UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 389-iHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFORETHE COMMITTEE OF PUBLIC ACCOUNTS
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This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral evidence
Taken before the Committee of Public Accounts
on
Members present:
Mr Edward Leigh, in the Chair
Angela Browning
Mr David Curry
Mr Austin Mitchell
Mr Don Touhig
________________
Mr Amyas Morse, Comptroller and Auditor General, National Audit Office, gave evidence.
Ms Paula Diggle, Treasury Officer of Accounts, HM Treasury, gave evidence.
REPORT BY THE COMPTROLLER
HM REVENUE & CUSTOMS: HANDLING TELEPHONE ENQUIRIES (HC 211)
Examination of Witnesses
Witnesses: Ms Lesley Strathie, Permanent Secretary and Chief Executive, Mr Nick Lodge, Director, Debt Management and Banking, and Mr Chris Hopson, Director, Customer Contact, HM Revenue & Customs, gave evidence.
Q1 Chairman: Good afternoon and welcome to the Committee of Public Accounts. Today we are considering the Comptroller and Auditor General's Report on HM Revenue & Customs; handling telephone enquiries. We welcome back to our Committee Lesley Strathie, who is the Chief Executive at HM Revenue & Customs. Would you like to introduce your colleagues, please?
Ms Strathie: Good afternoon, Chairman. On my left I have Chris Hobson, who is the Contact Centre Director. That is for main telephone operations in HMRC. On my right I have Nick Lodge, who is the Director of Debt Management and Banking, which is another key part of our telephone-based operations.
Q2 Chairman: Perhaps we can start on general performance, particularly as it compares with the private sector. If we look at 2.8, we can see, Ms Strathie, that your performance has been fairly up and down. When are you going to achieve a consistently high standard?
Ms Strathie: I think, as I have explained to the Committee in the past, we would
see achieving 90% of all calls answered, the industry standard, as being our
aspiration. The only hope we have of
ever achieving that is if we can manage the demand side out because there is no
way that you could meet all of the customers, the entire population of the
Q3 Chairman: Obviously it is more difficult for you in January when people are rushing to get their tax returns in and we see in paragraph 2.4 that your performance fell significantly in January 2009. I do not suppose that is entirely surprising. But what happened last month, for instance? Can you give us an update?
Mr Hopson: We answered 72.5% of our phone calls compared to 61% the previous year, so we have continued to show a good year-on-year improvement.
Q4 Chairman: You have your own accuracy standards and they are mentioned in paragraph 3.10, but for nearly seven million calls you did not meet your own accuracy standards. Why not? After all, you set these standards so surely you should meet them?
Ms Strathie: These are industrial quality standards and I absolutely accept those figures. I think it is important to put them in context because the test is one of following the exact script in every part of detail. So, for example, if the script says "Ask the customer for their name and the child's name and the child's date of birth" and one of my agents did not ask the child's date of birth but still dealt with the customer satisfactorily, that would fail our quality standards because they have not followed the prescribed process. We want to drive to a point that we are meeting that quality standard because every contact that we have with our customers is an opportunity to get our data quality right.
Q5 Chairman: I want to ask you next why your staff are spending so little time actually dealing with customers compared with the private sector? Shall we look at figure 10 on page 29 where we see that handling calls and follow-up work (staff equalisation rate) 38% HMRC; private sector, 6%. It is not very good, is it?
Ms Strathie: No, it is not, I would accept that, but before we just jump to the conclusion that HMRC's staff do not work hard enough, I think it is important to say that if you move work to a telephone-based operation then you have to start with the processes and your customer behaviour and customer insight to design the work and the technology in a way that people who are employed to be contact centre staff spend the vast majority of their time on contact. The Report shows that we have a way to go on that.
Mr Hopson: I think there are some particular complications for our contact centre operation. One of them is the fact - and you will see it from figure 10 - that we train our staff for six weeks compared to a private sector average of two weeks. That is partly to ensure that we get the right quality of response that you have already mentioned but also, given the nature of the business. We also have a business in which the volumes of calls coming in are very much in peaks and troughs. If I give you an example: in January 2009 we had staff utilisation of 47% but if you go back to the previous month, which is one of our lowest volumes of demand, the utilisation fell to 27%. It is partly about the nature of the fact that we have these big peaks and troughs of demand related to the tax year deadlines.
Q6 Chairman: First of all, you could manage for that but, secondly, why for instance do your staff spend 11% of their time waiting for calls? That is in this figure 10 as well. That does not show very good man management or lady management to me.
Ms Strathie: I think that is the challenge. We want people there, especially when they are skilled staff that we have invested that amount of time in, taking customer contact. The Report shows the scope that we have for efficiency but we have to do it in the totality of our business volumes, and that will mean, as we do for other modernisations of HMRC, that we need to move much, much more through self-service for those who are willing and able to do that and to be able to take work off the telephone that at the moment is either no value or low value, if our customers can comply with our processes in a way that does not require telephone contact.
Q7 Chairman: For instance, why have you got a sickness rate of 6% compared to the private sector at 4%?
Ms Strathie: I missed the end of that.
Q8 Chairman: There is a sickness rate here in figure 10 of 6% compared to the private sector which has 4%. Have you a plan to reduce sickness absence?
Ms Strathie: Yes, we have, and would you like to say what you have already done.
