Examination of Witnesses (Questions 40-59)|
22 NOVEMBER 2006
Q40 Mr Newmark: But this is a specific
letter I have got from one of your officers.
Mr Gray: Indeed, and the issue
about local coverage of staff not actually being boots on the
ground, to use Mr Cousin's phrase, in a particular area relates
to the point I was trying to respond to earlier, that increasingly
we think we can be more effective in collecting taxes due by having
a sophisticated risk-based intelligence system that does not just
rely on having people on the ground in every particular area,
and we have more sophisticated information that enables us to
target areas, including for example increasing use of mobile deployment
of staff. Mike, would you like to add anything on any of the points?
Mr Eland: I think certainly that
is the crucial point that what we are looking to achieve in this
programme is a shift of effort away from areas where the rate
of return is relatively low. The £17 million cost that produces
£21 million of revenue in the compliance field is a relatively
Q41 Jim Cousins: It is £4 million
you have not got.
Mr Eland: Yes, but what we are
looking to do as part of this programme is to invest £75
million a year over that five-year period in things like training
and improved risk packages for local compliance staff to work
on, which will enable them to focus their efforts in a better
targeted way at areas of more serious non-compliance and therefore
increase revenue yield. It is not at all the case that London
and the South East and some of those other areas are going to
become compliance-free zones. We are in the compliance area going
to maintain a national structure
Q42 Mr Newmark: I think probably
what he means is there are a number of hot-spots within those
areas that he is concerned in your restructuring will not be covered.
I suspect that is his point.
Mr Eland: The whole purpose of
what we are trying to do is to make sure that it is the real hot-spots
where we do have the coverage, and we are not putting effort into
areas where either there is no return at all or a very poor one
comparative to other possibilities. It is about focusing our efforts
on the best use.
Mr Gray: One of the issues that
concerns me in terms of where we are getting return from our compliance
interventions is there is too high a proportion of interventions
that actually do not generate any yield. We can quote the overall
figures but what we need to do by getting smarter is to increase
the strike rate so that we are not putting effort through particular
interventions into areas that will not yield any return.
Q43 Mr Newmark: And the loss of very
experienced staff is not something you are concerned with in your
Mr Gray: It is a very important
consideration to take into account as we plan it. I am not remotely
suggesting that is not an issue, it is a risk, and it is one we
need to manage in the careful way I have tried to describe.
Q44 John Thurso: Can I move on to
the question of office closures and thank you for your letter
of 16 November which answers some of the questions I would have
asked. In fact, it covers the whole area of consultation in some
detail, and I will certainly be taking up that opportunity, but
it also refers within the documentation to the initial estimates
of changes and there is a schedule of various changes to offices.
Can you explain what are the broad principles behind the decisions
that have been made?
Mr Gray: The way we have gone
about assembling those figures is within each of our individual
business areas we have asked the senior manager in that area to
draw up plans of how they think they can best deliver their business
targets over the years ahead and to consider to what extent they
think they can generate both greater effectiveness and more efficiency
by relocation. At the same time we have asked our central services,
particularly our estates team and the main people with whom we
are in contract for estates management, to be looking at the costs
incurred in relation to the running and maintenance of the offices,
so we have had a huge amount of input from different areas of
the business. We have then in our central workforce change programme
sought to bring together that information, done quite a lot of
iteration to identify areas in which there were inconsistencies
of planning, and then generate those overall numbers which, as
I hope the documents you have got make clear, are current estimates
of what we think is likely to be the raw footprint and then, as
you were describing, gone on to set out the consultation processes
under which, in consultation with staff, trade unions and other
stakeholders, and particularly stakeholders in the localities
concerned, we will do much more in-depth analysis of the impact,
and we will then consider and will put forward specific propositions
for consultation, and then reach a decision in the light of that.
Q45 John Thurso: Can I ask you how
much of what is available for consultation? If you look at my
area and take the broader Highland region, you have currently
got four offices which apart from the face-to face contact, which
I will come back to, is going to fold down to one office in Inverness.
How much is that open for consultation?
Mr Gray: It is open for consultation
in the same spirit of openness as I mentioned to Mr Cousins, I
thought it was right at this point to give an indication on the
basis of our current analysis of what offices we thought would
be strategic locations for the future and what offices would be
non-strategic. We obviously have not yet given you and other local
MPs a full analysis of why we might reach that conclusion. We
will provide that and if there are good arguments that come back
and say, "Actually there is a better way of doing this,"
then we will take that into account.
