5 Service standards |
94. Much of the evidence received by the Sub-Committee
focused on the service standards being delivered by HMRC. This
evidence suggests there is widespread concern, particularly among
tax professionals, about current standards and the knock-on impact
on individuals and businesses. These issues have been raised with
the Sub-Committee before, for example during its 2007 inquiry
into The Efficiency Programme in the Chancellor's Departments.
95. HMRC's customer service figures suggest that,
as of September 2010, 72.5% of customers were satisfied with HMRC's
performance. This represents a slight fall (0.3 percentage points)
compared to the baseline of June 2008 and a considerable fall
(3.5 pp) compared to March 2010. The figure was higher (79.5%)
among small and medium-sized businesses (SMEs) and considerably
lower (64.7%) among tax agents.
96. There was scepticism in some of our evidence
about the credibility of HMRC's service standards and targets.
Indeed, some representative bodies have developed their own surveys.
Our predecessors recommended in 2007 that new standards needed
to be developed in consultation with users.
In their evidence to this inquiry the ICAEW concluded that this
had not occurred.
John Seddon, of Vanguard Consulting, argued that HMRC has focused
on reducing transaction costs, rather than looking at the process
from an "end-to-end" consumer perspective.
97. Witnesses from the professional bodies were primarily
concerned about the amount of time it can take to get an accurate
response from HMRC, either by post or over the telephone. Paul
Aplin, the Chair of the Institute of Chartered Accountants England
and Wales's Technical Committee, told of his experiences as practitioner
in the South West:
Five or six years ago, if we wanted a relatively
simple thing done, like a PAYE coding changed, it was one telephone
call, the coding would be changed that day, and it was a very
simple and efficient process. If I want that simple thing done
today it can take me literally months [...]
The Chartered Institute of Taxation described customer
experience of HMRC as being "at an all time low",
whilst its Low Incomes Tax Reform Group was damning:
From the perspective of unrepresented taxpayers on
low and modest incomes, HMRC is now too often seen as an organisation
that is unable to collect the right amount of tax, increasingly
difficult to contact by phone, letter or in person, yet unforgiving
of customer error and relentless in its pursuit of small debts.
98. HMRC have acknowledged that their performance
in providing services to the public has been unacceptable. Its
Chairman, Mike Clasper CBE, told us that the most recent problems
had largely been caused by the exceptional nature of the PAYE
reconciliations process in 2010:
I am not happy with the service that we have been
providing and none of us is; none of the top team is. Basically,
our contact centres have been overwhelmed by the number of calls
that were created by [...] dealing with eight years in one.
welcome HMRC senior management's acknowledgement that the Department's
customer service performance has been unacceptable. We are not
convinced, however, that the problems can solely be accounted
for by the problems with PAYE in 2009-10. The evidence received
by us and our predecessors suggest that poor service standards
have been an issue for many years and have not been fully reflected
in HMRC's customer service measures.
100. We reiterate
our predecessor's 2007 recommendation that HMRC work closely with
the professional bodies, tax charities and businesses to develop
a series of performance indicators that credibly reflect customers'
end-to-end experience of dealing with HMRC and that these indicators
are regularly published as part of the transparency section of
its five-year business plan. We are disappointed that our predecessor's
recommendation was not acted upon and expect to see meaningful
progress within the next twelve months.
101. The evidence we received raised five issues
in particular: the performance of contact centres, the time taken
to respond to post, the displacement of costs from HMRC onto businesses
and individuals, the need for face-to-face contact or robust alternatives
and HMRC's drive towards online communication. In this chapter
we examine each issue in turn, before drawing some overall conclusions
and looking ahead.
102. The performance of HMRC's contact centres was
raised in evidence on several occasions. We identified three related
issues in the evidence we received: the amount of time taken to
get through to HMRC contact centres; the consistency of advice
provided by the contact centres and the cost of such calls to
taxpayersespecially to those without landline telephones.
103. Our predecessors examined contact centre performance
in their last report on the Administration and Expenditure
of the Chancellor's Departments 2008-09. They concluded that
contact centre response rates, though improving, remained at unacceptably
104. The performance of HMRC's contact centres was
examined in detail by the National Audit Office and the Committee
of Public Accounts (PAC) in the first half of 2010. Both reports
were critical. The PAC concluded:
The Department's performance in responding to calls
has been poor. In 2008-09, the Department answered only 57% of
the 103 million calls to its main helplines, compared to an industry
standard of 95%; callers waited on average two minutes, and nearly
four minutes in peak periods to speak to an advisor; and yet contact
centre staff spent only 38% of their time handling calls against
an industry benchmark of 60%.
The Report noted that the Department was taking steps
to improve its performance, but called on it to be more ambitious
in this regard.
105. The demands placed on HMRC's contact centres
vary throughout the year, following the tax and benefits cycle.
