Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 40-59)

MR PAUL GRAY, MR STEPHEN JONES AND MR MIKE ELAND

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 low yield.

  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 strategy?

  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 questions—I 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 at—and you mentioned DWP—in 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 working together.

  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.[1]


  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 increasingly—and you mentioned the debt management function—is 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 that, yes.

  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 holding—

  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.[2]




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