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Only listening will fix the government’s digital disasters


In the past few days, the government has shelved its voucher scheme for business digitalisation and kicked tax system transformation into the long grass for the fifth time. Isn’t it about time it stopped attempting to set the digital agenda and listened to what small firms want?

21st Dec 2022
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As the old adage almost goes, if at first you don’t digitise, try, try again, fail and incinerate a pile of taxpayers’ money. 

While the bar for government digital transformation schemes is pretty low, over the past week Whitehall has casually limboed underneath it, piña colada in hand, cancelling one flagship scheme and mothballing another.

The Help to Grow: Digital project, axed with little fanfare last week, was policy-making in the style of Bonnie and Clyde. Ignoring all available evidence and pleas from industry advisers, the government pressed down on the accelerator, smashed through the warning barriers and headed over the digital cliff.

The voucher scheme encouraging businesses to digitise for the first time was so poorly drawn up that there were suggestions it had been deliberately designed as a shield against critics slating the government for a lack of business support during the pandemic – with little intention of delivering its aims or spending its reported £520m budget. Less planned obsolescence, more planned obscurity.

Those involved talked of a missed opportunity to hook the scheme up to Making Tax Digital for income tax self assessment (MTD ITSA), helping those least up to speed with the requirements. However, one insider told AccountingWEB, somewhat wryly, that getting two government departments involved (The Department for Business, Energy and Industrial Strategy and the Treasury) to work together made this utterly impossible.

How do you do, fellow tax pros?

And this leads us nicely to the (count ’em) fifth delay of MTD ITSA. Brainchild of former financial secretary to the Treasury David Gauke, the “once-in-a-generation digital transformation of the tax system” was pitched to businesses by austerity hype-man George Osborne back in the simpler days of 2015. 

After Monday’s date shift, the five-time-delayed scheme now sports the same level of credibility in the accounting industry as Steve Buscemi’s private detective did among high-school students. How do you do, fellow tax pros?

Whether it’s the accounting firms that did the segmenting, attempted to sign up for the pilot and put up the bat signal to clients only to be made to look like mugs, or the vendors muttering mutinously (one has already closed its doors), those the government might have counted on as allies in the past for such a project can no longer be considered dead certs. 

The latest kick of the can sees MTD ITSA arrive in 2026 when current political projections have a new government responsible for delivering it. Surely any new Treasury minister worth their moat-cleaning expenses will spy a dead duck of a policy and press the trapdoor button? In a profession already hard pressed to find the time or staff to do the day jobs, who would possibly commit any time or effort to get on board with something that’s been delayed five times already?

None of this should be taken as a slam-dunk on HMRC staff charged with delivering the project – there are fundamental questions about MTD ITSA that to this day haven’t been satisfactorily answered, and can only be at the very top level of government.

What’s the problem MTD will fix?

So where next? The threshold announcements and phased entry to the scheme seem sensible, although this does come with a risk of over-complicating this still further.

Back to fundamentals, the government needs to be honest with businesses about what problem they’re trying to fix with MTD, and how any potential scheme will deliver a solution.

The MTD ITSA “review” announced on Monday needs to cultivate a genuine culture of listening to small businesses and advisers, and acting on that instead of trying to be the smartest guys in the room.

Instead of the usual parade of bankers, corporate lawyers and institutionalised yes-men presiding, it would also be nice to have the presence of those who’d been anywhere near the running of a small business.

Perhaps if they’re feeling particularly bold, they could try switching the approach of the scheme from stick to carrot and making it voluntary for at least the medium term. This may be enough to win back some in the profession and convince others that this is more than just a penalty farming exercise. Legislation should not be the main driver for digitisation, and mandating the use of third-party software with only vague promises of free offerings seems like a gateway to the Kafkaesque workings of the US tax system – and its assorted issues.

Digitising has tangible benefits to businesses and accounting firms big and small, but for some the cost of change or hassle of implementation just doesn’t make sense – they need to be listened to just as much as the bleeding-edge pioneer types.

At a recent FreeAgent small business roundtable in London, Enterprise Nation founder Emma Jones suggested the boldest thing any government could do right now would be to do nothing. Perhaps when it comes to digitising businesses and their taxes, this seems like an approach worth trying.

Replies (4)

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By adjadj
24th Dec 2022 08:33

A great article which got me thinking. HMRC and other parts of HMG have a structural weakness which implies they will fail to bring about change unless they listen more. Let me expand on this.

A key lesson I learned working as a business analyst developing customer facing systems over many years is the need to listen and absorb what operational staff say about the job they are doing. When new designs/ways of working are planned it is essential to test it against that experience and identify and explore mismatches before too much effort is expended on designing the detail.

On most projects I worked on we got access to this operational experience by working with subject matter experts (SMEs) who had experience of the day job either at operational or team leader level. Their input saved millions of pounds of wasted effort, and reduced the number of issues found at user acceptance testing, avoiding last minute delays due to rejection of the system by Operational Managers.

For tax systems the key users are either accountants with private clients or taxpayers themselves. They are the people who translate a business event such as paying a bill into a row on a spreadsheet or data entry event in software. They are the people who make the decisions on exactly what is keyed in.

HMRC has a minimal staff number of staff with operational experience of doing the paperwork for a small company or as an accountant who helps their clients submit accurate tax returns: i.e. HMRC has no access to internal SMEs with the relevant experience

When it came to MTD ITSA, not only did they not have access to knowledgeable SMEs but for many years they refused to heed the expert advice who repeatedly told them about the impracticality of quarterly reporting. The unsurprising outcome is that MTD ITSA is seen as a major failure; and this failure can be laid at the door of group-think by HMRC senior management.

In 2023 HMRC needs to internally acknowledge the weakness of their group-think and start to listen more. The question is will they?

Thanks (2)
Head of woman
By Rebecca Cave
24th Dec 2022 08:55

Great article Tom. It makes a very serious point with amusing references.
Will they listen?
Are we still just surviving under a Tory Govt?
Those two questions are related.

Thanks (1)
Replying to Rebecca Cave:
By Hugo Fair
24th Dec 2022 14:12

100% agree on your first point (and the precedent for them listening is not good) ... but not so sure about the glib elision into political causation.

I've been no fan of 'austerity' policies from the get go and hold no particular party close to my heart, but Gordon Brown arguably started a lot of the current rot with his glorification of PFI - see Mapeley STEPS for a deal with a tax-haven based co set up to acquire all the HMRC freehold estate for a knock-down price and subject to usurious lease terms (all based on a policy that was both badly thought out and injurious to Union members)!

Personally I lean more towards 'a curse on both/all their houses' ... at least until I see some (any) evidence of a change in culture that would encourage mandarins to indulge in a spot of non-prejudicial listening. It's good for the soul at the least!

Thanks (1)
By Hugo Fair
24th Dec 2022 14:18

Timely article Tom ... we can but hope the powers that be read it and make appropriate New Year's Resolutions.

BTW I think you may have mixed up Bonnie and Clyde with Thelma and Louise - although both pairs could have acted as role models for HMRC & HMT in the art of pig-headed monocular driving.

Happy Christmas :=)

Thanks (1)