A written parliamentary answer in October 2010 showed that the
percentage of calls answered ranged from 92.6% of 3.8 million
calls in November 2009 to 41.1% of 13.8 million calls in May 2010.
106. HMRC provided us with the average percentage
of calls answered in each year since HMRC's creation. These show
improvement on the 2005-06 average of only 37% of calls answered
to reach 70.9% of calls answered by 2007-08. However, performance
fell back in 2008-09 to 57.5% of calls answered, before improving
again in 2009-10 to 75.8% of calls. According to HMRC's Annual
Report and Accounts, performance fell back again to 48% in 2010-11.
The Department is committed to achieving the industry benchmark
of 90% of calls answered in a day by March 2012.
107. The PAC recommended that the Department should
be more ambitious in its target, and aim to match industry best
practice of 95% of calls answered. In its response, the Department
The significant peaks and troughs in demand for the
Department's services make it difficult for the Department to
reach best practice of 95% without a significant increase in resources.
Above 90%, the marginal cost of each percentage point improvement
would be significant and inefficiency would increase, with advisers
spending more time waiting for calls. The Department believes
that its aspiration to answer 90% of call attempts, as soon as
possible, represents the right balance between ensuring value
for money and providing an appropriate customer experience. However,
achieving this aspiration will depend on the balance of priorities
across the whole of the Department's business and the resource
levels available to achieve these.
performance at responding to telephone calls has been patchy at
best and unacceptable at worst. Based on past performance we do
not have confidence that the Department will be able to achieve
its target of 90% of calls answered in a day by March 2012. We
recognise that there had been improvement in performance prior
to the recent rise in contact due to the PAYE-related issues in
2010. However, even with that improvement, the Department was
falling well short of the target, whilst the fall in performance
in 2010-11 suggests there is insufficient capacity to deal with
unexpected surges in demand. Given that it has been HMRC's strategy
to push so many taxpayers and tax credit claimants into communication
by phone it is important that performance in this area improves
rapidly. We will return to this issue regularly, and will assess
the Department's performance against its target in 2012.
GETTING THE RIGHT ANSWER
109. A common theme in our the evidence we received
was that it had become harder to deal with a tax issueparticularly
a complex issuein a single call to HMRC. For example, the
Society of Trust and Estate Practitioners told us:
It appears that in order to cut costs HMRC is putting
greater reliance on relatively junior, inexperienced staff to
answer front line queries. Taxpayers with more complex affairs
are therefore finding it difficult to obtain information and guidance
from HMRC on issues in an acceptable time frame.
The tax advice charity Taxaid agreed:
A general point we have experienced is that HMRC
skills of front-line staff are probably about the same, or possibly
a bit worse, than 5 years agoand definitely worse than
10-15 years ago when staff facing the public had much more hands
on knowledge and experience of tax. Since processing and customer
contact have been separated, the decline has been marked.
Whilst the Low Incomes Tax Reform Group told us:
from the perspective of unrepresented taxpayers and
also tax credit claimants [...] You can ring up and get the right
answer but, equally, you can get the wrong answer. [...] In one
call that we took just this week, somebody had been told by a
call centre operator that they should be keeping records for seven
years, an individual not in business. No, the right answer is
22 months after the end of the tax year in question; certainly
not seven years. There is a lot of misinformation going out.
110. Dame Lesley Strathie accepted that there would
be cases where advice was incorrect or incomplete. She observed
that HMRC dealt with "1 billion transactions a year"
and "never on any day is everything going to work for everybody
in that sort of volume".
However, she defended the quality of advice provided by contact
centre staff and said that customer service satisfaction scores
exceeded industry standards:
What that tells us is that the great British public
will suffer quite a lot, in return for the service they get when
they get through to speak to our staff, because the satisfaction
level when they do speak to our staff is very high. I think it
is about 87%.
was significant concern among our witnesses that it has become
increasingly difficult to resolve a complex tax issue in a single
phone call to HMRC. We recommend that HMRC examine its processes
for escalating complex queries to ensure this is done quickly
and appropriately. We also understand that the Department is running
a pilot aimed at ensuring contact centre staff dealing with tax
credits and benefits are better able to answer more complex queries
first time around. The pilot is to be reviewed over summer 2011.
If this pilot is successful HMRC should look at expanding it to
all areas of tax.
COST OF CALLS
112. The PAC report observed that the average wait
to speak to an adviser was two minutesrising to four minutes
during peak periods.
We received evidence suggesting that HMRC could reduce the costs
to taxpayers of calling their helplines by switching from using
0845 numbers to using 0345 numbers instead.
