Civil service freeze adds to HMRC resource woes

All eyes were on Chancellor of the Exchequer Jeremy Hunt (above) at the Conservative Party conference this week, with plans to cut the civil service budget leaving many, including the already woefully under-resourced HMRC, reeling.

The Chancellor unveiled a plan to boost the Treasury coffers by up to £1bn by capping the civil service headcount at current levels with immediate effect. Bizarrely, the government is claiming that what effectively amounts to cuts to the civil service will in fact improve its efficiency. HM Treasury reports: “Through tackling unnecessary bureaucracy and improved use of technology, it is expected that the civil service will become more productive and act as a lean, agile and cost-effective organisation, in line with the people’s priorities.”

This statement, dripping with optimism and perhaps a touch of fantasy, conjures up an image that could not be much further from the realities of most of our readers’ recent experience of dealing with our ailing civil service department, HMRC.

Lean and mean

“Lean”, yes – it has not gone unnoticed that HMRC is suffering a serious resourcing crisis, with helpline wait times regularly exceeding 45 minutes, as shown by a survey carried out by the Chartered Institute of Taxation (CIOT) this summer, and callers frequently cut off before their call is answered.

“Agile” is defined by the Oxford English Dictionary as “able to move quickly and easily”. A far cry from the day-to-day reality faced by agents and taxpayers, or as HMRC calls them “customers”, in dealing with the tax authority. In fact 95% of respondents to the CIOT survey felt that the impact of HMRC’s poor service levels has had a “moderate” or “significant” negative impact on their ability to do business. Trying to get an answer from HMRC feels less “agile” and more akin to wading through treacle.

As for “cost effective”, look no further than the tax authority’s Making Tax Digital project, already costing more than £1bn over its initial estimate of £226m.

The Institute of Chartered Accountants of Scotland (ICAS) has raised concerns about the Chancellor’s plans, saying: “In the absence of improved digital services, any reduction in HMRC staffing levels would result in a further reduction to the service our members and the public are receiving.”

The professional body cited the recent removal of the 10-minute service call answering target on the Agent Dedicated Line as an example of cutbacks at HMRC that are already adversely affecting operations. 

Not a recruitment freeze

HM Treasury has confirmed that the cap on headcount does not equate to a recruitment freeze, and recruitment drives will still go ahead as planned. There will also be a review into equality, diversity and inclusion spending to ensure that this “represents value for money for the taxpayer”.

With many civil service departments, including HMRC, already at breaking point, it is difficult through even the most rose-tinted lens to imagine that capping the headcount can possibly result in a more productive service.

Living wage increase

Meanwhile there was at least some good news for the country’s lowest earners, with the Chancellor promising to increase the national living wage to at least £11 per hour from April 2024. This is forecast to result in a pay boost next year worth over £1,000 for 2m low-paid workers.

The Chancellor reiterated his position that there will be no tax cuts announced in the Autumn Statement on 22 November, despite UK taxes heading for an all-time high according to a recent report by the Institute for Fiscal Studies. Forecasts suggest tax revenues will rise from 33% of national income at the last election to around 37% by the next election in 2024. However, Hunt says the UK government has no fiscal headroom to reduce taxes and ruled out cuts in the short term.