Q46 John Thurso: I will tell you
why I ask these questionsI have got a horrible sense of
déja" vu because I have just been through all
this two years ago with DWP, which had a effective operation in
Wick and which decided, for exactly the same motives, to withdraw
to Inverness, and the result of that has been an utter collapse
in the efficacy of delivery to the point where staff who had been
made redundant have been re-hired in order to try and make some
sense of the caseload which they had not been able to cope with.
I think the worst example in my own office was spending two days
on the telephone chasing round five offices in Scotland before
finding out which office actually owned a particular piece of
work. That is using a lot of time, not just my office time but
also the time of the organisation, and I am concerned to know
how much due diligence has been done on the genuine efficiency
that is going to be delivered and therefore the genuine saving.
Mr Gray: At this stage I think
we have done a reasonable amount of due diligence. There is a
lot more to do as we come forward with detailed plans on which
we can consult with you and others. I certainly do not want to
get into a position where we do an inadequate job and then find
we are reaching conclusions that are unsustainable.
Q47 John Thurso: One of the problems
in that particular case, and I am sorry to use it as a particular
case but it is because there is hard evidence, was that nobody
thought of the fact that because Inverness is booming you could
not recruit people. It was driven simply by the fact that to a
certain extent the manager lived there and they happened to have
a property, and they did not take into account the fact that that
property could have been sold, it could have been located elsewhere
and it would have been more effective. You are open to that?
Mr Gray: I am absolutely open
to that and part of my reason for wanting to give pretty clear
indications of the current state of our thinking is so that our
staff know what is the current direction of thinking. We will
then obviously be gathering lots more information and finding
out their reactions in terms of how staff in different locations
are viewing this, what their plans would be so we can take exactly
that kind of thing into account.
Q48 John Thurso: The second point
you have made, which I am pleased to see, is that face-to-face
contact will continue in those offices. I was amused to see that
Ullapool has one member of staff and it is moving from one member
of staff to the minimum, which probably means going part-time.
Mr Gray: I think that implies
a degree of sophistication that analysis does not bear out.
Q49 John Thurso: The question I really
want to ask is, what is the quality of the face-to-face staff,
because again, going back to the DWP experience, they became people
with no ability to deliver for the customer. They were merely
ciphers saying, "Use that phone to ring that office".
Will these be people who can genuinely interface and get a resolution
or will they be merely the conduit to some other place?
Mr Gray: I think the honest answer
is it would be a mixture of the two. We would be looking in each
locality to work out what is the best mechanism and means for
delivering a local face-to-face service. In some cases we may
conclude that it is right to continue to do it exclusively through
our own staff out of the existing bricks and mortar in the estate.
Elsewhere we will be increasingly looking to build partnerships
with other parts of government, possibly other parts of the voluntary
sector, for ways in which we can perhaps more effectively deliver
those services. We are also looking atand you mentioned
DWPin consultation with them and other relevant government
departments whether there are ways in which collectively we can
improve the effectiveness of local face-to-face services by increasingly
Q50 John Thurso: The final point
I would like to ask is if you could just explain to me, because
I obviously do not know the answer, whether included these figures
are the former Customs officers, the point being that there are
a number of highly vulnerable places, particularly on the islands,
Shetland, Orkney and other ports, where there are problems of
tobacco smuggling, not in Shetland and Orkney, I hasten to add
for Mr Carmichael, but there are problems and officers have been
placed in those areas to combat that problem. If they are included
in those figures then that is a fairly dramatic reduction of front-line
staff. Could you tell us whether those figures include those people?
Mr Gray: What we are looking to
cover here are people who are permanently based in our office
functions around the country, and Mike might want to add something
to this in a minute, but we already in the Customs functions are
increasingly moving to measures of mobile deployment. There are
areas where we used to have permanent deployments that we now
cover in a more mobile and responsive way, but in thinking about
the coverage, particularly in parts of the country such as yours,
that will obviously be an important part of the overall planning,
to make sure that the effectiveness of our delivery on the Customs
function as well as on the tax customer issues is probably covered.
It may well mean in some areas that we are moving to a different
model where we may have increasingly mobile deployment so that,
rather than saying whether it is a Customs function or a front-line
tax function, there are always X number of people in that place
from nine to five, five days a week, who might move to more mobile
and flexible arrangements.
John Thurso: I would be grateful if you
could write to me afterwards on this question because, quite obviously,
if you have big ports, and in the office in Shetland if you have
not got a Customs officer he has to fly from Aberdeen or Edinburgh,
then that would be a significant degradation of the ability of
those ports to do business. Any withdrawals from the actual officer
on the beat, as it were, would have a big impact on the ability
of businesses to undertake their business, so I would be very
grateful at a later stage to have an answer to that.
