The scale of the Brexit challenge facing HMRC is extraordinary. The latest round of correspondence between HMRC and the Public Accounts Committee shows just how much must be done to ensure that systems and processes remain robust immediately after Brexit.
For example, it is estimated that the annual number of customs declarations will increase from 55m to 255m. If the system broke down it could lead to chaos with goods stranded at the docks waiting for clearance to be brought into the country.
But it is not just the movement of goods: what about food safety? Thirty per cent of the food consumed in the UK is sourced from the EU. What food safety monitoring will be put in place once EU-wide measures no longer apply?
These issues are taking up more and more of Whitehall’s time and the pressures will only increase as we get closer to April 2019. Even if there were an infinite amount of money (which there clearly isn’t) there are only so many hours into which the necessary work can be squeezed. Not surprisingly the Public Accounts Committee is very concerned about how HMRC and the civil service will cope.
The latest correspondence gives an upbeat assessment of how HMRC currently sees the position. An enormous amount of work is going on behind the scenes, with a very high level of engagement with software houses and industry groupings. HMRC believes that it is on track to deliver a new Customs Declaration Service with sufficient capacity to meet the anticipated demand with some spare resource in hand. It also has backup plans should the new system fail. The National Audit Office has given the project a broadly positive rating. All the evidence does therefore point to this major project being properly controlled and managed. If that is indeed the case HMRC is to be congratulated.
But of course this all comes at a cost. As Brexit planning becomes all-consuming there is a knock-on effect on other projects. At the end of 2017, HMRC had no fewer than 267 projects on which it was working. Something has to give. HMRC’s chief executive is very frank on this. After saying that proposals had gone to ministers for approval he said:
At this stage I can say that we have proposed a number of projects which should stop, or not start and a number which should be stretched out over a longer time scale. I hope that we can provide further transparency of the detail of this in due course.’
HMRC’s very ambitious transformation plans now look extremely vulnerable and I suspect that we are about to witness the slaughtering of some sacred cows. For many the big question will be what happens to the whole Making Tax Digital (MTD) programme. This has already been scaled back massively from what was originally proposed (remember the excitement about the ‘death of the tax return’?) and given that the most recent forecasts show that the programme will not deliver significant savings to HMRC or taxpayers in the short term it is easy to see that it could be a candidate to be put onto the back burner.
I doubt that it will be cancelled and nor should it be. But the whole programme needs a complete rethink and perhaps Brexit will give ministers political cover to step back and start again with a blank sheet of paper.
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