Parliamentary Committee shows HMRC puts taxpayers’ welfare on the line

A Public Accounts Committee (PAC) report released yesterday has highlighted how the incompetence of HMRC has harmed taxpayers. According to the report, the tax-collecting organisation released 5,600 staff from its personal tax division in 2014-15 in order to ‘live within its budget’. Though a reasonable aim, this led to a ‘significant deterioration in the quality of service provided to customers’. Unfortunately, the average waiting times for the taxes line and the self-assessment line peaked at 34 minutes and 47 minutes respectively.

It is important to remember that such waiting times do not only create inconvenience for taxpayers; they also create significant costs in the form of call charges and lost time. The economic burden created was such that, for every £1 HMRC saved on its telephone services, £4 of additional costs were incurred by consumers. This was not a small scale problem, as customers ‘spent some 4 million hours waiting for HMRC to pick up the telephone in 2015-16.’

Ultimately, this was remedied by hiring 2,400 staff in the autumn of 2015. Such volatility in employment decisions is obviously symptomatic of poor planning, but this all raises an important question: how could HMRC get things so wrong?

Well, it appears that HMRC believed that introducing two new services, ‘automated telephony and paperless self-assessment’, in 2013-14 would have led to a sufficient decrease for demand for telephone contact. Unfortunately, this was not the case.

Because of this, the report recommended that ‘HMRC must test whether its forecasts of demand are realistic’ and that it ‘should pilot how taxpayers will respond to new digital services’. This is concerning as these things should be obvious.

HMRC intends to downsize the number of staff in personal tax by 34% by 2020-21, and it believes this is feasible if it further digitises its services. While its striving to be more efficient is commendable, things do not bode well when one takes into account the organisation’s mentioned history. To borrow the words of Meg Hiller, the chairman of the PAC, this prospect ‘will chill the blood of many taxpayers.’

Let’s hope that, when looking at the consequences of this decision, her words won’t ring true.