The National Audit Office (NAO) sounded a note of caution over HMRC’s plan to trim £1.6bn from its cost base over the next four years. Jon Wilcox reports.
In the latest of a sequence of reports on the internal workings of HMRC, the NAO looked into HMRC’s £1.6bn cost reduction programme.
As part of the 2010 Comprehensive Spending Review, HMRC committed itself to cutting running costs by a quarter by 2014/15. The NAO report looked into 54 “change projects” within the department, 24 of which were designed to reduce running costs by £964m over the next four years. Further cost reductions of £647m will help HMRC hit its savings target of £1.6bn.
The NAO identified that more than a third of the £647m (£235m) will come from “agreed changes in the provision of IT services”. This is a reference to the £10bn+ Aspire outsourcing contract led by Capgemini, which was extended to run through to 2017 in a bid to help HMRC enable cost reductions to its technology infrastructure.
Other savings are expected to be made through productivity improvements, reduced sickness absence, and a reduction in staff numbers in a Change Programme established to oversee the implementation of the Spending Review plans.
The NAO has been tracking HMRC’s Change Programme for some time, and the report highlighted previous episodes where the department did not have sufficiently detailed management information to assess cost savings estimates. “As a result, HMRC was not well placed to make fully informed judgements on how best to reduce costs in a way that would secure value for money,” the NAO noted.
After five years of continuous organisational change since the Customs-Revenue merger, HMRC’s internal workings are being scrutinised by the House of Commons Treasury Select Committee as well as the NAO. Last week’s publication of HMRC’s annual accounts for 2010-11 was accompanied by an NAO report that examined difficulties and risks surrounding the new National Insurance and PAYE service (NPS) and weaknesses in recording Tax Credits payouts that led to a qualification for the accounts.
In between these reports, the NAO has also published a study of the tax department’s PaceSetter business improvement programme. HMRC claimed PaceSetter saved the equivalent of £400m in reources and £860m of tax yield between 2005-06 and 2010-11. The NAO concluded, “However the extent to which these reported savings represent overall efficiency improvements is not clear, in part because of the limited evidence on overall trends in business performance.”