and Customs (Wales)

4 pm

Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): I was rather enjoying the previous debate, and it seems a shame to interrupt it with this issue. However, I am grateful to have secured a short debate on the reorganisation of Revenue and Customs offices in Wales. I shall try to be as succinct as I can, as I know that the hon. Member for Llanelli (Nia Griffith) would like to say a few words before the Paymaster General’s reply, and I expect that there will be one or two brief interventions as well. Other Members from Wales, notably the hon. Member for Caernarfon (Hywel Williams) and my hon. Friend the Member for Clwyd, West (Mr. Jones), indicated to me that they would have participated if this had been a longer debate.

There is a great deal of interest in and concern about the issue throughout Wales. The title of the debate does not really capture what is troubling hon. Members from Wales about HMRC plans. The consultation published on 16 November, which outlined a programme of HMRC office closures in Wales, amounts less to a reorganisation than to a fundamental and dramatic cut in the presence of HMRC in Wales and the nearly total destruction of the network of tax offices in rural west, mid and north Wales. Under the review, Cardiff, Swansea and Wrexham will be the principal processing centres while the rest of the network will be radically downsized or closed altogether, with the projected loss of some 1,000 jobs. An enormous swathe of offices from Pembroke Dock in the south-west to Holyhead in the north is being lined up for closure.

Mr. Roger Williams (Brecon and Radnorshire) (LD): The hon. Gentleman mentioned rural mid-Wales, which has a high number of self-employed people and very small businesses. I am sure that he would agree that they depend on an accessible tax office to help them with self-assessment and pay-as-you-earn issues.

Mr. Crabb: The hon. Gentleman makes an excellent point. He highlights just one of the concerns that many Welsh Members have about the proposals. Mid and west Wales will be hit particularly hard by the plans for centralisation. Offices in Aberystwyth, Brecon, Newtown and Welshpool, where more than 200 staff are employed, will be reduced to a mere handful of employees. Carmarthen’s office staff will drop by around two thirds from 127 to 40, and in my area of Pembrokeshire, 72 staff at the offices in Haverfordwest and Pembroke Dock will also be cut down to a handful of employees.

Paul Gray, the acting chairman of HMRC, said on 16 November in a letter that announced the consultation exercise:

I, too, think that that is essential, and that is why I ask the Paymaster General to ensure that before any changes whatsoever are signed off, a proper economic impact assessment is conducted to investigate the localised effects of the office closures, particularly in Pembrokeshire and the mid and west Wales region. It would be helpful if copies of the impact assessments were placed in the Library.

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The Paymaster General must be aware that we are discussing one of the poorest regions, not just in the UK but in the entire EU. It has qualified for objective 1 funding precisely because of its low gross domestic product per capita, low average earnings and the fragility of its economy.

Mark Williams (Ceredigion) (LD): On that point, would the hon. Gentleman agree that there is great inconsistency? The region qualified for convergence funding, yet despite the avowed objective of such funding to get high-skilled, well-paid jobs into west Wales, we now face this situation. In my constituency, not only will we lose 37 jobs, but we have already lost two jobcentres and a social security office. The loss of all those high-skilled jobs has a real impact on small communities such as the ones that he and I represent.

Mr. Crabb: The hon. Gentleman is absolutely right. There is a glaring inconsistency and potential incompatibility between what is proposed and the wider aims of the objective 1 programme.

The economy of west Wales, like that of many peripheral rural areas, is characterised by low-margin activities such as agriculture and tourism, and low levels of manufacturing and business services. The result is that Pembrokeshire’s economy is dominated by micro-businesses: more than 83 per cent. of businesses employ fewer than five people, and a high proportion of workers are self-employed. In many places in the region, the public sector is actually the dominant economic activity, so when the Government take a knife to the public sector in places such as Pembrokeshire and Ceredigion, they risk seriously undermining the local economies. At a time when numerous Government agencies are trying hard to create new sustainable jobs in mid and west Wales, it is perverse that another arm of government should remove excellent skilled jobs from the communities. I would welcome the Paymaster General’s views on the compatibility of the initial HMRC proposals with the objective 1 programme in mid and west Wales.

