3 Staffing and management |
40. This Chapter examines a number of concerns that
were raised with the Sub-Committee around the staffing and management
of HMRC. It addresses low levels of staff engagement (the measure
used within the Civil Service to evaluate staff morale and related
issues), the culture within the organisation and the impact of
changes at the top.
41. Poor staff engagement at HMRC has been a source
of major concern for the Sub-Committee, HMRC management and ministers.
In 2009 our predecessors raised concerns in two reports: Administration
and Expenditure of the Chancellor's Departments 2007-08 and
Evaluating the Efficiency Programme. They linked poor morale
to uncertainty about the future among staff, a lack of understanding
as to why efficiency targets had been chosen and increasing pressure
as a result of having fewer resources to do the job.
A year later, in March 2010, they concluded:
We are deeply concerned about employee engagement
at HMRC and its effect on performance. We accept that the relatively
new senior management team is aware of the issue, and takes its
implications seriously. Nonetheless, we are deeply troubled by
the apparent absence of any detailed plan to ameliorate the situation.
We recommend that HMRC's management re-double their efforts to
re-engage with their workforce, and publish a clear and detailed
plan to provide focus and direction to their actions. We will
continue to monitor this issue closely.
42. Staff engagement figures continue to be poor.
The Cabinet Office's autumn 2010 people survey ranked HMRC bottom
of the entire Civil Service with an overall positive score of
34% (a composite score made up of responses to key questions)a
2 percentage point fall on the previous year.
HMRC point out that the reduction (which reverses a previous improvement)
may be in part due to the negative coverage of the PAYE reconciliations
on staff moralean impact likely to be particularly felt
in some of the lowest scoring areas, such as "engagement".
43. In its Response to the Committee's 2010 Report
the Government said improving staff engagement is a key strategic
objective for the Department and a corporate action plan was being
developed within HMRC to achieve this. We understand that the
action plan is now in place and will be updated following the
autumn 2011 People Survey.
The Department's 2010-11 business plan set a target of 60% engagement
by March 2012 and above average performance by 2014.
We note, however, that the longer-term Structural Reform Plan
published in autumn 2010 does not include specific indicators
relating to staff engagement (although it contains a commitment
to continue publishing staff survey results).
44. The Chairman of HMRC, Mike Clasper CBE, accepted
that staff engagement was a major concern, but argued that there
was a significant difference between the attitude of staff towards
their work and towards the organisation more generally:
Our staff are committed to the purpose; if you go
out there, or even if you look at the data, you see people who
believe they are doing a very important thing for the country.
They are committed to get the money in so that we can fund the
nation's public services. The second thingthis is the one
that suggests a sort of dichotomyis that in general they
like their work and they want to stay. Normally, that doesn't
come with the next two things, which are that they don't feel
a positive sense of direction in the department and they don't
Dame Lesley agreed:
I would like to make a plug for my staff, in saying
that the great thing we have to build on in HMRC is their passion
for their work, their pride in their work and their determination
to give good service to their customers. They are not engaged
with HMRC as a department, as a brand, and that is a huge part
of their work as we go forward as one single department. In my
conversations with the trade unions on this subject, some of the
things we have already done, like removing barriers from people,
moving from one line of business to another, being able to up-skill
them and redeploy them, and starting to paint a picture of hope
for careers and better investment and targeting investment, and
opportunities for jobs, are some of the things we have to do.
45. ARC agreed that "despite the staff survey"
staff were "keen in their work", a statement supported
by the 72% of respondents to the survey who agreed or strongly
agreed with the statement that they were interested in their work.
 However, the
overall average of positive responses relating to "My Work"
was 49%, 22 percentage points lower than the CSb (Civil Service
benchmark), driven down by very low scores relating to amount
of control staff felt they had over their work. Several of our
witnesses observed a "command and control" culture within
HMRC that may account for some of these figures. We discuss this
46. There has been some improvement in the staff
survey results relating to organisational purpose and aims, with
greater awareness of HMRC's objectives and how individuals fit
into achieving those. However, these improvements are small, and
though the positive scores in this area exceed 60%, they remain
between 15 and 20 percentage points below the CSb.
