Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 1-19)


22 NOVEMBER 2006

  Q1 Chairman: Mr Gray, welcome back to the Sub-Committee. Could you introduce yourself formally please and your colleagues.

  Mr Gray: I am Paul Gray, Acting Chairman of HM Revenue & Customs. On my right is Mike Eland, who is the Director-General for Enforcement and Compliance; and on my left is Stephen Jones, who is the Finance Director.

  Q2 Chairman: Mr Gray, it was announced in July that Sir David Varney was leaving and he left nearly three months ago. Why are you still the Acting Chairman?

  Mr Gray: I am not sure I am best placed to answer that, Chairman. I was asked at the beginning of August to take over as Acting Chairman from 1 September. Sir David did not leave until the end of August and I took over as Acting Chairman on 1 September and, as I understand it, no decision has yet been made about who should be the substantive Chairman, so I have seen it as my job to get on and act as Chairman and carry forward the work of the Department with the support of my colleagues.

  Q3  Chairman: Has it been decided yet whether there will be an Executive Chairman and a Chief Executive?

  Mr Gray: No, I do not think it has. The former arrangement was to have an Executive Chairman, which was Sir David, and myself as Deputy Chairman. I assume the initial decision will be taken on the appointment of a Chairman and then decisions will follow from that on what supporting structure there should be.

  Q4  Chairman: But this is a very big and important department of government. Why is all this taking so long to resolve?

  Mr Gray: As I said, Chairman, as the incumbent, the decision as to who should be made substantive Chairman is clearly not one addressed to me. As I say, I see it as my job to get on with the job in hand, and that is what I am seeking to do.

  Q5  Chairman: You have introduced Mr Jones but he is leaving you.

  Mr Gray: He is indeed leaving at the end of this year. We are in the process of appointing a new Finance Director to succeed him.

  Q6  Chairman: Has the attrition rate of senior staff in your Department increased since the merger?

  Mr Gray: No, I do not think it has overall. On our overall Executive Committee, the 10 people who form the executive members of the board, we have had no departures of the incumbents of that prior to Sir David and Mr Jones, so we actually have in place a top team, most of whom have been in continuity through the now nearly two years since Sir David and I were appointed.

  Q7  Chairman: Your 2005-06 Accounts refer to "problems with the procurement of consultancy services in respect of non-adherence both to public procurement rules and recommended governance processes." What was the total value of the consultancy services affected by those problems?

  Mr Gray: The total value of our consultancy budget overall is of the order of about £100 million a year. The issues that we were anxious to make sure were fully in accordance with best practice affected only a small proportion of those. I am afraid I do not have a figure in my head. I am not sure whether Mr Jones is in a position to add to that detail. We have put in place new procedures. Since I assumed the role of Acting Chairman I have also in recent weeks put in place additional arrangements requiring all my directors in the business to further increase their level of oversight and accountability to me for all arrangements being put in place for new consultancy contracts.

  Q8  Chairman: In July the National Audit Office reported that the Department had spent £52 million in order to secure a competition when it put its ASPIRE contract out to re-competition. How would you justify that £52 million?

  Mr Gray: This now goes back two years to July of 2004—we were re-competing in relation to the then Inland Revenue a contract for 10 years for the supply of our major IT services. The value of that contract over such a long period runs to many hundreds of millions of pounds. We thought it was appropriate in reaching what would be a very important decision on who was best placed to support the Department in this core service to spend an appropriate amount of money to assure that process of competition and selection.

  Q9  Chairman: As I understand it, your Janet Champion has circulated a note saying that Christmas lunches must now be taken out of holiday leave. Is that the position?

  Mr Gray: That is the position. Last year for Christmas 2005, which was the first Christmas since the two former departments had come together into the integrated HM Revenue & Customs, there had been rather differing practices in different parts of the former departments in the past, and we decided to leave it to managers' discretion around the Department as to how they operated their arrangements. In the event, there was clear inconsistency of practice. In some areas of the business, for example where we are operating contact centre services where the provision right through the day from eight to eight to our customers requires a high level of attendance, different arrangements were adopted from, for example, some other areas of the Department without that minute-to-minute customer contact. We concluded this autumn in looking ahead that the appropriate arrangement was to say we were not going to allow formal use of (in the jargon) flexi credits to people for the purpose of Christmas lunches. This is in the overall context of arrangements for our staff which provide huge amounts of flexibility for their hours, a whole range of different forms of contract, very favourable conditions for members of staff wishing to work part-time hours—

  Q10  Chairman: I understand all that. Is it the position that Christmas lunch has to taken out of holiday time?

  Mr Gray: Yes.

  Q11  Chairman: Will you be taking unpaid leave to attend lunches in the Department?

  Mr Gray: Yes, any time on that I will work in addition outside my normal condition hours.

  Q12  Jim Cousins: It does strike me that that is not quite the same thing as unpaid leave though, is it? You will not actually suffer any reduction of pay for the time you take out for your Christmas lunch?

  Mr Gray: I will suffer a reduction of free time that I would otherwise have had.

  Q13  Jim Cousins: Yes. Will your staff all be treated in the same way?

  Mr Gray: That is our intention and that was the purpose of the guidance note going round to which the Chairman referred.

  Q14  Jim Cousins: So that if any of your staff ended up paying by loss of wages to go out for their Christmas lunch that really would not be proper if they were willing to work the extra time?

  Mr Gray: Sorry, could you rephrase that, I did not quite follow your point.

  Q15  Jim Cousins: The point I am making is if somebody on your staff were to suffer a reduction of income because of going out for a Christmas lunch and were willing to make the time up, that would be quite wrong.

  Mr Gray: Sorry, I am not quite following the point you are making.

  Q16  Jim Cousins: Would you treat a member of staff, if they did that, the same way as you are treating yourself?

  Mr Gray: I would look to operate for myself in a consistent way with what I am expecting my staff to do.

  Q17  Jim Cousins: Thank you. Coming to the issue of staffing reductions, I just want to get my head round what the real situation is because the formal target is a reduction of 12,500 jobs nationally and that is for the period running up to March 2008.

  Mr Gray: Yes.

  Q18  Jim Cousins: I am greatly indebted to one of my constituents in Newcastle who sent me a message you posted on the intranet which says that beyond 2008 to 2011, although you do not have a target "we will need to save around a further 12,500 posts".

  Mr Gray: That is indeed what I said.

  Q19  Jim Cousins: Thank you. I am also indebted to one of my constituents in Newcastle who has shown me that the figures I have been giving you for the reductions of staff in Newcastle up to 2008 do not include reductions of staff on fixed-term appointments, of whom in Newcastle there appear to be about 600. They will be on top of that figure; is that correct?

  Mr Gray: What we are looking to do in those figures is to identify the anticipated number of posts that we will have in future in each broad location. There is then I think a secondary question of what is the composition of those jobs between full-time employees and fixed-term appointments.

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