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18 July 2007 : Column 82WH—continued
The institute, which deals with tax offices on a day-to-day basis, has surveyed its members and found that 65 per cent. of respondents feel that the HMRC merger has not improved services. It also found—this is particularly relevant to the debate—that 71 per cent. feel that centralisation has gone too far, and that 79 per
cent. feel that the lack of HMRC offices and contacts is making their job much harder. That important point was made by the hon. Members for Burton and for Falmouth and Camborne (Julia Goldsworthy). People want to be able to speak to somebody directly—to be able to sit down and have a face-to-face meeting. When tax credits were designed, the intention was that there would be an opportunity to have such meetings. When dealing with the state as a whole, there is a desire for such an approach.
The hon. Member for Burton raised some local issues, including the fact that a lot of people in Burton do not speak English as their first language. Having done a little research in this area, I know that four of Burton’s wards are among the 10 per cent. most deprived in the west midlands.
East Staffordshire borough council has recently shown its desire to speak to people by establishing a customer service centre in Burton. In the first three weeks, about 1,500 people visited it. I am grateful to Andrew Griffiths, the excellent Conservative parliamentary spokesman for Burton, for drawing this to my attention. A desire to speak to people clearly exists.
John Whiting of the Chartered Institute of Taxation raised a concern with the Treasury Committee about the loss of experience within HMRC. He said that it was harder for people to get good interaction with someone who could answer their questions. A consistent message is coming back: routine problems such as VAT registration and trying to check whether coding notices have been issued are taking longer to resolve. Previously, such matters would have been dealt with by a quick telephone call or a quick visit. It is a great concern that the quality of service provided by HMRC is not what it should be—indeed, it appears to be declining in many instances.
Tax credits are one of a handful of recent particular stresses on HMRC. I am only going to touch on them now, but I am sure that it will not be the last time that I debate them with the Financial Secretary. We saw the report last week from the National Audit Office, produced along with HMRC’s annual accounts. One of the many concerns raised in it was that the level of fraud and error in 2004-05 was unacceptably high, and there was no evidence to demonstrate a lower estimate for subsequent years. One problem identified by Sir John Bourn of the NAO was the quality of the inquiry work undertaken by HMRC. Does the Financial Secretary think that the removal of local offices will have any impact on the inquiry work undertaken by HMRC to identify fraud and error?
Another subject that we debated at some length during consideration of the Finance Bill, particularly on Report, was VAT issues, particularly delays in VAT registrations and repayments. Again, that is not a new issue, although it may be for the Financial Secretary. There is considerable concern about HMRC delays within this process, and Paul Gray, its chairman, acknowledged the problem in January. There is a recognition of what we hope is a temporary blip in performance. None the less, we are seeing considerable delays in the time that it takes to register a company for VAT and to make a VAT repayment.
I should acknowledge that many of the problems are occurring because of legitimate attempts to tackle missing trader intra-community fraud. I do not want to put any pressure on HMRC to fast-track processes and not go through the necessary checks, but there is a wider issue. Resources appear to be diverted into tackling that fraud, leaving insufficient resources to deal with routine matters.
I return to income tax and the NAO report issued last week. It seems that HMRC may not be pursuing some £880 million of tax due, and that there is about £340 million in overpaid tax. The report states:
“potentially five million taxpayers not paying the right amount of”
“tax.”
The Public and Commercial Services Union, which deals with this area, has stated:
“The programme of office closures and job cuts will potentially have a devastating impact on jobs, conditions and the delivery of public services, particularly in areas where service delivery is already impeded by inadequate staffing.”
“Morale has reached a new low”.
One of the points made by the trade union is that, given the various staff reductions, HMRC may be
“employing thousands of staff on short-term, temporary contracts and using overtime (at an additional net cost to the Government) in an effort to try to cope with backlogs of work.”
I would be very grateful if the Financial Secretary shed light on whether that is true.
We can see that HMRC will have a very tight budget for the next few years, and that there will be some fairly ambitious attempts at reorganisation. Doing all this at once creates certain strains. We must ask ourselves whether HMRC is coping and whether its customers are suffering. We have also heard important points about the impact on communities and on staff, and it is right that we address all these issues. My concern is that the then Chancellor perhaps sought to have a very tight spending round, and wanted to lead by example. In doing so, has he caused a problem in our tax system that will create problems in raising revenue, and for taxpayers and staff?
10. 47 am
The Financial Secretary to the Treasury (Jane Kennedy): It is a pleasure to be debating this subject under your chairmanship, Mr. Cummings. For once, it is not raining, so hopefully the day will continue to go well. I am pleased to have been able to listen to the concerns that were expressed, and I congratulate my hon. Friend the Member for Burton (Mrs. Dean) on securing the debate and, as has been said, on enabling a number of other colleagues to speak on this subject, which is of clear importance to the neighbourhoods that they represent.
