Tax office cuts could lead to another customer service collapse, MPs warn

Plans to save money at HM Revenue & Customs by moving more of its activities online risk a repeat of the "catastrophic collapse" in customer service caused by job cuts last year, a parliamentary report has warned.

The House of Commons Public Accounts Committee previously highlighted problems at HMRC in 2015/16, when taxpayers were left waiting for a combined total of 4 million hours for phone calls to be answered following a 5,600 reduction in staff numbers.

In a new report, the cross-party committee warned it was "not convinced" that the tax authority has a credible plan to prevent a similar "disastrous decline" in service levels in the upcoming period, when it faces further spending cuts, business restructuring, a new IT contract and the relocation of most of its staff, while dealing with the implications of Brexit.

As part of a plan to become "one of the most digitally advanced tax administrations in the world", HMRC aims to save £98 million by 2021 by cutting the number of customer service staff by one-third and encouraging more people to sort out their personal tax affairs online. The changes will involve a 16% overall reduction in staff, with others being moved into specialist work on tax avoidance and evasion. Some 137 tax offices - 90% of the total - will be closed as workers move to 13 regional centres.

But the committee warned that HMRC is "staking a great deal" on the readiness of taxpayers to switch to digital and "lacks an adequate plan" to cope if demand at its call centres does not reduce as quickly as hoped.

After the previous wave of job cuts, HMRC was forced to recruit 2,400 extra staff to restore stability, and the report voiced "concern" that no contingency plan has yet been agreed for the possibility of this being necessary again.

The authority has already lost its chief digital and information officer and further departures of key staff would "damage HMRC's capability to deliver transformation and manage the risks when its IT contract ends", said the committee.

PAC chair Meg Hillier said it was "disconcerting" that concerns were being raised about HMRC customer service so soon after the previous problems.

"The lack of a convincing fallback plan to safeguard service as HMRC undergoes significant change remains a looming threat to its ability to collect tax from individuals simply trying to pay their fair share," said the Labour MP.

"HMRC's senior management cannot afford to be complacent about the catastrophic collapse in customer service in 2014/15 and the first half of 2015/16, nor about what is at stake should their projections about demand for call centres prove wrong.

"Contingency planning should not be an optional extra. By the spring, we will expect to see evidence that HMRC has agreed measures with the Treasury to ensure it is not left playing catch-up at taxpayers' expense."

The committee also questioned whether HMRC might be "painting too rosy a picture" of its success in reducing the gap between the amount of tax due and the total collected, which the authority claims to have cut from 8.3% in 2005/06 to 6.5% (£36 billion) in 2014/15.

And it called for greater transparency about the tax affairs of multinational corporations "to increase the pressure on them to pay their fair share of tax".

The MPs restated their concern about the "unnecessary hardship and suffering" to tax credit claimants caused by HMRC's failed contract with private firm Concentrix to tackle fraud and error in the system.

Public and Commercial Services union general secretary Mark Serwotka said: "The committee again makes it clear that cutting too many staff in HMRC damaged the service provided to taxpayers, yet the department is absurdly pressing ahead with plans to close 90% of its UK offices and axe thousands more employees.

"There is now an overwhelming case for these plans to be halted to allow for a proper public debate and parliamentary scrutiny of the kind of revenue collection service we need and the staff and resources it will take."

An HMRC spokesman said: "We now consistently answer 90% of calls first time, in an average of less than five minutes.

"We have invested heavily in customer services, recruiting more than 3,000 new staff who are also available outside normal office hours when many of our customers choose to call us.

"This is alongside a new range of popular digital channels for customers to get the information and support they need without having to pick up a phone or pen.

"Efforts to crack down on tax avoidance, evasion and fraud have also secured in £26.6 billion over the last year.

"We've also led the way on improving global tax transparency and tackling tax avoidance by multinationals.

"As a result, for the first time, we are starting to receive details of UK taxpayers' offshore financial accounts in more than 100 countries and can now find out what tax multinationals have paid in each country in which they operate."