Report says tax authority’s plan doesn’t take into account potential changes in technology or the shift to provide services through digital channels

HMRC regional plans questioned by MPs – Photo credit: HMRC

The Public Accounts Committee has said that HMRC has not considered the negative economic impact restructuring its estate might have, and criticised the decision to sign up to long-term leases.

HMRC plans to reduce its estate from 170 buildings to create 13 regional centres in the centre of some of the UK’s major cities along with four specialist sites and a London headquarters.

The move is part of wider plans to cut costs – HMRC spent £269m running its estate in 2015-16 – and to change the way the tax authority works by embracing the potential of digital technologies.

It has estimated that implementation of the plan will cost £500m over the next decade, and that it will achieve cumulative efficiency savings of more than £300m by 2025-26, and £80m a year after that.

However, in a report published today (28 April), the MPs on the influential Public Accounts Committee said they “do not believe that it will save as much money as HMRC has predicted”.

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The report also questioned suggested that some of the plans don’t quite tally with HMRC’s ambition of becoming one of the world’s most digitally advanced tax authorities.

For instance, PAC said that HMRC had not demonstrated why, when a large part of its strategy is to transform services to digital channels, it has chosen “such expensive” city-centre locations for its regional centres.

In addition, the committee pointed out that the department had signed up to 25-year leases for two of the regional centres – in Bristol and Croydon – which it said risked “lock[ing] government into holding larger properties than it will need”.

The committee’s report argued that, as technology and working practices change, it might not need the same amount of space to carry out its work – but the lease agreements have now been signed without break clauses.

“It does not know if these properties will match its needs beyond 2026,” the report said. “It has negotiated conditions which would enable it to sublet any surplus space to other government departments but has no further flexibility in the leases.”

It recommended that HMRC works with the Government Property Unit when negotiating the other leases, to ensure there is “an appropriate mix” of medium- and long-term leases.

These should “provide flexibility for regional centres and hubs so that the government estate can adapt to future changes in the way departments work”.

The committee also said that the plans to ask 38,000 staff to move workplace – with 5,000 expected to leave the authority – meant there was a significant risk that the agency might not be able to carry out its day-to-day functions properly.

The warning is reminiscent of the authority’s 2014-15 decision to cut down to reduce its headcount by 5,600, only to have to recruit 2,400 additional staff the following year after customer service for personal taxpayers collapsed because HMRC had overestimated customers’ readiness to interact with the council via digital means alone. 

As well as planning to reduce headcount, HMRC is also hoping to move staff from repetitive roles to work on tackling tax avoidance or evasion. As part of this, HMRC has set up what it calls an “ideas front door”, which allows staff to propose ideas to a Robotic Automation Board.

Among the proposals was to create a dashboard for contact centre advisers that automatically opens relevant case files on screen – this has cut down call times by around two minutes, an average of a 40% reduction.

Meanwhile, the tax authority’s plans to ask businesses to maintain their tax records digitally, while filing quarterly reports and annual tax returns to HMRC via compatible software have been put on hold due to the early general election.

The need to push through the Finance (No2) Bill, in which the reforms are set out, meant that the government this week agreed to cut out almost half of the clauses, including those for Making Tax Digital.