I would also be grateful if the Paymaster General could comment on how the plans would help deliver on the stated aim of the Welsh Assembly Government to move public sector jobs out of Cardiff and distribute them more equitably in the Welsh regions. It seems that the HMRC proposals would do precisely the opposite. What discussions have there been between her Department and officials at the Assembly about that?

The starting point for the reorganisation was, of course, the merger between Revenue and Customs last year, which has led to the need for some rationalisation in the office estate. Bringing accommodation back in line with operational requirements seems entirely sensible and reasonable, and I believe that most Members would agree wholeheartedly that an efficient public sector is a good thing and that the Government have a duty to maximise value to taxpayers. I would go further than that and say that Ministers should positively seek out opportunities for streamlining operations.

However, what we are discussing in this case is not the streamlining of back-office functions but deep and severe cuts in the front line of a vital public service. I find it hard to square the proposals that were outlined in “Transforming HMRC” with the stated aim of the
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review to ensure that “service standards are improved”. For example, my local office in Haverfordwest is one of those earmarked for closure. It employs some 65 staff—making it one of the largest employers in the town—in the debt management and banking function. Those people recover money for the Exchequer. Their work involves visits to homes. In fact, visits are a vital part of their operation. How can that be done remotely from a centre in Cardiff?

The compliance function will be affected. All the work carried out by the compliance team in Haverfordwest is location-specific; that is, it must be undertaken in the locality. It includes visits to businesses to examine records. Again, I ask how such work can be done efficiently from a processing super-office in Cardiff.

Then there is the processing function itself, or what is known in rural areas as distributed processing, which is the business of processing self-assessed tax returns. I understand that all that work is to be centralised in Cardiff. Could the Paymaster General offer some clues as to how those functions will be delivered to individuals and businesses in Pembrokeshire and across Wales to the same or a better standard by a centralised contact centre in Cardiff?

The other local office in Pembrokeshire is in Pembroke Dock. It focuses mainly on collection of excise from the two oil refiners. I understand that there is also a VAT team at that office. There is a no longer a permanent Customs presence working on detection at the port; the intelligence side of things is now based in Birmingham. I have been told that the VAT team at Pembroke Dock is comprised entirely of ex-uniform staff. One employee suggested to me that, given the Government’s renewed interest in border security, it would be easy to transfer staff to a new Customs and security team if VAT jobs are to go from Pembroke Dock. Perhaps things will come full circle and we will have a proper uniformed Customs presence once again in Pembrokeshire. I ask the Paymaster General to comment on that idea.

The Federation of Small Businesses in Wales stated that there is genuine concern among businesses about the impact of the proposed cuts on the quality of service from HMRC. Many of the businesses are small businesses or self-employed people who do not have specific expertise in finance, accounting or taxation, so they value local contact with HMRC. The FSB stated that there is a danger that HMRC will increasingly be perceived as

I note that, under the terms of the review, HMRC is specifically committed to retaining a face-to-face service in all locations where such a service currently exists. Given the sheer scale of the proposed cuts outlined in the document, it is incumbent on the Paymaster General to spell out just how such face-to-face service can be maintained to a high standard when the offices themselves will disappear. Is not the problem that HMRC simply does not see small businesses and places such as Pembrokeshire and rural west Wales as key customers? I noted the press statement from the Treasury on 20 November that announced the implementation of the recommendations of the Varney review into links with large businesses. The positive approach to providing big business with a high-quality tax service contrasts, I am
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afraid, with the message being sent out by the proposals that we are discussing this afternoon.

What assessment does the Paymaster General make of the potential for lost revenue as a result of the proposed reorganisation? I understand that her Department will save some £74 million nationally by cutting some 2,500 compliance jobs, but that its own figures identify that it will lose £250 million in yield to the Exchequer. It might be that she considers that the potential loss in yield as a result of the new wave of centralisation will be less than the efficiency margin that can be squeezed out, which would make it worth while, but I would be very sceptical. In any case, such calculations should be in the public domain.

