Public Services > Central Government

HMRC told to undergo 'digital revolution'

David Bicknell Published 18 December 2012

Digital strategy expected soon as NAO calls for greater customer self-service within cost reduction plans


The National Audit Office (NAO) has encouraged HM Revenue & Customs (HMRC) to undergo a 'digital revolution' and make the internet its first-choice channel for contact.

In a report, Reducing Costs in HM Revenue & Customs, the NAO argues that around a third of contacts by phone and post could be removed if HMRC's customers had access to their records so that they could check them, amend them if necessary and exercise a greater degree of self-service.

It adds that the usability of the department's online forms could be improved and that HMRC has a project in its change programme to improve web-based guidance and online forms.

HMRC has responded saying that how it moves towards more digital transactions will be outlined in the soon to be published HMRC digital strategy. It is believed departments', including HMRC's, digital strategies could be published before Christmas.

"Customers usually engage HMRC by the channel of their choice (paper, online, telephone) based on preference, habit or trust, rather than the most cost-effective channel for them and us. Our aim is to change this so that customers who are able to use our digital channel either unsupported or with help choose to use it because the service is quick and gives them certainty, security and reliability.

"Where customers are unable to access the digital channel even with help, then alternative routes such as paper and telephone will still be made available to them," said an HMRC spokesman.

In all, says the NAO, HMRC faces a significant challenge in securing a £1.6 billion reduction in running costs over the next four years, at the same time as increasing tax revenues, improving customer service and achieving reductions in welfare payments.

The NAO adds that HMRC has reported savings of some £1.4 billion since 2005. To achieve its cost reductions it plans to implement 24 change projects and other measures including savings in the provision of IT services, improvements in productivity, reduced sickness absence and headcount reductions. The size and shape of HMRC will change substantially as it reduces staff numbers by 10,000 and significantly reduces the number of offices it operates.

The NAO argues that in assessing potential cost reductions, HMRC has established a clear vision and specified operational priorities and revenue targets. But it has not yet sufficiently defined the business performance and customer service it intends to achieve by 2015. It has good information on the different costs it incurs but only limited information on the cost of its end-to-end processes and on the cost of servicing different customers groups. It also has a limited understanding of the link between the cost and value of its activities which has restricted its ability to assess fully the impact of cost reductions on business performance.

NAO's report points out that HMRC has made no allowance in its cost reduction plans for under-delivery or slippage, and currently has no reserve of proposals on which to draw. It says it needs to build greater confidence in the planned reductions as the estimated savings and some of the assumptions have not been fully tested including, for example, the proposed reductions in sickness absence.

According to the NAO, HMRC recognises the challenges it faces in delivering its plans. It has begun to implement its cost reduction plans, established comprehensive governance arrangements and is developing arrangements to manage the risks. It has not, though, yet assessed all the dependencies between projects and the critical path for delivery.

NAO points out that HMRC has significantly increased the level of online services it offers including online registration, filing and other services. In particular, it says, HMRC's 'one click' project is improving the online service for new businesses and small- to medium-sized enterprises. It aims to simplify engagement, reduce administrative burdens and improve experience. It has developed an online dashboard so businesses can access information about their tax records all in one place. Online VAT registration will be in place by the end of 2012 and is expected to significantly reduce registration times.

Amyas Morse, head of the National Audit Office, said, "Reducing running costs by £1.6 billion over four years is a big challenge for HMRC. It is making progress but there is no contingency in its plans. To achieve value for money, it needs to better define the service it is aiming for; improve its understanding of costs; and develop its implementation plan."


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