Mr Hopson: We are taking action to reduce sickness absence. It is down by 15% this year. If we get to the minimum target that we are aiming for next year of 10%, that means we will have reduced our sickness by 40% over five years, so we are making good progress. It is still too high. Clearly my management team and I would like it to be at the private sector average but it is coming down and coming down really pretty rapidly.
Q9 Chairman: You are obviously encouraging people now to move on-line and to ring you up rather than have face-to-face contact, so what savings are you expecting to make as a result of this campaign?
Ms Strathie: The total package of savings - and we are on track to deliver this - for HMRC by the end of the year 2010-11 is £754 million in savings. At the moment we are working through the savings we expect to deliver for the three to four years after that.
Q10 Chairman: What worries me about all this is that you use committees like this as an excuse for moving away from face-to-face contact. My local tax office in Gainsborough is closing and my colleagues have problems all around the country. There are many people who want face-to-face contact. They may be elderly people or people who are not comfortable with the internet. They may be neither elderly or they even may be comfortable with the internet but they want to have face-to-face contact, so I do not want you to use this Committee as an excuse to end your face-to-face contact with the general public. After all, these are their own tax affairs, this is their money, these issues are very complex; they do not always want to be talking to machines.
Ms Strathie: Chairman, I would not use this Committee as an excuse for anything.
Q11 Chairman: I bet you would not!
Ms Strathie: But I can tell you right across all of our customer groups, particularly older people, the number of customers who say their preferred channel to deal with this is the telephone is in excess of 82%. It varies between that and the upper 80s. We regularly are taking the temperature with our customers for that. I recognise that there are some people who will always prefer face-to-face but they might not necessarily want to get on a bus or a train to have that face-to-face contact; there are people that do. I think it is a challenge for the totality of HMRC's business and the cost of administration that we move as much as we can to self-serve and cheapest cost to serve for those who are able, if we are going to free up the capability to be able to deal with those people who need more.
Q12 Chairman: The other thing that worries me about particularly the Inland Revenue, which used to be one of the best run departments in the country, was that you knew your local tax inspector, you had a local tax office, you could visit and you could ring them. Now everything is done on the basis of efficiency drives. You have created national customer contact centres so you are dealing with strangers, you are waiting for your call to be answered. Are you actually providing as good a service as you used to?
Ms Strathie: I cannot speak for the old Inland Revenue because it seems a long time ago and I had no dealings with it. I can say that it is a big change and the strategic review that we have done in the Department means that we have revisited all of those plans, as you know, and we have consulted on which offices we close and we have consulted on alternative service delivery models, but if you just take how many people are able to self-serve in self-assessment - and we had another 12% increase this year in January - that is an enormous shift of over seven million people who are able to operate that system easily. People with complex tax affairs need to employ tax agents to do that. The challenge for us is what we put through the phone and what would we still use paper for and when do people still need face-to-face contact. We do take the feedback from our customers and there is a very low requirement for face-to-face contact relative to the tens of millions of people with whom we engage.
Chairman: Thank you very much. Angela Browning?
Q13 Angela Browning: Ms Strathie, moving people to use on-line tax returns is obviously going to help you and we have discussed this in previous sessions here. Can I draw your attention to people who have been making their self-assessment returns in the last few months for the tax year 2008-09, which they would have been filing in 20O9. I do not do that myself, because for some weird reason MPs cannot file on-line, but my husband files his on-line and he is a former accountant. He informs me that when you come to do this, there are problems with the software still that require him then to make a phone call, and when he makes a phone call he is openly told by your staff that, oh yes, there is something that still needs to be modified on the software package which would have enabled him to have completed it on-line and he needs to be guided through that software glitch. How carefully have you looked at the experience of the software because that would have avoided the phone call in the first place? I think there is an issue there which would avoid a few phone calls on self-assessment?
Ms Strathie: I shall take that away. From time to time we have had some problems with the software that we supply that people use for doing the assessments inside the overall assessments and calculations. I am a user myself, I have filed on-line, and I have to say this year we have had nothing but positive feedback from people's experience of that. We do, however, require people to phone us when they are new users because obviously we have got to balance security and giving people a pass through, but we will take that away.
Q14 Angela Browning: He is not a new user. It is just that when he has phoned they have said immediately, "Oh yes," and immediately they know what the problem with the software is and they will then guide him on through it. Thank you. Just moving on from there to reducing avoidable contacts of which that is one: the Department estimates, according to the NAO Report that around 35% of contacts to its contact centres are avoidable. I just wonder how you are actually going to go about reducing that 35%?
Ms Strathie: Chris will probably come in on this but, essentially, the balance we have is between giving people a telephone number if they do not understand the communication we have sent them, if they have difficulty getting themselves round the web site, and asking people to take certain actions before they do, and removing telephone contact numbers so that it is not easy to phone us, but leaving people in real need in difficulties. Quite a large proportion of our telephone calls are from people whom we have actually asked not to contact us, they have no need, we have simply told them, "This is what we are required to tell you," but they prefer to phone up just to check, so there is a trust issue there that we have to work on.
Mr Hopson: We have shamelessly stolen from the private sector in terms of identifying people who are best at reducing demand, and what we have done is put in place a call classification system that enables us to identify which calls are avoidable and which calls therefore, if we focused on changing things, we could eliminate. We have then used our most important resource, which is our staff, and we have asked them to identify every time they come across a call that they think might be avoidable to send us a postcard that says, "This is an example of a call that is avoidable," and then we are working through all of the changes that need to be made. I can give you a very specific example. We send out a letter every year to those people who are joining self-assessment for the first time. We send out 660,000 of those letters and it was very clear from our advisers' feedback that there was one particular element of the letter that was confusing people, so we have now changed that letter on the basis of our advisers' feedback and we have eliminated 88,000 phone calls, which will save us £500,000 a year, so it is a combination of call classification but also using our advisers' expertise.