Dame Lesley said that HMRC was in the process of reviewing and
reducing the number of telephone numbers. She committed to examine
the issue in more detail. Subsequently HMRC wrote to us, accepting
changing to 0345 numbers would benefit some, perhaps
many, customers, primarily those telephoning from "pay as
you go" mobile phones. However not all customers would benefit
and some would, on the basis of current tariffs, incur additional
costs when compared to 0845.
There would also be significant additional costs
for the Department associated with a change during the current
HMRC telephony contract (which expires in June 2013). Initial
"ball park" estimates suggest that these costs could
be in the range £5m-£15m depending on the implementation
timescale and contractual negotiations.
welcome the fact that HMRC is reducing the number of telephone
numbers it operates. However, at a time when calls are not being
answered quickly, it cannot be acceptable that those without landline
telephonesoften less well off members of societymay
be being charged more as a result of the use of 0845 numbers.
We recommend that HMRC investigate alternatives to 0845 numbers,
including 0345 and freephone numbers, as part of the process of
agreeing its next telephony contract and ask the Department to
brief us on its key aims in negotiating that contract. As an interim
measure we recommend the Department examine whether a non-0845
number could be provided for tax credit claimants and publicised
through tax charities.
114. We have received a substantial number of letters
from the public expressing concern and even disbelief about the
time taken by HMRC to respond to post. Cases of replies being
received only after two or three months, in each case from a different
geographic location, are not uncommon. HMRC's record in responding
to post was also mentioned in a number of submissions and in evidence
to us. Paul Aplin told us:
We regularly wait two to three months for a reply
to a letter and when we ring to chase, the answer we regularly
now get is, "We can't find the letter". If you chase
below two months the answer is, "It hasn't come to us yet".
If you wait too long the answer is, "We can't find it";
so you have to write again and go through the process again.
The Institute of Chartered Accountants of Scotland
said staff had to be redeployed within HMRC to address post backlogs
once they reached crisis levels, leading to shortfalls elsewhere.
Submissions by individuals referred to two months as being a standard
wait for a reply, whilst Tax Help for Older People put the figure
at three months and described correspondence with HMRC as being
"a communication channel of last resort".
115. At our request HMRC provided graphs showing
performance on post turnaround and post accuracy. These suggest
that, as of November 2010, approximately 60% of post received
by HMRC was being "turned around" within 15 days and
90% had been turned around within 40 days. Performance generally
was fairly consistent except for 2009 when, in March, turnaround
within 15 days fell to less than 40%, and performance generally
was more inconsistent than previous and subsequent years.
However, it was not clear from the figures whether 'turnaround'
included the sending of holding replies, and no record appears
to be kept of follow-up correspondence.
116. Delays in responding to post do not only cause
frustration and inconvenience to taxpayers. The Association of
Taxation Technicians and Chartered Institute of Taxation both
made reference to HMRC's Debt Management Unit attempting to recover
incorrect amounts of tax because relevant mail had not been opened.
Moreover, as the Institute of Chartered Accountants of Scotland
noted, delays increase the inefficiency in the system, as taxpayers
and agents who have not received a response to their letter call
already busy contact centres to chase progress.
117. HMRC is piloting a system of scanning post electronically,
allowing it to be passed to relevant offices without having to
be physically moved from one location to another. This may alleviate
some delays, but the essential question of whether there are enough
people available to respond to the post in a comprehensive way
118. We recognise that the time taken to respond
to an item of mail is not always a good indicator of performance.
A complex technical query could be expected to take some weeks,
whereas a routine change of details should be dealt with much
quicker. A quick but incomplete reply will often be worse for
both taxpayer and HMRC than a more considered response. However,
the evidence we have received, correspondence from the public
and the coverage in the professional press suggest that long delays
in responding to post at HMRC are endemic. This is unacceptable.
Such delays increase demand elsewhere in the system, as taxpayers
and tax credit claimants chase progress, increasing costs for
the public and HMRC alike.
119. We recommend
that HMRC draw up minimum service standards for dealing with post
in a timely and accurate fashion in consultation with the professional
bodies, tax charities and businesses representatives. Such standards
should recognise the distinction between simple and complex queries,
and look at the progress of correspondence end-to-end rather than
in relation to individual items of post. We recommend that the
Department publishes an indicative timetable for achieving those
standards and keeps us regularly updated on progress towards meeting
120. HMRC's programme of local office closures is
well documented. Between 2006 and 2008 HMRC conducted a series
of reviews aiming towards consolidating its estate and re-locating
its staff. By December 2008 the reviews had concluded that 258
premises would be vacated whilst 235 would be retained.
The Public and Commercial Services Union put the figure of offices
closed to date at around 200 and noted that opening hours have
also been reduced.
