Nov 2007 22
Those HMRC staff cuts
Yes, the PM can blame the junior official who downloaded the data and sent the discs through the ordinary mail. But come on. How on earth was it possible for him to do it? What’s to stop a criminal gang member getting a job round at HMRC and just helping himself? How do we know it hasn’t happened already? The entire set-up is a shambolic disgrace.

And from what we know so far, it looks like a major factor was the impact of staff cuts. As HMRC’s Annual Report shows, since 2003-04, the department has cut over 10,000 staff (net, full-time equivalent), with a further 2,500 going this year.

These cuts are part of the Gershon "efficiency" programme, very familiar to regular BOM readers, and the personal idea of one G Brown. It was his blunderbuss scheme to make government more cost effective by cutting spending and staff so as to "release resources for the frontline".

He launched it amid much fanfare in the 2004 Budget, with the following ambitious targets:

Right from the off, it was a classic top-down exercise visited on departments, with very little practical idea how the cuts could be achieved down at ground-level. So right from the off, departments used every trick in the Sir Humphrey playbook to deliver their targets without necessarily making real cuts. Which is why BOM has always been very sceptical about the overall savings (eg see this blog, and many others).

Since 2004, in every budget and pre-budget report, we’ve been given an update on supposed progress. By October this year, according to Darling’s Pre-Budget (pre-aborted election) Statement, the Gershon programme had delivered "annual efficiency gains of over £20 billion… and is on track to deliver the goal of £21.5 billion by the end of March 2008". Moreover, there have been "gross reductions of over 79,000 civil service and administrative and support related military posts towards the target of 84,150, with over 13,000 of these reallocated to frontline roles" (para 3.28).

But according to the Public Accounts Committee, based on the most recent National Audit Office probe (see this blog), only one-quarter of the reported cuts are "reliable". By implication, the rest are a figment of the commissars’ fertile imagination.

So on that basis, of the claimed £20bn savings, real savings are only about £5bn.

But even those "savings" have come at a considerable cost in terms of service quality. For example, the PAC found that "savings" at the Department for Work and Pensions had increased the average time taken to process Jobseeker’s Allowance claims from 11 days to 16 days. And the Department of Health, while reporting over £1 billion of efficiency gains from reducing the average length of time patients stay in hospital, had taken no account the fact that emergency readmissions had risen consistently.

The very worst cases have been where cuts have been imposed in areas already struggling with other changes.

For example, last year, we had the fiasco at the Rural Payments Agency (eg see this blog). There, a quango was attempting to develop and implement a brand new, highly complex, and IT-intensive farm payments system, at the same time as Gershon cutting 45% of its staff (see this blog). The combined effect was disastrous. RPA staff were reorganised into specialisms, rather than the previous "case-working" structure, because that seemed to be more efficient. But it meant that there was no fallback when the new IT systems failed. The old experience and knowledge had simply been discarded.

And taxpayers had to pick up a big tab to put things right- around £0.6bn, including a £436m fine from the EU for failing to meet their deadline (see this blog). In other words, the Gershon "savings" ended up costing us money.

And now we have HMRC.

As we blogged yesterday, the problem goes beyond a simple matter of staff cuts. Just like at the RPA, there are also new IT systems, and there are new "lean production" work patterns being imposed- less case working, and more specialisation (aka dumbed down production line jobs). It’s a toxic combination, and staff morale is rock bottom (there is a dedicated chat room for HMRC staff called Disgruntled Lemmings- mysteriously "unavailable" at present).

Now, as taxpayers, we naturally applaud any sensible moves to make government more efficient. But imposing arbitrary staff cuts ahead of securing the IT systems required to support them is a recipe for disaster. And a shortcut to even higher costs.

Let’s just think the unthinkable. Let’s suppose these data discs have fallen into criminal hands. What will it cost us?

The going rate for bank account details on the international crime market is reportedly around £200 each. We don’t know how many of these lost 25m records include bank accounts, but given what we do know, 5-10m seems a reasonable guess. Which means the black market value of these two discs is an extraordinary £1bn – £2bn.

But if their black market value is £1-2bn, you have to believe the likely loss from bank accounts is a multiple of that. We have no idea what multiple, but five-times is as good a guess as any other. Which means a bill of £5-10bn. A ten-times multiple means £10-20bn.

And who do you think will pay? It won’t be the banks, despite the impression Bottler and Darling have sought to give. It will be us taxpayers.

And the cost doesn’t end there. Everyone will need a new bank account (if you’ve been claiming Child Benefit in the last five years and haven’t switched yet, do it tomorrow). Everyone may need a new National Insurance number. And for the next 18 years children hitting 18 will need to check their credit records to make sure someone isn’t applying for credit in their name.

And we taxpayers will have to make good all the losses. Which will hugely outweigh the savings made from the Gershon cuts.

You know, it may be time we stopped politicos playing with blunderbusses altogether.

