Examination of Witnesses (Questions 220-229)
MR DAVE
HARTNETT CB AND
MR NICK
LODGE
17 DECEMBER 2007
Q220 Mr Williams: Instead of thinking
in terms of people, if we think in terms of bank accounts the
figures are significantly lower than the figures that we have
been reading about in the press, is that so?
Mr Hartnett: I have never seen
the suggestion, but help me if I have got it wrong here, that
it was 25 million bank accounts. I have got the precise break
down if it helps. Claimants 7.29 million, children 15.5 million,
alternative payees 2.3 million, appointees, which I think is a
technical term, just less than 2,200 and agents around 11,700.
Q221 Mr Williams: If there was 7.9
million why did you only write to 7.25 million?
Mr Hartnett: No, 7.29 million.
We have written to everybody.
Q222 Mr Williams: You said there
were 7.29 but according to your evidence you only wrote to 7.25.
I am just wondering who was left out.
Mr Hartnett: Nobody I think, Mr
Williams. We did not aim to leave anyone out at all.
Mr Williams: There is nothing else to
cover, it has all been covered.
Q223 Chairman: We are almost at the
very end now. Can I just ask you one question which I have been
wanting to ask you for some time. I was sent an email from one
of your staff—she wants to remain anonymous—who says:
"The original structure of the Department was each of the
300 or so officers were responsible for all the taxpayers within
the geographical area surrounding the location of the office itself.
In 2000 we moved to an area management structure to take the place
of all the offices in the UK which were merged into larger units".
Then she goes on about the staff you have lost. She seems to be
implying that because of the way you changed the structure it
is much more difficult to keep track of security. I have had another
email, again the person wishes to remain anonymous and they are
a member of your staff, saying that he is about to retire after
35 years and is glad to go because he is witnessing the disregard
for providing a service to the taxpayer who contact HMRC by telephone,
and he goes on about tax credits and all the rest of it. It does
seem to me that you may have problems with some of your staff
about morale and the way they feel they had a very dedicated Inland
Revenue-type department in small units, your accounts had never
been qualified, and now people are being forced into these ever
larger units and it is difficult to provide the kind of service
to your clients, the taxpayers, that you did before. Do you recognise
that there may be anything in what these people say to me in their
emails?
Mr Hartnett: I recognise the concerns
that are expressed and I hear them occasionally from my staff
who have been in the Department for a long time. I think they
have a concern about change but all organisations need to change.
It is really important to look around for evidence. Many of the
representative bodies, tax advisers for example, who have looked
at the merger and looked at our restructuring have said it was
the right thing to do and the Adjudicator has said there has been
no diminution of performance because of merger.
Q224 Chairman: Can I put one point
to you on that. Please refer to Sir Gus O'Donnell's review published
this afternoon. He says here: "The senior leadership has
not been successful injecting pace, confidence and dynamism throughout
the Department. More staff take a negative view of the impact
of changes than a positive one, 48%:21%". That must worry
you as the Chief Executive of this organisation, does it not?
Mr Hartnett: Those figures are
of concern to me and we are working very hard with our people
to promote a better understanding of change. I have brought a
little book with me called Our Ambition which is how we
are trying to explain to our people what we are trying to achieve.
One of the things I have instituted is a huge number of face-to-face
meetings with our people since this data was lost, but from January,
something that is common in a number of areas of life, Town Hall
meetings with our people where we spend about a third of the meeting
with board members and directors explaining what the organisation
is trying to achieve and letting our people who are in the frontline
tell us their ideas and thoughts so that we can engage with them.
This is an important initiative for us. I and some of my colleagues
have been back to the frontline recently, and I spent time in
Cardiff and Newport on the frontline of our Department getting
a much better understanding of how it works.
Q225 Mr Bacon: Mr Hartnett, you have
a whole series of breaches that you have reported to the Information
Commissioner as significant breaches since April 2005, I think
the figure is seven and that is excluding the breach yesterday.
Why did all of those breaches and those earlier control failures
not alert senior management to the fact that you had got a serious
problem? Why was it only very recently that Mr Lodge was appointed
after this series of failures over recent years?
Mr Hartnett: The answer, Mr Bacon,
is this: every one of those issues we have analysed and made some
changes. This very serious issue which led to the resignation
of our chairman led to my appointment. On the back of the discussions
that we had been having in the organisation I decided, with my
board colleagues, to bring forward a number of changes. This is
not a sudden thing. As I said to Mrs Browning, we have already
made some changes and we are now speeding those up very rapidly.
I go back to what Mr Poynter said, I think at the start of his
interim report, and that was when he came to look at this we had
already done the things he would have expected us to do.
Q226 Mr Bacon: You are the third
chairman in two and a half years.
Mr Hartnett: I am.
Q227 Mr Bacon: This is an organisation
that has recently undergone a big merger and we know how difficult
big mergers are in any organisations, public or private sector.
The Inland Revenue and Customs & Excise each had their own
significant problems which were often aired in this Committee.
At the same time, or around the same time, you took on a huge
new function, Child Benefit, which, given your annual expenditure
is £15 billion, an indication of the scale of the importance
of Child Benefit is that it takes up two-thirds of that expenditure,
and at the same time you are reducing your staff. It almost beggars
belief that in that environment the staff will not feel under
huge pressure and that corners will sometimes get cut when they
are trying to cope with so much at once with fewer people doing
it. Is that not fair?
Mr Hartnett: Mr Bacon, I have
already explained to the Committee that we are making huge improvements
in effectiveness, efficiency and quality. I have acknowledged
that our staff are concerned by change, which is why at board
level and immediately below it we are going to be engaging face-to-face
with the largest possible number we can going forward. The Chairman
has brought out the sort of concerns that some of our people have
and we are engaging with them on that.
Q228 Mr Touhig: Your predecessor,
of course, kindly agreed to come to Wales, to Cardiff, to meet
some of my constituents having problems with tax credits, and
I would like to extend that invitation to you. Will you accept?
Mr Hartnett: Of course.
Mr Touhig: Thank you very much.
Q229 Chairman: That is a good note
on which to end.
Mr Hartnett: Chairman, can I just
clarify two things very, very quickly. The first is I did not
quite get an opportunity to comment on the 2,111 incidents. I
would just like to say to this Committee what I said to the Treasury
Select Committee. In order to improve our arrangements for security
we are encouraging the reporting of anything that could be considered
a security incident. The second thing I want to say quickly is
to add to what I said to Mr Dunne on Winzip 8. From our perspective
it provides a very crude and very weak encryption method that
we thought was irrelevant and insufficient from a security perspective
and that was why we at HMRC had taken the view that the disks
were password protected only.
Chairman: I think we have well and truly
discussed this issue this afternoon. Thank you very much.
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