47. The Department came out best in relation to "My
Team" and "My Line Manager". Scores in this area
are 74% and 57% positive respectively3 percentage points
and 7 percentage points below the CSb and with scores improving
more or less across the board. Conversely the worst results came
under the headings of "Engagement" and "Leadership
and Managing Change". Under engagement, only 15% felt proud
when they tell others that they worked for HMRC, a full 40 percentage
points lower than the Civil Service benchmark, whilst only 12%
would recommend it as a great place to work. Under leadership
and managing change, HMRC on average scored 17% positive responses,
20 percentage points below the Civil Service benchmark. Only 9%
of employees who responded to the survey believed that change
in HMRC was usually for the better, whilst 12% responded positively
to the suggestion that "HMRC as a whole is managed well".
Results in this area fell between 15 and 29 percentage points
below the CSb.
48. The poor scores in these areas are a cause for
concern as HMRC goes into another period of restructuring. ARC
told us "HMRC is going into a massive restructuring exercise
with a relatively poor capability and a demoralised workforce
that does not trust senior managers to deliver change". They
pointed out that the staff survey revealed that "61 per cent
of staff have no confidence in the decisions made by HMRC's senior
managers" explaining that: "The figures suggest a likely
frailty in staff willingness to support changes without significant
improvements in the way they are involved in the change process."
49. Mike Clasper accepted that HMRC had managed change
poorly and "we need better leadership". However he saw
a positive direction of travel:
Looking forward, we have to continue changing. There
is no way we can deal with the financial state of the country
and the fact that our customers are changing all the time; economic
issues and tax policywe have to deal with change. I think
one of the two most important things we have to do, going forward,
is to deliver that sense of direction and opportunity that we
have not been doing as well as we should have been. The great
advantage is that we now have a spending review and a financial
plan that fits the direction of travel. The second thing is to
have much better linkage between the top of the organisation and
engagement at HMRC was a major concern of our predecessors throughout
the last Parliament. The management team have achieved some small
improvements in relation to organisational purpose whilst staff
remain dedicated to their work despite the considerable pressures
on them and the organisation, some of which originates from outside
the Department. However, this cannot conceal the overall picture.
Relatively positive staff attitudes towards immediate colleagues
and superiors stand in stark contrast with overwhelmingly negative
attitudes towards organisational change and the management of
the Department. It appears likely that the poor handling of the
recent PAYE reconciliations and relentless negative publicity
has further harmed engagement and morale. This widespread disengagement
is a serious problem for a Department about to undergo further
restructuring, and which was described by one witness as "stretched
almost to breaking point".
51. The evidence
we heard identified two broad causes behind the poor staff survey
results: the impact of constant restructuring and staff reductions,
and a perceived "command and control" culture.
52. As discussed in the previous chapter, efficiency
savings were one of the key aims of the merger of the Inland Revenue
and HM Customs and Excise. The combined organisation has reduced
staff numbers in each year since the merger, from 92,888 full-time
equivalents in 2005-06, to 69,300 in 2009-10an overall
reduction of a quarter. The largest reduction, 11,860 posts (14%
of the workforce), occurred between April 2009 and April 2010.
53. The unions representing HMRC workers blamed poor
staff morale on these job cuts. Graham Black of ARC told us:
I think there is a much better idea of the strategy
of the Department going forward and what they want to achieve,
but frankly any series of managers in the position that the current
incumbents are in would find it a very, very difficult job. You
have a department that will effectively have halved in size over
that period [from the merger to the end of the current Spending
Review period]. It is very difficult to get a highly motivated
and high morale department when you're dealing with that year
in, year out; no escape; no times when it gets stabilised; no
times when significant things seem to get better. It has a pretty
corrosive impact on the department, and senior managers have struggled
to come up with an answer to that.
