HMRC got digital rollout wrong, NAO says

HMRC got its timing badly wrong when rolling out its digital strategy, the National Audit Office (NAO) has said.

The digital strategy aims to improve the efficiency and quality of its customer services by moving more personal taxpayers online, thereby reducing demand for more costly to handle telephone and postal contact. HMRC, through substantial staff reductions, decreased the cost of its personal tax operations between 2010-11 and 2014-15 by £257 million.

However, the NAO’s report says that while HMRC maintained or improved customer service up to 2013-14 it then misjudged the cumulative impact of its complex transition and released too many customer service staff before completing service changes.

The NAO found that the quality of service provided by HMRC for personal taxpayers collapsed in 2014-15 and the first seven months of 2015-16 when average call waiting times tripled. Services have subsequently improved following the recruitment of additional staff but whether this performance is sustainable depends on HMRC achieving successful outcomes from its programme to make tax digital.


Staff cuts

Between 2010-11 and 2014-15, HMRC cut staff in personal tax from 26,000 to 15,000. To achieve the reductions, it planned to increase automation of the PAYE system, operate on a more flexible basis so staff could move between different services, and move customers from traditional channels to less expensive contact through the expansion of digital services.

HMRC expected to have reduced demand for contact with customers towards the end of the spending review period. It introduced two new services, automated telephony and paperless self-assessment, in 2013-14, but demand for telephone advice did not fall. To live within its budget, it released 5,600 staff from personal tax in 2014-15, reducing customer service capacity. The NAO says HMRC was over-optimistic about the cumulative impact of the change and had not built sufficient contingency into its plans.


Significant increase

The NAO found that call waiting times increased significantly between 2012-13 and 2015-16. As a result, the overall cost to telephone customers, taking into account both the cash cost of calls and the economic cost of time on the phone, rose by more than half. Average waiting times for self-assessment callers to the taxes helpline were below 10 minutes for most of 2012-13 and 2013-14 but grew progressively longer throughout 2014-15 and the first seven months of 2015-16. Customers waiting for an adviser at busy times have faced a long wait, sometimes over an hour.

The NAO estimates that the overall cost incurred by customers who have called the taxes helpline increased from £63m in 2012-13 to £97m in 2015-16. Customers paid £2m less in call costs because HMRC reduced call charges by moving to local-rate ’03’ telephone numbers in September 2013. But an increase in the economic cost of time spent waiting for an answer or speaking to an adviser more than offset this saving. When compared to HMRC’s data on the annual cost of answering calls, the NAO estimates that the increased cost to customers was £4 for every £1 saved by HMRC over this period.

Amyas Morse, head of the National Audit Office, commented: “HMRC’s overall strategy of using digitally enabled information to improve efficiency and deliver service in new ways make sense to the NAO. This does not change the fact that they got their timing badly wrong in 2014, letting significant numbers of call handling staff go before their new approach was working reliably. This led to a collapse in service quality and forced a rapid expansion of headcount. HMRC needs to move forward carefully and get their strategy back on track while maintaining, and hopefully improving, service standards.”

The full report can be viewed here.

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