121. Concerns were raised with us that the closure
of local offices would impact primarily on the disadvantaged and
elderly. For example, Tax Help for Older People told us:
This lack of accessible information is compounded
by the programme of closure, contraction or amalgamation of Enquiry
Centres (ECs), leaving huge numbers, particularly those disadvantaged
by disability or transport difficulties, without practicable recourse
to face-to-face help and advice. Even when there is an EC close
at hand, the complexities of telephoning for an appointment and
then getting past the barrier of a floorwalker whose primary task
is to direct you to a telephone or computer militate against our
122. Richard Murphy, of Taxresearch LLP, raised the
issue of the social impact of closing offices. He argued:
Any revenue raising department has not only to raise
tax, but also be seen to do so fairly, appropriately, helpfully,
and justly, and in the process it must properly differentiate
those who are seeking to pay the right amount of tax in the right
place at the right time (tax compliant behaviour) and those who
are seeking to either avoid or evade their obligations. This requires
a very visible presence in the community because it can rightly
be argued that tax is the consideration in the social contract
between people and their government, and that contract must be
seen to have impact in the places where people live.
123. HMRC stressed that they were retaining a face-to-face
presence in many places across the country, but the closure of
local inquiry centres were justified on the grounds of value for
money and declining use. Mike Clasper told us:
What we are trying to do is follow where the taxpayer
is going. This is an apples for apples comparison. In 2006-07,
in inquiry centres face to face, versus where we are today, on
the number of people coming into those places, the footfall had
declined 40%. Although there are still lots of people going into
those inquiry centres, and Lesley has already explained the efforts
we will need, outreach and so on, the number is going down and
down and down every year. [...] I think we are trying to follow
the customer, not drive the customer.
The Minister agreed:
[...] there is one inquiry centre where HMRC has
been paying £162,000 a year in rent and that inquiry centre
gets, on average, four appointments a week. There are another
two examples where the rent is £26,000 and £34,000 a
year and they are getting, on average, one appointment a week
each. It is clearly not sensible to pursue that but we can be,
and I think HMRC can be and is being, more imaginative in the
sense that there doesn't necessarily need to be a separate HMRC
office incurring all those costs. HMRC can make use of job centres
or council offices and so on and be much more creative in the
way that is done.
124. The Low Incomes Tax Reform Group have suggested
that enquiry centres can be poorly advertised and difficult to
find and suggested that falling footfall may be as much about
lack of access as lack of demand for the services they provide.
Robin Williamson, for example, observed that whilst the number
of people using HMRC's enquiry centres had declined over the previous
three years, the number of people using Tax Help for Older People's
services had "virtually doubled".
125. We urge
HMRC to examine how far declining use of Enquiry Centres is due
to factors such as inconvenient opening hours or lack of advertising.
More broadly, we recommend that the Government examine whether
withdrawing its physical presence from an area has a mediumor
long-term impact on local compliance.
126. Some witnesses speaking for unrepresented taxpayers
accepted that continuing a full network of centres was unsustainable
given the current spending settlement. They had a number of suggestions
of how a face-to-face presence could be maintained in more efficient
ways, some of which HMRC have taken up. These included: introducing
well-advertised part-time opening hours that fit with people's
other commitments, sharing premises with other centres of advice
such as Citizens Advice Bureau and the Department of Work and
Pensions, or expanding mobile advice centres.
We welcome the fact that
HMRC's Change Plan commits to "providing targeted help for
vulnerable customers who most need face-to-face support",
but we do not believe face-to-face support should solely be available
to the vulnerable. The Department has a strategic approach focused
on delivering contact through contact centres and online. Face-to-face
contact must be an integral part of that strategy, not an exception.
We recognise that savings must be made; the tax charities and
other bodies who submitted evidence to us had a number of imaginative
suggestions for how face-to-face services could be delivered more
cost effectively. We recommend that HMRC look closely at alternative
ways of providing wide coverage of face-to-face advice such as
co-location with other public offices, convenient part-time opening
hours and mobile advice centres.
127. HMRC has put a great deal of resources in recent
years into expanding its online presence. Their written evidence
stressed the value of encouraging taxpayers and other users to
use online methods to administer their tax affairs:
we will migrate "willing and able" customers
to online channels; releasing more of our contact centre resource
to dealing with tax credits customers, where telephone contact
is the most effective channel.
Dame Lesley was clear about where the Department's
priorities lie in terms of communication:
The Government strategy is digital; not the telephone.
It is that we move as much of our service online and then we provide
assistance for people who can't use online.
In particular HMRC has been developing, alongside
the Department for Business and Innovation and Skills, a 'one-click'
system for registering businesses and a 'dashboard' through which
businesses can view all their tax liabilities in place.
128. The increasing provision of online services
by HMRC is desirable and, as the ACCA said in their evidence,
the demand for such services is "irresistible".
HMRC told us that:
Services that we have put online have had a high
take-up rate. Current rates for online filing are 75% in Self
Assessment, 37% in Corporation Tax, 98% in PAYE for employers
End of Year returns and 71% in VAT compared to rates of 23%, 2%,
65% and 5% respectively in 2005-06.