54. In their written evidence HMRC accept that "uncertainty
about job security" and "reduced development and promotion
opportunities" have impacted on staff morale.
It is noticeable that the Department's approach to addressing
staff engagement "aims to provide a solution that looks beyond
the issues currently experienced by staff, such as the workforce
change agenda, and addresses core staff motivators and levers
55. Any organisation
facing the constant job losses that HMRC has faced over the last
five years would experience problems with staff engagement. The
Spending Review settlement means that some areas are likely to
experience greater stability, even expansion, whilst other parts
of the Department continue to be reduced in size. Ensuring that
engagement does not fall still further in these latter areas will
be an enormous challenge for HMRC managers.
56. A second contributory factor identified by our
witnesses was a 'command and control' approach to management within
HMRC. Martin Lewis, a former HMRC employee, sent us compelling,
but disturbing, evidence about his experience of the culture within
Middle managers are discouraged from reporting back
to the top "bad news" or news that projects and initiatives
are becoming unmanageable or are going awry. Such reports are
regarded as "negativity" and will damn career progress.
Thus at the top senior managers are largely unaware
of the difficulties, problems, and obstacles that the bulk of
the organisation faces. They know little of the scale of unanswered
phone calls, and the unopened letters, the data quality of tax
payers' records and perhaps most importantly the nature and quality
of the service provided on a daily basis to the taxpaying public.
The role of middle managers is to struggle vainly
and to provide the appearance that their targets have been met.
They are not expected to provide reasons why targets are not met,
they are just expected to get on and meet them.
57. Chas Roy-Chowdhury of ACCA told us he believed
that the organisation was too set it in its existing ways: "I
think, culturally, there is a problem because there is a process-driven
attitude and they do not want to think outside the box".
58. The unions supported Mr Lewis' views. PCS pointed
to figures in the staff survey, suggesting that only 21% of staff
within HMRC felt it was safe to challenge the way things are done18
percentage points (pp) lower than the Civil Service benchmark
(CSb). Graham Black
told us: "we certainly recognise the sort of cultural issues
that were being raised there, and they go right through. We have
SCS members, senior civil servants, who feel it is not a comfortable
place to challenge accepted practice."
59. Particularly interesting in this regard is the
dichotomy in the staff survey results between the perceived willingness
of direct line managers to listen to the ideas of staff (70% positive
result, 7 pp below the CSb), and the percentages who believe they
are involved in decisions affecting their work (28%, 22 pp below
CSb) or who believe they have a choice in deciding how they do
their work (40%, 30 pp below CSb).
60. HMRC management has introduced a series of initiatives
that are designed to improve staff's willingness to engage and
raise their concerns. These include opportunities to phone or
e-mail problems to staff forums or senior management. However,
Martin Lewis suggests that these have become "tightly managed
events", with issues rarely being fully addressed.
We are not in a position to comment, but note there was no improvement
in staff's willingness to challenge in the autumn 2010 survey
compared to the previous survey.
61. The implications of such a culture are deeply
concerning. As ARC put it in written evidence:
There is a presumption that projects sponsored at
the highest levels will not fail, but it is difficult to see how
success can be maximised without proper early consultation with
62. The unions also identified the level of scrutiny
that staff are subjected to as a major part of the problem. Simon
Boniface, of PCS, said that "some of the micro-management,
is just unnecessary". Staff felt that management did not
trust them and subjected them to excessive internal bureaucracy
and scrutiny. Both
unions agreed that senior management should:
take a deep breath, accept the fact that you were
not going to micro-manage people for a period of time; put a bit
of trust in them; empower them to do the job; see if they deliver
for you; and then if they do, you can stay with that approach
and you do not need to command and control.
ARC submitted a detailed series of proposals along
these lines on how morale could be improved.