Q15 Angela Browning: Thank you. Do you think the fact that you have 139 customer facing 0845 numbers, half of which I understand relate to taxation alone, are really necessary?
Mr Hopson: No it is not, and it is partly an accident of history. The way that our previous PAYE computer system worked is that we were linking each number to each tax district so, in other words, if you were a customer of a particular tax district you had to ring a particular number which then went through to a particular contact centre to be able to answer that particular question. We now have a new computer system that we introduced last year which means that any one of our tax advisers can take any PAYE phone call, and later on this year we will be eliminating 70 of those phone numbers, all of the multiple tax district phone numbers, to come down to a single number. We will be doing that this year but we were only able to do so as a result of introducing the new national PAYE Service computer service last year.
Q16 Angela Browning: We have had a very helpful analysis of the NAO Report from the Chartered Institute of Taxation from their Low Incomes Tax Reform Group. I expect you have seen the paper. I wondered why you had not followed the example of the DWP with whom we have often, Chairman, had some quite robust discussions in this Committee, as you can imagine. They seem to be working in the right direction by introducing 0800 numbers, by having people ring back at a set time rather than just leaving people high and dry wondering whether they are going to get a call back, in order to minimise the cost, particularly for people who are on low incomes?
Ms Strathie: I am very familiar with the DWP journey and where they are on it. Indeed, I have spent a lot of time talking to John Andrews and I agree with the gist of his report and analysis to the Committee. I think the challenge for us is the scale and the level of investment to make that move. We have a number of quite complex commercial relationships in our various telephone channels, as part of the legacy, and as they come up for review later on this year, we are already working through the business imperatives that we want to put through the telephone channel, and what that means for the commercial deal that we strike with our suppliers, because it depends very much on where you are paying for the service and at what point what you have scope to do. Given that everybody is a customer at least once, sometimes twice or three times over, and the scale of our operation, we will always have to strike a balance between giving a service that is completely free at the point of contact on free call to one set of customers versus trying to spread that cost across the business, when it is proportionate and when it is not, so I absolutely agree with what CIT and LITRG are saying. I just think for us it is quite a challenge to get there yet.
Q17 Angela Browning: Thank you. I can see that that is quite an issue but perhaps people on low incomes who get totally frustrated by this then ring or write to their MP so that our caseloads are growing, because of course we do have access to the MPs' helpline, particularly on things like tax credits. I find that one of the reasons they come to me is, frankly, they cannot afford to use their mobile phone any more trying to contact you by phone.
Mr Hopson: I think, as you said Lesley, there are a set of different issues that need to be balanced here. Let me give you an example about the DWP. What the DWP have done is moved their longest calls, which are those when you first come into Jobseeker's Allowance you need to go through a structured telephone interview, and that takes quite often between half an hour and an hour and that is the gateway entitlement to that benefit, they have transferred those calls, and those calls alone, to 0800 numbers because they recognise that they are very long calls. If you look at HMRC's calls, 96% of our child benefit calls and 94% of our tax credit calls are less than ten minutes ---
Q18 Mr Curry: Once you get through.
Mr Hopson: So we have a completely different call profile to DWP. What we are saying is we recognise there are some particular needs for people on low incomes, but the call profile is very different to DWP, and the solution that they may use for those particularly long calls may suit them, but there is a different set of issues for us. Lesley put it very well in terms of we have to balance the cost to all taxpayers of providing all calls free to all of our customers versus the fact that at the moment some of our customers do pay via 0845 numbers. There is a balance to strike between the two different things.
Angela Browning: The NAO Report shows that 11 out of every 100 calls made can result in the caller being given inaccurate advice, particularly in more complex areas that result in longer phone calls, for example child care or disability tax credits or age allowances on the pension computation. Would it surprise you to know that even as a Member of Parliament dealing with tax credit casework all the time, in respect of a personal case of a member of my own family on a disability tax credit case, I have struggled for the last 18 months? The person concerned was awarded disability tax credits on getting employment and then had it arbitrarily taken away. I went through the MPs' helpline. It was reinstated as a result of a ministerial investigation. There was a change of circumstance which should not have affected the tax credit. The tax credit was taken away. It was then reinstated at the end of last year, £4,000 extra was paid, and I have just heard in the last fortnight that it has been taken away again and the money has to be repaid. I am an MP, I am used to dealing with these things, and we are talking about somebody who is not able to deal with their tax credit queries themselves. They have a lifelong disability and therefore they are not able to handle them. I have to say that the telephone conversations I have had, if I was somebody outside of Parliament, I would have been tearing my hair out by now, not to mention the financial implications this has when inaccurate information and information at such variance is given. It totally upsets people's lives.
Chairman: It is a very long story, Mrs Browning.
Angela Browning: I just wanted to get it on the record, Chairman, because this is probably the only chance I shall get because I am retiring in, I hope, about a month's time!
Chairman: Just show some sympathy, give a quick answer and let us move on.
Q19 Angela Browning: If you would, Ms Strathie,
Ms Strathie: I apologise first and foremost for the customer's experience. Obviously it is difficult to comment on a particular case ---
Q20 Angela Browning: And my experience.