129. Paul Aplin of the ICAEW told us that HMRC had
made significant efforts to engage with professional bodies in
implementing some of its moves online, with positive results.
He indicated that there was a noticeable difference in the success
of IT projects that had followed the principles outlined in Lord
Carter of Coles' Review of HMRC's Online Services and those
that had not.
130. However, HMRC's movement online has not been
without its problems and its critics. The online tax credits portal
has been shut down since a large-scale fraud in 2005.
The Forum for Private Business argued that many online processes
are too complex for their members to use and gave an example of
a relatively simple change to information on HMRC's website that
they were told could take up to six months.
A survey of business people by the Institute of Directors found
that only 16% considered it easy or very easy to find the information
they needed on the HMRC website, although the IoD acknowledged
that improvements had been made.
131. The principal criticism we had from our witnesses
was the speed with which online options are replacing, rather
than complementing, alternatives, running the risk of excluding
those without reliable interest access. One element of this was
access to information. Robin Williamson, of the Chartered Institute
of Taxation's Low Incomes Tax Reform Group, told us:
More and more information put out by HMRC is online,
less and less on paper. That instantly excludes a great many often
poorer, often older people, who are not comfortable using the
internet or have never used a computerpeople with disabilities
can'tand people who live in areas that are remote and have
unreliable broadband access.
Tax Help for Older People described the replacement
as "unacceptable"observing that more than 60%
of people over the age of 65 have never used the internet. They
Re-introducing some basic written information may
appear at first sight to be money-consuming, not saving, but taxpayers
who can fulfil their obligations in an informed way do not make
expensive demands on HMRC by either phoning contact centres repeatedly,
completing forms incorrectly or failing to take appropriate action
at various times. Preventive action by providing clear, simple
and accessible information saves money.
the production of advice and guidance leaflets may save money
in the short term. However, it will force those who do not have
access to the internet to turn to the telephone or enquiry centres
for advice, and may lead to an increase in mistakes which are
costly for HMRC to rectify. HMRC should examine reintroducing
selected, well targeted, leaflets aimed at groups such as the
elderly who are most likely to lack internet access.
133. A similar trend can be seen in relation to online
filing for businesses. Again, the concern was not that HMRC was
putting more information online, or allowing businesses to file
online. Both of these things were welcomed by witnesses. The concern
was with the speed with which HMRC has moved from providing a
service online to requiring (mandating) it. For example, HMRC
requires all Company Tax Returns for periods ending from 31 March
2011 to be filed online, yet figures in a report commissioned
by HMRC in 2008 suggest 9% of businesses do not have access to
a computer, let alone broadband internet.
134. From HMRC's perspective mandating online filing
substantially increases take-up of what is, for them, the most
efficient means of filing and eliminates the need to run parallel
systems. Nor can we lose sight of the fact that many businesses
will prefer online filing. However, mandation excludes those without
easy access to the requisite IT. Even where exemptions are permitted,
taking advantage of them may add an additional layer of worry
and complexity to the process of paying taxand in so doing
may increase the risk of individuals becoming non-compliant through
a lack of opportunity and the costs in terms of both time and
money. As the Chartered Institute of Taxation said in their evidence:
HMRC need to make it easier to comply. The increasing
mandation of online filing causes us concerns. While more online
filing does offer real efficiencies, it does bring problems (e.g.
there have been delays in iXBRL corporation tax software for all
but the smallest and largest companies). HMRC also need to maintain
alternatives to online filing for those without access to secure
has been relatively successful at enabling taxpayers to pay many
of their taxes online. However, requiring online filing prematurely
runs the risks of excluding those without reliable high-speed
internet access, dissuading those who are not computer literate
from being tax compliant and overloading systems that have not
had time to bed in. HMRC should always ensure it has robust, well-advertised
alternatives in place for those who cannot submit online and publish
a statement of its commitment to continue to provide a robust
free filing service for basic tax return filing.
USE OF EMAIL
136. A possible response to the delays in responding
to post would be for HMRC to accept much more correspondence via
email. This proposal was put forward by the ICAEW, ICAS and CIOT
in their evidence and Dame Lesley Strathie told us that, in her
experience, there was much for demand for email rather than face-to-face
we would welcome any moves towards greater use of email or secure
messaging by HMRC, we accept there are genuine concerns on the
grounds of security. Without proper planning, greater use of email
may also achieve little more than transferring the bulk of the
correspondence backlog from one medium to another. We recommend
that the Department make a clear statement of their intent in
relation to email and secure messaging.
Service standards and the efficiency
137. In the light of this evidence, we asked witnesses
what they thought of HMRC's claim that there had been no overall
negative impact on performance as a result of the Department making
£1.1 billion of efficiency savings.