63. HMRC's Chairman accepted that the organisation
needed "much better linkage" between the top of the
organisation and the bottom. He said that some areas of HMRC had
as many as thirteen management layers, and that it was their aim
to reduce this to seven or eight.
64. The evidence
we have received about the management culture within HMRC, supported
by the staff survey results, is very disturbing. There is a perception
that the Department is run on the principles of close control
and management scrutiny, with little opportunity for individuals
to develop autonomy and exercise their skills. Whilst there is
a need for consistency in dealing with people's tax affairs and
appropriate performance management, a culture such as the one
described to us is likely to harm staff morale and lead to disengagement
and poor performance.
65. It is particularly
concerning that staff feel unable to escalate possible problems
up the management chain or challenge established practice. In
principle one of the benefits of close scrutiny should be that
issues are anticipated and responded to. This does not appear
to be the case, as the handling of the 2009-10 PAYE reconciliations
shows. HMRC intends to reduce its layers of management to improve
communication; however this will achieve little unless the underlying
culture of the organisation is changed. We recommend that HMRC
engage constructively with staff and unions to see how this can
be achieved and report back to this Committee within the financial
66. The destabilising impact of large-scale job losses
has been accompanied by instability at the top of HMRC. After
the events of 2007 the Department was restructured around lines
of business and responsibilities at the top were rearranged, leading
to the current system of a non-Executive Chair working alongside
the Permanent Secretary and Chief Executive and Permanent Secretary
for Tax. The organisation is about to undergo another process
of structural change as a result of the Spending Review process.
67. As our predecessors noted, the 2009 Capability
Re-review of HMRC provided a partial vindication of the restructuring.
Success stories include the handling of personal data. The Department
reported only one major incident of protected personal data loss
in 2009-10, compared to five in 2008-09 and nine in 2007-08.
Nonetheless the Re-review still concluded that the Department
faced a "huge transformational challenge" and identified
numerous areas for potential improvement, with staff engagement
requiring urgent attention.
68. Whilst the restructuring of HMRC has resulted
in some benefits, ARC stressed in their written evidence the destabilising
impact of frequent structural change and changes of senior managementespecially
where that process has been poorly managed.
Mike Clasper implicitly acknowledged the importance of some of
these concerns when he stressed the importance that he attached
to having a new senior management team:
Lesley and I have built a new top team. That includes
the non-executives but crucially it is the leadership group of
HMRC. When I joined the department there were an awful lot of
interims, temporaries, acting-up and so on. So I think we have
a top team that I have a lot of confidence in.
69. Dame Lesley and Mr Clasper both stressed the
importance of the Department having a clear strategic direction,
which had been developed over a number of years following the
publication of Vision, Purpose and Way in 2008. We have already
discussed how the way in which cost cutting and staff reductions
have been managed had been criticised by some witnesses for a
lack of strategic direction.
Mike Clasper accepted that the frequent changes at the top of
the Department had impeded its ability to set a direction for
when I joined the department, although there were
individual elements of a strategy for the total department, basically
an overarching strategy for the total department one-HMRC
strategywas not in existence. We put that in place.
This view was broadly accepted by ARC, as we saw
earlier, although they were sceptical about whether the vision
could be achieved given the pressures on the Department.
has been through a period of instability at the top of the organisation
that has led to a lack of strategic vision. The current management
team has now been in place for two years. It has set out a vision
of where they would like the organisation to be, but have yet
to demonstrate substantial progress towards achieving those goals
and do not yet have the confidence of staff. We intend to monitor
progress in these areas closely during the Parliament.
71. As we discussed in the introduction, the structure
of HMRC was revised following the 2007 Capability Review and the
Poynter Review. The Department replaced the complex structure
that had been put in place at the time of the merger with a more
streamlined one around lines of business. In place of an executive
Chairman, the organisation is now headed by a non-executive Chairman,
the Permanent Secretary and Chief Executive, and the Permanent
Secretary for Tax, the senior tax professional in the Department.
