"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."
Amyas Morse, head of the National Audit Office, 20
July 2011
HM Revenue & Customs 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, according to a report today by the National Audit
Office.
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.
In assessing potential cost reductions, HMRC
has established a clear vision and specified operational priorities
and revenue targets. 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. This has restricted
its ability to assess fully the impact of cost reductions on
business performance.
Today’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 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.
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.
Publication details:
HC: 1278, 2010-2012
ISBN: 9780102969900