HMRC – not very nice but a lot more efficient

I know I keep banging on about this but I’m still not sure the penny has dropped for many people. More efficient public services won’t necessarily be better from the end user’s point of view. Given the scale of savings required over the next few years, they will almost certainly be worse. Like my hypothetical school in yesterday’s post, they might simply increase their efficiency by delivering less.

The publication of a commons report on HMRC caused a lot of huffing and puffing last week. According to the Treasury select committee, Revenue and Customs is barely able to function and customer service has all but collapsed. But amidst all the condemnation and the eating of humble pie by HMRC’s chairman, some of the numbers got lost.

The National Audit Office reports that HMRC has cut its running costs over the 3 years to 2010-11 by an average of 6 percent per year. Over the same period, its revenue collection has remained constant at about 91 percent of revenue due. That means that HMRC is now more efficient than it was 3 years ago. It is doing the same for 18 percent less. Most CFOs would be more than happy if their billing and revenue collection departments were to deliver performance like this. OK, it would be better if they upped their collection rates but managing to do the same while costing a lot less is a good start.

Some of these cost savings seem to have been achieved at the expense of customer service. As I have said before, one of the easiest ways to simplify processes in a service industry is to design out the customer. The more you can force them to follow set procedures, the less time you have to spend on the phone. This strategy is short-sighted when you are trying to sell things to people but when you are trying to collect money from them it makes more sense.

Much of the tax gap is due to small errors and fiddles worth less than £1000. Rather than investigate the culprits, or call them to ask questions, it’s much cheaper to send them letters, threatening to break their doors down and seize goods to pay off their debts. This scares the shit out of most people. If the letters include contact phone numbers they can’t get through on, it forces them to write and explain themselves. It’s not nice but it does the job and it’s much cheaper than having people taking calls listening to excuses.

The complaints from MPs, which were widely reported at the weekend, were mostly about the way HMRC treated people and its determination to force more of us to do things online. But that, alas, is how you make its services cheaper to administer. HMRC has to make similar savings, around 6 percent per year, over the next four years, so expect more of the same.

This is what cheaper and more efficient public services look like. With cuts of this scale and speed, it is extremely unlikely that many public services will be able to do more for less. The best we can hope for is quite a bit less for a hell of a lot less. In the process, some parts of the state will simply stop doing stuff. Most of the nice-to-haves and quite a lot of the near-essentials will go.

People won’t like it. Most no longer believe the more-for-less spin but a lot still think they will get the same for less. They will be in for a shock. Performance and productivity are not the same thing. The public services of the futue will, hopefully, be more cost-effective but, in becoming so, they will won’t give us as much as we have been used to. In some cases, cheap may well mean nasty too.

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6 Responses to HMRC – not very nice but a lot more efficient

  1. Pingback: HMRC – not very nice but a lot more efficient - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Tom says:

    Hi Rick, thanks for the post, very good perspective that needs reiterating until it becomes part of public consciousness. One question thought – you mention that HMRC collect 60% of tax revenue due – I’ve had a quick flick through the report you link to which talks of a tax gap of only around 9% (which I infer means that they collect 91% of revenue due). Do I have this wrong somehow?


    • Rick says:

      No Tom, you are absolutely not wrong. The uncollected number is £40bn not 40%. A fail on my part which, oddly enough, I didn’t make last time I wrote about this. Senior moment. Thanks for spotting it.

      • Tom says:

        Thanks – I was pretty shocked at the 60% figure and wondered why it wasn’t bigger news! 91% I would imagine is a relatively good figure compared to similar economies.

        What’ll be interesting to see is whether the threats will continue to work once it becomes common knowledge that HMRC are doing this on a larger scale than previously known. If you’ve never heard of anyone else receiving a threatening letter from HMRC, then you yourself receive one, it’s likely to scare you into action.

        If many friends and colleagues have received one at some point, it’s not going to have quite the same effect. I wonder if they’re coasting on a social norm that says ‘letter from the tax man = serious business’; what happens when that norm becomes ‘letter from the tax man = business as usual’?

        But, of course, the central message is that when politicians talk of reducing inefficiencies and waste, they are mostly talking about reducing the involvement of you, the citizen. Human beings mess up neat, efficient systems.

  3. Howard Clark says:

    This is indeed, one interpretation of HMRC performance.

    I agree that the easiest way to [appear] to cut costs is to design the service user out of the service. In fact dumb up the service to such an extent that in weary frustration people just pay.

    Cut jobs, buildings, don’t pick-up the phone, don’t answer letters, shove everything online and make em use use stuff online. When HMRC send information it will be wrong, and so if you challenge it you will probably win. But we still get more revenue in than challenged.

    The purpose becomes ‘an arbitrary amount of money … with threats’.

    There is a price to be paid for this service in terms of respect (or lack of it) for government and institutions

    There is an alternative based upon a very different set of principles that starts out with the understanding that people do generally want to do the right thing (and yes pay their fair share).

    The system has been designed in such a way that instead of helping people to do the right thing.

    1. Taxpayers need accountants to navigate the complicated tax rules and system (a crazy situation)
    2. Taxpayers can’t be confident that the amount that they are paying is correct
    3. Taxpayers will use accountants to follow complex rules that it appears many but the most specialist don’t understand
    4. Attempting to understand the right amount to pay is difficult when you can’t speak to a human being who understands
    5. The complexity of the system aids fraud rather then assists fraud reduction
    6. There is huge cost in the complexity of the system (court costs, service costs, societal costs)

    A system designed to help businesses and people pay the right amount with clear transparency may actually bring in many hundreds of millions (billions) more than the current system.

    It may costs many hundreds of millions less and would have the respect of the services users who have to use the service.

    Crazy! But ultimately very possible.

  4. Jonathan says:

    If politicians are happy to demand that HMRC cuts its costs by 6 percent per year, then they ought to make the effort to cut the burden of tax law by a similar amount – that’s the only genuine way to save money on this in the long term.
    I have been owed £2000 in overpaid tax since 2006-07, and I simply can’t get through to a human being at HMRC who will take responsibility for the problem and resolve it. There is something wrong with this system that goes way beyond front-line customer service. It needs simplifying so that it is practical.

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