The Department remains a non-ministerial Department, accountable
to Treasury ministers but not run by them.
72. Our predecessors expressed concerns that the
new structure might lead to confused lines of accountability,
particularly between the two Permanent Secretaries and in relation
to the role of the Chairman.
We also pressed the Minister on his role in relation to the Department.
He argued that it is right that HMRC should be a non-ministerial
department in order to ensure that ministers do not become involved
in taxpayers' affairs. However, he said he had a close relationship
with HMRC and described his role as:
similar to what the Treasury Select Committee has
to do, in that my role is to scrutinise. It is not to operate,
direct, but it is to scrutinise and question and press and push
and ensure that the concerns that we, as a Government, have about
HMRC's performance are conveyed and that HMRC and the Treasury
can work closely together in achieving the Government's objectives.
Ministers are accountable in Parliament for the general
administration of the Department, but have no decision-making
role. We agree that ministers should not be involved in individual
taxpayers' affairs. However, the limitations of the Minister's
role were apparent when he discussed the impact of legacy issues
such as the build up of open cases:
There is a big responsibility for management to try
to address that, and it is probably easier for management to sort
the problem out than it is for Ministers to sort it out. Maybe
I should put it this way: Ministers can make the matter worse,
but I am not sure that Ministers can make things better.
has gone through significant changes at the top of the organisation
since 2008. The new structure needs time before a proper evaluation
of its effectiveness can be made, including whether the model
of a non-ministerial department remains the appropriate one. The
respective roles of the Minister, non-executive Chairman and Permanent
Secretaries are something that we intend to return to later in
40 Treasury Committee, Seventh Report of Session 2009-10,
Administration and Expenditure of the Chancellor's Departments
2008-09, HC 156; Treasury Committee, Thirteenth Report of
Session 2008-09, Evaluating the Efficiency Programme, HC
Administration and Expenditure of the Chancellor's Departments
2008-2009, para. 66 Back
Civil Service People Survey 2010, http://www.civilservice.gov.uk/about/improving/engagement/people-survey-2010.aspx
Ev 97 Back
Government Response to Administration and Expenditure of the Chancellor's
Departments 2008-09, Cmd 7917, p. 8 Back
HMRC Corporate Business Plan 2010/11, http://www.hmrc.gov.uk/about/bus-plan-2010-11.pdf
accessed 26 May 2011 pp. 19-20 Back
HMRC Business Plan 2011-15, http://www.number10.gov.uk/wp-content/uploads/HMRC-Business-Plan1.pdf
accessed 6 June 2011 Back
Q 134 Back
Q 308 Back
Q 58 Back
Ev 90 Back
Q 134 Back
Q 86 Back
Ev 102 Back
Q 58 Back
Ev 97 Back
Government Response, Administration and Expenditure of the Chancellor's
Departments 2008-09, Cmd 7917, p. 8 Back
Ev w31 Back
Q 122 Back
HMRC Staff Survey, Autumn 2010, http://www.hmrc.gov.uk/research/ss-autumn2010.pdf,
accessed 25 May 2011 Back
Q 70 Back
Autumn 2010 Staff Survey Back
Ev w32 Back
HMRC Staff Survey Back
Ev 121 Back
Q 68 Back
Q 68 Back
Ev 121 Back
Q 134 Back
Annuals Reports, Table 1 Back
Cabinet Office (2009), HMRC: Capability Re-Review, http://www.civilservice.gov.uk/Assets/HMRC%20Capability%20Review%20web_tcm6-35127.pdf,
accessed 26 May 2011 Back
Ev 90 Back
Q 133 Back
See sections on cuts in anticipation and lose of experience above. Back
Q 133 Back
Q 58 Back
Treasury Committee, First Report of 2008-09 Session, Administration
and Expenditure of the Chancellor's Departments 2007-08, HC
35, para. 82 Back
Q 368 Back
Q 386 Back