Nov 2007 21

Once upon a time Chancellors took responsibility

Just imagine that Lloyds TSB, say, had loaded all its customer records onto an unencrypted CD and then lost it. What do you think would happen?

First off, there’d be a huge public outcry, led by the media but with our name and shame politicos tut-tutting loudly from the grandstand.

The share price would tank.

Shareholders would insist that the CEO and half the board resign (that is, if they hadn’t already gone on the announcement). No way would the sacking of a departmental manager be enough.

The regulators would send in a hit squad.

Customers would queue round the block to get their money out.

Competitors would say thank you very much, while frantically checking their own procedures to make sure it couldn’t happen to them.

And Lloyds TSB would get taken over by a bank with credibility.

Compare and contrast that with the catastrophe at HMRC. 25m Child Benefit records lost, including parents’ and children’s names, addresses, dates of birth, child benefit and national insurance numbers and in some cases, bank or building society details. Two unencrypted computer CDs, downloaded by an office junior, and sent through the post unregistered. Millions of people exposed to financial fraud and possibly worse.

And yet the Chancellor- who is already presiding over one catastrophe- remains in post. He fires a departmental manager, claiming that the tax department is in fact independent and nothing to do with him. And he remains in post.

And for the next two years there’s absolutely no way he can be ousted. Unlike shareholders we can’t insist on it, and unlike customers, we can’t take our business elsewhere.

And that’s really the nub of the issue. Yes, the public clamour may sink Darling, but do we really think that would improve matters?

HMRC- Her Majesty’s tax collectors and once the epitome of dependable, responsible government- is fundamentally bust.

As has been pointed out, this is the THIRD such loss of confidential personal records by this dysfunctional department in just over three months. And each time we’ve been assured procedures were being changed to ensure it couldn’t happen again.

Just two weeks ago, we learned of a virtually identical case:

"Around 15,000 Standard Life customers could be at risk of fraud after their personal details were lost by HM Revenue & Customs (HMRC).

The data was on a CD sent from the Revenue office in Newcastle to the company’s headquarters in Edinburgh. But the disc containing names, national insurance numbers, dates of birth and pension data never arrived at its intended destination."

We’ve blogged the massive problems at HMRC many times before (eg see here ). To recap:

  • Tax credit fraud- officially put at around 10% of total payments, or £1.25bn pa (see here)
  • Missing Trader VAT fraud- last officially estimated at up to £1.9bn pa (see previous blogs, eg here and here).
  • Incorrect tax assessments- 1.6m people over or undercharged income tax as a result of processing errors at HMRC. The total sum involved was £0.6bn, or around 400 quid each
  • Inadequate accounts- HMRC accounts qualified by NAO for the last five years
  • Hopeless IT systems- over 250 separate "major" computer systems
  • Ramshackle organisation- hundreds of disparate local offices
  • Wildly unrealistic Gershon staff cuts- Pacesetter programme cutting 8,500 jobs soonest
  • Half-baked management- introducing "lean production" methods, originally designed for car manufacturing, and including whacky rules for positioning bananas on desks
  • Rock-bottom staff morale- some offices now suffering annual sick leave averaging 23 days, or nearly five weeks pa (the private sector average is just 6 days pa); so many people have left, some offices are 25% staffed by temporary contractors

HMRC is now a complete and utter shambles.

Just like the Home Office.

Just like DEFRA.

And just like any number of other government departments.

How dare these people tell us how to order our lives. They are incompetent, irresponsible, and treat our interests with utter contempt. Why should we ever trust them with anything important, like our personal financial information?

Surely nobody will now want to go ahead with that crazy and insecure £20bn ID cards project.

And if you’ve been claiming Child Benefit in the last five years, our strong advice is to switch your bank account.

PS Darling tried to suggest in the Commons that he somehow isn’t responsible for HMRC. According to him, HMRC is "operationally independent of government". This takes us right back to Tesco Government, and it is total rubbish. As the Treasury website records, Darling’s junior Jane Kennedy, Financial Secretary to the Treasury, has "overall responsibility for HM Revenue and Customs". Maybe Darling should read it.

Nov 2007 21

It appears that hiring illegal immigrants and presiding over general misconduct within the workplace are just the tip of the iceberg for Birmingham City Council, as the Birmingham Post reports the details of just some of the millions of pounds worth of discrepancies presented to the financial audit committee yesterday.Anarchy_2

The list includes:

•    £37,000 that they continued to pay to a foster carer four years after she ceased to look after children.
•    £3,000 lost by a member of staff on collecting petty cash from the bank.
•    £2,000 lost from the safe at a children’s home after a member of staff left the key unattended.
•    The suspected illegal use of 1,181 disabled badges issued in the names of people who have since died. The badges were used by family members who never handed them back.
•    22,000 people claiming for single person council tax discount when they are suspected of living with another person. This is believed to cost the city £6million-per-year.

