Examination of Witnesses (Questions 20-39)
HM REVENUE AND
CUSTOMS
7 NOVEMBER 2007
Q20 Chairman: There is no point me
putting the question to you about how you are going to make the
tax system less complex if you simply refer that to the Chancellor
of the Exchequer. I have tried that one before. I am asking you
how you are going to make it more consumer friendly. Presumably
you would accept that the tax system as defined by the Chancellor
of the Exchequer is perfect in every single respect.
Mr Gray: I am charged to administer
that as effectively and in as customer friendly a way as I can.
Q21 Chairman: Exactly. We want you
to make it easy for us to understand what is going on.
Mr Gray: As part of that we have
a major programme underway of regularly reviewing and redesigning
our forms. We have introduced in recent years a number of significant
improvements and simplifications. For self assessment we introduced
in 2005 a very much shorter form which meets a large number of
people's needs. This coming year we are introducing a new main
form for self assessment which will involve significant simplification
of the design of the form. In all of this we are seeking to take
into account the valuable help and guidance that the NAO gave
us during the course of this study.
Q22 Chairman: Thank you. If you look
at paragraph 4.12, with reference to a very small sample it says,
"We also found that 19 out of 24 callers who should have
been transferred to more expert staff members were not."
That worries me because it means that there may be many people
who need expert advice who are not finding it.
Mr Gray: It is certainly an issue
that arose during the course of this study. It is something we
are focused on. Getting the right balance in our contact centres
between having people who can answer a good range of questions
from people and as against the need to hand them on to more specialist
members of staff, is not an easy balance to strike. We know from
our customer research that customers do not like being bounced
around from one person on the phone to the next one to the next
one, but I quite accept, in the light of this finding, that we
do need to do more to make sure that where there is a particular
specialist inquiry we do get the handover to the more specialist
member of staff right. The sample showed we are not perfect in
that.
Chairman: Thank you very much. Richard
Bacon.
Q23 Mr Bacon: Mr Gray, before I get
on to questions about the forms themselves, you very kindly answered
my question about EDS last time on 10 October—in fact very
fulsomely, considering your limitations, which you did explain.
You said in your public reply that you had had a number of meetings
with EDS. Since it is now nearly a month since, has anything since
happened that you can tell the Committee about?
Mr Gray: There is nothing significant
further to report. But I mentioned to you in that reply last time,
Mr Bacon, that, following those recent meetings, there had been
agreement to introduce some new arrangements from the beginning
of the next calendar year. I am confident that they will be put
in place. As I said to you last time, if I deem the need for any
further contact with EDS over that matter I will not hesitate
to initiate it.
Q24 Mr Bacon: And please be assured
that I will not hesitate to ask you this question each time you
see us.
Mr Gray: I would be very disappointed
if we did not have this conversation every time!
Q25 Mr Bacon: I knew you would be,
which is why I continue with it! I regard it as one of the very
few pieces of sport that I get to ask you this question each time
you come before us and you come before us pleasantly often from
my point of view. Finally on this subject: I would not expect
your Department to have prepared the replies yet but are the replies
in process to the questions asked about pension payers? You may
recall that I sent in some written supplementaries.
Mr Gray: Indeed.
Q26 Mr Bacon: Particularly small
payments. This was a point of the Low Incomes Tax Reform Group.
That is in train, is it?
Mr Gray: Yes, we have that work
in hand and I will have it with you very shortly.
Q27 Mr Bacon: Thank you very much.
I would like to ask about pensioners now, back on the subject
of this Report. They are, by definition, a group of people who
tend to have more complicated tax affairs, because their income
will come from a variety of sources: it might be the old age pension,
it might be a company pension, it might be a private pension that
they have saved for and a variety of other possible sources, including
rental income from property and so on. It is a curious characteristic
of pensioners that they both have more complex tax affairs and
are more likely than average to have a low income, that they are
less likely than average to be able to access the internet or
even to know how to use a computer—and that is not to say
that all pensioners cannot but there are many who cannot. How
do you balance those two, to make sure that this group of people
who are quite vulnerable but who have, in some cases, more complex
tax arrangements, do not fall foul of your processes?
Mr Gray: One of the ways in which
we are trying to move the way we manage the business is to get
much more focus on the needs of those different broad customer
groups. As you rightly say, pensioners are a growing group in
the population as a proportion of the total and, on average, their
affairs are becoming rather more complex. Traditionally, it would
be fair to say, the majority of pensioners—not all pensioners—have
relatively simple affairs, but, as you say, more and more are
having a range of different pensions, a small pension and other
payments.
Q28 Mr Bacon: My point is that it
does not necessarily mean they are rich.
Mr Gray: No, absolutely.
