HMRC estate: big is better, or is it?

Towards the end of 2015, HMRC announced a bold programme to reorganise its current estate and prepare it for the future. In total HMRC has targeted 137 offices for closure, to be replaced with 13 new regional centres supplemented by four specialist sites and a headquarters in Central London. HMRC estimates that this will generate savings of £100m a year.

These new regional centres will house the latest technology plus training facilities designed to prepare HMRC staff for the challenges ahead which include the new digital age, improving its customer service and continuing the fight against avoidance and evasion.

It is still not fully understood where these regional hubs will be based, however what is clear (from HMRC’s perspective anyway) is that it is full steam ahead.

With plans centred on benefits such as: savings, enhanced training, improved customer service, improvement in IT to deal with the unprecedented demands the new digital age will bring, and greater resources to tackle tax evasion – why are concerns being raised?

These concerns are centred on:

  • there being no clear rationale to have such a large concentration of resources;
  • the already stretched customer service is likely to get worse before we see any significant improvement;
  • HMRC staff morale will be hit further for those within existing offices who will see their workplaces closed, longer journeys to work, or redundancy.

This nervousness received significant support in a report published on 10 January 2017 by the National Audit Office (NAO). In a damning report, HMRC plans were branded as ‘unrealistic,’ and findings that HMRC will spend nearly £600m more than it originally planned on restructuring its estate does not bode well at such an early stage.

The NAO also raised concerns about the scale of disruption involved with the planned restructure, which means ‘moving or replacing too many staff too quickly, while delivering 14 other major change programmes in parallel’.

As noted above, the rationale behind having such a large amount of resource in a relatively small number of locations is unclear; however the modernisation programme is a sure sign of the intention to significantly reduce HMRC staff numbers. Some estimates suggest a reduction of staff in the region of 15 per cent to 30 per cent compared to the number employed in 2016.

The NAO warned that ‘during the transition to regional centres, HMRC must ensure that its service to taxpayers and its ability to collect tax revenue are not impaired’. Worryingly it also noted that ‘HMRC has yet to define fully how regional centres will support better customer service and more efficient and effective compliance activities’.

Time will be required for us to feel the full benefits of the significant changes being undertaken by HMRC. However, it is almost certain that these changes will adversely impact taxpayers in the short term.

Amyas Morse, head of the NAO said that ‘HMRC has acknowledged its original plan for regional centres was unrealistic and is now re-considering the scope and timing of the programme. It should step back and consider whether this strategy still best supports its wider business transformation and will deliver the sustainable cost savings it set out to achieve in the long run’.

However, somewhat surprisingly, HMRC appears to have suggested the plans are going ahead as originally planned, although with this report and further scrutiny from the Public Accounts Committee, which is also reviewing the HMRC estate and reorganisation, those plans are likely to change. HMRC’s agreement to changes of approach and timescale to make the project manageable and to reduce the inevitable adverse impact on taxpayers is required.

Big may be cheaper, but HMRC really needs to show us all that it will be better.

For more information please get in touch with Andrew Walker, or your usual RSM contact.