I also appreciate the way in which hon. Members have expressed their acceptance of the need for the current review. I know that they will appreciate that, following the merger of the Inland Revenue and Customs and Excise, the department has significantly more office accommodation than it needs. The position varies across the regions, but in general HMRC believes that it has about 40 per cent. more office accommodation than it
needs to support its operations. It estimates that this spare capacity costs about £100 million a year to maintain. The annual cost of accommodation in the urban centres of Nottingham, Derby and Leicester to the department is about £12 million. I am glad that my hon. Friends have agreed that the board has a responsibility to reduce unnecessary cost.
In a thoughtful and probing speech, the hon. Member for South-West Hertfordshire (Mr. Gauke) raised a number of issues. He is right that the challenges facing HMRC are not easy. I would like to say one or two things on the issue of tax credits, which he mentioned. He also quoted from evidence to the Treasury Committee, and raised concerns that were expressed by representatives of tax advisers or agents. I acknowledge that the agent community may require specific services, as do other members of the public, from HMRC. HMRC is piloting a dedicated agents’ hotline to see whether it meets those needs. However, I am sure that we will discuss this issue again on other occasions.
Similarly, the hon. Gentleman questioned whether we had the balance right, whether HMRC was being asked to do too much and what impact that might have on levels of service. I recognise that some difficulties exist. HMRC is working to recover the position on VAT, and working on the speed with which VAT registrations and returns are processed. I hope that the hon. Gentleman will be reassured that we have ring-fenced resources for tax credits. Transformation of the process seeks to address some of the problems, and to improve the level of service as part of the efficiency programme. HMRC aims to deliver an effective and efficient service focused on the needs of its customers—I prefer to call them customers rather than claimants, as we do with some tax credit claimants. Those improvements cannot be achieved by continuing to occupy buildings that are no longer needed, and carrying out work in ways that are no longer efficient.
Very little of HMRC’s current work in its local offices relates to economic activity in the local area in question. Its business is arranged on national business lines, including the use of large contact and processing centres, with the exception of its inquiry centre network—I shall return to that—and locally based compliance and debt management activity. It is important that HMRC uses its larger centres as efficiently as possible, and it has embarked on a transformation programme that will allow it to deliver its business with up to 25 per cent. fewer staff. A number of jobs will go over time, but it is the process by which HMRC achieves those improvements and efficiencies that we are discussing.
Beyond that, HMRC is making significant changes to the way in which it carries out its business to respond to customer demand. Many customers now choose to use the telephone, or the internet to file returns and make claims. It is right for senior management to look at all operations to ensure that they are run as efficiently as possible. In some work areas, that need is best served by concentrating work in larger units where the processes can be streamlined. In other areas, a more mobile work force is seen as the best solution to meet customer needs. Finally, there must be an emphasis on improving compliance by matching resources to the risks that HMRC deals with in particular locations.
I shall now deal with a couple of general points. The hon. Member for Falmouth and Camborne (Julia
Goldsworthy) asked what contribution the closure will make to the Gershon recommendations. HMRC is aiming for ongoing savings of £507 million per annum by 1 April 2008. The hon. Lady suggested that we were salami-slicing services, and asked whether there would be more change in the future. There is nothing more certain than that there will be more changes. HMRC transformation will continue over a number of years, and it is likely that, as customer needs and processes change, decisions will be revisited.
The hon. Lady made a throwaway comment about changes at jobcentres, Jobcentre Plus and so on, and some of the associated traumas. When I was Minister for Work a few years ago, I rejoiced when an unemployment benefit office in my constituency was closed—I had signed on there 20-odd years ago—and put up for sale. It was looking rather sad and dilapidated, and it is now being made ready for redevelopment for a totally different purpose. I asked my agent whether I could pose in front of it for a photograph for a leaflet, because it is excellent that the strength of the economy and the greater number of jobs mean that we can consider with equanimity some of the changes that, at other times in our country’s history, have been much more problematic.
HMRC is ahead of schedule with its general efficiency programme, having reduced the number of posts by some 11,000 through a combination of restricted recruitment and voluntary early retirement. I emphasise that the plan is to reduce its use of office accommodation and to focus on back-office functions, not public inquiry facilities.
My right hon. Friend the Member for Bristol, South (Dawn Primarolo), who served for a long time at the Treasury and is an extremely hard act to follow, made it clear that the network of inquiry centres must be maintained. I want to assure my hon. Friend the Member for Sherwood (Paddy Tipping) that I fully endorse that approach. HMRC will not change that approach in any way.
When an inquiry centre is to close—for example, because a lease cannot be renewed—HMRC has been asked to re-provision the facility as close as possible to the current inquiry centre. Face-to-face contact will be maintained, and in many cases it will be enhanced.
Mrs. Dean: If a back office closes, will the inquiry office be open for as long as it is now, and will increased staffing be necessary to fulfil that?