Q29 Mr Bacon: They might have a few
dribs and a few drabs and that makes it complex.
Mr Gray: And it does mean that
all of them fall near the various thresholds between different
rates of tax and so on which does make them potentially vulnerable
to inaccuracies in payment. We are seeking to increasingly tailor
the way in which we deal with people, to identify pensioners and
other vulnerable groups and to tailor the way in which we provide
our support to recognise those issues. Indeed, in the last hearing
to which you referred just now, we were talking about a particular
exercise that we went through last year for retirement annuity
contracts where we put in place a specialist team in one of our
offices in the Midlands to be in touch with people, pensioners,
to try to make sure that we were getting those particular categories
of relatively small annuity payments right in their codings.
Q30 Mr Bacon: The inheritance tax
form is one of the most difficult. We have recommended in the
past that the inheritance tax form should be made simpler. Given
the recent changes to inheritance tax, a lot of people were quite
surprised to find that the changes recently proposed were already
available if one were to go through the trouble and expense of
appointing a lawyer to draft the appropriate arrangements for
one's work. Ought it to be necessary, in order to take advantage
of the lawful arrangements that obtain, for a "normal"
taxpayer to go to a lawyer?
Mr Gray: I think you are quite
close, Mr Bacon, to asking me a policy question about inheritance
tax which—
Q31 Mr Bacon: I absolutely do not
want to ask you a policy question. I am just curious that a set
of arrangements exists and obtains, which under the law you can
benefit from and you have obligations under, and yet those arrangements,
whatever they are for the time being, appear to be sufficiently
complicated that a group of the population who are well enough
off to hire advice can take advantage of them and another group
who are not cannot. That is not a policy question; it is a policy
about complexity and a question about fairness. Should it not
be possible to take advantage of whatever the existing arrangements
are? I am not talking about for billionaires and people who have
huge wealth and very complex tax affairs; I am talking about for
the "normal" person? Should it not be possible to complete
one's tax affairs without having to resort to buying the advice
of a lawyer?
Mr Gray: I think where we try
to address that question is in offering comprehensive guidance
to people about the regimes. On the particular point that you
are raising, of course, following the change announced in the
Pre-Budget Report that will be available to people generally.
Indeed, in the redesign of the inheritance tax form which we will
be rolling out next year, an element will be included for people
to make that particular provision.
Q32 Mr Bacon: This may be a question
for Mr Lodge. I would like to ask you about the accuracy of the
advice given in contact centres and, indeed, over the phone. This
is referred to in figures 12 and 13 on pages 26 and 27. For example,
someone phones up and says, "I'm a pensioner and would like
to claim back tax on building society interest." Nine out
of 12 advisers correctly offered to send callers the form—so
that was the expected response: the Department's expects advisers
to do that—and three did something else. Over the page,
in figure 13 we see: "Seven out of 12 visitors were given
a telephone contact number (the response expected by the Department)"—and
this was in response to an enquiry: "I have bought a house
and plan to rent it out. What sort of expenses can I claim?"—and
the other five were referred to relevant alternative information.
In relation to another enquiry: "My mother has just retired.
Can she claim back on her building society interest?" we
learn that "Two out of 12 were given the number of the taxback
helpline (the response expected by the Department). In the remaining
cases, the advisers answered the query there and then and/or provided
the relevant literature." Plainly sometimes the member of
staff will not give the "expected response" but will
nonetheless be able to deal with the problem, but some do not
or they do something different. It increases the chance of inconsistent
advice being given if you do not have a standard response to a
standard type of enquiry, does it not? What are you doing about
that to increase the proportion of the same? Even nine out of
12 means that a quarter of callers are being given advice different
from that expected by the Department and in many cases it is much
higher than that.
Mr Lodge: We make sure that our
advisers have a standard operating guide available to them online
in an effort to address the very point you make, to ensure consistency
of advice to customers including in the areas to which you refer.
Nonetheless, equally you are quite right in saying that there
have been occasions here, in the mystery shopping exercise carried
out as part of the NAO's investigations, that revealed that in
one or two places we did not get the advice right.
Q33 Mr Bacon: How much time is there
for staff training to make sure they know how to find the advice
online?
Mr Lodge: If somebody comes to
us new, then they will have up to ten weeks of training before
they start to talk to a customer on the phone. We carry on that
training as part of our normal course of business throughout the
time that an adviser is with us. So people are trained, there
is quality monitoring that is carried out as a matter of routine,
there are daily sessions with staff to make sure that they understand
any errors that come to light and which are being made so that
they can be advised of those. Our internal quality checks for
our PSA objectives show an overall quality of around 95%. Our
customer satisfaction surveys tell us that 92% of our customers
are either satisfied or very satisfied; nonetheless there are
clearly areas for improvement, as revealed in the work that NAO
did, and we are going to continue to re-run these kinds of mystery
shopping exercises so that we can pick them up and make sure we
address them—as we have, indeed, in these cases already.