All this and deputy leader Paul Tilsley claims that the council deserve credit:

"I think we deserve credit for bringing these, and other internal cases, out into the open. In the past the result of the audit investigations would have been sunk without trace. Nobody would have known about them."

So we must praise them for being honest about their incompetence rather than burying it and keeping their residents in the dark? How any council representative could have the audacity to put a positive spin on these details is astounding.

And if you thought that was it, then you’re wrong. The Birmingham Post report continues:

* The council corporate fraud team concluded 240 investigations in 2006/07 into corrupt practices valued at £3.3 million;
* During the first quarter of 2007/08, 34 investigations into fraud worth £1.2 million were under way;
* The council’s own employees were found to be involved in 26 cases involving housing or council tax benefit fraud;
* However, there were only 90 successful prosecutions in 2006/07 and 132 in the year to date;
* Investigations into suspected benefit fraud during the first half of this year uncovered overpayments amounting to almost £2 million, with 2,320 separate inquiries taking place.

But at least they’re honest, eh?

Nov 2007 21

According to a report in yesterday’s Birmingham Mail no less than 50 illegal workers were caught in a swoop at Birmingham City Council.

This investigation was called for after earlier this year one Ugandan employee, an illegal immigrant, managed to steal in excess of £1million from the council’s social services department, buying himself a flash new car and five houses.

Although 50 were caught as a result of recent council action, others seemed to have slipped through the net as several employees left of their own accord once news of the crackdown spread.

That so many illegal workers have managed to gain employment at Birmingham City Council really does reveal the poor quality screening process in place which has now resulted in expensive investigations and no doubt prosecutions, not to mention the cost to taxpayers of any stolen money or goods as in the above instance. A thorough vetting and interview process would surely have avoided this expensive fiasco?Anarchy

Unfortunately, illegal immigrants are not the only cause of Birmingham City Council’s staffing woes. According to the same report eleven officials had to be sacked for downloading pornography and 25 were handed disciplinary warnings. These were amongst the 75 employees whose “net visits pointed to serious internet misuse”. Do these people not have managers? Are they not monitored? It’s sad that this sort of information has to been thrown up by a swoop.

There’s more. One council official was shown the door for being on long term sick, whilst all the time working full-time for another local authority. Unbelievable.

The cherry on top comes in the form of the comment given to the paper by one of the investigators:

"We also found employees whose multiple employments resulted in poor timekeeping and a failure to adequately discharge their duties, but the action we were able to take was limited due to poor timekeeping records – a serious issue we continue to raise with managers."

So this is what local residents are paying for? A complete free for all. Poor timekeeping, bad management, abuse of the internet (also amounting to time wasting), unsuitable employees, illegal employees, absent employees, theft that goes unnoticed until it escalates to a ridiculous level, and lamentable employee screening.

The fact is that Birmingham City Council can’t keep on top of who is coming and going, what they’re background is and how they are behaving in the workplace because it is just too big and unwieldy. The need for any such probing investigations could be eliminated if the council were to slim down and improve lines of communication rather than adding to their endlessly expanding and increasingly untrustworthy bands of bureaucrats.

Over the past few years Birmingham City Council has grown and grown and it seems that the taxpayer is paying for more than just their salaries. In an environment where management are consistently overlooking these abuses there is a real need to reassess, and that doesn’t mean throwing good money after bad and hiring more bureaucrats, but truly cutting back with a view to improving the quality of services through streamlining and efficiency.

The HMRC Helpline (and what it tells us about government)
Nov 2007 21

HMRC have announced that any of the 25 million people whose personal and banking information has been lost or stolen can now phone 0845 302 1444 for information and advice about the “organisational failure” and how to protect themselves against any resulting risk of fraud or identity theft.

Given the gravity of the problem and the number of people affected, it has taken HMRC a remarkably long time since yesterday’s announcement to set this phone line up and start publicising it. If you consider that they’ve actually known about the data loss for more than 11 days now, it is another disgraceful delay in a story full of squandered time.

Worse is the fact that, having finally set up the number, Revenue and Customs have used an 0845 number which is not even free to call. Having caused 25 million people great anxiety (and it is still entirely possible that it will yet cost people money or their identities) the idea that those people will now have to pay to get advice on how to protect themselves is insulting. People are furious about this gross error – and the Government’s bungled handling of the issue is only going to make things worse.

This Agency messed up horrendously – their budget should be tapped for the resources to help put it right. HMRC should be paying for these phone calls, not the innocent victims of HMRC incompetence.

If we wanted to find some areas in the HMRC budget that could provide the funding, we could do worse than start by looking at the senior management. Eight HMRC senior staff members appeared in the TPA 2007 Public Sector Rich List at a total cost to the taxpayer of £1,212,350. Perhaps some room could be found in that sum to help finance a phone line?

If Government Departments knew that if they make errors, their budgets or bonuses will have to bear the costs of setting things right it would be a useful incentive to run things properly in the first place.

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