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PAC report plays out drama of departing CIO

2nd Aug 2016
Head of Insight AccountingWEB
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HMRC CIO walks out the door
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HMRC CIO walks out the door

Continuing cost-cutting and executive instability threaten HMRC customer service standards, the Public Accounts Committee (PAC) warned last week - just before HMRC announced CIO Mark Dearnley would be leaving.

Drawing on the findings of the NAO’s recent study on HMRC customer service, the parliamentary committee collected further evidence from tax officials and stakeholders about the problems affecting the department and its ambitious plans for technology transformation. The findings are published in its latest report, Quality of service and replacing the Aspire contract.

As the NAO discovered - and AccountingWEB members know all too well - HMRC customer service collapsed in 2014–15 and early 2015–16 after the department cut 5,600 staff. Call waiting times tripled and only recovered after HMRC took on 2,400 new staff.

HMRC underestimated the level of public demand and did not consider the costs to customers of providing a sub-standard service, the committee found. As its recent annual report made clear, HMRC is committed to further cost reductions by 2019–20 through extensive computerisation.

“The prospect of HMRC making further cuts to spending on customer service will chill the blood of many taxpayers,” commented Labour MP and PAC chair Meg Hillier.

“HMRC’s recent performance in this area has been appalling for long periods and left members of the public counting the cost in time and money…

“HMRC has serious work to do before this committee is confident it can provide a consistent, efficient service that properly meets the needs of taxpayers and optimises tax revenue.

“Efforts to meet government spending targets must not come through ill-conceived measures that effectively penalise the people departments are intended to serve.”

Thanks to the amounts of time taxpayers wasted, and call charges incurred while on hold to HMRC help lines, the report noted that for every £1 HMRC saved on its telephone services, taxpayers suffered around £4 in additional costs.

As a result, the MPs endorsed the NAO recommendation that HMRC should estimate the cost of using its services and use this information when making resource decisions to strike a better balance between its own costs and those borne by customers.

Behind the scenes at HMRC’s data centres

At an oral evidence hearing in June, the MPs focused on the department’s digital overhaul, taking in the replacement of its 15-year, £10bn Aspire outsourcing contract and the wider Making Tax Digital project. Following recent news that Accenture had won the contract to migrate the national insurance mainframe record-keeping system to a private cloud system, it is a timely concern.

During the last parliament, the PAC raised alarms about HMRC’s ability to make the transition without affecting tax collection. So far, HMRC has addressed some of those concerns, but the next two years will be “crucial” to deliver all the claimed benefits.

For those looking for insights of what's going on behind the scenes, some of the most interesting material in the report came from HMRC chief digital and information officer Mark Dearnley, who will leave the department when his contract comes to an end in September.

Dearnley told the MPs HMRC’s digital transformation was the “hugely exciting thing” that drew him to the position. “We have gone from something that worked really well for self-assessment to something where now 65% of all the things people want to call us about can be answered if you go to your personal tax account,” he said.

Digging through the self-justifying management-speak, it became clear that progress has been a matter of forward and backward steps for Dearnley since he joined in 2013. As well as bringing forth the personal tax account he has overseen a strategy to feed out that information to commercial tax software via application programming interfaces (APIs).

In addition to leaving the £10bn Aspire contract, one of Dearnley’s objectives was to bring down the cost of HMRC’s back end servers by switching to cheaper and more efficient “virtualised” servers shared in the cloud.

“If you take a typical server, they ran at about £30,000 a server per year. We have now moved to somewhere between £6,000 where we are doing it ourselves, and then £4,000 if we move more into the commodified [environment],” he told the committee.

But the Aspire exit is not quite running to plan. As originally planned the “drop dead” date was 2017. After what committee member Richard Bacon suggested was some ministerial “tweaking”, Dearnley admitted roughly 20% of the overall scope of the Aspire contract would extend through to 2020.

Meanwhile, around 27% of the Aspire team, 30-40 people, chose “not to come across” to HMRC’s revamped Revenue and Customs Digital Technology Services (RCDTS) team.

And Dearnley himself has chosen not to continue with the department when his contract ends in September. In a couple of cringe-worthy exchanges, it becomes clear that Dearnley and HMRC chief executive Jon Thomson appeared in front of the committee while negotiations were taking place about Dearnley’s position.

“One of the problems we often see in this committee is people in very senior positions such as yours moving on very quickly,” commented PAC chair Meg Hillier, who urged Thomson to “get his skates on”.

“To lose someone senior at this point would not be good news, given the challenges outlined in the [NAO] report.”

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