Q34 Mr Bacon: You mentioned ten weeks.
I found to my astonishment that DWP staff were not allowed to
give advice on a particular benefit unless they had had a 13-week
training module on it. Constituents of mine were being told, "I
can't talk to you about child tax credit, I can only talk to you
about income support, because I haven't done the module."
Mr Gray made the point earlier about having a relative degree
of expertise across a wide range. Presumably, it is the case that
for 97% of enquiries an individual adviser could deal with nearly
all of them with a broad degree of expertise. Is your training
tailored to make sure that everybody gets up to a reasonably high
level, so that the first point of contact is the one where nearly
all inquiries can be dealt with?
Mr Gray: Nick can answer on precise
figures here, but, yes, we are trying to make sure before anybody
goes live on the phone that they have a reasonable level of knowledge
and expertise. But we are deliberately not relying on what is
in people's heads: as with other forward-looking contact centre
operations we increasingly use online guidance and a key part
of the training is to make sure that people can navigate the guidance,
all of which is designed to get that consistency that we were
talking about just now. Another key bit of the training and guidance
is trying to strike this balance between a sensible proportion
of questions to aim at which all of our frontline contact centre
staff can handle and the proportion they need to hand on to more
specialist staff. Getting that balance right is an art rather
than a science.
Q35 Mr Bacon: Is it 80:20? Is it
97:3?
Mr Gray: Nick, can you say something
on the overall numbers?
Mr Lodge: I cannot give you a
precise number but it is closer to 97% than it is to 80%. We would
expect our frontline advisers to be able to handle the vast majority
of the questions and enquiries that they get and, indeed, to carry
out the transactions that we carry out over the telephone. The
issue that I think came out most strongly in the NAO Report is
making sure that people equally know when they need to refer that
particular enquiry to somebody with greater technical expertise.
That is the area that we have been addressing following the NAO
Report.
Mr Bacon: Thank you very much.
Q36 Mr Mitchell: I wonder if part
of the problem is that our tax forms—and perhaps the system—are
more complicated than those in comparable countries. You have
comparisons with Canada and Australia and New Zealand. It has
always struck me that the tax forms in New Zealand are very simple
and straightforward compared with the self-assessment form here.
Would that be the cause of a problem?
Mr Gray: I think there are always
things we can learn from some of our international counterparts
to make things better and easier but, on self assessment, two
years ago we introduced a major simplification of the form with
the short tax form. That is merely four pages and very straightforward
to handle. One of the measures that the Chancellor announced in
the Pre-Budget Report the other week will make it a lot easier
for people to fill in self-assessment forms; for example, for
the self employed he doubled the threshold under which people
can just put in three-line entries for their income rather than
having to produce full accounts. So I think we are trying to address
simplification of the system and, progressively, over time, get
better at form design, but, learning from what other tax authorities
are doing and comparing notes with them is certainly something
we do all the time. Other tax authorities sometimes try to learn
things from us.
Q37 Mr Mitchell: I hope so. You do
not feel our system is more complicated than theirs.
Mr Gray: Overall, I do not think
so, no.
Q38 Mr Mitchell: In Appendix Three
there is a comparison of the websites. Clearly you want more people
to pay and that is another assessment in this way. Under "Details
of the difference between the Department's website and comparator
sites" our system provides "breadcrumb trails"—whatever
they are: they sound like something for the birds. "The Australian
and Canadian sites have a last modified date on each page"—so
you know how up-to-date the information is—and "`back-to-top
links' to help navigate around"—so they are easier
to navigate. "Some overseas tax authorities use the website
as a portal to other forms of contact." Your website appears
to be deficient in those respects.
Mr Gray: I think in those particular
respects we are behind some other tax administrations and we are
looking to catch up on them. We acknowledged during the course
of this study that there is very significant scope for us to improve
our web design. We have major programmes in train to seek to address
some of those issues. In terms of the links with other sites,
one of the major changes that we are introducing following my
predecessor David Varney's Report: Transformational Government
is to use two Government sites: Directgov for individuals
(which is now going to be managed by DWP on behalf of the whole
of Government) and "Business Link (for which
we in HMRC have now taken the overall ownership and coordination
for from the old DTI). We are looking to offer businesses and
individuals the opportunity to use those umbrella websites to
access a whole range of different government services across the
whole of one department and across a range of departments.
Q39 Mr Mitchell: This was the Service
Transformation Report rationalising Government websites and
providing information.
Mr Gray: That is right.
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