Ms Strathie: But it is a prime example of taking something that is very complex and putting it on a channel that is designed for very simple signposting advice, so I would accept the difficulty of dealing with that.
Angela Browning: The House of Commons paid for the phone calls. I would hate to think what it would have cost somebody if they had been on a mobile.
Chairman: Don Touhig. Let us move briskly and show an example of efficiency by keeping on time.
Q21 Mr Touhig: Ms Strathie, we have been corresponding on behalf of one of my constituents who required urgent dental care and had asked for a tax exemption certificate. He was told he could not receive one because he lived in Holland. Earlier when he applied for child tax credits he was told that he could not receive them because he lived in Holland. He has never lived in Holland, although he did admit to me in a letter, "I have passed through Schiphol Airport"! As I said, we have corresponded on behalf of my constituent. You wrote to me on 11 February saying that your records were inaccurate, you have amended them and they now show that he has never, ever lived in Holland, and then your letter gave him a telephone number that he should ring in order to obtain his certificate. The number is unobtainable.
Ms Strathie: I apologise if that is the case, Mr Touhig.
Q22 Mr Touhig: Should one not be able to rely on the Chief Executive to give out information with a telephone number for a constituent to ring that is accurate? The number has been discontinued for some time.
Ms Strathie: I am saying I apologise if that is the case. I read that letter and I sent it and I assumed that the number on it was one of our 139 that has just been quoted here, and I apologise if it is not. Presumably, you will be writing to me again?
Mr Touhig: No, I will not be writing to you again. I have to say that Hannah Parker, your Complaints Officer, has been superb. She has sorted it. She is somebody to watch there, Mrs Strathie, somebody who perhaps deserves promotion because the issue has now been sorted.
Chairman: Perhaps she is in this room. A lot of them are!
Q23 Mr Touhig: I just think one ought to be able to rely on letters from the Chief Executive to give accurate numbers and I am disappointed that I did not get it. At present 89% of calls meet your Department's targets for accuracy of advice, but of course people have to get through to get the advice that is accurate in the first place. On page 6, point 8 of the Report we are told that your Department has measures to improve its accuracy. Could you tell us what these measures are and how successful they have been?
Ms Strathie: We have a whole range of accuracy measures in the Department. It is something we have been looking at business by business because they are at the moment a mix of quality measures and measures that are internal for our staff's competence when they have been trained in something and the stage that they are at as to whether their work can progress unchecked. If I start with the largest business in personal tax, we have seen a considerable dip in accuracy performance since the introduction of the new PAYE/National Insurance service, not in the accuracy of what actually goes to the customer in this particular case but where our staff struggle to work with a system that is designed in a very different way to the previous system. What we are looking at right across the board are the accuracy measures that we want to improve the overall outcome for the customer, particularly in relation to error, both official error and customer error, and how we can design that out of the system.
Q24 Mr Touhig: You have certain targets that you are aiming for. How are you constantly measuring that you are achieving these targets?
Ms Strathie: To start with, we have departmental strategic objectives, as agreed, that that is what the Department is there for and that is what it needs to deliver. We then have a range, another four objectives that drive the transformation of the Department and its delivery, and then those come down to an overall performance framework, which has been developed bottom up and top down. The executive committee, under my chairmanship, meets every month to review the totality of our performance, and each of the directors general and their directors are managing their performance up and down. We agree the action that needs to be taken to address under-performance.
Q25 Mr Touhig: The Chairman touched on a point earlier and so did Mrs Browning, where the Chartered Institute of Taxation said that 6.8 million callers do not receive advice that meets your own internal accuracy targets.?
Ms Strathie: I answered that question to the Chairman. The accuracy standards are not necessarily our own internal standards; they are actually driven by external quality standards. We would accept that some of those are inaccuracy that leads to inaccurate information, and that is not good enough, but there is also inaccuracy because people did not follow the standard process and standard scripts so they did not meet the quality standard. It does not necessarily mean that the customer got any inaccurate outcome as a result.
Q26 Mr Touhig: That is not the view of the Chartered Institute, is it? What happens when a customer relies, to their detriment, on advice that your staff give if that information is inaccurate?
Mr Hopson: We record our calls. Any customer has the ability to request a recording of the call. We provide a number of those every year. The customer can then ask us to review the call and the information that was given if they believe there has been a case of misadvice.
Q27 Mr Touhig: What scheme do you have to compensate people who are taking your advice and your advice is inaccurate?
Ms Strathie: We do have a compensation scheme and, indeed, we try very hard to be proactive. Where we identify that someone has been given wrong information, we make a small payment as a goodwill gesture.
Q28 Mr Touhig: How do you publicise that?
Ms Strathie: I do not know the answer to that actually. In our accounts it will show how much we spend on such activity.
Q29 Mr Touhig: Repeating what the Chartered Institute say, they say 6.8 million callers did not receive advice which met your internal accuracy standards. Surely that is a huge number and you must have a scheme to compensate people for your errors?
Ms Strathie: That did not say that there was an error. I think we need to be really, really careful here.
Q30 Mr Touhig: It says it does not meet your accuracy standards".
Ms Strathie: Yes, because we are actually trying to drive up standards and we are asking people to follow a script in the process ---
Q31 Mr Touhig: With respect, Ms Strathie, being accurate or inaccurate is like being pregnant; either you are or you are not. There is no grey area. You are either accurate or you are not inaccurate.
Ms Strathie: I have explained it twice, Mr Touhig. I explained there were no errors in the outcome but on what we are trying to train our staff to do and use it to feed back into the system so that our staff improve, because we have defined those scripts for very good reason.
