1.HMRC’s service has not been good enough and has failed to meet the standard to which taxpayers are entitled. The Department has acknowledged that the level of service it provided in 2014–15 and for periods of 2015–16 was unacceptable. In one week in October 2015, the average time taken for HMRC to answer the telephone reached almost 35 minutes and, in 2015–16, 28% of calls remained unanswered as customers simply gave up. Following the recruitment of 2,400 staff, HMRC was able to recover customer service performance in the second half of 2015–16 to previous levels. HMRC told us that it had maintained this improvement, handling over 90% of calls in April and May 2016, with an average waiting time of less than 6 minutes. We noted, in November 2015, that the previous Committee had considered that HMRC’s then target of answering 80% of telephone calls within 5 minutes was “woefully inadequate and unambitious” and that it had recommended that HMRC should set a more challenging, short-term target for call waiting times and a long-term target that is much closer to industry standards. We note that HMRC is now aiming to answer at least 90% of telephone calls, expects average waiting times to fall below 5 minutes and is seeking to reduce average waiting times still further.
Recommendation: HMRC must provide an acceptable and consistent level of service to customers that ensures all calls are answered promptly and dealt with effectively. HMRC should set out what level of service it is seeking to provide in the short term and its plans for improving this in the longer term, with a timetable for doing so.
2.HMRC released too many staff too soon because it was over-optimistic about how quickly the demand on its call centres would fall. Between 2010–11 and 2014–15 HMRC cut staff in personal tax from 26,000 to 15,000. This included releasing 5,600 staff in 2014–15, reducing customer service capacity, which corresponded with a significant deterioration in the quality of service provided. HMRC’s staff reductions included 2,500 redundancies of trained personal tax staff it considered were in offices or on contracts incompatible with its workforce strategy. However, HMRC subsequently recruited and trained 2,400 new staff in 2015 at short notice to recover customer service performance. HMRC plans to further digitise its services and reduce the number of staff in personal tax by a further 34% by 2020–21. It acknowledges that the challenge of getting customers to use online methods of contact (for example, a digital tax account) is the key risk it faces in personal tax services.
Recommendation: HMRC must test whether its forecasts of demand are realistic and be prepared to flex its resources as necessary to ensure service demand is met. HMRC should pilot how taxpayers will respond to new digital services before they are widely implemented.
3.HMRC has not considered the costs to customers of providing a sub-standard service. Although HMRC reduced the costs of its services for personal taxpayers between 2010–11 and 2014–15, the resulting rise in waiting times increased the costs borne by customers, who spent some four million hours waiting for HMRC to answer the telephone in 2015–16. Taxpayers also incur direct call charges whilst on hold to HMRC’s 0300 helpline which, unlike the 0800/0808 numbers used for some other government services such as Jobseekers Allowance, is not free. Every £1 saved by HMRC on its telephone services over this period has resulted in an estimated £4 in additional costs to customers. HMRC accepts that in making decisions about the level of resourcing for customer services, it needs to take the cost of customer time further into account, balancing this against its own administration costs.
Recommendation: HMRC should estimate the cost to those using its services, including factors such as charges incurred using the 0300 helpline and time spent waiting on the telephone. It should use this information when considering resource needs to ensure the optimal balance is struck between its own costs and those borne by customers.
4.HMRC does not know what impact the quality of service it provides has on tax revenue. In October 2015 we recommended that HMRC should identify what impact its poor level of service was having on tax revenues. HMRC said it would work to try to identify evidence of the link between service and compliance and report back to us on this in 2016. HMRC agrees that the level of customer service it provides is likely to affect tax revenue in some way; for example, a customer’s attitude to compliance is likely to be affected by the quality of their interaction with HMRC. However, while there are examples that indicate such a link, measuring the relationship is challenging. HMRC recognises that its existing analysis, which suggests that a one percentage point improvement in customer satisfaction might lead to increased annual income tax revenue of £43 million, is ‘highly speculative’ and based on poor data. HMRC agrees that a clear understanding of the relationship would support decisions about how much to spend on services to customers to maximise tax revenue. Initiatives like thanking taxpayers for their contribution in annual tax summaries may well positively impact customers’ perception of HMRC and it is considering this approach.
Recommendation: HMRC must make significant progress in understanding and measuring the relationship between service quality and tax revenue, and report back to the Committee on how far it has got by the end of 2016.
5.HMRC is now making progress in replacing the Aspire contract but moving to a new model of IT provision remains a substantial undertaking which will require firm and consistent leadership. In 2015, the previous Committee reported that HMRC faced an enormous challenge in replacing the Aspire contract by 2017. Subsequently HMRC decided to adopt a phased approach to replacing Aspire services between 2015 and 2020, extending some services by three years, bringing some in-house and using smaller, shorter contracts for others. This phased approach should help HMRC to manage the risks involved to customer services and tax collection . HMRC now plans to take crucial decisions in 2018 on the long term IT model it will operate from 2020. We remain concerned that HMRC may struggle to integrate different services from different providers. As we have seen from elsewhere in government, one of the main factors that determines the success of complex programmes such as this is the quality and stability of their leadership.
Recommendation: HMRC must ensure continuity in the leadership of the Aspire programme to maximise its ability to design and introduce a new IT model successfully.
6.Making a smooth and effective transition from Aspire to a new IT model is integral to HMRC’s digital transformation and value for money. The replacement of the Aspire contract will allow HMRC to take greater control of its IT estate. By introducing a new IT model, HMRC aims to lower its costs, support improvements in customer service and protect tax revenue. However, as HMRC is aware, the transition carries risks that need to be managed carefully. Opportunities to reduce costs must be considered within the context of the paramount importance of the stability and continuity of services which enable HMRC to collect over £500 billion of tax each year.
Recommendation: HMRC should update this Committee on progress at each key point in the Aspire programme.
25 July 2016