In his last select committee appearance, outgoing boss Sir Jim Harra told MPs about the tax department’s ongoing work to deliver significant efficiencies, albeit still £19m behind the stated target

Improvements to its IT set-up and increased use of digital services will help HM Revenue and Customs deliver an estimated £700m in efficiency savings this financial year, against a target of £719m.

The department was asked in the 2021 Spending Review to achieve annual cost savings of £500m by 2024-25 – the last year of the SR period. However, HMRC revealed in its 2023-24 accounts that this had risen to a target of £719m, primarily to absorb inflationary pressures, and warned that it was “proving challenging” to meet the new aim.

Speaking at the Public Accounts Committee last week, HMRC chief finance officer Justin Holliday said the department “will have made, by the end of this financial year, about £700m worth of efficiencies”.

Holliday said these savings, found in 2022-23, 2023-24 and 2024-25, are in three broad buckets of cost areas: general process improvements; utilisation of the estate – moving from PFI contracts to more normal arrangements – and improving the efficiency of the department’s IT function.

Making his final appearance at the Public Accounts Committee, HMRC permanent secretary Sir Jim Harra was questioned on where the department can cut costs and if it is planning to carry out work to compare its efficiency to that of tax authorities in other countries.

Committee member Oliver Ryan, who asked the question, referred to a benchmarking exercise carried out in 2016 by the consulting firm McKinsey of 21 tax administrations around the world, in which HMRC ranked fifth. 

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“Since then, whilst there has been no repeat of that benchmarking exercise, we do obviously – through OECD in particular – benchmark ourselves and self-assess with other jurisdictions, and learn from them and they learn from us,” Harra said.”In terms of the productivity of staff… there is clearly a big area where there are further cost savings to be made and that is in customer contact.”

Harra said HMRC has reduced customer contact in recent years through digitisation, despite growth in customer numbers, but still estimates that around two-thirds of the customer contact it gets on helplines is avoidable and could be dealt with digitally and through automation.

“So there’s lots of scope for us to continue improving our digital services, and improving their take-up, and reducing that contact,” he said. 

PublicTechnology exclusively revealed last week that HMRC is embarking upon a £250,000 project ort-term project to generate innovative ideas for “reducing avoidable contact” from citizens reaching pension age.