I want to conclude—rather negatively I am afraid—by drawing attention to a letter to me from the Paymaster General dated 28 July this year about the HMRC estate in which she said:

She signed off the letter cheerily with the comment:

No, they do not. Just four months down the line, they are staring at a massive programme of office closures and job cuts by HMRC in Pembrokeshire and across Wales. This is not the first time my constituents have been given an assurance in writing or from the Dispatch Box about a threatened local service in Pembrokeshire only for that assurance to appear totally and utterly worthless just a matter of weeks or months later. I refer specifically to an assurance we were given about the future of Withybush hospital last year.

Coming back to these proposals, I hope that the Paymaster General will look hard at what is proposed in the document and at how it impacts on west Wales. I believe that if she considers the evidence, she will see that the proposed closures fly in the face of Westminster and Welsh Assembly Government economic policy towards the objective 1 area, that they will cause real economic damage to a number of sensitive areas, that they will not lead to an improved taxation service for businesses in west Wales and that they risk further undermining the accessibility, reputation and perception of HMRC in the eyes of honest taxpaying individuals, families and companies. I look forward to her reply.

4.12 pm

Nia Griffith (Llanelli) (Lab): I congratulate the hon. Member for Preseli Pembrokeshire (Mr. Crabb) not only on securing the debate but on covering the points so well and so clearly. I shall make only a couple of small points to add to his excellent explanation of the situation.

I am absolutely horrified at the proposal to close the Llanelli office. In Llanelli, where there are few exciting opportunities to lure staff elsewhere, we have an extremely loyal, experienced and hard-working work force. That contrasts sharply with recruitment difficulties in more prosperous areas. Her Majesty’s Revenue and Customs ought to recognise the high standard of delivery that it gets and the serious risk of detriment to the service if it tries to move the service out of Llanelli.

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There are serious environmental concerns about crowding people into the south-east to work, whether from housing or water shortages, congestion or transport difficulties, and the same is now happening in Cardiff and Wrexham. Any attempt to move jobs from more rural areas towards the centres seems utter madness. We took a strong initiative back in the 1970s and moved jobs out of the centres, and that is the way in which we should be moving. It is certainly the way in which the Assembly is moving. For those reasons, I ask for serious reconsideration of the proposals as I think that they will do detriment both to the service and to those using the service, and will not make the savings that they are supposed to.

4.14 pm

The Paymaster General (Dawn Primarolo): I congratulate the hon. Member for Preseli Pembrokeshire (Mr. Crabb) on securing the debate, which gives me the opportunity to push aside the myths and to focus on the practicalities.

I want to say to all hon. Members who have made contributions that, as the hon. Gentleman made clear, you cannot have your cake and eat it. One cannot say that one wants a tax administration to be efficient and to use its resources appropriately because it is spending taxpayers’ money and then say, “But not in my constituency.” The challenges that the Department faces are those that he mentioned, and I shall return to them.

I want to point out in the strongest possible way—I know that this may seem counterintuitive to the hon. Gentleman—that the senior management team of Her Majesty’s Revenue and Customs has not announced a decision to close offices in Wales and elsewhere in the United Kingdom. What was announced on 16 November was the decision to undertake consultations to try to explore and come to decisions on exactly the points that the hon. Gentleman raised. How do we ensure that a Department spends taxpayers’ money in the most efficient and reasonable way? How do we ensure that we maintain the type of service that taxpayers have a right to expect in the most efficient way? Are there any other considerations that are relevant to the decisions that a Department should take?

On 16 November, the Department brought forth its plans to bring its office accommodation—using exactly the same words as the hon. Gentleman—back into line with its operational requirements. Final decisions have not been made or announced by the board and there will be a consultation exercise. In Wales, that is scheduled for next summer. It will be up to every Member of Parliament, every community and every organisation that has an interest to make representations, to make the points that have been made this afternoon and to demonstrate their validity. They should not deal in generalities but the specifics. That is what the Department needs to take note of.

All remarks and submissions, including what has been said today, will be taken into account by the Department. All Members of Parliament who represent Wales will be invited to contribute to the consultation exercise. The board of HMRC will make final plans and decisions only when it has taken full account of all the views expressed during each of the consultation exercises.