Chas Roy-Chowdhury, of the ACCA, told us that this claim was "nonsense".
Paul Aplin from ICAEW told us: "For five years those of us
at the coalface have been seeing service standards decline".
He went on to explain "I think the department has more than
it can handle and it has had its resource cut by 5% a year, year
However, he did not feel that HMRC had been deliberately misleading
in saying that these savings had not had a negative impact. "I
do not think they are lying. I think they just have a rather different
perception from the perception those of us at the coalface have."
We also asked representatives from the unions for their opinion
on HMRC's statement on savings and performance. Simon Boniface
of the Public and Commercial Services (PCS) union "would
confidently say" that the statement was untrue.
138. Responding to these views, Dame Lesley Strathie
told us "performance in terms of the Department's core business
is to collect the revenue and pay out the benefits and credits".
She conceded that in some other areas performance was not satisfactory,
telling us that "customer service and employee engagement
are the two things that we are not proud of and we know that we
have to do a lot better".
Mike Clasper, HMRC's non-executive Chairman, didn't feel that
the customer service problems were directly related to the resources
pressed Mr Clasper on whether he would tell Government if the
Department was not being given the resources it needed to operate
effectively. He told us that HMRC management had said to the Government
"we were passionate that there is a tax gap we can close
and that if we were at 25% reduction we would not have been able
to close the tax gap any further, but with this [£917 million]
reinvestment that we have talked about we will close the gap by
£7 billion a year."
139. There was
near unanimity among our witnesses that the efficiency savings
at HMRC have been partly responsible for the decline in service
standards and, therefore, that HMRC's claim to have delivered
£1.1 billion of savings "without overall negative impact
on performance" lacked credibility.
140. Although the majority of evidence we received
was critical of HMRC's service standards, feedback was largely
positive in relation to the Department's Large Business Service.
Richard Baron, of the Institute of Directors, told us:
what has been done at the large end, introducing
these personal customer managers who will co-ordinate the work
of the different bits of HMRC who will have to interact with a
large group, does seem to have been a big success storyto
the extent that they have now extended it still further down the
line into what they call the large and complex group who are outside
the ambit of the large business service.
This has been achieved despite reductions in headcount
in the service.
HMRC in their evidence trumpeted the success of the Unit in raising
the tax yield from their Large Business Service from £3.6
billion in 2005-06 to £6.3 billion in 2009-10. The Sub-Committee
is in the process of taking further evidence on the unit's effectiveness
at delivering compliance. The
features of the Large Business Service that appear to have led
to high customer satisfaction ratings are personal contact with
an individual responsible for a case and the ability of a single
contact point to co-ordinate HMRC activity across departments.
Whilst it is not feasible for every individual or small business
to have access to that level of service, these are features that
HMRC should be trying to replicate as closely as possible in its
contact centres through effective channels of escalation and responsibility.
141. HMRC has repeatedly stressed in its evidence
to us the importance of its 'customer-centric' approach to managing
contact with taxpayers and other users. Its written evidence stated:
To help us deliver our Vision, we have developed
a customer-centric business strategy using our understanding of
customer attitudes and behaviours to focus our efforts where they
will have the biggest effect, tailoring our servicesand
the way we workto the needs, abilities and motivations
of our customers.
But it went on:
We aim to shift the behaviour of customers where
we can in order to keep our and our customers' costs to a minimum,
maximise revenues, and provide good customer service.
142. A common complaint against HMRC has long been
that it does not understand how its work impacts on the taxpayers
that it deals with. Small businesses in particular have long taken
the view that HMRC simply does not understand how they operate.
Individual taxpayers, particularly those making payments through
PAYE, often believe that HMRC will automatically calculate their
tax correctly, whilst in reality HMRC is reliant on the information
provided by them and their employers.
focus on customer research is to be welcomed insofar as it leads
to a greater responsiveness to customer needs. To be effective
this quantitative work needs to be supported by on the ground
experience of how taxpayers operate.
our recommendation that HMRC staff at all levels should spend
time in tax practices, charities and businesses better to understand
the people they deal with and how changes at HMRC affect them.
Examples of how this could be achieved include day visits, short
secondments and work shadowing.
143. The ACCA said that HMRC's claims to be customer-centric
would "ring hollow" to many in the light of the problems
More fundamentally, a customer-centric strategy should be about
responding to customers' needs, whilst much of the evidence we
discussed aboveparticularly in relation to online mandationsuggests
the strategy has actually been about redirecting the public to
cheaper, more impersonal forms of communication. HMRC
are right to base their customer-service strategy on research
into what taxpayers want. However, we question whether a strategy
focused around shifting customers' behaviour can truly be described
as customer-centric. Where behaviour shifts are achieved voluntarily
through the increased attractiveness of (for example) an online
alternative the claim is credible. It is not credible, however,
where contact options are narrowed down to the one HMRC would
prefer customers to use. The evidence we have received suggests
that both elements are present in HMRC's current approach.