Q51 Chairman: When you say that some
of these functions can be replaced by mobile teams I am a little
puzzled. I am told that in Kent, for example, the debt management
offices in Chatham, Canterbury and Tonbridge Wells have all closed,
Maidstone will be downgraded, the debt management will be downgraded
and the debt management function will transfer to Bradford. Is
that the position?
Mr Gray: For back office functions
within debt management it is obviously perfectly possible to do
the work remotely, and a large amount of our work is back office
processing work that does not require face-to-face office contact,
but what we are looking at increasinglyand you mentioned
the debt management functionis to have a larger proportion
of our staff who are engaged in face-to-face contact operating
in a mobile way. They would have a particular office base. They
certainly would not be based in Bradford in order to service Kent
but we might have people permanently based in fewer locations
and effectively more of them on the road, particularly around
the enforcement activity for debt management where we are increasingly
experimenting with having more mobile teams using their cars,
making appointments to visit people in their homes or at their
businesses, and the early evidence is that that is a more effective
means of enforcement and collection than the more traditional
office-based, "I'll send you a letter and you may or may
not reply to me".
Q52 Mr Todd: You have had an earlier
CSR settlement than everyone else. Have you agreed PSA targets
as part of that?
Mr Gray: We are still in the process
of agreeing those. We have, along with the DWP, the Treasury and
the Cabinet Office, had earlier settlement of the resource total.
Hopefully we will have a fairly early resolution on what we need
to deliver with it but those discussions are not yet complete.
Q53 Mr Todd: As the earlier discussion
demonstrated, there is quite a peer relationship in your area
between resource allocation and outcome in terms of yield performance,
so can you give us some indication of the shape of this negotiation
that you are having with the Treasury?
Mr Gray: I might ask Stephen to
add something, but in broad terms I think the point you are getting
at is that because we have not definitively finalised the outcomes
we need to deliver we cannot finalise all the detailed planning
about how we match resource to outcome delivered. The broad shape
is that we are looking with the Treasury to build on and develop
the sort of outcome target framework that we have already got
set for 2008. I think it is unlikely we will have a radically
different broad picture of targets, but exactly what parameters
go with those and the exact details are yet to be settled. Stephen,
do you want to add something to that?
Mr Jones: Only to say that the
broad parameter is that the settlement is on the basis of our
being expected to maintain our targeted performance for 2008 over
the 2008-11 period.
Q54 Mr Todd: So you are not being
expected to improve yield, for example, over that period with
a lower level of resources, and I think part of the discussion,
which I followed with interest and thought you made some fair
points, was that targeting the resources on areas where yields
are better actually suggests that you might improve yield performance
over time if you do that effectively.
Mr Gray: We might be able to do
Q55 Mr Todd: But you are not aiming
to have those within your targets?
Mr Eland: In the period up to
2008 we are looking to also improve our yield as well as making
savings of the £12,500 we have talked about. In the period
after 2008 it is, as Stephen was suggesting, more a question of
Q56 Mr Todd: Does it look as if you
will be meeting those targets by then?
Mr Eland: I think we are making
good progress against most of them on the revenue side, the compliance
side that I am responsible for. We have obviously ups and downs
in that process, particularly where it comes to tackling fraud,
where you tend to be successful in tackling a problem in one form
and the fraudsters then immediately shift and try and develop
another thing, and while we are then in turn developing a response
to that fraud levels can go up and then come down again.
Q57 Mr Todd: I think you would accept
that although a pound-for-pound resource to yield outcome really
is not very attractive in public expenditure terms as a norm there
are occasions when that is a necessary part of an enforcement
process, that if you do not do that it gives an entirely inappropriate
signal even though the yield may be low.
Mr Eland: We have to constantly,
in tackling this area, be focused partly on yield and partly on
an overall deterrent, as you suggest; that is fair. What we try
to do therefore is to get a mixture of coverage, publicity of
successes which produces a deterrent and things like penalties
and so on.
Q58 Mr Todd: Is there any more information
you can give us on the differential yield outcomes of different
kinds of activities? That would be quite interesting in filling
out for us the sorts of discussions you are likely to be having
with the Treasury.
Mr Gray: It is quite a complex
matrix but we will try and let you have some information on the
nature of that.
Q59 Mr Todd: Because I can imagine
it is a complex matrix; it is not easy to do.
Mr Gray: Yes. It is not pure science
though. There is quite a lot of judgment.
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