NAO: HMRC Digital Shift ‘Risks Losing Confidence’

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The department was ‘over-optimistic’ about reducing staff in the transition to digital services

HM Revenue and Customs (HMRC) risks losing the confidence of individuals and businesses in the development of new digital systems because it has not fully estimated the costs for taxpayers or given a clear idea of the potential benefits of the new systems.

This is according to the National Audit Office (NAO), which said HMRC has also failed to address a previous overestimate of the numbers of staff reductions that would be made possible by new digital systems.

Service ‘collapse’

Government services“HMRC was over-optimistic about how much change it could deliver all at once, and how fast it could reduce demand for telephone contact in particular,” the NAO said in a report on the department’s accounts for 2015/16.

“This resulted in a collapse of its service to personal taxpayers in 2014/15 and the first half of 2015/16. HMRC has since recovered the quality of its service to personal taxpayers by recruiting more staff and has adjusted its future resource plans in the light of this experience.”

HMRC began offering online tax accounts for individuals and businesses as part of a programme aimed at delivering “one of the most digitally advanced tax administrations in the world”.

But the NAO noted that businesses are likely to need to file with HMRC more frequently and to have to pay for new software to use the systems, resulting in a “sceptical” view of the changes.

HMRC faces a challenge in building “public trust that the new digital systems are easy to use and secure”, protecting itself from data loss and IT crime as the new systems are brought online.

Online security

“HMRC is therefore investing resources and expertise in making its data more secure and ensuring access to sensitive tax data in particular is safeguarded,” the report said. “It must also demonstrate to taxpayers that its controls to verify each taxpayer’s identity and protect the confidentiality of data are working effectively.”

NAO head Amyas Morse said the department faces a complex task in pushing ahead with its programmes.

“On the one hand, it needs to keep its nerve and commitment to its goals even if there are occasional setbacks along the way; on the other, it needs to ensure that it does not make the taxpayer underwrite the risk of failure through service breakdowns,” he stated.

In the midst of widespread government pressure to cut budgets, HMRC last year announced a 10-year programme that would see the closure of 137 of its 170 offices as it consolidates its workforce around digital processes and more online interactions with taxpayers.

The strategy, which unions called “devastating”, is to see staff brought together in 13 regional centres, located in city centres where possible, as well as four specialist sites for work with IT suppliers or other government agencies or departments, HMRC said at the time.

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