Q32 Mr Touhig: Yes, but what I am trying to get at is the compensation scheme for giving inaccurate information.
Ms Strathie: Why would I use taxpayers' money to compensate somebody if they have not lost in any way at all? Why would I do that?
Q33 Mr Touhig: There are all sorts of ways people can lose. You are ruthless, are you not, in imposing sanctions against people who have made mistakes? You and I have corresponded about tax credits. Your Department is utterly ruthless in pursuing people who are very vulnerable and yet you say you should not be using taxpayers' money to compensate people when you foul up on your own part.
Ms Strathie: I do not accept that we have fouled up. I think that is the basis of the argument here. What I would say is if you looked at the outstanding debt in tax credits, if you looked at how much people through their own errors have been overpaid, and if you look at what we have written off and just how lenient we are, and how long we give people to pay back, I do not think that what you say about us and tax credits stands much scrutiny.
Q34 Mr Touhig: Indeed it does, Ms Strathie. You and I have had extensive correspondence on one particular case where there is only one particular line that supports you and yet you are ruthlessly pursuing somebody in order to return money and it is your fault that they got it in the first place.
Ms Strathie: As you say, we have corresponded on it.
Q35 Mr Touhig: We have indeed. Can you assure the Committee that you do not impose sanctions on people who have received inaccurate advice and acted upon it?
Ms Strathie: That we do not impose any sanction?
Q36 Mr Touhig: If you have given inaccurate advice, and people have acted upon it, can you assure us that you do not take any steps against those people if it is your fault?
Ms Strathie: No, I cannot give you that assurance.
Q37 Mr Touhig: Why not?
Ms Strathie: Because I am not qualified to give you it. We would apply the basic principles of law and any principles that had to be balanced. At the end of the day, what we would generally look at in any case, first and foremost, is whether the customer has taken reasonable care and whether we have evidence that we have given wrong information or we have misled in any way. We have a whole process, do we not, through complaints?
Q38 Mr Touhig: My question, Ms Strathie, with respect is fairly narrow: can you tell us that you do not impose sanctions against people who act upon inaccurate advice that you give them?
Ms Strathie: And I said I cannot give you that assurance because I do not feel qualified to answer that.
Mr Touhig: Time to give up, Chairman.
Q39 Chairman: Mrs Strathie, I have never heard that answer from a Permanent Secretary before. It is a fairly direct question. "I do not feel qualified." What does that mean? Normally not being qualified means not having the expertise but you are the head of this Department and you can say either yes or no to Mr Touhig. What do you mean by that answer "I am not qualified"?
Ms Strathie: I am very happy to write to you. It is a very narrow question that has been put to me and there is enormous law versus perhaps somebody who was given or alleges they were given one piece of wrong information. Given the penalties and sanctions regime, given that this could be someone who simply claimed a few hundred pounds of tax credits versus somebody who has potentially avoided or evaded millions in taxation, it is very hard for me to say if we have ever given somebody any wrong information, there will never be any penalty or sanction.
Q40 Chairman: If he had asked you generally, Mrs Strathie, as a matter of natural justice whether you seek to impose sanctions on people to whom you have given wrong advice, you would presumably answer differently?
Ms Strathie: I would absolutely answer that that is absolutely the case; we would not seek to do that and, as I have said already, we actually try to be proactive in compensating people for their inconvenience.
Chairman: Thank you very much. David Curry?
Q41 Mr Curry: Can I just look down the other end of the telescope for a minute. Can you remind me about the Workforce Change programme. How many jobs did you set out to get rid of at the beginning of this programme?
Ms Strathie: I was not there at the beginning of the programme but if you go back to the Spending Review 2004 announcement, I believe the announcement for HMRC for that period was a 25,000 reduction.
Q42 Mr Curry: We have now had the latest stage of that, have we not?
Ms Strathie: Yes, we are in another phase, 13 January we announced.
Q43 Mr Curry: That is right because I have a written answer here from Stephen Timms which said that 130 offices would be vacated and 1,700 surplus staff and there is this rather charming phrase "those who have not yet found alternative posts are now eligible to be considered for voluntary redundancy on compulsory terms".
Ms Strathie: Cabinet Office rules.
Q44 Mr Curry: I am aware of what it is intended to mean. How much money have you put aside for this programme? What is your budget from the Treasury to pay for redundancies for this latest tranche?
Ms Strathie: It is not a specific budget. We will exit people as we can afford to do so and in a way that we take advantage of technology. I would expect ---
Q45 Mr Curry: Sorry to interrupt, could I just stop you.
Ms Strathie: I can give you a figure of what I am expecting.
Q46 Mr Curry: Tell me that.
Ms Strathie: I would expect that if everyone who was eligible for this particular package took it, alongside those who were eligible for a less favourable package, which goes up to December, it will be in the region of about £75 million.
Q47 Mr Curry: And you have provision for that?
Ms Strathie: Yes.
Q48 Mr Curry: You have just used phrase you "would exit people as we can afford to do so." I am slightly curious. You just said you can afford to do so because you have made some assumptions and you have £75 million to do it.
Ms Strathie: We made a very strong business case that we do not need to maintain the cost of those buildings and the workforce will continue to change over a number of years, and therefore for those people who are genuinely stranded, they cannot get to another site or take advantage, or there is not another job for the use of their skills, then we are entitled to offer them that package to leave the organisation, yes.
