Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents

Examination of Witnesses (Questions 160 - 179)



  Q160  Mr Tyrie: But you are going to want to take measures to put this right and some of those are going to cost money.

  Ms Strathie: Yes.

  Q161  Mr Tyrie: The obvious question for those who are going to agree to that, which is ministers, is what is the return, what is the output measure that you are going to ministers with, saying I need to do something about morale because if I do I get the following return?

  Ms Strathie: At the moment we are very focused on those people who are in parts of our estate which are non-strategic sites, where we have already announced and ministers have already announced that we will be withdrawing our operations from those sites, and we are refining the dates for each of those and serving notice on them, and we have a programme of work which is focused. Money is made available from Treasury through our end year flexibility, to target those people as a last opportunity, can we find any way that they can move to another job and, if not, to do it. It is expensive to sever and we need the balance between those people who can be genuinely redeployed somewhere else and those people who are stranded.

  Q162  Mr Tyrie: But you have not made an estimate of what it is costing you.

  Ms Strathie: We know what we have spent so far—

  Q163  Mr Tyrie: The question is what is it costing you in lost output, lost tax yield, that is the question.

  Ms Strathie: I do not think we can.

  Q164  Mr Tyrie: Not a penny. Have you lost any tax yield as a consequence of the fact that your department has poor morale?

  Ms Strathie: I do not believe so, but I do not know so.

  Q165  Mr Tyrie: It is just a quality of life factor in the building then, as far as the public is concerned we do not want to spend a penny on it.

  Ms Strathie: The vast majority of our intervention yield comes through our large business effort and our litigation strategy so in terms of the total workforce that we have many of the people who will have to terminate their employment are people who have been with us long serving but in essence the world has moved on and the systems, processes, structures by which we achieve the yield have changed significantly.

  Chairman: We need to move on; we can come back to some of these points. Colin Breed.

  Q166  Mr Breed: Can we move on to tax collection which I suppose must be one of the most important areas, hopefully, of your activity. Between last November and June this year you agreed 158,000 time to pay arrangements; how many did you expect to agree, what was your forecast back at that time and then perhaps looking forward how many more do you expect to agree? We are trying to get an idea of the volume of these requests?

  Ms Strathie: The first thing to say is that I consider this a huge success and a real demonstration of how fleet of foot HMRC can be when asked to deliver. Within three weeks we had this service up and running. We have always had time to pay; this was about broadening access and us scaling it up.

  Q167  Mr Breed: Is that 158,000 extra ones or 158,000 including all the ones that you would have had anyway?

  Ms Strathie: That is the total but we were doing this on a very rapid service on the telephone which was the modern part. By 11 October we had taken 335,700 calls from businesses and we had arranged more than 217,700 time to pay arrangements worth just over £3.8 billion.

  Q168  Mr Breed: Where did the 158,000 come from then?

  Ms Strathie: That was probably the latest briefing that you have there, I am talking about now, as of October 2009. It is an on-going service.

  Q169  Mr Breed: The number at the end of that period was less than the peak of it at some stage. You are saying you did 217,000.

  Ms Strathie: At October 2009, this month, the latest total is now 217,700 worth over £3.8 billion. In terms of delivering against those arrangements we have a success rate above 90% so we see that we have supported business through this difficult time but also we have brought more business into compliant regimes.

  Q170  Mr Breed: 10% have basically failed to honour their agreement, is that it, did not pay you anything in the end?

  Ms Strathie: I used the term over 90% because I am not talking about a statistically valid series here, I am talking about where we have got to and what we are scoring, and some of that is on a sample basis. We know that that is a high level of compliance.

  Q171  Mr Breed: Have you had repeat requests?

  Ms Strathie: Yes, I believe that in those figures, although I cannot give you the details, if you consider VAT is something that is quarterly paid then there may be a case where we give someone a time to pay regime, they deliver on that and then there may be another time to pay regime on another head of duty.

  Q172  Mr Breed: Are you reviewing the criteria, making it stricter or keeping it about the same or what?

  Ms Strathie: When I say we got this up and running in three weeks time on the scale that we were doing it, it is something that is constantly under review and we are now developing robust systems and measures because we believe that this is something that will be with us for quite a long time.

  Q173  Mr Breed: Are you more robust in refusing them now than you were a year ago?

  Ms Strathie: I do not know what the figures were a year ago in terms of refusals.

  Q174  Mr Breed: Do you know what the criteria were a year ago?

  Ms Strathie: Yes.

  Q175  Mr Breed: Are they stricter now?

  Ms Strathie: It is very clear: if someone cannot pay they cannot pay, that criterion does not change. The extent to which we would look very, very hard in terms of who they were paying—it remains at the end of the day that the business has got to be viable, we have to believe that they can pay over a period of time and that criteria has never changed, we have just really marketed the service and encouraged people to come to us and get into a compliant regime rather than go below our radar if you like and us spend a lot of resource trying to get there.

  Q176  Mr Breed: Next Saturday it is the deadline for paper tax returns coming in. As you will be aware there is a potential postal strike action planned for three days from Thursday.

  Ms Strathie: Yes.

  Q177  Mr Breed: Can you provide reassurance that no one who posts their paper tax return before Saturday will be fined for a late return?

  Ms Strathie: I can give you assurance that we will take the postal strike into account. There is a legal deadline, as I am sure you know, but we will be very reasonable in terms of paper returns. We would encourage everybody to file online rather than use the paper return as the safer option.

  Q178  Mr Breed: The total revenue collected declined last year by about 5%; how confident are you that this reflects declining economic performance rather than increased tax avoidance?

  Ms Strathie: The analysis would suggest that most of this is due to the economy. As you know, figures get revised at Budget time and the Pre-Budget Report, but what we are seeing is very much the impact on the economy. Where VAT is concerned you also had the reduction in the rate of VAT and an increase in debt.

  Q179  Mr Breed: Have you made any estimate at all of how much tax is being avoided that you might have wished to have had?

  Ms Strathie: I do not think that is something that I can answer. We have issued figures on avoidance in the past in terms of best estimate3[1], but it is not a figure I can quote to you today.

1   Note by witness: In March 2008 HMRC released details of some analysis from 2005 that attempted to derive estimates of the direct tax gap at the start of the decade-see This included a very broad brush estimate, for conditions in 2002-03, of direct tax avoided of £5bn-£15bn. As HMRC has made clear, these figures are far from certain and came from assumptions based upon agents fees reported in the accountancy press, which are likely to include commercial tax planning as well as the use of artificial avoidance schemes. Back

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