144. A key component of HMRC's approach is a focus
on demand management. Figures supplied to the Sub-Committee by
HMRC suggest that around 40% of the calls made to HMRC are "potentially
avoidable or could be migrated to a more cost effective channel."
These include 7.34 million calls chasing progress and 6.17 million
calls due to poor quality initial contact. Mike Clasper told us
that 'chasing' meant relatively small increases in demand could
have disproportionately large impacts on contact centres:
there can be relatively small increases in demand;
we only have 10% more callers than we had last year, but the issue
is they are not getting through, so they recall and they recall
and they recall, and somebody ends up with a two hour 20 minute
phone call and it is not acceptable.
145. HMRC intends to expand its demand management
programme and has undertaken to improve the design of forms and
improve accountability for demand management targets within teams.
In 2010-11 it estimated that the programme eliminated some 6 million
unnecessary calls and diverted a further 7 million to automated
146. The figures support those of our witnesses who
argue that poor quality or inefficient contact at one point in
the system leads to greater inefficiency and cost elsewhere.
HMRC admits that many of the problems in responding to calls to
contact centres have arisen from the handling of the National
Insurance and PAYE Service upgrade and the large number of calls
generated, which vastly exceeded the number it expected.
Similarly, poorly worded information can lead to confusion among
taxpayers or benefit claimants, thereby increasing calls. For
example we heard that a letter telling people repaying overpayments
of tax credits that their direct debit was being renewed was worded
in such a way as to give the impression of being a new direct
debit, leading to concerned calls from claimants.
As noted above, delays in responding to post have also increased
the number of 'chasing' calls to HMRC.
147. HMRC accepted this point in their written evidence,
saying that they were reviewing their external communications.
We pressed Dame Lesley Strathie on how HMRC intended to
reduce unnecessary demand. She replied:
We have a programme of work to eradicate 13 million
of what we would class as non-value calls because, generally speaking,
they are people who do not trust us and want to ring up to check.
There is no value to the customer, and there is no value to the
organisation. It is how we move those through, improve face to
face for the 25% of people who will always need some kind of help,
with better messaging and telephones to direct people through
electronically, and improving capability in our work force.
management of demand will require HMRC to have a good understanding
of how changes made in one part of the organisation will impact
upon others and, most importantly, the impact such changes will
have on the public. The Department accepts that many of its current
communications generate more contact and inefficiency. Improvements
in external communication therefore have the potential to make
savings vastly in excess of their cost. We recommend that the
Department look at how it draws up its public communications and
establishes links with tax charities and professional bodies to
ensure all major communications and guidance are tested at a very
early stage on focus groups before being made public.
149. The prospects of HMRC's customer service improving
in the near future appear bleak. The Department is still wrestling
with the fall-out from the implementation of NPS and does not
expect to clear the backlog of open cases until 2012. HMRC's written
evidence suggests the Department accepts and understands many
of the issues. However, Mike Clasper admitted that, in relation
to customer service, "we are not going to be in a great place
Paul Aplin and Chas Roy-Chowdhury agreed that standards were likely
to get worse before they got better, particularly if resources
continued to be cut.
150. The Department has recruited or redeployed an
additional 1,000 contact centre staff to increase capacity ahead
of the tax credit renewal deadlineechoing a similar move
made in 2005-06.
We welcome this move and the Department's commitment to ensure
that tax credit applicants do not lose out owing to continuing
demand on the PAYE side. However, redeploying staff runs the risk
of reduced performance elsewhere. Dame Lesley assured us that
the redeployed resources came from other areas of the business
"where that is shrinking".
151. HMRC's poor performance in relation to customer
service is concerning, not just because of the unacceptable delays
and costs being placed on members of the public and businesses,
but also its possible impact on the tax take. Several witnesses
suggested links between the ease of complying with a tax regime
and the compliance rate. Chas Roy-Chowdhury of the ACCA suggested
that if it was not for the fact that Income Tax and VAT were collected
more or less automatically, the Government would be facing a major
revenue crisis because of the difficulties of communicating with
152. Similarly, reputational damage done to HMRC
by the errors to PAYE codes in January 2010 and the subsequent
reconciliation issues in late 2009-10 tied into a wider concern
that a distant, underfunded and poorly performing HMRC could diminish
respect for the institution and the tax system generally.
As the Low Incomes Tax Reform Group put it:
HMRC is now too often seen as an organisation that
is unable to collect the right amount of tax, increasingly difficult
to contact by phone, letter or in person, yet unforgiving of customer
error and relentless in its pursuit of small debts. This image
may have been exaggerated by parts of the press, but failings
occur too frequently to be dismissed as 'isolated instances'.