Q49 Mr Curry: What caught me was the expression "exit people as we can afford to do so" when you have said that you can afford it. When do you expect this process to be complete then? When will you know how many people are going, when are people going to be relocated or have been relocated?
Ms Strathie: People were asked to volunteer by 8 February and then we will make offers by 26 February to those people and then they have the opportunity to firm that up. Sorry, we made the offers by 8 February and right up until the point at which somebody actually exited the organisation, if we found another job for them that they could do (somebody else might leave that job in the meantime) then we would seek to redeploy them. We will only seek to exit people on any kind of package if we absolutely cannot redeploy them and we cannot absorb them.
Q50 Mr Curry: I can understand that you are under the cosh in financial terms because you have got to make savings. I can remember sitting in the Treasury and having this lecture read out to us about the budgetary implications of what had to happen. Then you proposed office closures and there was a consultation on it. I am sure that we all get staff who come to see us and we all know that, quite frankly, it is a total waste of time because they have no choice; you are going to close those offices. How many offices which were slated for closure have you decided not to close as a result of consultation? What have been the principal grounds for it?
Ms Strathie: At the end of the day we do not start with the savings; we start with the shape of the business and the business need. I think that is the first important thing to say. We are a vast organisation that is going to shrink incrementally because as more people self-serve, as more people use other channels and we become more efficient, inevitably, we will need fewer people in low-grade, heavily manual work than at the moment. So I cannot actually see a point where we come to an end. I believe this process ---
Q51 Mr Curry: That was my next question.
Ms Strathie: --- Because we are already planning our plans for the next three years after the end of the next one.
Q52 Mr Curry: Can you tell us a little bit about that then?
Ms Strathie: Given where our resources are, it is very clear that we need to be more efficient in our back office. We have an estate, we have IT and we have people. They are the big cost burners in HMRC. So any efficiency and any reduction in cost comes from those three things.
Q53 Mr Curry: I can appreciate that but you said, in a sense, it was driven by the changing shape of the business. I have photographic recollections of a meeting in the Treasury where that was not what was told at all. There was a large figure with lots of notes put in front of us and we were told that is the amount of money we have got to save and that is what this means in terms of recruitment and retention of staff.
Ms Strathie: Maybe the Treasury has come a long way since then.
Q54 Mr Curry: It may be that the Treasury has changed its terminology but I am not quite sure it has not changed its motivation.
Ms Strathie: But you would not expect me to do anything as a Chief Executive other than look for best value for the taxpayer and to drive an efficient organisation.
Q55 Mr Curry: Well, we will not debate that just at the moment. Whenever people start invoking the taxpayer I always get slightly suspicious, I have to say.
Ms Strathie: I am one and that is what drives me.
Q56 Mr Curry: We all are. Ms Strathie, you mentioned the next phase. Tell me about the next phase then? We have just had the next stage of the Workforce Change programme and there is another stage to come, is there, or a new phase? How do you envisage the shape of the business in five years and what are the implications for the number of people who work there?
Ms Strathie: It is in broad terms because, for a start, we will have a Budget before that and we will have an Election, and some of those things might impact on what we are asked to do or how we are asked to do them. Essentially, when we issue our business plan for 2010-11, which we will do by the end March/beginning of April, we will be very clear in that about what we see as the shape of the workforce and the reductions over that period. Before we are well into that year, we will be publishing our efficiency plans for the next three to four years and we will be very clear then on the numbers, so you will not have long to wait.
Q57 Mr Curry: I think it is probably a fair assumption that the General Election is unlikely to bring in a Government who thinks you ought to have more resources. Do you think that is likely to be the case, given the state of the public finances?
Ms Strathie: I have no idea, but I have managed through many elections the transition phase, and priorities can change, can they not?
Q58 Mr Curry: You are still here. Yes, they can indeed. The availability of money may just be an issue. When we talk about the Change programme, in this area in particular, am I right in thinking that a significant number of people affected who work for you are likely to be middle-aged ladies?
Ms Strathie: I think the average age of my workforce is around 43 and the average length of service is around 16 years and we have a high proportion of female staff.
Q59 Mr Curry: The reason I ask the question is because for many, just based on my constituency experience, redeployment is not a real choice. They have commitments to do with family, they have young children or they may be carers. If they work in the Skipton office, they may have quite a journey to get to Skipton in the first place and therefore the redeployment to Keighley or Bradford is not a realistic option, particularly as I have profound suspicions as to how you calculate the ease of getting to Bradford. I do not know quite which piece of kit tells you how you get there but those who actually do the journey sometimes find that it is not quite the same as in theory. In practice, redeployment is quite difficult, is it not? Given that demography and profile of the workforce, redeployment is not an easy one for them?
Ms Strathie: For some people that is true. For a start, our most junior employees have restrictions in their mobility, so we would not compulsorily transfer them, whereas more senior people we would. First, that is the kind of segmented workforce. Second, there is a difference between where I would ask someone to move and compel them to move versus what people are prepared to do voluntarily. Given the choice of offices closing, business ceasing, then that is part of the choice that some people have. Although I will not compel them to leave, and I would be obliged to compensate them for leaving because they cannot move, there are other people who then choose to get in their cars and do that drive, not that I am quoting the specific one that you mentioned. The reality is we will try to redeploy within their line of business, then we will try to redeploy right across HMRC and then we will seek every other government department and any others to help our people find work. My old business, Jobcentre Plus, has been very helpful to people in helping them to build their CVs and make that move into the wider labour market. Indeed, over 2,000 of our people now have been redeployed to other government departments, which is a win for everybody, especially the taxpayer.
