7 Feb 2013 08:51am

HMRC needs to make additional £66m savings

The National Audit Office (NAO) has warned HMRC has to find an additional £66m new savings to meet its cost reduction targets

A report from the spending watchdog published this morning says the department has a “challenge” ahead to make cost reductions while improving customer service and introducing Real Time Information.

Throughout the 2011/2012 year, the Revenue has undertaken an aggressive series of cost reductions. The department has reduced by around 2,400 full-time staff, with pay increases frozen to save £29m.

HMRC also reduced the price paid for IT equipment and services, which the NAO says saved £74m, and it reduced the size of its estate by 138,000 sq m, moving out of 118 buildings. This saved the department £26.8m. Other contracts including postage and printing, were reduced to save a further £26m.

The NAO says that HMRC managed to “maintain performance” despite these cuts, but has warned though that it is “ too early to tell what the long-term impact of cost reduction will be on HMRC’s performance.

The big challenge ahead will be to make more and deeper spending reductions without impairing its performance

Amyas Morse

In total HMRC achieved £296m of savings in the last year, exceeding its target by 19%, and equalling around a third of the total savings it has to make over the four year spending review period. HMRC is spending £376m in total on change projects across the four year spending review period to make savings of £411m a year by 2014/15.

However, the NAO said that HMRC expects these projects to save £162m less over the spending review period than when the NAO last reported on the department’s cost savings in July 2011. It blames this on “more refined and realistic” forecasts, and says that because some projects took longer to start, “the benefits will take longer to be realised.”

HMRC needs to make new savings of £585m a year by 2014/15 as well as maintain those savings already made. At September 2012, HMRC was on track to exceed its 2012-13 cost reduction target by £29m. However, this reduction in planned savings being delivered by change projects means that HMRC needs to find £66m more savings than it originally planned through other initiatives.

The NAO warns that as at July 2012, HMRC had not fully worked out where these additional savings in 2013/14 and beyond would come from.

Amyas Morse, head of the National Audit Office, said today, “In one year, HMRC has managed to deliver a third of the savings it is required to deliver over the four years of the spending period, at the same time as maintaining performance in key areas such as maintaining tax collection and reducing tax debt.

“HMRC is moving from making tactical efficiency savings and quick wins towards a more strategic approach to managing its resources. We recognise the importance of this change and note that HMRC is addressing PAC and NAO recommendations in the process.

“The big challenge ahead will be to make more and deeper spending reductions without impairing its performance.”

The NAO praised the department for exceeding targets on the level of tax collected, reducing thelevel of tax debt, and restoring “customer service performance from a low point.”

A separate report in December from the NAO concluded that HMRC was still giving “poor value for money” in terms of its phone service, saying that more than £130m of costs in callers’ time and charges were racked up through the year as callers waited to speak to an advisor.


Helen Roxburgh


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