153. ICAS told us that "Other jurisdictions
admire the way in which HMRC achieves its level of compliance
and the UK citizenship's cultural attitude is something to be
preserved and valued." Over 97% of the tax that is paid,
is paid voluntarily.
The danger for HMRC is that by continuing to offer a poor service
the UK taxpayer becomes increasingly disinclined to have contact
with the Department and the culture of voluntary compliance is
154. The service
standards provided by HMRC cannot be treated as a separate issue
from the collection of tax revenues and the level of tax compliance.
Current levels of voluntary compliance should not lead to complacency:
any negative change in attitudes regarding paying taxes may take
many years to filter through into reduced tax compliance and tax
yields, at which stage it may be very hard to reverse. If a view
of dealing with HMRC as being a frustrating, costly and time-consuming
business were to become entrenched then there is a significant
risk of public respect for the institution, and the tax system
more generally, being lost.
96 Treasury Committee Eighth Report of Session 2006-07,
The Efficiency Programme in the Chancellor's Departments,
HC 483 Back
Ev 107 Back
For example the ICAEW has published three surveys of its Members'
experiences. The sample sizes of these surveys are too small to
be statistically robust, but their results support the statements
made by ICAEW witnesses. www.icaew.com/.../taxrep-43-10-HMRC%20service%20standards%20-%20results%20of%20survey.ashx
accessed 7 June 2011 Back
Treasury Committee, Eighth Report of Session 2006-07, The Efficiency
Programme in the Chancellor's Departments, HC 483-I, paras.
Ev 77-78 Back
Ev w49 Back
Q 77 Back
Ev w19 Back
Ev 92 Back
Q 142 Back
Treasury Committee, Seventh Report of Session 2009-10, Administration
and Expenditure of the Chancellor's Departments, HC 156, para.
Committee of Public Accounts, Twenty-fourth Report of Session
2009-10, HM Revenue and Customs: Handling Telephone Enquiries,
p. 3 Back
HC Deb, 11 October 2010, col. 240W Back
HMRC 2010-11 Annual Report and Accounts, p. 14; Q 136 Back
Ev 97 Back
HM Treasury, Treasury Minutes on the Tenth to the Eleventh and
the Fourteenth to the Thirty Second Reports from the Committee
of Public Accounts Session 2009-10, Cm 7885, p. 63 Back
Ev w8 Back
Ev w5 Back
Q 80 Back
Q 222 Back
Q 220 Back
Handling Telephone Enquiries, p. 8 Back
Q 109; Ev w42 Back
Ev 125 Back
Q 99 Back
Ev w11 Back
Ev w33-w34; Ev w36; Ev w24 Back
Ev 107-110 Back
Ev w28; Ev w19 Back
Ev w11 Back
HMRC website: http://www.hmrc.gov.uk/news/changes-incoming-mail-update.htm
accessed 8 June 2011 Back
HMRC website, http://www.hmrc.gov.uk/local/change-programme.htm,
accessed 23 May 2011 Back
Ev 80-81 Back
Ev w23 Back
Ev w53 Back
Q 282 Back
Q 424 Back
LITRG, 'The Slow Death of the Inquiry Centre', http://www.litrg.org.uk/Migrant/migration-2010-01-28/news/2009/the-slow-death-of-the-enquiry-centre,
accessed 25 May 2011 Back
Q 109 Back
Ev w24; Ev 94 Back
Ev 97 Back
Q 278 Back
Ev 97 Back
Ev 85 Back
Ev 97 Back
Q 83 Back
Ev w40 Back
Ev w14-w17 Back
Institute of Directors, Tax Administration, Where Next?,
accessed 25 May 2011 Back
Q 109 Back
Ev w224 Back
GfK Business, The Extent and Nature of the Use of Computerised
Accounting by Businesses to meet their VAT and Corporation Tax
Obligations, p. 13 Back
Ev w20 Back
Q 279 Back
Ev 16 Back
Q 80 Back
Q 81 Back
Q 79 Back
Q 7 Back
Q 248 Back
Q 247 Back
Q 254 Back
Q 113 Back
Ev 103-106 Back
Ev 97 Back
See for example, the Institute of Directors' Report Tax Administration:
Where Next? Back
Q 111 Back
Ev 86 Back
Q 143 Back
Ev 96-97 Back
For example, Ev w11 Back
Q 142; Ev 83 Back
Ev 131 Back
Ev 96-97 Back
Q 226 Back
Q 145 Back
Q 81 Back
HC Deb, 2 March 2011, col. 399 Back
Q 217 Back
Q 76 Back
See for example, Ev w13, Ev w55; Q 81 Back
Ev 92 Back
Ev 102 Back
See for example, Ev w13 Back