Q60 Mr Mitchell: I must say it is a kind of unhappy position, this impersonal service you are going to provide. Here you are, you are cutting down on staff, cutting down on offices, you are withdrawing 45 telephones and dealing with the customer on a very emotional issue - tax - an upsetting issue for many people, particularly me, on the telephone, and you are doing it badly.
Ms Strathie: Thank you for that feedback, Mr Mitchell! On any given day I know we will be doing it badly for somebody somewhere in the organisation because of the scale of it, but actually we could counter many of those arguments with the customer feedback we have got.
Q61 Mr Mitchell: Are you really doing it because it is cheaper to do it on the telephone than to have human contact? Yes or no?
Ms Strathie: I do not think I can answer
it as "yes" or "no". This is about what
do we want the
Q62 Mr Mitchell: It is there to deal sensitively with the public.
Ms Strathie: Yes, but is it going to do face-to-face advice for everyone ---
Q63 Mr Mitchell: Yes.
Ms Strathie: --- or is it going to move with the times and with the customers and what they tell us they need? My job is to get taxes in and pay benefits and credits and health and pregnancy benefits.
Q64 Mr Mitchell: That creates a situation which is all right for the middle class, or the better off, who all employ accountants to deal with you at some distance, but not for the poor and vulnerable, the deaf and the lame and the old who have to go on a telephone.
Ms Strathie: As I said earlier, well in excess of 80% of our customers say the telephone is their preferred channel. When we had everybody being dragged face-to-face people were complaining bitterly about the fact that they had to come into a tax office. Now people who do not like the phone are more likely to be saying to me, "Why can't I do this on the internet? Why do I have to get on the phone?"
Q65 Mr Mitchell: I am sure it is better dealing with a real person than a disembodied voice. The simplest would be, although it would make it more expensive, why do you not call folk back on the telephone?
Ms Strathie: Do you want to say something about the technology on that?
Mr Hopson: That is something that we will look at because we recognise ---
Q66 Mr Mitchell: Do not look at it. Bristol Council have told the Chartered Institute of Taxation's Lower Incomes Tax Reform Group that they tell you there is a queue, "It will be ten minutes before we can deal with you, or we will call you back at a set time". Why can you not do that?
Mr Hopson: We are already trialling a callback service for customers on our child benefit line so that if they are in the queue we will offer them the option of us calling them back at a specified time.
Q67 Mr Mitchell: Only for them?
Mr Hopson: We have just started that pilot. Obviously we will evaluate whether that works effectively and then see if we should roll it out further.
Q68 Mr Mitchell: At the moment, if 'Worried of Grimsby' rings you up you do not call them back?
Mr Hopson: The pilot we are talking about is specifically on the child benefit line.
Ms Strathie: Mr Mitchell, we agree with you. The point is we agree that is a good way of handling this matter.
Q69 Mr Mitchell: Another problem, and I have not had experience of you on the telephone - I am sure it is a very charming experience with you personally on the telephone - is with banks. By the way, is the Department in any way contemplating transferring this kind of service overseas?
Ms Strathie: No.
Q70 Mr Mitchell: There is no discussion on that?
Ms Strathie: No.
Q71 Mr Mitchell: I find when I deal with banks and you have got a complex problem, the person in Bangalore or Birmingham cannot deal with it but when you ring back you get another person and you have to explain it all over again. If you called people back you would avoid that.
Ms Strathie: I think we would avoid it. Now that our customer contact agents have got access to much, much more information about the customer, there is much more opportunity when a customer comes on-line that they can get the right answer. That is what we would strive for, getting it right first time. The other big challenge is the peaks in our business. Tax credits are renewed on the telephone for the vast majority of customers and this summer that went incredibly smoothly. We need to keep moving our workforce on to different areas of business according to the time of year, but it is a pretty packed year for HMRC.
Q72 Mr Mitchell: This submission we have had from the PCS really worries me. It says that by 2011 you are going to close 200 offices. Perhaps you might give us a note on how that affects north-east Lincolnshire and the Grimsby area. The Chairman said his Gainsborough tax office is closing.
Ms Strathie: It is 130.
Q73 Mr Mitchell: I would like a note on how it is going to affect my area.
Ms Strathie: I think I have already written to you.
Q74 Mr Mitchell: You are going to fire 25,000 staff, cut jobs by 25,000, and therefore you are going to be driving more and more people onto the phone but the PCS says that there is also going to be a 50% cut in the workforce managing calls. How is that possible?
Ms Strathie: First of all can we say that there are not 200 offices, there are 130, and some of those are partial buildings, not whole buildings. Second, 25,000 was from the SR04 baseline and we are actually well on target to deliver that. That is not 25,000 from now. I just want to clear that up. Lastly, as we move on productivity and systems get better and there is an inevitable trade-off, and that is the balance for me, the affordability and the change in the workforce, between the people we have who are permanent members of staff and the needs of the business.
Q75 Mr Mitchell: The PCS says by channelling things into calls you are going to deal with three million extra calls but you have only employed three extra staff.
Mr Hopson: We have actually cut the number of calls we received this year by 27%.
Q76 Mr Mitchell: Was that by not answering them?
