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The taxman’s cost-cutting measures have been criticised by the National Audit Office (NAO) for posing substantial risks and lacking certainty.
The NAO today published Reducing Costs in HM Revenue & Customs, the latest paper in the wider programme of audit of HMRC. The document suggests the department faces a ‘significant challenge’ in trimming £1.6 billion from it operational outlay over the next four years. During the same period, tax authorities are expected to increase revenues, improve service for taxpayers, and achieve reductions in welfare payments.
HMRC have a clear vision for their spending review, says the NAO, and the department has begun to implement its cost-reduction plans, having established comprehensive governance arrangements. But a sufficiently defined operating model for business performance and achieving service targets is not yet in place, and there is still need for robust strategies to mitigate the risks that are carried by the wide-ranging changes within the combination of cutbacks and the Revenue’s ongoing restructuring programme, which incorporates the shrinking of staff numbers by 10,000, closure of offices, and lower spending in the provision of IT.
The new report lambastes the Revenue for having made no allowance in its cost-reduction plans for under-delivery or slippage, and for currently having no reserve of proposals on which to draw. The department must build greater confidence in its savings strategies, claims the audit office, because some of the assumptions have not been fully tested, including reductions in sickness absence and PaceSetter, the programme aimed at streamlining business operations that was criticised last week by the NAO for not providing value for money.
While the department has reported savings of around £1.4 billion since 2005, it has a limited understanding of the link of between the cost of its activities and their value, according to NAO. This failing has restricted the taxman’s ability to assess fully the impact on business performance of cost reductions.
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