Jane Kennedy: In line with the assurances that I have given and the steer that was given to HMRC by my predecessor, the face-to-face services that the public receive through those offices should be maintained and, wherever possible, enhanced. I cannot predict too far into the future the specifics of what may happen in a particular office, but I assure my hon. Friend that the current level of services will be maintained.
Mrs. Dean: Does my right hon. Friend accept that, in order to maintain the number of hours that an office is open to the public if a back office closes, it will be necessary to employ more face-to-face staff?
Jane Kennedy:
I do not want to pre-empt anything that might come out of the consultation and review, but where those considerations are being made, my
hon. Friend is right. I will look to the professionals charged with responsibility for managing the decisions for the details. Her point is sensible, and such considerations will be taken into account. I hope that I have reassured her, without going too far into the details.
The new department has been asked to draw up plans to improve services and to reduce costs over the next five years. The Government will invest significantly in each of those years to improve HMRC services.
My hon. Friend the Member for South Derbyshire (Mr. Todd) has asked on a number of occasions about the detailed business case. HMRC’s business case is predicated on improving services for customers by re-engineering its processes; strengthening compliance—those who have had concerns about the compliance effort should be reassured—achieving efficiencies that, in part, will release the 25,000 posts that I mentioned; and releasing up to 40 per cent. of excess estate, which is costing more than £100 million. While the impact assessment may reflect the costs of a single building and the likely cost of staff moving, it cannot cover each of the national savings noted above.
Similarly, my hon. Friend the Member for Burton asked about the effect of job cuts and local office closures, and expressed her concerns about compliance yield and local knowledge. That issue was raised in an Adjournment debate last week. There is no question but that local knowledge is important for compliance work, but the local compliance presence does not always need to be quite as local as it is now. Co- locating teams from former Inland Revenue and former Customs and Excise will enable them to work more effectively, and HMRC can continue to protect revenue by greater assessment of risk and the use of intelligence.
As my hon. Friend and others are aware, HMRC has designed a systematic approach of review, consultation and announcements on decisions. It is amazing how time flies, and I am aware that my time is coming to an end. I assure my hon. Friend the Member for Amber Valley (Judy Mallaber) that I will take account of all the submissions that have been made, including representations in this debate, before any decisions are made. We are caught between a rock and a hard place. I do not want to make an announcement—I have not had any advice on this—before the end of term, and no announcements will be made until the House resumes, so that hon. Members have an opportunity to comment.
During the remaining seconds, may I say that, as a former trade union official, I compliment the managers charged with taking forward these changes on the care that they are taking to ensure that individual members of staff, whose concerns my hon. Friend rightly raised, are dealt with as fairly as possible?
Forest Protection
11 am
Barry Gardiner (Brent, North) (Lab): Earlier this year, the Governments of Brunei Darussalam, Malaysia and Indonesia signed an important declaration on the “Heart of Borneo” initiative. Those three countries have one conservation vision, recognising the importance of their island, as they refer to it, as “a life support system”. The initiative involves voluntary trans-boundary co-operation that is based, as they declare, “on local wisdom” and “on sustainable development principles”. As such, the declaration brings together two agendas that have for far too long been kept apart. It may have been convenient for non-governmental organisations and Governments to separate developmental issues from environmental ones, but in truth they represent one agenda. Environmental sustainability will not happen if in order to achieve it we ask the world’s poor to sacrifice economic growth and development. Equally, development that is not environmentally sustainable undermines its own foundations, as the Stern report recently highlighted.
I know that my hon. Friend the Minister recognises that point, and I welcome the fact that his previous boss as Secretary of State for International Development, our right hon. Friend the Member for Leeds, Central (Hilary Benn), has now taken over as Secretary of State for Environment, Food and Rural Affairs, strengthening further the links between the two Departments. Our right hon. Friend worked tirelessly on the issue of combating illegal logging in Indonesia. The “Heart of Borneo” declaration expresses that common environmental and developmental agenda in the following way:
“With one conservation vision and with a view to promote people’s welfare, we will cooperate in ensuring the effective management of forest resources and conservation of a network of protected areas, productive forests and other sustainable land-uses within an area which the three respective countries will designate as the ‘Heart of Borneo (HoB)’, thereby maintaining Bornean natural heritage for the benefit of present and future generations”.
I have worked closely with two of the three Ministers who signed that declaration—Minister bin Khalid from Malaysia and Minister Kaban from Indonesia—and in relation to Indonesia I want to put on the record today my admiration for just how far that country has moved since 1998 and the days of corruption under the Suharto regime, when the country was a kleptocracy. Today, it is a country putting in place protections under the law for its people and its quite extraordinary biota.
The island of Borneo is the third largest in the world, after Greenland and New Guinea, covering an area twice the size of Germany. Whereas Germany might boast approximately 2,700 different higher plant species, however, one mountain alone in Borneo, Mount Kinabaloo, has almost double that figure. The island as a whole registers more than 15,000—diversity as great as that in the whole of Africa.
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