Mr Hopson: No, that was not by not answering because we have answered 77% of our calls this year compared to 55% last year. We have also introduced IVR messages so that if people want basic information they can get that when they ring and they get a message. Let me give you a very simple example. Lesley has talked about tax credit renewals: if you want to renew your tax credits you need to have last year's income information, so we put that on the message and 350,000 people between April and July rang off when they heard that message because they had not got last year's income information. I am not saying that every call or anything like every call, but 10% of our calls are being answered by those IVR messages now.
Q77 Mr Mitchell: You are trying to put them off.
Mr Hopson: Not trying to put them off.
Q78 Mr Mitchell: If I ring you to snitch on my neighbour and say, "This man is making millions of pounds by running a drive-in brothel and it is not taxed" - not that my neighbour is - I can do it free on an 0800 number. Why can I not ring you for advice and help on an 0800 number? The Department for Work and Pensions does that. You insist that I go through an 0845 number and pay through the nose.
Ms Strathie: We actually have an 0800 number, as you said, for the hotline and we have a process of gathering human intelligence in that way. Mr Mitchell, I would actually like to be able to offer all my customers a freephone service.
Q79 Mr Mitchell: Why not?
Ms Strathie: Because we have 45 million of them and if everybody decides to phone that is a huge cost in the organisation.
Q80 Mr Mitchell: You are there to provide a service.
Ms Strathie: Yes, I am there to provide a service within the resources available. If we were giving the kind of service that I would like to be giving, most of our customers would have no need to contact us, other than those that we prescribe as part of the process, like tax credit renewals. A sign of the amount of calls that we get that are particularly unavoidable is because we have not made it easy for people to understand the process, engage with the process and then trust us to do our job. My job is to drive down telephone calls by improving the services we give.
Q81 Mr Mitchell: I think the vulnerable, the deaf, those who do not speak English very well, like me, and people with difficulties are going to find it very difficult to deal with this kind of situation.
Ms Strathie: The customer segmentation we have done, and this is working with all of the stakeholders for various customer groups, shows us that we do have a proportion of people who are vulnerable, they will probably remain vulnerable, and what we do in designing the services ---
Q82 Mr Mitchell: And you will retreat from it.
Ms Strathie: Sorry?
Q83 Mr Mitchell: They will remain vulnerable and you will retreat from it by at least 45 telephones.
Ms Strathie: No, we will not retreat from them. We will work very hard with third parties to make sure that we engage in the right kind of service for them. We are not designing for 100% of the population. What we aim to do is make things really easy for those who are willing and able, those who need a bit of help to try and help them move into the willing and able category, and then be able to focus our services on those who need a lot of help and to try and improve that. That is our aspiration.
Q84 Mr Mitchell: Okay. One final question. You say you do not make money from these calls, so you have not had the astuteness that ITV had with its calls, but the PCS says that this is factually incorrect because incomes are received both directly and also through VAT receipts from the telecoms providers. Are you making any money from these calls?
Ms Strathie: I can categorically say we are not making any money. We are not in the business of making money. What I can say, without getting into the commercial in confidence aspects of any of our contracts, is the 0845 numbers are actually configured in a way that over a period of time we are paying for that investment in the system. It is actually quite a complex arrangement and we do not have a single telephone provider for all of our telephone services at the moment. I do know what you are alluding to and I did go through this journey in DWP and Jobcentre Plus and, as I said earlier, we are in the process of reviewing our current suppliers and contracts on telephones at the moment.
Q85 Chairman: You have this target of answering 90% of calls at around 30% less cost by March 2012. That will be for our successor committee to hold you to account, but what are you going to achieve by the end of this month?
Mr Hopson: At the end of the financial year we reckon we will have answered 77% of our phone calls and the cost reduction, we will have reduced the number of advisers by around 18%, so we are on the way.
Q86 Chairman: Thank you, Ms Strathie. That concludes our hearing. I think you can expect a critical Report because as you are closing your tax offices you are retreating to this fortress call centre and, frankly, as Mr Mitchell described it, the performance is simply not good enough. For instance, in this period 2008-09, 44 million calls, that is 43% of the total, from members of the public went entirely unanswered. During the tax credit renewals peak of July 2008 - we are talking about an Inland Revenue that used to be very efficient dealing effectively with middle-class people, now dealing with many more vulnerable people with their tax credit problems - you only managed to answer a third of calls. These are vulnerable people with desperate problems and you are only answering a third of their calls. This may be because, frankly, your workforce is only spending around 38% of their time dealing with customers and this compares with 60% in the private sector. You are not running an efficient organisation. In addition, on average people contacting HMRC had to wait almost two minutes for their calls to be answered, four minutes during peak time, and the best practice in the private sector is that 90% of calls are answered in ten seconds. Frankly, you are not running an efficient organisation. Do you want to have one final comment before we break?
Ms Strathie: Yes, Chairman. I think that summary is slightly unfair given that we are talking about a period of scrutiny of April 2008 to March 2009 and given how much our performance has improved over that period. The target of 90% is my own target that is the industry standard and that is the benchmark that I have set HMRC and we are striving towards. I also think you cannot make the assumption that vulnerable customers were those customers who did not get their calls answered because when you run telephone operations it is very clear why you want to answer the phone in ten seconds, 20 or 30 seconds, depending on the type of business, because the behaviour that runs from that with people putting the phone on automatic redial immediately swells your calls by anything up to 200%. You cannot assume that those unanswered calls were all people, but I would accept it is not the kind of operation that we want to run and I am very, very pleased with the improvements that we have made, particularly the tax credits renewal last summer.
Chairman: Thank you, Ms Strathie.