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Let us look at the scale of what needs to be done. Following the merger of the Inland Revenue and Customs and Excise, the Department has significantly more accommodation than it needs. The position varies across the United Kingdom, but in Wales the board believes that it has 40 per cent. more accommodation than it needs to support its operations. To return to the point that the hon. Gentleman so eloquently made, of course he expects the board to use those resources efficiently. The board is consulting in a way that no Department has ever done before about how it should distribute those resources. Indeed, the previous Conservative Government did not do that when they slashed the number of jobs in the Department in Wales in a matter of four or five years under what was then called the future expenditure review.

I am glad that the hon. Gentleman recognises the central point, and I can assure him that this will be done in an open way. He raised the specific point of inquiry centres. The thrust of what he said and of the interventions from other hon. Members was that the public should have access to the advice that they need. Throughout the country that is done through what are called inquiry centres, which are backed up by contact centres and specialist staff elsewhere in the UK if necessary. I want to make it absolutely clear that although the board is looking at its office accommodation and its back office functions, there will not be a reduction in the public inquiry facilities. I have made it absolutely clear that the network of inquiry centres must be maintained as it is the point of access for the taxpayer and the micro-businesses that the hon. Gentleman referred to. There are 18 inquiry centres in Wales and they will remain.

Mr. Crabb: We understand the point about surplus office accommodation, but part of the problem with the proposal, as I understand it, is that it goes beyond a tidying up exercise or a decision about what to do with the excess surplus accommodation as a result of the merger. There is a move towards a quite different business model on the part of Revenue and Customs and the way it delivers advice to customers and that is what is causing a great deal of concern. A whole network of offices are being lost, particularly in the rural north-west mid-Wales region.

Dawn Primarolo: The changing nature of how HMRC inter-relates and interacts with the taxpayer is driven by the taxpayer. For instance, they increasingly do not want to write a letter; they want to make a phone call or send an email. Taxpayers want access to interactive sites that give them the basic information that they require. Over and above that, when it is necessary, they want access to a named official who specialises in the area that they are concerned with. The problems are increasingly complex.

People also want access to inquiry centres, which I have already commented on. I am sure that the hon. Gentleman is not suggesting that the Department should stand like King Canute and say to the taxpayer, “We don’t care what you want. You will write to us and communicate with us in this way. We insist on not having electronic systems and we will do everything manually and by paper”. I do not think that the taxpayer would consider that a reasonable response.
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Processes relating to automation and how we can give a quicker, more timely and accurate service as a Department are vastly different from the opportunities available 10 years’ ago. It is not just the Department saying that it will do its business differently; it is learning from other business practices and, most importantly, learning from the taxpayer about what they want. Increasingly, they do not want to call the Revenue at 10 minutes to 4; they want to call it when they are ready—for example on a Saturday, a Sunday or in the evening. We have to face those prospects in considering how to shape how business is done by the Department in the future.

The hon. Gentleman is right when he says that the merger of Revenue and Customs makes it possible to look rationally at the estate. What is the point of having two offices under-utilised that are very close to each other? Of course, the efficiency programmes have changed how business is done and how quickly we can respond. Increasingly, people send their self-assessment tax returns electronically and that means we do not need hundreds and hundreds of people dealing with paper because we deal with an electronic return.

I agree with the hon. Gentleman that the Department’s operation in Wales must be based on an understanding of what the taxpayers’ needs are and the challenges that we face in terms of efficiencies. The planning assumptions for the board cover all of the UK as announced on 16 November. The impact on Wales is similar to that on other areas in the country with the exception of London and the south-east, where a greater reduction in posts is planned in recognition of the move away from this area to other regions. Other Government Departments have relocated to Wales.

In relation to the next point that the hon. Gentleman raised, it is important, when seeking to understand this process, to recognise that the cornerstone of each consultation exercise will be an assessment impact. It is proposed that that should be undertaken in every location and I absolutely agree with the points that hon. Members have made. There could be a differential impact on the labour market depending on the opportunities in that area or how far it is to travel for work. That is precisely why the assessment impacts will be undertaken and, of course, Members of Parliament can contribute to that.

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