Administration and effectiveness of HM Revenue and Customs - Treasury Contents

7  Conclusion

170. The evidence we have received in this inquiry has been disturbing. HMRC's delivery of services to the general public has fallen to unacceptable levels in several areas. Many factors have contributed to this process: overly ambitious expectations for IT projects, sustained cuts to resources, a management culture of "command and control", increasingly complex tax legislation and the legacy of the merger.

171. HMRC performs a crucial role and operates under significant pressures. The Department has faced and will continue to face substantial reductions in resources, tax policy has not always been designed with full consideration of the administrative impact and there will always be a degree of public and media dissatisfaction with a revenue collection agency, even if it is doing its job perfectly. The staff of HMRC face a difficult challenge in responding to these pressures and their continued professionalism and dedication are vital to ensuring that the Department regains the reputation of its predecessors as being among the most effective in Whitehall.

172. The management team at HMRC has been in place for two years. The broad view from our witnesses was that the team had improved its understanding of the issues facing HMRC and is committed to tackling them. However, the Department's achievements have been obscured by high-profile failings and staff do not have confidence in management. The Department faces a difficult few years as it resolves the legacy of 'open cases' in PAYE and introduces further ambitious IT upgrades. We will monitor HMRC's performance closely during this Parliament and expect the Department to deliver where substantial improvements have been promised.

173. Whilst genuine efficiencies have been, and will continue to be, made, we are concerned that HMRC's performance will continue to deteriorate if further reductions in resources are badly managed. There was near unanimity among our witnesses that the reductions made so far have had a damaging impact. We are particularly worried as there is no evidence that the methods that management will deploy to find 'efficiencies' and 'cost savings' have changed in any substantial way. We also believe there is a tension between the drive for 'more automation' and 'centralisation' and the desire to empower and boost the morale of staff who must deliver the cost savings.

174. HMRC collects revenue for the Government of more than a hundred times the amount it costs to run. Given the fiscal position, it would make little sense for the Department to be cut back further if resource reductions in addition to those plans already agreed would have the effect of reducing receipts, displacing disproportionate costs onto the wider economy or further eroding public confidence in the tax system. Great care will be needed before any further savings are planned or implemented.

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Prepared 30 July 2011